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Viomi Technology Co., Ltd

Viomi Technology Co., LtdVIOT決算レポート

Nasdaq · 非必須消費財 · 家庭用電化製品

YI Technology, also known as Xiaoyi in Mainland China markets, is a company that manufactures cameras and computer vision technologies. Some of the company's popular camera models include the YI 1080p Home Camera, and the YI Outdoor Security Camera. YI Technology was originally backed and branded by Xiaomi, but in October 2016, YI split off from Xiaomi, dropping the "Xiaomi Yi" branding.

What changed in Viomi Technology Co., Ltd's 20-F — 2022 vs 2023

Top changes in Viomi Technology Co., Ltd's 2023 20-F

812 paragraphs added · 936 removed · 667 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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If the PRC government deems that our contractual arrangements with our VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
If the PRC government deems that our contractual arrangements with our VIEs do not comply with PRC regulatory restrictions on foreign investment in relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.
We cannot be certain that our licensors are not infringing the intellectual property rights of third parties or that our licensors have sufficient rights to the licensed intellectual property in all jurisdictions in which we may sell our products, neither can we guarantee that these licensors were, are or will be in full compliance with laws and regulations in the relevant jurisdictions.
We cannot be certain that our licensors are not infringing the intellectual property rights of third parties or that our licensors have sufficient rights to the licensed intellectual property in all jurisdictions in which we may sell our products, neither can we guarantee that these licensors were, are or will be in full compliance with laws and regulations in relevant jurisdictions.
The material weaknesses identified related to (i) our lack of sufficient resources regarding financial reporting and accounting personnel with understanding of U.S. GAAP, in particular, to address complex U.S. GAAP technical accounting issues, related disclosures in accordance with U.S. GAAP and financial reporting requirements set forth by the SEC, (ii) the lack of comprehensive U.S.
The material weaknesses identified related to (i) our lack of sufficient resources regarding financial reporting and accounting personnel with understanding of U.S. GAAP, in particular, to address complex U.S. GAAP technical accounting issues, related disclosures in accordance with U.S. GAAP and financial reporting requirements set forth by the SEC, and (ii) the lack of comprehensive U.S.
Our business could be adversely affected by natural disasters or other acts of god. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, military conflicts, riots, terrorist attacks or similar events that negatively impact the Chinese economy could also severely and adversely affect our business and operating performance. Our business could also be adversely affected by health epidemics.
Our business could be adversely affected by health epidemics,natural disasters or other acts of god. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, military conflicts, riots, terrorist attacks or similar events that negatively impact the Chinese economy could also severely and adversely affect our business and operating performance.
According to the Special Administrative Measures (Negative List) for Foreign Investment Access, our provision of internet information services falls within the restricted category and the equity ratio of foreign investment in the enterprises operating the business under the restricted category is subject to the cap of 50%.
According to the Special Administrative Measures (Negative List) for Foreign Investment Access, our provision of internet information services falls within the restricted category and the equity ratio of foreign investment in the enterprises operating the business under the restricted category is subject to the cap of 50%.
In addition, although our provision of e-commerce services falls within the permitted category, foreign investments in this business are still restricted by other requirements under related regulations in China.
In addition, although our provision of e-commerce services falls within the permitted category, foreign investments in this business are still restricted by other requirements under related regulations in China.
Investors in our ADSs thus are not purchasing equity interest in our VIEs in China but instead are purchasing equity interest in a Cayman Islands holding company.
Investors in our ADSs thus are not purchasing equity interest in our VIEs in China but instead are purchasing equity interest in a Cayman Islands holding company.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms.
It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, none of whom currently reside in the United States and whose assets are located outside the United States.
It may also be difficult for you to enforce U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, none of whom currently reside in the United States and whose assets are located outside the United States.
Furthermore, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC and no entities or individuals may provide documents or materials in connection with its securities activities to the overseas without proper authorization.
Furthermore, according to Article 177 of the PRC Securities Law, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC and no entities or individuals may provide documents or materials in connection with its securities activities to the overseas without proper authorization.
The PRC regulatory authorities could disallow the VIEs structure, which would likely result in a material adverse change in our operations, and our Class A ordinary shares or our ADSs may decline significantly in value; ● We rely on contractual arrangements with our VIEs and their respective shareholders for substantially all of our business operation, which may not be as effective as direct ownership in providing operation control; and ● Any failure by our VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business, financial condition and results of operations.
The PRC regulatory authorities could disallow the VIEs structure, which would likely result in a material adverse change in our operations, and our Class A ordinary shares or our ADSs may decline significantly in value; ● We rely on contractual arrangements with our VIEs and their respective shareholders for substantially all of our business operation, which may not be as effective as direct ownership in providing operational control; and ● Any failure by our VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business, financial condition and results of operations.
Our ability to expand the sales of our IoT products to a broader consumer base depends on several factors, including Chinese consumers’ receptiveness towards and adoption of smart home AI and IoT technology, the market awareness of our brand, the timely introduction and market acceptance of our products and services, the network effects of our products and services, our ability to attract, retain and effectively train sales and marketing personnel, the effectiveness of our marketing programs, our ability to develop effective relationships with distribution partners and expand our network of offline experience stores, the cost and functionality of our products and services and the success of our competitors.
Our ability to expand the sales of our IoT products to a broader consumer base depends on several factors, including Chinese consumers’ receptiveness towards and adoption of smart home AI and IoT technology, the market awareness of our brand, the timely introduction and market acceptance of our products and services, the network effects of our offerings, our ability to attract, retain and effectively train sales and marketing personnel, the effectiveness of our marketing programs, our ability to develop effective relationships with distribution partners and expand our network of offline experience stores, the cost and functionality of our products and services, and the success of our competitors.
The Confidentiality and Archives Management Provisions require, among others, that PRC domestic enterprises seeking to offer and list securities in overseas markets, either directly or indirectly, shall establish the confidentiality and archives system, and shall complete approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of PRC government agencies to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals.
The provisions require, among others, that PRC domestic enterprises seeking to offer and list securities in overseas markets, either directly or indirectly, shall establish the confidentiality and archives system, and shall complete approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of PRC government agencies to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals.
Holders hold our ADSs or ordinary shares, we would generally continue to be treated as a PFIC with respect to such U.S. Holders even if we do not satisfy either of the above tests to be classified as a PFIC in a subsequent taxable year. See “Item 10. Additional Information—E. Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Considerations.”
Holders hold our ADSs or ordinary shares, we would generally continue to be treated as a PFIC with respect to such U.S. Holders even if we do not satisfy either of the above tests to be a PFIC in a subsequent taxable year. See “Item 10. Additional Information—E. Taxation—U.S. Federal Income Tax Considerations—Passive Foreign Investment Company Considerations.”
Although the failure to do so does not in itself invalidate the leases, we may be ordered by the PRC government authorities to rectify such noncompliance and, if such noncompliance were not rectified within a given period of time, we may be subject to fines imposed by PRC government authorities ranging from RMB1,000 and RMB10,000 for each lease agreement that has not been registered with the relevant PRC governmental authorities.
Although the failure to do so does not in itself invalidate the leases, we may be ordered by the PRC government authorities to rectify such noncompliance and, if such noncompliance were not rectified within a given period of time, we may be subject to fines imposed by PRC government authorities ranging from RMB1,000 and RMB10,000 for each lease agreement that has not been registered with the PRC governmental authorities.
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 requirements differently from us.
In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the following: ● variations in our net revenues, earnings and cash flow; ● announcements of new investments, acquisitions, strategic partnerships, or joint ventures by us or our competitors; ● announcements of new products and services and expansions by us or our competitors; ● changes in financial estimates by securities analysts; ● failure on our part to realize monetization opportunities as expected; ● changes in revenues generated from our significant business partners; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; 62 Table of Contents ● detrimental negative publicity about us, our management, our competitors or our industry; ● regulatory developments affecting us or our industry; and ● potential litigation or regulatory investigations.
In addition to market and industry factors, the price and trading volume for our ADSs may be highly volatile for factors specific to our own operations, including the following: ● variations in our net revenues, earnings and cash flow; ● announcements of new investments, acquisitions, strategic partnerships, or joint ventures by us or our competitors; ● announcements of new products and services and expansions by us or our competitors; ● changes in financial estimates by securities analysts; ● failure on our part to realize monetization opportunities as expected; ● changes in revenues generated from our significant business partners; 55 Table of Contents ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; ● detrimental negative publicity about us, our management, our competitors or our industry; ● regulatory developments affecting us or our industry; and ● potential litigation or regulatory investigations.
Against this backdrop, China has implemented, and may further implement, measures in response to the changing trade policies, treaties, tariffs and sanctions and restrictions against Chinese companies initiated by the U.S. government. For example, the Ministry of Commerce of China published new rules in January 2021 to counter restrictions imposed by foreign countries on Chinese citizens and companies.
Against this backdrop, China has implemented, and may further implement, measures in response to the changing trade policies, treaties, tariffs and sanctions and restrictions against Chinese companies initiated by the U.S. government. For example, the Ministry of Commerce of China published rules in January 2021 to counter restrictions imposed by foreign countries on Chinese citizens and companies.
If our user engagement ceases to grow or declines, our business and operating results may be materially and adversely affected. User engagement is important to our business model. Our value-added businesses ecosystem and the virtuous cycle that we anticipate it to create depend heavily on the level of user engagement with the products and services provided by us.
If our user engagement ceases to grow or declines, our business and operating results may be materially and adversely affected. User engagement is important to our business model. Our value-added businesses ecosystem and the virtuous cycle that we anticipate to create depend heavily on the level of user engagement with the products and services provided by us.
We rely on cloud servers maintained by Xiaomi, Huawei, Alibaba and Tencent Cloud services to store our data. Problems with our cloud service providers or the telecommunications network providers with whom they contract could adversely affect the experience of our users. Our cloud service providers could decide to cease providing us with services without adequate prior notice.
We rely on cloud servers maintained by Huawei, Tencent Cloud, Alibaba, Xiaomi and Volcengine to store our data. Problems with our cloud service providers or the telecommunications network providers with whom they contract could adversely affect the experience of our users. Our cloud service providers could decide to cease providing us with services without adequate prior notice.
If local authorities determine that we failed to make adequate contributions to any employee benefits as required by relevant PRC regulations, we may face late fees or fines in relation to the underpaid employee benefits. In addition, our provision for these liabilities may not be adequate, particularly in light of the recent tightening regulations.
If local authorities determine that we failed to make adequate contributions to any employee benefits as required by the PRC regulations, we may face late fees or fines in relation to the underpaid employee benefits. In addition, our provision for these liabilities may not be adequate, particularly in light of the recent tightening regulations.
Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with our VIEs and their respective shareholders for substantially all of our business operation, which may not be as effective as direct ownership in providing operation control” and “Item 3. Key Information—D.
Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with our VIEs and their respective shareholders for substantially all of our business operation, which may not be as effective as direct ownership in providing operational control” and “Item 3. Key Information—D.
Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future. For more detailed information, see “Item 3. Key Information—D.
Given the uncertainties of interpretation and implementation of laws and regulations and the enforcement practice by government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future. For more detailed information, see “Item 3. Key Information—D.
We have developed an IoT @ Home platform consisting of an ecosystem of IoT @ Home portfolio, home water solutions, consumables and small appliances and others. We face intense competition from other smart home solution providers, internet companies, and traditional home appliances companies. We also face regional competition from local brands in the various geographies where our products are sold.
We have developed an IoT @Home platform consisting of IoT @Home portfolio products, home water solutions, consumables and small appliances and others. We face intense competition from other smart home solution providers, internet companies, and traditional home appliances companies. We also face regional competition from local brands in the various geographies where our products are sold.
We are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, requires that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ended December 31, 2019.
We are subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act requires that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ended December 31, 2019.
It is an important growth strategy for us to continue to grow our user base and enrich our value-added businesses ecosystem, key components of our IoT @ Home platform, which enable us to differentiate our offerings and create additional monetization opportunities for us, including the sale of complementary products and provision of value-added services.
It is an important growth strategy for us to grow our user base and enrich our value-added businesses ecosystem, key components of our IoT@Home platform, which enable us to differentiate our offerings and create additional monetization opportunities for us, including the sale of complementary products and provision of value-added services.
It further stipulates that providing or publicly disclosing documents and materials which may adversely affect national security or public interests, and accounting files or copies of important preservation value to the state and society shall be subject to corresponding procedures in accordance with relevant laws and regulations.
It further stipulates that providing or publicly disclosing documents and materials which may adversely affect national security or public interests, and accounting files or copies of important preservation value to the state and society shall be subject to corresponding procedures in accordance with the laws and regulations.
Although we have obtained and completed for our two facilities all such permits, approval and registrations as of the date of this annual report, we cannot assure you that we will be able to obtain their respective renewal in a timely manner, or at all.
Although we have obtained and completed all such permits, approval and registrations for our facilities as of the date of this annual report, we cannot assure you that we will be able to obtain their respective renewal in a timely manner, or at all.
Our interests and those of our other shareholders may at times conflict with the interests of Xiaomi and its public shareholders and other affiliates. Such conflicts may result in losing business opportunities for us, including opportunities to enter into lines of business that may overlap with those pursued by Xiaomi or companies within its ecosystem.
Our interests and those of our other shareholders may at times conflict with the interests of Xiaomi and its shareholders and other affiliates. Such conflicts may result in losing business opportunities for us, including opportunities to enter into lines of business that may overlap with those pursued by Xiaomi or companies within its ecosystem.
According to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to our PRC subsidiaries are subject to the requirement of making necessary filings or reports in the Foreign Investment Comprehensive Management Information System, and registration with a local bank authorized by SAFE.
According to the PRC regulations on foreign-invested enterprises in China, capital contributions to our PRC subsidiaries are subject to the requirement of making necessary filings or reports in the Foreign Investment Comprehensive Management Information System, and registration with a local bank authorized by SAFE.
Furthermore, as these foreign exchange regulations and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities.
Furthermore, as these foreign exchange regulations and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the government authorities.
In addition, under relevant PRC laws and regulations, our VIEs as license holders are required to update certain licenses if any change to their respective name, registered capital or legal representative during the validity period of such license.
In addition, under the PRC laws and regulations, our VIEs as license holders are required to update certain licenses if any change to their respective name, registered capital or legal representative during the validity period of such license.
GAAP financial statements. If it were determined, however, that we are not the owner of the consolidated VIEs for U.S. federal income tax purposes, we may be treated as a PFIC for the current taxable year and any subsequent taxable year.
GAAP financial statements. If it were determined that we are not the owner of the consolidated VIEs for U.S. federal income tax purposes, we may be treated as a PFIC for the current taxable year and any subsequent taxable year.
If we fail to expand or maintain the pool of our ecosystem partners, our net revenues growth may be adversely affected and the number of application scenarios of our products may not grow as quickly as we expect, or at all, which may reduce the attractiveness of our products.
If we fail to expand or maintain the pool of our ecosystem partners, our net revenues may be adversely affected and the number of application scenarios of our products may not grow as quickly as we expect, or at all, which may reduce the attractiveness of our products.
Because we will generally take into account our current market capitalization in estimating the value of our goodwill and other unbooked intangibles, our PFIC status for the current taxable year and foreseeable future taxable years may be affected by our market capitalization.
Because we will generally take into account our current market capitalization in estimating the value of our goodwill and other unbooked intangibles, our PFIC status for the current taxable year and future taxable years may be affected by our market capitalization.
Business Overview—Regulation—Regulation on Tax—PRC Enterprise Income Tax.” However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax, unless a reduced rate is available under an applicable tax treaty, from dividends we pay to our shareholders that are non­resident enterprises, including the holders of our ADSs.
Business Overview—Regulations—Regulations on Tax—PRC enterprise income tax.” However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax, unless a reduced rate is available under an applicable tax treaty, from dividends we pay to our shareholders that are non­resident enterprises, including the holders of our ADSs.
If we are not able to manage our growth or execute our strategies effectively, our expansion may not be successful and our business and prospects may be materially and adversely affected. In addition, our business operations and growth may be affected by many factors beyond our control.
If we are not able to manage our growth or execute our strategies effectively, our strategies may not be successful and our business and prospects may be materially and adversely affected. In addition, our business operations and growth may be affected by many factors beyond our control.
We may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations. 48 Table of Contents Risks Related to Doing Business in China The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor in the past has deprived our investors with the benefits of such inspections.
We may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations. 42 Table of Contents Risks Related to Doing Business in China The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor in the past has deprived our investors with the benefits of such inspections.
If we or our VIEs are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including: ● levying fines or confiscating our income or the income of our WFOEs or our VIEs, placing restrictions on our right to collect revenues, or imposing other requirements with which we or our VIEs may not be able to comply; ● revoking or suspending the business licenses or operating licenses of our WFOEs or our VIEs, or to re-apply for the necessary licenses, or to relocate our business, staff and assets; ● discontinuing or placing restrictions or onerous conditions on our operations through any transactions between our WFOEs and our VIEs; ● requiring us to restructure our ownership structure or operations, including the nullification or termination of the contractual arrangements with our VIEs and deregistering the equity pledges of our VIEs, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over our VIEs; 44 Table of Contents ● restricting or prohibiting our use of the proceeds of our initial public offering to finance our business and operations in China; and taking other regulatory or enforcement actions that could be harmful to our business.
If we or our VIEs are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including: ● levying fines or confiscating our income or the income of our WFOEs or our VIEs, placing restrictions on our right to collect revenues, or imposing other requirements with which we or our VIEs may not be able to comply; ● revoking or suspending the business licenses or operating licenses of our WFOEs or our VIEs, or to re-apply for the necessary licenses, or to relocate our business, staff and assets; ● discontinuing or placing restrictions or onerous conditions on our operations through any transactions between our WFOEs and our VIEs; ● requiring us to restructure our ownership structure or operations, including the nullification or termination of the contractual arrangements with our VIEs and deregistering the equity pledges of our VIEs, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over our VIEs; ● restricting or prohibiting our use of the proceeds of our initial public offering to finance our business and operations in China; and taking other regulatory or enforcement actions that could be harmful to our business.
All of these occurrences are beyond our control, and could result in our inability to continue to use the relevant technologies and our incurrences of potential liabilities for our cooperation with such licensors.
All of these occurrences are beyond our control, and could result in our inability to continue to use the technologies and our incurrences of potential liabilities for our cooperation with such licensors.
Our WFOEs have each entered into a series of contractual arrangements with one of our VIEs, and their respective shareholders, which enable us to (i) exercise effective control over our VIEs, (ii) receive substantially all of the economic benefits of our VIEs, and (iii) have an exclusive option to purchase all or part of the equity interests and assets in our VIEs when and to the extent permitted by PRC law.
Our WFOEs have each entered into a series of contractual arrangements with one of our VIEs, and their respective shareholders, which enable us to (i) exercise effective control over our VIEs, (ii) receive substantially all of the economic benefits of our VIEs, and (iii) have an exclusive option to purchase all or part of the equity interests and assets in our VIEs when and to the extent permitted by PRC laws.
In addition, the Provisions of Ministry of Commerce on Implementation of Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors which became effective in September 2011 and the Measures for the Security Review of Foreign Investment which became effective in January 2021 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition.
In addition, the Provisions of Ministry of Commerce on Implementation of Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors effective in September 2011 and the Measures for the Security Review of Foreign Investment effective in January 2021 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition.
Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the exclusive option agreements with these shareholders to request them to transfer all of their equity interests in the VIE to a PRC entity or individual designated by us, to the extent permitted by PRC law.
Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the exclusive option agreements with these shareholders to request them to transfer all of their equity interests in the VIE to a PRC entity or individual designated by us, to the extent permitted by PRC laws.
If it is determined in the future that approval from or filing with the CSRC or other regulatory authorities or other procedures, including the cybersecurity review under the Cybersecurity Review Measures and the Draft Regulations on Network Data Security, are required if we were to conduct offshore offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures.
If it is determined in the future that approval from or filing with the CSRC or other regulatory authorities or other procedures, including the cybersecurity review under the Cybersecurity Review Measures and the Regulations on the Network Data Security (Draft for Comments), are required if we were to conduct offshore offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures.
See also “Risk Related to Doing Business in China—Changes in international trade policies and rising political tensions, particularly between the U.S. and China, may adversely impact our business and operating results.” In addition, we cannot assure you that our cooperation with such suppliers would not negatively impact our branding and marketing activities in the U.S. or other countries or regions.
See also “—Risks Related to Doing Business in China—Changes in international trade policies and rising political tensions, particularly between the U.S. and China, may adversely impact our business and operating results.” In addition, we cannot assure you that our cooperation with such suppliers would not negatively impact our branding and marketing activities in the U.S. or other countries or regions.
Although the law in this regard is not entirely clear, we treat our consolidated VIEs as being owned by us for U.S. federal income tax purposes because we control their management decisions and are entitled to substantially all of the economic benefits associated with it, and, as a result, we consolidate their results of operations in our consolidated U.S.
Although the law in this regard is not entirely clear, we treat our consolidated VIEs as being owned by us for U.S. federal income tax purposes because we control their management decisions and are entitled to substantially all of the economic benefits associated with them, and, as a result, we consolidate their results of operations in our consolidated U.S.
Furthermore, although products that these ecosystem partners offer are not our products, customers may still associate us with any dissatisfaction with the products and services offered by our ecosystem partners. Moreover, we may be subject to litigation or potential sanctions under PRC law if we were to negligently participate or assist in infringement activities associated with counterfeit or defective goods.
Furthermore, although products that these ecosystem partners offer are not our products, customers may still associate us with any dissatisfaction with the products and services offered by our ecosystem partners. Moreover, we may be subject to litigation or potential sanctions under PRC laws if we were to negligently participate or assist in infringement activities associated with counterfeit or defective goods.
Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects. 49 Table of Contents The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs.
Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects. 43 Table of Contents The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our ADSs.
Any changes in these laws could cause changes to our business practices and increased cost of operations, and any security breaches and our actual or perceived failure to comply with such laws could result in claims, penalties, damages to our reputation and brand, declines in user growth or engagement or otherwise harm our business; ● We are susceptible to supply shortages and interruptions, long lead times, and price fluctuations for raw materials and components, any of which could disrupt our supply chain and have a material adverse impact on our results of operations; 20 Table of Contents ● We rely on certain contract manufacturers to produce a majority of our products.
Any changes in these laws could cause changes to our business practices and increased cost of operations, and any security breaches and our actual or perceived failure to comply with such laws could result in claims, penalties, damages to our reputation and brand, declines in user growth or engagement or otherwise harm our business; ● We are susceptible to supply shortages and interruptions, long lead times, and price fluctuations for raw materials and components, any of which could disrupt our supply chain and have a material adverse impact on our results of operations; ● We rely on certain contract manufacturers to produce a majority of our products.
Liu’s decision will not be impacted by any potential conflict of interest arising from his relationship with Xiaomi. 40 Table of Contents In connection with the audit of our consolidated financial statements included in this annual report, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting.
Liu’s decision will not be impacted by any potential conflict of interest arising from his relationship with Xiaomi. 35 Table of Contents In connection with the audit of our consolidated financial statements included in this annual report, we and our independent registered public accounting firm identified material weaknesses in our internal control over financial reporting.
Capitalization and Indebtedness Not applicable. 19 Table of Contents C. Reasons for the Offer and Use of Proceeds Not applicable. D. Risk Factors Summary of Risk Factors An investment in our ADSs involves risks. Below is a summary of material risks we may face, organized under relevant headings. These risks are discussed more fully below in this Item 3.
Capitalization and Indebtedness Not applicable. C. Reasons for the Offer and Use of Proceeds Not applicable. 18 Table of Contents D. Risk Factors Summary of Risk Factors An investment in our ADSs involves risks. Below is a summary of material risks we may face, organized under relevant headings. These risks are discussed more fully below in this Item 3.
It is uncertain whether financing will be available in amounts or on terms acceptable to us, if at all. 39 Table of Contents We may engage in acquisition and investment activities, which could require significant management attention, disrupt our business, dilute shareholder value, and adversely affect our operating results.
It is uncertain whether financing will be available in amounts or on terms acceptable to us, if at all. 34 Table of Contents We may engage in acquisition and investment activities, which could require significant management attention, disrupt our business, dilute shareholder value, and adversely affect our operating results.
Our failure to establish and promote our brand and any damage to our reputation will hinder our growth; ● If we fail to successfully develop and commercialize new products, services and technologies that are well received by consumers in a timely manner, our operating results may be materially and adversely affected; ● Our expansion into new product categories and scenarios, and substantial increases in product lines may expose us to new challenges and more risks; ● We operate in the emerging and evolving IoT-enabled smart home products market in China, which may develop more slowly or differently than we expect.
Our failure to establish and promote our brand and any damage to our reputation will hinder our growth; ● If we fail to successfully develop and commercialize new products, services and technologies that are well received by consumers in a timely manner, our operating results may be materially and adversely affected; ● Our expansion into new product categories and scenarios and substantial increases in product lines may expose us to new challenges and more risks; ● We operate in the emerging and evolving IoT products market in China, which may develop more slowly or differently than we expect.
In addition, under PRC law, rulings by arbitrators are final, which means parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay.
In addition, under PRC laws, rulings by arbitrators are final, which means parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay.
Risks Related to Our Business and Industry Risks and uncertainties related to our business include, but not limited to, the following: ● We operate in highly competitive markets, and the scale and resources of some of our competitors may allow them to compete more effectively than we can, which could result in a loss of our market share and a decrease in our net revenues and profitability; ● As we continue to grow, we may not be able to effectively manage our growth and the increased complexity of our business, which could negatively impact our brand and financial performance; ● Xiaomi is our strategic partner and our most important customer.
Risks Related to Our Business and Industry Risks and uncertainties related to our business include, but not limited to, the following: ● We operate in highly competitive markets, and the scale and resources of some of our competitors may allow them to compete more effectively than we can, which could result in a loss of our market share and a decrease in our net revenues and profitability; ● We may not be able to effectively manage our growth and the increased complexity of our business, which could negatively impact our brand and financial performance; ● Xiaomi is our strategic partner and our most important customer.
Our management believes that there is only a remote possibility that this scenario would happen. 7 Table of Contents Permissions Required from the PRC Authorities for Our Operations We conduct our business primarily through our subsidiaries and VIEs and their subsidiaries in China. Our operations in China are governed by PRC laws and regulations.
Our management believes that there is only a remote possibility that this scenario would happen. 6 Table of Contents Permissions Required from the PRC Authorities for Our Operations We conduct our business primarily through our subsidiaries and VIEs and their subsidiaries in China. Our operations in China are governed by PRC laws and regulations.
Risk Factors—Risks Related to Our Corporate Structure—Any failure by our VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business, financial condition and results of operations.” There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with our VIEs and its nominee shareholders.
Risk Factors—Risks Related to Our Corporate Structure—Any failure by our VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business, financial condition and results of operations.” 3 Table of Contents There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with our VIEs and its nominee shareholders.
For the years ended December 31, 2020, 2021 and 2022, no dividend or distribution was made to Viomi Technology Co., Ltd or its offshore subsidiaries by our PRC subsidiaries. Accordingly, no withholding tax was recorded in the corresponding period. See “Item 8. Financial Information—A.
For the years ended December 31, 2021, 2022 and 2023, no dividend or distribution was made to Viomi Technology Co., Ltd or its offshore subsidiaries by our PRC subsidiaries. Accordingly, no withholding tax was recorded in the corresponding period. See “Item 8. Financial Information—A.
As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States. 52 Table of Contents It may be difficult for overseas regulators to conduct investigation or collect evidence within China.
As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States. 46 Table of Contents It may be difficult for overseas regulators to conduct investigation or collect evidence within China.
In addition, under the Enterprise Income Tax Law of the PRC, or the EIT Law, and its implementation rules, undistributed profits earned by foreign-invested enterprises, or FIEs, prior to January 1, 2008 are exempted from any withholding tax, while profits of a FIE generated in or after 2008 that are distributed to its immediate holding company outside Mainland China are subject to withholding tax at a rate of 10%, unless the foreign holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate of withholding tax.
In addition, under the Enterprise Income Tax Law of the PRC and its implementation rules, undistributed profits earned by foreign-invested enterprises prior to January 1, 2008 are exempted from any withholding tax, while profits of a foreign-invested enterprise generated in or after 2008 that are distributed to its immediate holding company outside Mainland China are subject to withholding tax at a rate of 10%, unless the foreign holding company’s jurisdiction of incorporation has a tax treaty with China that provides for a reduced rate of withholding tax.
If we or any of our VIEs is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures.
If we or any of our VIEs is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the applicable PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures.
For example, a holding company in Hong Kong, subject to approval of the PRC local tax authority, will be eligible to a 5% withholding tax rate under the Arrangement Between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital if such holding company is considered to be a non-PRC resident enterprise and holds at least 25% of the equity interests in the PRC FIE distributing the dividends.
For example, a holding company in Hong Kong, subject to approval of the PRC local tax authority, will be eligible to a 5% withholding tax rate under the Arrangement Between the PRC and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital if such holding company is considered to be a non-PRC resident enterprise and holds at least 25% of the equity interests in the PRC foreign-invested enterprise distributing the dividends.
In addition, on February 24, 2023, the CSRC, the PRC Ministry of Finance, National Administration of State Secrets Protection and National Archives Administration of China jointly issued the Provisions on Strengthening Confidentiality and Archives Management of Overseas Securities Issuance and Listing by Domestic Enterprises (the “Confidentiality and Archives Management Provisions”), which became effective on March 31, 2023.
In addition, on February 24, 2023, the CSRC, the PRC Ministry of Finance, National Administration of State Secrets Protection and National Archives Administration of China jointly issued the Provisions on Strengthening Confidentiality and Archives Management of Overseas Securities Issuance and Listing by Domestic Enterprises, which became effective on March 31, 2023.
Our key sales channels consist of a network of online e-commerce platforms, Viomi offline experience stores, third-party offline channels, through which we predominantly sell Viomi-branded products, as well as Xiaomi, to which we predominantly sell Xiaomi-branded products. Historically, Xiaomi has been our largest and most important customer.
Our key sales channels consist of a network of online e-commerce platforms, Viomi offline experience stores, third-party offline channels and overseas distribution channels, through which we predominantly sell Viomi-branded products, as well as Xiaomi, to which we predominantly sell Xiaomi-branded products. Historically, Xiaomi has been our largest and most important customer.
Moreover, failure to comply with the various foreign exchange registration requirements described above could result in liability under PRC law for circumventing applicable foreign exchange restrictions. As a result, our business operations and our ability to distribute profits to you could be materially and adversely affected.
Moreover, failure to comply with the various foreign exchange registration requirements described above could result in liability under PRC laws for circumventing applicable foreign exchange restrictions. As a result, our business operations and our ability to distribute profits to you could be materially and adversely affected.
If the IoT-enabled smart home products market does not grow as we expect, or if we cannot expand our products and services to meet consumer demands, our results of operations may be materially and adversely affected; ● If our user engagement ceases to grow or declines, our business and operating results may be materially and adversely affected; ● Our business is subject to complex and evolving Chinese and international laws and regulations, including those regarding data privacy and cybersecurity, many of which are subject to change and uncertain interpretation.
If the IoT products market does not grow as we expect, or if we cannot expand our products and services to meet consumer demands, our results of operations may be materially and adversely affected; ● If our user engagement ceases to grow or declines, our business and operating results may be materially and adversely affected; ● Our business is subject to complex and evolving Chinese and international laws and regulations, including those regarding data privacy and cybersecurity, many of which are subject to change and uncertain interpretation.
Liquidity and Capital Resources—Holding Company Structure.” Under PRC law, Viomi Technology Co., Ltd and its offshore subsidiaries may provide funding to our PRC subsidiaries only through capital contributions or loans, and to our VIEs only through loans, subject to satisfaction of applicable government registration and approval requirements.
Liquidity and Capital Resources—Holding Company Structure.” Under PRC laws, Viomi Technology Co., Ltd and its offshore subsidiaries may provide funding to our PRC subsidiaries only through capital contributions or loans, and to our VIEs only through loans, subject to satisfaction of applicable government registration and approval requirements.
To the extent we are unable to execute our strategy of continuously introducing new and innovative products, diversifying our product portfolio and satisfying consumers’ changing preferences, we may not be able to grow our household user base and our competitive position and results of operations may be adversely affected.
To the extent we are unable to execute our strategy of continually introducing new and innovative products, diversifying our product portfolio and satisfying consumers’ changing preferences, we may not be able to grow our household user base and our competitive position and results of operations may be adversely affected.
Based on its evaluation, our management concludes that our internal control over financial reporting as of December 31, 2022 was not effective. See “Item 15. Controls and Procedures—Management’s Report on Internal Control over Financial Reporting.” For future fiscal years, our management may conclude that our internal control over financial reporting was not effective either.
Based on its evaluation, our management concludes that our internal control over financial reporting as of December 31, 2023 was not effective. See “Item 15. Controls and Procedures—Management’s Report on Internal Control over Financial Reporting.” For future fiscal years, our management may conclude that our internal control over financial reporting was not effective either.
Any such tax may reduce the returns on your investment in the ADSs or ordinary shares. 54 Table of Contents We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
Any such tax may reduce the returns on your investment in the ADSs or ordinary shares. 48 Table of Contents We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
We do not intend to have any of its subsidiaries located in PRC distribute any undistributed earnings of such subsidiaries in the foreseeable future, but rather expects that such earnings will be reinvested by such subsidiaries in their operations or transferred by such subsidiaries to our VIEs and their subsidiaries for their operations.
We do not intend to have any of its subsidiaries located in PRC distribute any undistributed earnings of such subsidiaries in the foreseeable future, but rather expect that such earnings will be reinvested by such subsidiaries in their operations or transferred by such subsidiaries to our VIEs and their subsidiaries for their operations.
Assuming that we are the owner of our VIEs for U.S. federal income tax purposes, and based on our income and assets and the market value of our ADSs, we believe that we were not a PFIC for the taxable year ended December 31, 2022.
Assuming that we are the owner of our VIEs for U.S. federal income tax purposes, and based on our income and assets and the market value of our ADSs, we believe that we were not a PFIC for the taxable year ended December 31, 2023.
See “—Any failure by our VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business, financial condition and results of operations.” Therefore, our contractual arrangements with our VIEs and their shareholders may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be. 45 Table of Contents Any failure by our VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business, financial condition and results of operations.
See “—Any failure by our VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business, financial condition and results of operations.” Therefore, our contractual arrangements with our VIEs and their shareholders may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.
Corporate Governance.” As a result, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq governance listing standards applicable to U.S. domestic issuers. 68 Table of Contents We may be classified as a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S.
Corporate Governance.” As a result, our shareholders may be afforded less protection than they would otherwise enjoy under the Nasdaq governance listing standards applicable to U.S. domestic issuers. 60 Table of Contents We may be a passive foreign investment company for U.S. federal income tax purposes, which could result in adverse U.S. federal income tax consequences to U.S.
Because there are uncertainties in the application of the relevant rules, it is possible that the Internal Revenue Service may challenge our classification of certain income or assets as non-passive, or our valuation of our goodwill and other unbooked intangibles, each of which could cause us to become classified as a PFIC for the current or subsequent taxable years.
Because there are uncertainties in the application of these rules, it is possible that the Internal Revenue Service may challenge our classification of certain income or assets as non-passive, or our valuation of our goodwill and other unbooked intangibles, each of which could cause us to become a PFIC for the current or subsequent taxable years.
We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law. See “Item 4. Information on the Company—B.
We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC laws. See “Item 4. Information on the Company—B.
While detailed interpretation of or implementation rules under Article 177 of the PRC Securities Law and the Confidentiality and Archives Management Provisions have yet to be available, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by investors in protecting your interests.
While detailed interpretation of or implementation rules under the provisions and Article 177 of the PRC Securities Law have yet to be available, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by investors in protecting your interests.
We lease real properties from third parties primarily for our office use in China, and none of our lease agreements for these properties has been registered with the PRC governmental authorities as required by PRC law.
We lease real properties from third parties primarily for our office use in China, and none of our lease agreements for these properties has been registered with the PRC governmental authorities as required by PRC laws.
We may experience service disruptions, customer complaints and reduced sales, and our reputation may be materially and adversely affected if end users of our products are unsatisfied with our network partners’ performance. Our offline experience stores may not be successful due to factors beyond our control, such as underperformance of the stores or adverse market conditions.
We may experience service disruptions, customer complaints and reduced sales, and our reputation may be materially and adversely affected if end users of our products are unsatisfied with our network partners’ performance. 27 Table of Contents Our offline experience stores may not be successful due to factors beyond our control, such as underperformance of the stores or adverse market conditions.
We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and contractual remedies, which we cannot assure you will be sufficient or effective under PRC law.
We may also have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and contractual remedies, which we cannot assure you will be sufficient or effective under PRC laws.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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The PRC Foreign Investment Law also provides that the industries not included in the Negative List shall be managed under the principle that domestic investment and foreign investment shall be treated equally.
The PRC Foreign Investment Law also provides that industries not included in the Negative List shall be managed under the principle that domestic investment and foreign investment shall be treated equally.
It further stipulates that (1) providing or publicly disclosing documents and materials which may adversely affect national security or public interests, and accounting records or photocopies thereof to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals shall be subject to corresponding procedures in accordance with relevant laws and regulations; and (2) any working papers formed in the territory of the PRC by securities companies and securities service agencies that provide domestic enterprises with securities services relating to overseas securities issuance and listing shall be stored in the territory of the PRC, the outbound transfer of which shall be subject to corresponding procedures in accordance with relevant laws and regulations.
It further stipulates that (1) providing or publicly disclosing documents and materials which may adversely affect national security or public interests, and accounting records or photocopies thereof to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals shall be subject to corresponding procedures in accordance with the laws and regulations; and (2) any working papers formed in the territory of the PRC by securities companies and securities service agencies that provide domestic enterprises with securities services relating to overseas securities issuance and listing shall be stored in the territory of the PRC, the outbound transfer of which shall be subject to corresponding procedures in accordance with the laws and regulations.
Pursuant to the Exclusive Consultation Service Agreement, our WFOE II has the exclusive right to provide Foshan Viomi with the software technology development, technology consulting and technical services required by Foshan Viomi’ business. Without our WFOE II’s prior written consent, Foshan Viomi may not accept any same or similar services subject to this agreement from any third party.
Pursuant to the Exclusive Consultation Service Agreement, our WFOE II has the right to provide Foshan Viomi with the software technology development, technology consulting and technical services required by Foshan Viomi’ business. Without our WFOE II’s prior written consent, Foshan Viomi may not accept any same or similar services subject to this agreement from any third party.
In the opinion of Han Kun Law Offices, our PRC legal counsel: ● the ownership structures of our VIEs in China and our WFOEs, are not in violation of applicable PRC laws and regulations currently in effect; and ● the contractual arrangements between our company, our WFOEs, our VIEs and their respective shareholders governed by PRC law are valid, binding and enforceable, and will not result in any violation of applicable PRC laws.
In the opinion of Han Kun Law Offices, our PRC legal counsel: ● the ownership structures of our VIEs in China and our WFOEs, are not in violation of applicable PRC laws and regulations currently in effect; and ● the contractual arrangements between our company, our WFOEs, our VIEs and their respective shareholders governed by PRC laws are valid, binding and enforceable, and will not result in any violation of applicable PRC laws.
Pursuant to the Announcement of the State Administration of Taxation on Issuing the Administrative Measures for Special Tax Adjustment and Investigation and Mutual Consultation Procedures, effective on May 1, 2017, the tax authorities shall adopt means such as examination of declarations of related party transactions, management of contemporaneous documentation and monitoring of profit level, to implement monitoring and administration of special tax adjustment for enterprises; an enterprise may adjust and pay taxes at its own discretion when it receives a special tax adjustment risk warning or identifies its own special tax adjustment risks; and the tax authorities may also carry out special tax investigation and adjustment in accordance with the relevant provisions in regard to enterprises that adjust and pay taxes at their own discretion.
Pursuant to the Announcement of the State Administration of Taxation on Issuing the Administrative Measures for Special Tax Adjustment and Investigation and Mutual Consultation Procedures effective on May 1, 2017, the tax authorities shall adopt means such as examination of declarations of related party transactions, management of contemporaneous documentation and monitoring of profit level, to implement monitoring and administration of special tax adjustment for enterprises; an enterprise may adjust and pay taxes at its own discretion when it receives a special tax adjustment risk warning or identifies its own special tax adjustment risks; and the tax authorities may also carry out special tax investigation and adjustment in accordance with the provisions in regard to enterprises that adjust and pay taxes at their own discretion.
The Confidentiality and Archives Management Provisions require, among others, that PRC domestic enterprises seeking to offer and list securities in overseas markets, either directly or indirectly, shall establish and improve the system of confidentiality and archives work, and shall complete approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of state organs to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals.
The provisions require, among others, that PRC domestic enterprises seeking to offer and list securities in overseas markets, either directly or indirectly, shall establish and improve the system of confidentiality and archives work, and shall complete approval and filing procedures with competent authorities, if such PRC domestic enterprises or their overseas listing entities provide or publicly disclose documents or materials involving state secrets and work secrets of state organs to relevant securities companies, securities service institutions, overseas regulatory agencies and other entities and individuals.
PRC dividend withholding tax Pursuant to an Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the relevant conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%.
PRC dividend withholding tax Pursuant to an Arrangement Between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income, and other applicable PRC laws, if a Hong Kong resident enterprise is determined by the competent PRC tax authority to have satisfied the conditions and requirements under such Double Tax Avoidance Arrangement and other applicable laws, the 10% withholding tax on the dividends the Hong Kong resident enterprise receives from a PRC resident enterprise may be reduced to 5%.
If we or our VIE are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D.
If we or our VIE are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D.
However, the Administrative Measures on Internet Information Services promulgated by the State Council on January 8, 2011 prohibit an ICP Operator from insulting or slandering a third party or infringing the lawful rights and interests of a third party. The regulations further authorize the relevant telecommunications authorities to order ICP Operators to rectify unauthorized disclosure.
However, the Administrative Measures on Internet Information Services promulgated by the State Council on January 8, 2011 prohibit an ICP Operator from insulting or slandering a third party or infringing the lawful rights and interests of a third party. The regulations further authorize the telecommunications authorities to order ICP Operators to rectify unauthorized disclosure.
We evaluate on an ongoing basis our current contract manufacturers and component suppliers, including whether or not to utilize new or alternative contract manufacturers or component suppliers. Our two in-house facilities, Guangdong Lizi and Guangdong AI Touch have commenced commercial operations in the first half of 2019 and were integrated into our Viomi platform.
We evaluate on an ongoing basis our current contract manufacturers and component suppliers, including whether or not to utilize new or alternative contract manufacturers or component suppliers. Our two in-house facilities, Guangdong Lizi and Guangdong AI Touch, commenced commercial operations in the first half of 2019 and were integrated into our Viomi platform.
Specifically, personal information processors using personal information for automated decision-making shall ensure the transparency of decision-making and the fairness and impartiality of the results, and shall not impose unreasonable differential treatment on individuals in terms of pricing and other transaction conditions. The relevant governmental authorities shall organize assessment on mobile apps’ personal information protection and publicize the outcome.
Specifically, personal information processors using personal information for automated decision-making shall ensure the transparency of decision-making and the fairness and impartiality of the results, and shall not impose unreasonable differential treatment on individuals in terms of pricing and other transaction conditions. The governmental authorities shall organize assessment on mobile apps’ personal information protection and publicize the outcome.
Our customers may return all products purchased from our official Viomi online store and other online platforms within seven days from receipt. Our customers may also have their products replaced for specific types of defects or quality issues as required under the relevant laws and regulations.
Our customers may return all products purchased from our official Viomi online store and other online platforms within seven days from receipt. Our customers may also have their products replaced for specific types of defects or quality issues as required under the laws and regulations.
Furthermore, our employees’ access to our internal information management system is limited to verified IP address and we restrict the scope of such access based on the duty of the employee. Our data is stored securely in Xiaomi, Huawei, Alibaba and Tencent Cloud services.
Furthermore, our employees’ access to our internal information management system is limited to verified IP address and we restrict the scope of such access based on the duty of the employee. Our data is stored securely in Huawei, Tencent, Alibaba, Xiaomi and Volcengine Cloud services.
In addition, in April 2021 we introduced the high-end EROx mineral water purifier with the application of electrodialysis technique which is able to retain the minerals beneficial for human health to further meet the diverse demands of our users.
In April 2021, we introduced the high-end EROx mineral water purifier with the application of electrodialysis technique which is able to retain the minerals beneficial for human health to further meet the diverse demands of our users.
However, if the dispute cannot be settled through mutual consultation, the patent owner, or an interested party who believes the patent is being infringed, may either file a civil legal suit or file an administrative complaint with the relevant patent administration authority.
However, if the dispute cannot be settled through mutual consultation, the patent owner, or an interested party who believes the patent is being infringed, may either file a civil legal suit or file an administrative complaint with the patent administration authority.
Our PRC subsidiaries and VIEs have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options or hold the vested restricted shares.
Our PRC subsidiaries and VIEs have obligations to file documents related to employee share options or restricted shares with the tax authorities and to withhold individual income taxes of those employees who exercise their share options or hold the vested restricted shares.
Under the PRC Cyber Security Law, network operators are subject to various security protection-related obligations, including: (i) network operators shall comply with certain obligations regarding maintenance of the security of internet systems; (ii) network operators shall verify users’ identities before signing agreements or providing certain services such as information publishing or real-time communication services; (iii) when collecting or using personal information, network operators shall clearly indicate the purposes, methods and scope of the information collection, the use of information collection, and obtain the consent of those from whom the information is collected; (iv) network operators shall strictly preserve the privacy of user information they collect, and establish and maintain systems to protect user privacy; (v) network operators shall strengthen management of information published by users, and when they discover information prohibited by laws and regulations from publication or dissemination, they shall immediately stop dissemination of that information, including taking measures such as deleting the information, preventing the information from spreading, saving relevant records, and reporting to the relevant governmental agencies.
Under the Cybersecurity Law, network operators are subject to various security protection-related obligations, including: (i) network operators shall comply with certain obligations regarding maintenance of the security of internet systems; (ii) network operators shall verify users’ identities before signing agreements or providing certain services such as information publishing or real-time communication services; (iii) when collecting or using personal information, network operators shall clearly indicate the purposes, methods and scope of the information collection, the use of information collection, and obtain the consent of those from whom the information is collected; (iv) network operators shall strictly preserve the privacy of user information they collect, and establish and maintain systems to protect user privacy; (v) network operators shall strengthen management of information published by users, and when they discover information prohibited by laws and regulations from publication or dissemination, they shall immediately stop dissemination of that information, including taking measures such as deleting the information, preventing the information from spreading, saving relevant records, and reporting to the governmental agencies.
On February 13, 2015, the SAFE promulgated the Circular on Further Simplifying and Improving the Policies Concerning Foreign Exchange Control on Direct Investment, or SAFE Circular 13, which took effect on June 1, 2015 and was amended on December 30, 2019.
On February 13, 2015, the SAFE promulgated the Circular on Further Simplifying and Improving the Policies Concerning Foreign Exchange Control on Direct Investment, which took effect on June 1, 2015 and was amended on December 30, 2019.
According to the Regulations on Management of Housing Fund, effective on April 3, 1999, and most recently amended on March 24, 2019, when employing new staff or workers, the units shall undertake housing fund payment and deposit registration at the housing fund management center within 30 days from the date of the employment, and the housing fund to be paid and deposited by an individual staff member or worker shall be withheld from his salary by the unit for which he serves.
According to the Regulations on Management of Housing Fund, which became effective on April 3, 1999 and was most recently amended on March 24, 2019, when employing new staff or workers, the units shall undertake housing fund payment and deposit registration at the housing fund management center within 30 days from the date of the employment, and the housing fund to be paid and deposited by an individual staff member or worker shall be withheld from his salary by the unit for which he serves.
If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and regulations, we may face sanctions imposed by the tax authorities or other PRC government authorities.
If our employees fail to pay or we fail to withhold their income taxes according to the laws and regulations, we may face sanctions imposed by the tax authorities or other PRC government authorities.
These flagship stores enhanced our “trending technology” branding positioning through unified storefront decoration and immersive scenario experience, and helped implement our one-stop IoT home solutions.” Third-party offline channels To further diversify and strengthen our overall channel penetration and presence, we have increased our overall points of sales, particularly through cooperation with various O2O outlets of major e-commerce retailers such as JD, as well as established strategic partnership with leading domestic home design enterprises such as KUKA, all of which are expected to increase our end-points of sales and overall consumer awareness of our brand, products and concept.
These flagship stores enhanced our “trending technology” branding positioning through unified storefront decoration and immersive scenario experience, and helped implement our one-stop IoT home solutions.” 66 Table of Contents Third-party offline channels To further diversify and strengthen our overall channel penetration and presence, we have increased our overall points of sales, particularly through cooperation with various O2O outlets of major e-commerce retailers such as JD, as well as established strategic partnership with leading domestic home design enterprises such as KUKA, all of which are expected to increase our end-points of sales and overall consumer awareness of our brand, products and concept.
Processors processing personal information exceeding the threshold to be set by the relevant authorities and critical information infrastructure operators are required to store, within the territory of the PRC, the personal information collected and produced within the PRC.
Processors processing personal information exceeding the threshold to be set by the authorities and critical information infrastructure operators are required to store, within the territory of the PRC, the personal information collected and produced within the PRC.
In addition, the PRC Data Security Law provides a national security review procedure for those data activities which affect or may affect national security and imposes export restrictions on certain data and information. 90 Table of Contents On July 30, 2021, the State Council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1, 2021.
In addition, the PRC Data Security Law provides a national security review procedure for those data activities which affect or may affect national security and imposes export restrictions on certain data and information. 81 Table of Contents On July 30, 2021, the State Council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1, 2021.
On July 21, 2015, our WFOE I, Beijing Viomi and each of the shareholders of Beijing Viomi entered into an Exclusive Consultation and Service Agreement, which contains terms substantially similar to the Exclusive Consultation and Service Agreement described above. 98 Table of Contents Agreements that provide us with the option to purchase the equity interests in and assets of our VIEs Exclusive Option Agreements.
On July 21, 2015, our WFOE I, Beijing Viomi and each of the shareholders of Beijing Viomi entered into an Exclusive Consultation and Service Agreement, which contains terms substantially similar to the Exclusive Consultation and Service Agreement described above. 90 Table of Contents Agreements that provide us with the option to purchase the equity interests in and assets of our VIEs Exclusive Option Agreements.
On November 14, 2021, the CAC issued the Draft Cyber Data Security Regulations, which provide that data processors conducting the following activities shall apply for cybersecurity review: (i) merger, reorganization or separation of Internet platform operators that have acquired a large number of data resources related to national security, economic development or public interests affects or may affect national security; (ii) listing abroad of data processors processing over one million users’ personal information; (iii) listing in Hong Kong which affects or may affect national security; or (iv) other data processing activities that affect or may affect national security.
On November 14, 2021, the CAC issued the Regulations on the Network Data Security (Draft for Comments), which provide that data processors conducting the following activities shall apply for cybersecurity review: (i) merger, reorganization or separation of Internet platform operators that have acquired a large number of data resources related to national security, economic development or public interests affects or may affect national security; (ii) listing abroad of data processors processing over one million users’ personal information; (iii) listing in Hong Kong which affects or may affect national security; or (iv) other data processing activities that affect or may affect national security.
In addition, the PRC Cyber Security Law requires that critical information infrastructures operators generally shall store, within the territory of the PRC, the personal information and important data collected and produced during their operations in the PRC and their purchase of network products and services that affect or may affect national securities shall be subject to national cybersecurity review.
In addition, the Cybersecurity Law requires that critical information infrastructures operators generally shall store, within the territory of the PRC, the personal information and important data collected and produced during their operations in the PRC and their purchase of network products and services that affect or may affect national securities shall be subject to national cybersecurity review.
Further, we leverage social-media, including live-streaming platforms to engage with users of our products, whereby we enhance user-experience while promoting our brand. For example, we have invited internet key opinion leaders, or KOLs, industry KOLs, celebrities, and even our management and employees to be live-streaming hosts.
Further, we leverage social-media, including live-streaming platforms to engage with users of our products, whereby we enhance user-experience while promoting our brand. For example, we have invited key opinion leaders, or KOLs, celebrities, and even our management and employees to be live-streaming hosts.
If the seller pays compensation and it is the manufacturer that should bear the liability, the seller has a right of recourse against the manufacturer. Similarly, if the manufacturer pays compensation and it is the seller that should bear the liability, the manufacturer has a right of recourse against the seller.
If the seller pays compensation and it is the manufacturer that should bear the liability, the seller has a right of recourse against the manufacturer.
Patents relating to invention are effective for twenty years, and utility models and designs are effective for ten years from the date of application.
Patents relating to invention are effective for twenty years, utility models are effective for ten years, and designs are effective for fifteen years from the date of application.
Failure to comply with this requirement will result in the denial of any Chinese patent for the relevant invention. This added requirement of confidential examination by the SIPO has raised concerns by foreign companies who conduct research and development activities in China or outsource research and development activities to service providers in China.
Failure to comply with this requirement will result in the denial of any Chinese patent for the relevant invention. This added requirement of confidential examination by the agency has raised concerns by foreign companies who conduct research and development activities in China or outsource research and development activities to service providers in China.
Software copyright law The PRC Copyright Law (Revised in 2020) provides that Chinese citizens, legal persons, or other organizations shall, whether published or not, enjoy copyright in their works, which include, among others, works of literature, art, natural science, social science, engineering technology and computer software.
Software copyright law The PRC Copyright Law (2020 Revision) provides that Chinese citizens, legal persons, or other organizations shall, whether published or not, enjoy copyright in their works, which include, among others, works of literature, art, natural science, social science, engineering technology and computer software.
Hereafter, the Ministry of Health and the NHFPC promulgated Regulations on Administrative License for Hygienic Safety Products involving Drinking Water at the Provincial Level, delegating the authority of examination and approval of products related to hygiene and safety of drinking water, except for those made of new materials, technology and chemicals, to the health and family planning department at the provincial level.
Hereafter, the Ministry of Health and the NHFPC promulgated Regulations on Administrative License for Hygienic Safety Products involving Drinking Water at the Provincial Level, delegating the authority of examination and approval of products related to hygiene and safety of drinking water, except for those made of new materials, technology and chemicals, to the hygiene and health department at the provincial level.
Our AI technology team develops and refines our proprietary, artificial intelligence-based algorithms, and leverages third-party AI components to build a more effective system. Artificial intelligence technology is widely implemented through our services, for example in voice and gesture control, as well as in water quality analysis.
Our AI technology team develops and refines our proprietary, AI-based algorithms, and leverages third-party AI components to build a more effective system. AI technology is widely implemented through our services, for example in voice and gesture control, as well as in water quality analysis.
Regulation on foreign exchange The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended on August 5, 2008.
Regulations on foreign exchange The principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, most recently amended on August 5, 2008.
In addition, relevant administration departments of each critical industry and sector, or Protection Departments, shall be responsible to formulate eligibility criteria and determine the critical information infrastructure operator in the respective industry or sector. The operators shall be informed about the final determination as to whether they are categorized as critical information infrastructure operators.
In addition, the administration departments of each critical industry and sector shall be responsible to formulate eligibility criteria and determine the critical information infrastructure operator in the respective industry or sector. The operators shall be informed about the final determination as to whether they are categorized as critical information infrastructure operators.
A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. 96 Table of Contents C.
A PRC company is not permitted to distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year. 88 Table of Contents C.
Pursuant to this circular, the opening of various special purpose foreign exchange accounts (e.g., pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts), the reinvestment of lawful incomes derived by foreign investors in China (e.g., profit, proceeds of equity transfer, capital reduction, liquidation and early repatriation of investment) and purchase and remittance of foreign exchange as a result of capital reduction, liquidation, early repatriation or share transfer in an FIE no longer require the SAFE approval, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible before.
Pursuant to this circular, the opening of various special purpose foreign exchange accounts (e.g., pre-establishment expenses accounts, foreign exchange capital accounts and guarantee accounts), the reinvestment of lawful incomes derived by foreign investors in China (e.g., profit, proceeds of equity transfer, capital reduction, liquidation and early repatriation of investment) and purchase and remittance of foreign exchange as a result of capital reduction, liquidation, early repatriation or share transfer in a foreign-invested enterprise no longer require the SAFE approval, and multiple capital accounts for the same entity may be opened in different provinces, which was not possible before.
We have acquired land use rights to a parcel of land of approximately 36,000 square meters from the local government in Shunde, Guangdong Province, for the development of Viomi IoT Technology Park, a comprehensive high-tech industrial campus, which is expected to be completed in two phases over an up to five-year period.
We acquired land use rights to a parcel of land of approximately 36,000 square meters from the local government in Shunde, Guangdong Province in June 2020, for the development of Viomi IoT Technology Park, a comprehensive high-tech industrial campus, which is expected to be completed in two phases over an up to five-year period.
We have constant access to each manufacturing facility of our contract manufacturers, and our quality control team continuously monitors the quality of incoming components, materials and finished products, as well as the manufacturing processes at our contract manufacturers’ facilities.
We have constant access to each manufacturing facility of our contract manufacturers, and our quality control team continually monitors the quality of incoming components, materials and finished products, as well as the manufacturing processes at our contract manufacturers’ facilities.
Equity Pledge Agreements. Our WFOE I, Foshan Viomi and Mr. Xiaoping Chen entered into an Equity Pledge Agreement on September 5, 2018, or the Original Equity Pledge Agreement. On April 28, 2020, WFOE I, Foshan Viomi and Mr. Xiaoping Chen entered into a Termination Agreement, which terminated the Original Equity Pledge Agreement.
Xiaoping Chen entered into an Equity Pledge Agreement on September 5, 2018, or the Original Equity Pledge Agreement. On April 28, 2020, WFOE I, Foshan Viomi and Mr. Xiaoping Chen entered into a Termination Agreement, which terminated the Original Equity Pledge Agreement.
Pursuant to the Provisions on the Administration of Foreign-Invested Telecom Enterprises, promulgated by the State Council in 2001 and last amended in 2022, the foreign investor are prohibited from holding more than 50% of the equity interests of a telecom enterprise operating value-added telecom services unless otherwise provided by relevant laws and regulations.
Pursuant to the Provisions on the Administration of Foreign-Invested Telecom Enterprises, promulgated by the State Council in 2001 and last amended in 2022, foreign investors are prohibited from holding more than 50% of the equity interests of a telecom enterprise operating value-added telecom services unless otherwise provided by the laws and regulations.
SAFE Circular 13 delegates the authority to enforce the foreign exchange registration in connection with the inbound and outbound direct investment under relevant SAFE rules to certain banks and therefore further simplifies the foreign exchange registration procedures for inbound and outbound direct investment.
The circular delegates the authority to enforce the foreign exchange registration in connection with the inbound and outbound direct investment under the SAFE rules to certain banks and therefore further simplifies the foreign exchange registration procedures for inbound and outbound direct investment.
In 2022, we deepened our cooperation with JD Logistics to access a broader range of services including planning, logistics, warehousing and installation, which we believe improves efficiency throughout our cycle, from solution design and delivery to installation, as well as provide our customers with more enjoyable after-sale service experience.
Since 2022, we have deepened our cooperation with JD Logistics to access a broader range of services including planning, logistics, warehousing and installation, which we believe improves efficiency throughout our cycle, from solution design and delivery to installation, as well as provide our customers with more enjoyable after-sale service experience.
We continuously develop our platform to offer users an effortless and seamless experience across our products and services, while at the same time enhancing the reliability and scalability of our platform. We cooperate with Xiaomi, Huawei, Alibaba and Tencent Cloud services for services such as computing services, storage, server, bandwidth and video call.
We continually develop our platform to offer users an effortless and seamless experience across our products and services, while at the same time enhancing the reliability and scalability of our platform. We cooperate with Xiaomi, Huawei, Alibaba, Tencent and Volcengine Cloud services for services such as computing services, storage, server, bandwidth and video call.
The PRC Foreign Investment Law was promulgated on March 15, 2019 by the State Council and has come into force since January 1, 2020, which stipulates that the state implements a management system of pre-entry national treatment plus Negative List for the administration of foreign investment.
The PRC Foreign Investment Law was promulgated on March 15, 2019 by the National People’s Congress and has come into force since January 1, 2020, which stipulates that the state implements a management system of pre-entry national treatment plus Negative List for the administration of foreign investment.
For products that are subject to Compulsory Product Certification, the state implements unified product catalogue, or the 3C Catalogue, unified compulsory requirements, standards and compliance assessment procedures in technical specification, unified certification marks and unified charging standards.
For products that are subject to Compulsory Product Certification, the state implements unified product catalogue, unified compulsory requirements, standards and compliance assessment procedures in technical specification, unified certification marks and unified charging standards.
Using our cloud-based software system, our products receive automatic updates, often on an overnight basis, to incorporate new functionalities and grow smarter over time based on our data analysis. Artificial Intelligence We intend to leverage ongoing advancements in artificial intelligence by incorporating them into our products and services.
Using our cloud-based software system, our products receive automatic updates, often on an overnight basis, to incorporate new functionalities and grow smarter over time based on our data analysis. AI We intend to leverage ongoing advancements in AI by incorporating them into our products and services.
According to the PRC Social Insurance Law, effective on July 1, 2011 and most recently amended on December 29, 2018, an employer that fails to make social insurance contributions may be ordered to pay the required contributions within a stipulated deadline and be subject to a late fee.
According to the PRC Social Insurance Law, which became effective on July 1, 2011 and was most recently amended on December 29, 2018, an employer that fails to make social insurance contributions may be ordered to pay the required contributions within a stipulated deadline and be subject to a late fee.
Regulation on mobile internet Pursuant to the Provisions on the Administration of Mobile Internet Applications Information Services, or the Provisions on Administration of Application, promulgated by the CAC in June 2016 and effective on August 1, 2016, and lastly amended on June 14, 2022 and effective on August 1, 2022, application providers shall obtain the relevant qualifications prescribed by laws and regulations, strictly implement their information content administrator responsibilities and carry out the duties including to authenticate the real identity information of users, establish and complete information content inspection and management mechanisms, fulfill the data security protection obligations and regulate personal information processing activities.
Regulations on mobile internet Pursuant to the Provisions on the Administration of Mobile Internet Applications Information Services promulgated by the CAC in June 2016 and lastly amended on June 14, 2022, application providers shall obtain the relevant qualifications prescribed by laws and regulations, strictly implement their information content administrator responsibilities and carry out the duties including to authenticate the real identity information of users, establish and complete information content inspection and management mechanisms, fulfill the data security protection obligations and regulate personal information processing activities.
However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties issued in 2009 by the SAT, if the relevant PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment; and based on the Announcement on Certain Issues with Respect to the “Beneficial Owner” in Tax Treaties, issued on February 3, 2018, and effective on April 1, 2018, the business activities conducted by the applicant do not constitute substantive business activities is one of the factors which are not conductive to the determination of an applicant’s status as a “beneficial owner”, and thus are not entitled to the above-mentioned reduced income tax rate of 5% under the Double Tax Avoidance Arrangement.
However, based on the Circular on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties issued in 2009 by the State Administration of Taxation, if the PRC tax authorities determine, in their discretion, that a company benefits from such reduced income tax rate due to a structure or arrangement that is primarily tax-driven, such PRC tax authorities may adjust the preferential tax treatment; and based on the Announcement on Certain Issues with Respect to the “Beneficial Owner” in Tax Treaties, which was issued on February 3, 2018 and became effective on April 1, 2018, the business activities conducted by the applicant do not constitute substantive business activities is one of the factors which are not conductive to the determination of an applicant’s status as a “beneficial owner”, and thus are not entitled to the above-mentioned reduced income tax rate of 5% under the Double Tax Avoidance Arrangement.
The PRC Enterprise Income Tax Law imposes a uniform enterprise income tax rate of 25% on all PRC resident enterprises, including FIEs, unless they qualify for certain exceptions. The enterprise income tax is calculated based on the PRC resident enterprise’s global income as determined under PRC tax laws and accounting standards.
The PRC Enterprise Income Tax Law imposes a uniform enterprise income tax rate of 25% on all PRC resident enterprises, including foreign-invested enterprises, unless they qualify for certain exceptions. The enterprise income tax is calculated based on the PRC resident enterprise’s global income as determined under PRC tax laws and accounting standards.
In July 2011, the Ministry of Health (currently, the NHFPC) promulgated the Notice on Adjustment of Hygiene Administrative License for Domestic Reverse Osmosis Water Purifier and Domestic Nano Filter Water Purifier, which delegates health administrative departments at the provincial level the authority to regulate domestic reverse osmosis water purifiers and domestic nano filter water purifiers.
In July 2011, the Ministry of Health (currently, the National Health Commission) promulgated the Notice on Adjustment of Hygiene Administrative License for Domestic Reverse Osmosis Water Purifier and Domestic Nano Filter Water Purifier, which delegates health administrative departments at the provincial level the authority to regulate domestic reverse osmosis water purifiers and domestic nano filter water purifiers.
Xiaoping Chen has completed his initial registrations with the local branch of the SAFE and all the PRC resident shareholders shall register or amend their existing registrations with the local branch of the SAFE in connection with the equity interest of our company held by them directly or indirectly through the trust arrangements adopted in 2020, please see the description under “Item 6.
Mr. Xiaoping Chen has completed his initial registrations with the local branch of the SAFE and all the PRC resident shareholders shall register or amend their existing registrations with the local branch of the SAFE in connection with the equity interest of our company held by them directly or indirectly through the trust arrangements adopted in 2020. See “Item 6.
On March 20, 2019, the PRC Ministry of Finance, the SAT and the General Administration of Customs promulgated the Announcement on Policies to Deepen Value-Added Tax Reform, which provides that the applicable tax rate for VAT taxable sales or imports by a general taxpayer of VAT shall be adjusted to 13% from the original 16% and to 9% from the original 10%, commencing on April 1, 2019. 93 Table of Contents According to the Circular of the State Administration of Taxation on Printing and Distributing the Administrative Measures for Tax Refund (Exemption) for Exported Goods (for Trial Implementation), effective on May 1, 2005 and the Announcement of the State Administration of Taxation on the Revision to Certain Taxation Regulatory Documents, effective on June 15, 2018, unless otherwise provided by law, for the goods as exported via an export agency, the exporter may, after the export declaration and the conclusion of financial settlement for sales, file a report to competent Local Taxation Bureau for the approval of refund or exemption of VAT or consumption tax on the strength or the relevant certificates.
On March 20, 2019, the Ministry of Finance, the State Administration of Taxation and the General Administration of Customs promulgated the Announcement on Policies to Deepen Value-Added Tax Reform, which provides that the applicable value-added tax rate for taxable sales or imports by a general taxpayer of value-added tax shall be 13% and 9%, commencing on April 1, 2019. 85 Table of Contents According to the Circular of the State Administration of Taxation on Printing and Distributing the Administrative Measures for Tax Refund (Exemption) for Exported Goods (for Trial Implementation) effective on May 1, 2005 and the Announcement of the State Administration of Taxation on the Revision to Certain Taxation Regulatory Documents effective on June 15, 2018, unless otherwise provided by law, for the goods as exported via an export agency, the exporter may, after the export declaration and the conclusion of financial settlement for sales, file a report to competent Local Taxation Bureau for the approval of refund or exemption of VAT or consumption tax on the strength or the relevant certificates.
The SAFE promulgated the Circular of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, or Circular 16, effective on June 9, 2016, which reiterates some of the rules set forth in Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-affiliated enterprises.
The SAFE promulgated the Circular of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account effective on June 9, 2016, which reiterates some of the rules set forth in the Circular on Reforming the Administration Measures on Conversion of Foreign Exchange Registered Capital of Foreign-invested Enterprises, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-affiliated enterprises.
If the consequences of any such disclosure are expected to be serious, ICP Operators must immediately report the incident to the telecommunications regulatory authority and cooperate with the authorities in their investigations. On December 28, 2012, the Standing Committee of the NPC issued the Decision on Strengthening the Protection of Online Information.
If the consequences of any such disclosure are expected to be serious, ICP Operators must immediately report the incident to the telecommunications regulatory authority and cooperate with the authorities in their investigations. On December 28, 2012, the Standing Committee of the National People’s Congress issued the Decision on Strengthening the Protection of Online Information.
Other smart products In addition to our smart kitchen products lineup, we also offer a diverse array of IoT products that complements our IoT @ Home portfolio and addresses users’ needs across different home scenarios, such as air conditioning systems, washing machines, water heaters, smart water kettles, interactive smart screens (TVs), sweeper robots, smart locks, smart screen-based control interface and other smart devices, among others. 72 Table of Contents Home water solutions The core of our home water solutions is our self-branded and Xiaomi-branded smart water purifiers, which are complemented by our easy-to-install replaceable water filter consumable products.
Other smart products In addition to our smart kitchen products lineup, we also offer a diverse array of IoT products that complement our IoT@Home portfolio products and addresses users’ needs in different home scenarios, such as air conditioning systems, washing machines, water heaters, smart water kettles, interactive smart screens (TVs), sweeper robots, smart locks, smart screen-based control interface and other smart devices, among others. 64 Table of Contents Home water solutions The core of our home water solutions is our Viomi-branded and Xiaomi-branded smart water purifiers, which are complemented by our easy-to-install replaceable water filter consumable products.
Our strong research and development capabilities, supply chain resources and innovative products and services are able to enrich Xiaomi’s suite of offerings, resulting in a mutually beneficial relationship between Xiaomi and us. We have developed a 5G IoT home structure, which integrates a technology framework, AI algorithms, 5G IoT chip modules, sensors, smart hardware and cloud storage.
Our strong research and development capabilities, supply chain resources and innovative products and services are able to enrich Xiaomi’s suite of offerings, resulting in a mutually beneficial relationship between Xiaomi and us. We have developed a 5G IoT home system, which combines technology, AI algorithms, 5G IoT chip modules, sensors, smart hardware and cloud storage.
Currently, a majority of our product manufacturing is outsourced to a number of contract manufacturers, who produce our products using design specifications and standards that we have established. We also help our contract manufacturers to design the equipment and tooling used in the production and help train their workers.
Currently, a majority of our product manufacturing, excluding water purification products and filters, is outsourced to a number of contract manufacturers, who produce our products using design specifications and standards that we have established. We also help our contract manufacturers to design the equipment and tooling used in the production and help train their workers.
Regulation on product quality and consumer protection The PRC Product Quality Law applies to all production and sale activities in China. Pursuant to this law, products offered for sale must satisfy the relevant quality and safety standards. Enterprises may not produce or sell counterfeit products in any fashion.
Regulations on product quality and consumer protection The PRC Product Quality Law applies to all production and sale activities in China. Pursuant to this law, products offered for sale must satisfy the relevant quality and safety standards. Enterprises may not produce or sell counterfeit products in any manner.
Article 19 of the PRC Patent Law provides that, for an invention or utility model completed in China, any applicant (not just Chinese companies and individuals), before filing a patent application outside of China, must first submit it to the SIPO for a confidential examination.
Article 19 of the PRC Patent Law provides that, for an invention or utility model completed in China, any applicant (not just Chinese companies and individuals), before filing a patent application outside of China, must first submit it to the State Intellectual Property Office of China for a confidential examination.
This rule classified internet information services into commercial internet information services and non-commercial internet information services, and a commercial operator of internet information services or transaction processing services must obtain a corresponding operating permit for value-added telecommunications services (VATS License) from the appropriate telecommunications administration authorities.
These measures classified internet information services into commercial internet information services and non-commercial internet information services, and a commercial operator of internet information services or transaction processing services must obtain a corresponding operating permit for value-added telecommunications services (VATS License) from the appropriate telecommunications administration authorities.
Guangdong Lizi was established as a smart water purification system facility focusing on the research, design, production and supply of smart water purifiers and water purifier filters, and then expanded to research, design, production and supply of some of smart sweeper robots, alongside the supply of some small appliances.
Guangdong Lizi is a smart water purification system facility focusing on the research, design, production and supply of smart water purifiers and water purifier filters, and then expanded to research, design, production and supply of some of smart sweeper robots, alongside the supply of some small appliances.
To comply with these laws and regulations, we have obtained the certificates, licenses and labels necessary for our current products. Further, we have verified the qualifications of our manufacturing contractors for the production of the relevant products before their engagement by requiring them to provide effective licenses, such as the industrial product production license.
To comply with these laws and regulations, we have obtained the certificates, licenses and labels necessary for our current products. Further, we have verified the qualifications of our manufacturing contractors for the production of the relevant products before their engagement by requiring them to provide effective licenses.
Most requirements under this decision relevant to ICP Operators are consistent with the requirements already established under the MIIT provisions discussed above, but are often stricter and broader. Under this decision, ICP Operators are required to take such technical and other measures necessary to safeguard information against inappropriate disclosure.
Most requirements under this decision relevant to ICP Operators are consistent with the requirements already established under the Ministry of Industry and Information Technology provisions discussed above, but are often stricter and broader. Under this decision, ICP Operators are required to take such technical and other measures necessary to safeguard information against inappropriate disclosure.
On August 20, 2021, the Standing Committee of the NPC promulgated the Personal Information Protection Law, which came into effect on November 1, 2021. The Personal Information Protection Law integrates the scattered rules with respect to personal information rights and privacy protection.
On August 20, 2021, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law, which came into effect on November 1, 2021. The Personal Information Protection Law integrates the scattered rules with respect to personal information rights and privacy protection.
On November 28, 2019, the Secretary Bureau of the CAC, the General Office of the MIIT, the General Office of the Ministry of Public Security and the General Office of the State Administration of Market Regulation, or the SAMR, issued the Notice on the Measures for the Determination of the Collection and Use of Personal Information by Apps in Violation of Laws and Regulations.
On November 28, 2019, the Secretary Bureau of the CAC, the General Office of the Ministry of Industry and Information Technology, the General Office of the Ministry of Public Security and the General Office of the State Administration of Market Regulation issued the Notice on the Measures for the Determination of the Collection and Use of Personal Information by Apps in Violation of Laws and Regulations.
After the need is identified, the user can interact with our IoT products operating in that exact scenario and place the order for the product or service. For example, when the laundry detergent is running low, our washing machine can remind the user or automatically place the order for refill.
Once the need is identified, the user can interact with our IoT products operating in that particular scenario and place an order for the product or service. For example, when the laundry detergent is running low, our washing machine can remind the user or automatically place an order for refill.
The Mobile Application Interim Measures requires, among others, that internet information service providers must ensure that a mobile application, as well as its ancillary resource files, configuration files and user data can be uninstalled by a user on a convenient basis, unless it is a basic function software, which refers to a software that supports the normal functioning of hardware and operating system of a mobile smart device.
These measures require internet information service providers to ensure that a mobile application, as well as its ancillary resource files, configuration files and user data can be uninstalled by a user on a convenient basis, unless it is a basic function software, which refers to a software that supports the normal functioning of hardware and operating system of a mobile smart device.
We also sell products via our proprietary Viomi mobile app and WeChat program. In 2022, we reached a strategic cooperation with Tmall concerning a portfolio of one-stop smart home solutions. Together, we and Tmall promote a whole-home smart ecology, with an AI smart kitchen, living room, balcony, restroom and bedroom.
We also sell products via our proprietary Viomi mobile app and WeChat program. Since 2022, we have established a strategic cooperation relationship with Tmall concerning a portfolio of one-stop smart home solutions. Together, we and Tmall promote a whole-home smart ecology, with an AI smart kitchen, living room, balcony, restroom and bedroom.
To further implement this decision and relevant rules, MIIT issued the Regulation of Protection of Telecommunication and Internet User Information on July 16, 2013, which became effective on September 1, 2013.
To further implement this decision and relevant rules, the Ministry of Industry and Information Technology issued the Regulation of Protection of Telecommunication and Internet User Information on July 16, 2013, which became effective on September 1, 2013.
Creativity means that, compared with existing technology, an invention has prominent substantial features and represents notable progress, and a utility model has substantial features and represents any progress. Practical applicability means an invention or utility model can be manufactured or used and may produce positive results. Patents in China are filed with the SIPO.
Creativity means that, compared with existing technology, an invention has prominent substantial features and represents notable progress, and a utility model has substantial features and represents any progress. Practical applicability means an invention or utility model can be manufactured or used and may produce positive results. Patents in China are filed with the State Intellectual Property Office of China.
It stipulates that ICP Operators may not, without a user’s consent, collect the user’s information that can be used alone or in combination with other information to identify the user and may not provide any such information to third parties without the user’s prior consent.
These provisions stipulate that ICP Operators may not, without a user’s consent, collect the user’s information that can be used alone or in combination with other information to identify the user and may not provide any such information to third parties without the user’s prior consent.
We have a working data redundancy model with comprehensive backups of both cloud services. This redundancy supports the reliability of our network and the stable operation of our business. 79 Table of Contents Competition We compete with other companies in all aspects of our business, particularly companies that are in the home appliances and smart home markets.
We have a working data redundancy model with comprehensive backups of both cloud services. This redundancy supports the reliability of our network and the stable operation of our business. Competition We compete with other companies in all aspects of our business, particularly companies that are in the home appliances market.
Pursuant to the Civil Code, the collection, storage, use, process, transmission, provision and processing of personal information should follow the principles of legitimacy, properness and necessity. 89 Table of Contents The Cyber Security Law of the PRC, or the PRC Cyber Security Law, which was promulgated on November 7, 2016 by the Standing Committee of the NPC and came into effect on June 1, 2017, provides that network operators shall meet their cyber security obligations and shall take technical measures and other necessary measures to protect the safety and stability of their networks.
Pursuant to the Civil Code, the collection, storage, use, process, transmission, provision and disclosure of personal information should follow the principles of legitimacy, properness and necessity. 80 Table of Contents The Cybersecurity Law of the PRC, which was promulgated on November 7, 2016 by the Standing Committee of the National People’s Congress and came into effect on June 1, 2017, provides that network operators shall meet their cyber security obligations and shall take technical measures and other necessary measures to protect the safety and stability of their networks.
Under these laws and regulations, FIEs in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
Under these laws and regulations, foreign-invested enterprises in China may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations.
Sales through our own and third-party channels, which constitute the vast majority of our Viomi-branded products business, accounted for 50.4%, 56.7% and 56.6% of our net revenues in 2020, 2021 and 2022, respectively. Xiaomi is our strategic partner, shareholder and customer.
Sales through our own and third-party channels, which constitute the vast majority of our Viomi-branded products business, accounted for 56.7%, 56.6% and 47.2% of our net revenues in 2021, 2022 and 2023, respectively. Xiaomi is our strategic partner, shareholder and customer.
Our strategic partnership with Xiaomi provides us with access to Xiaomi’s ecosystem users, sales platforms and data resources and related support. Sales to Xiaomi, predominantly comprising Xiaomi-branded products, accounted for 49.6%, 43.3% and 43.4% of our net revenues in 2020, 2021 and 2022, respectively.
Our strategic partnership with Xiaomi provides us with access to Xiaomi’s ecosystem users, sales platforms and data resources and related support. Sales to Xiaomi, predominantly comprising Xiaomi-branded products, accounted for 43.3%, 43.4% and 52.8% of our net revenues in 2021, 2022 and 2023, respectively.
ICP Operators are subject to legal liability if the unauthorized disclosure results in damages or losses to users. On December 29, 2011, the MIIT promulgated the Several Provisions on Regulating the Market Order of Internet Information Services, effective as of March 15, 2012.
ICP Operators are subject to legal liability if the unauthorized disclosure results in damages or losses to users. On December 29, 2011, the Ministry of Industry and Information Technology promulgated the Several Provisions on Regulating the Market Order of Internet Information Services effective on March 15, 2012.
Although SAFE Circular 19 allows for the use of RMB converted from the foreign currency-denominated capital for equity investments in China, the restrictions continue to apply as to FIEs’ use of the converted RMB for purposes beyond the business scope, for entrusted loans (unless permitted by the business scope) or for inter-company RMB loans.
Although this circular allows for the use of RMB converted from the foreign currency-denominated capital for equity investments in China, the restrictions continue to apply as to foreign-invested enterprises’ use of the converted RMB for purposes beyond the business scope, for entrusted loans (unless permitted by the business scope) or for inter-company RMB loans.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Dividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income with respect to Taxes on Income and Capital and receives approval from the relevant tax authority.
Dividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between Mainland China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income with respect to Taxes on Income and Capital and receives approval from the tax authority.
Critical Accounting Estimate Critical Accounting Policies, Judgments and Estimates An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.
Critical Accounting Estimates Critical Accounting Policies, Judgments and Estimates An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.
Our revenue is primarily derived from (i) IoT @ Home portfolio including sweeper robots, air conditioning systems and other smart devices, (ii) home water solutions, which are composed of smart water purification systems, (iii) consumable products complementary to our IoT-enabled smart home products, such as water purifier filters, and (iv) small appliances and others refer to the value-added businesses.
Our revenue is primarily derived from (i) IoT@Home portfolio products including sweeper robots, air conditioning systems and other smart devices, (ii) home water solutions, which are composed of smart water purification systems, (iii) consumable products complementary to our IoT products, such as water purifier filters, and (iv) small appliances and others refer to the value-added businesses.
If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%. See “Item 3. Key Information—D.
If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%. See “Item 3. Key Information—D.
The difference between net cash used in operating activities and our net loss of RMB282.6 million (US$41.0 million) was primarily due to RMB210.7 million used for working capital, partially offset by the adjustment of RMB88.5 million in depreciation and amortization, RMB 53.0 million in allowance for doubtful accounts, and RMB32.8 million in inventory write-down.
The difference between net cash used in operating activities and our net loss of RMB282.6 million was primarily due to RMB210.7 million used for working capital, partially offset by the adjustment of RMB88.5 million in depreciation and amortization, RMB 53.0 million in allowance for doubtful accounts, and RMB32.8 million in inventory write-down.
IoT @ Home portfolio . Revenues from IoT @ Home portfolio decreased by 52.4% from RMB3,401.0 million in 2021 to RMB1,619.9 million (US$234.9 million) in 2022, primarily due to the complete cutoff of sales of Xiaomi-branded sweeper robots, as well as SKU adjustments for smart kitchen products . Home water solutions .
Revenues from IoT@Home portfolio products decreased by 52.4% from RMB3,401.0 million in 2021 to RMB1,619.9 million in 2022, primarily due to the complete cutoff of sales of Xiaomi-branded sweeper robots, as well as SKU adjustments for smart kitchen products. Home water solutions .
Our gross margin increased from 22.6% to 22.8% for the same periods. The increase in gross margin was primarily driven by our continued efforts to shift the product mix toward higher profit margin products, partially offest by a decrease in the selling prices of certain clean-up products in 2022.
Our gross margin increased from 22.6% to 22.8% for the same periods. The increase in gross margin was primarily driven by our continued efforts to shift the product mix toward higher profit margin products, partially offset by a decrease in the selling prices of certain clean-up products in 2022.
Under PRC law, each of our subsidiary, our VIEs and their subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital.
Under PRC laws, each of our subsidiary, our VIEs and their subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital.
Revenue recognition In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”) and subsequently, the FASB issued several amendments which amend certain aspects of the guidance in ASC 2014-09 (ASU No. 2014-09 and the related amendments are collectively referred to as “ASC 606”).
Revenue recognition In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” and subsequently, the FASB issued several amendments which amend certain aspects of the guidance in ASC 2014-09 (ASU No. 2014-09 and the related amendments are collectively referred to as “ASC 606”).
For the years ended December 31, 2020, 2021 and 2022, sales of our IoT products accounted for 78.2%, 78.1% and 71.2% of our net revenues, respectively. Different product categories may have different attributable gross margins due to various factors, including industry and competitive dynamics, our pricing strategy, target customer demographics as well as raw material and production costs, among others.
For the years ended December 31, 2021, 2022 and 2023, sales of our IoT products accounted for 78.1%, 71.2% and 73.2% of our net revenues, respectively. Different product categories may have different attributable gross margins due to various factors, including industry and competitive dynamics, our pricing strategy, target customer demographics as well as raw material and production costs, among others.
Historically, revenues from this category have predominantly comprised of related household product sales. Brands Our IoT @ Home platform comprises of two key pillars, our Viomi business, predominantly comprising our Viomi-branded products, and our Xiaomi business, comprising our strategic partnership with Xiaomi.
Historically, revenues from this category have predominantly comprised of product sales. Brands Our IoT@Home platform comprises of two key pillars: our Viomi business, predominantly comprising our Viomi-branded products, and our Xiaomi business, comprising our strategic partnership with Xiaomi.
We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us. 113 Table of Contents Holding Company Structure Viomi Technology Co., Ltd is a holding company with no material operations of its own.
We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us. Holding Company Structure Viomi Technology Co., Ltd is a holding company with no material operations of its own.
Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates. 114 Table of Contents The following descriptions of critical accounting policies, judgments and related critical estimates should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual report.
Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates. The following descriptions of critical accounting policies, judgments and related critical estimates should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual report.
Investing activities Net cash provided by investing activities was RMB314.5 million (US$45.6 million) in 2022, mainly as a result of RMB983.9 million received from the maturity of short-term investments, partially offset by RMB348.0 million used for the purchase of short-term investments, RMB195.6 million used for the purchase of equipment and RMB171.5 million used for the placement of short-term deposits. 111 Table of Contents We used RMB265.3 million in investing activities in 2021, mainly as a result of RMB1.8 billion used for the purchase of short-term investments, RMB164.8 million used for placement of short-term deposits and RMB99.4 million used for the purchase of equipment, partially offset by RMB1.7 billion from the maturity of short-term investments.
Net cash provided by investing activities was RMB314.5 million in 2022, mainly as a result of RMB983.9 million received from the maturity of short-term investments, partially offset by RMB348.0 million used for the purchase of short-term investments, RMB195.6 million used for the purchase of equipment and RMB171.5 million used for the placement of short-term deposits. 102 Table of Contents We used RMB265.3 million in investing activities in 2021, mainly as a result of RMB1.8 billion used for the purchase of short-term investments, RMB164.8 million used for placement of short-term deposits and RMB99.4 million used for the purchase of equipment, partially offset by RMB1.7 billion from the maturity of short-term investments.
Selling and marketing expenses decreased by 18.1% from RMB751.0 million in 2021 to RMB614.9 million (US$89.2 million) in 2022. This decrease was primarily due to a decrease in logistics and staff related expenses. Income tax expenses We had an income tax expenses of RMB18.2 million (US$2.6 million) in 2022, compared to RMB5.7 million in 2021.
Selling and marketing expenses decreased by 18.1% from RMB751.0 million in 2021 to RMB614.9 million in 2022. This decrease was primarily due to a decrease in logistics and staff related expenses. Income tax expenses We had an income tax expenses of RMB18.2 million in 2022, compared to RMB5.7 million in 2021.
In addition, the proportionate contributions of our various business lines to our net revenues may change over time as we continue to grow our business and increase the number of our household users.
In addition, the proportionate contributions of our various business lines to our net revenues may change over time as we continue to develop our business and increase the number of our household users.
Our research and development expenses primarily consist of salaries and benefits as well as share-based compensation for research and development personnel, materials, general expenses and depreciation expenses associated with research and development activities.
Our research and development expenses primarily consist of salaries and benefits as well as share-based compensation for research and development personnel, materials, general expenses and depreciation expenses associated with research and development activities. Selling and marketing .
Cost of revenues Our cost of revenues decreased by 39.2% from RMB4,105.8 million in 2021 to RMB2,495.6 million (US$361.8 million) in 2022, which is in line with the overall decreased revenue scale. Gross profit As a result of the foregoing, our gross profit decreased by 38.5% from RMB1,198.1 million in 2021 to RMB737.1 million (US$106.9 million) in 2022.
Cost of revenues Our cost of revenues decreased by 39.2% from RMB4,105.8 million in 2021 to RMB2,495.6 million in 2022, which is in line with the overall decreased revenue scale. Gross profit As a result of the foregoing, our gross profit decreased by 38.5% from RMB1,198.1 million in 2021 to RMB737.1 million in 2022.
Financing activities Net cash provided by financing activities was RMB113.6 million (US$16.5 million) in 2022, mainly as a result of RMB118.7 million proceed from borrowing, partially offset by RMB8.0 million used in repurchases of ordinary shares.
Net cash provided by financing activities was RMB113.6 million in 2022, mainly as a result of RMB118.7 million proceed from borrowing, partially offset by RMB8.0 million used in repurchases of ordinary shares.
Revenues from consumables decreased by 2.3% from RMB367.0 million in 2021 to RMB358.4 million (US$52.0 million) in 2022. Small appliances and others . Revenues from small appliances and others decreased by 27.7% from RMB792.9 million in 2021 to RMB573.3 million (US$83.1 million) in 2022, primarily due to the streamline of SKUs within this category.
Revenues from consumables decreased by 2.3% from RMB367.0 million in 2021 to RMB358.4 million in 2022. Small appliances and others . Revenues from small appliances and others decreased by 27.7% from RMB792.9 million in 2021 to RMB573.3 million in 2022, primarily due to the streamline of SKUs within this category.
Home water solutions The core of our home water solutions is smart water purification systems, which were the first product category we launched and sales of these products have contributed a material portion of our historical revenues.
Home water solutions The core of our home water solutions is smart water purification systems, which were the first product category we launched in this business line, and sales of these products have contributed a material portion of our historical revenues.
Relationship with Xiaomi Xiaomi is our strategic partner, shareholder, customer and related party. Our strategic partnership with Xiaomi provides us access to Xiaomi’s ecosystem users, sales platforms and data resources and related support. Sales to Xiaomi, predominantly comprising Xiaomi-branded products, accounted for 49.6%, 43.3% and 43.4% of our net revenues in 2020, 2021 and 2022, respectively.
Relationship with Xiaomi Xiaomi is our strategic partner, shareholder, customer and related party. Our strategic partnership with Xiaomi provides us access to Xiaomi’s ecosystem users, sales platforms and data resources and related support. Sales to Xiaomi, predominantly comprising Xiaomi-branded products, accounted for 43.3%, 43.4% and 52.8% of our net revenues in 2021, 2022 and 2023, respectively.
Consumables include products complementary to our IoT products, such as water filters. Our small appliances and other business include the sales of complimentary household products, such as small appliances and homeware, as well as provision of various services, such as access to media and entertainment content, e-commerce platforms and interfaces embedded within and integrated with our products, and installation services.
Our small appliances and other business include the sales of complementary household products, such as small appliances and homeware, as well as provision of various services, such as access to media and entertainment content, e-commerce platforms and interfaces embedded within and integrated with our products, and installation services.
Net loss As a result of the foregoing, we recorded a net loss of RMB282.6 million (US$41.0 million) in 2022, compared to the net income of RMB88.9 million for 2021. Excluding the impact of share-based compensation expenses, our net loss was RMB263.1 million (US$38.1 million) in 2022, compared to the net income of RMB136.3 million for 2021.
Net loss As a result of the foregoing, we recorded a net loss of RMB282.6 million in 2022, compared to the net income of RMB88.9 million for 2021. Excluding the impact of share-based compensation expenses, our net loss was RMB263.1 million in 2022, compared to the net income of RMB136.3 million for 2021. B.
As of December 31, 2022, we had RMB89.0 million outstanding capital commitments, which are mainly related to the construction of Viomi IoT Technology Park. We intend to fund our existing and future material cash requirements with our existing cash and cash equivalents, restricted cash, short-term investments and other financing alternatives.
As of December 31, 2023, we had RMB42.2 million outstanding capital commitments, which are mainly related to the construction of Viomi IoT Technology Park. We intend to fund our existing and future material cash requirements with our existing cash and cash equivalents, restricted cash, short-term investments and other financing alternatives.
Trend Information Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events since the beginning of our fiscal year 2022 that are reasonably likely to have a material 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 operating results or financial conditions.
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 period since January 1, 2024 that are reasonably likely to have a material 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 operating results or financial conditions.
Furthermore, capital account transactions, which include foreign direct investment and loans, must be approved by and/or registered with the SAFE, its local branches and certain local banks. The restricted net assets of our PRC subsidiaries and VIEs amounted to RMB61.9 million, RMB112.6 million and RMB115.8 million (US$16.8 million) as of December 31, 2020, 2021 and 2022, respectively.
Furthermore, capital account transactions, which include foreign direct investment and loans, must be approved by and/or registered with the SAFE, its local branches and certain local banks. The restricted net assets of our PRC subsidiaries and VIEs amounted to RMB112.6 million, RMB115.8 million and RMB110.7 million (US$15.6 million) as of December 31, 2021, 2022 and 2023, respectively.
Operating Results Key Factors Affecting Our Results of Operations Key factors affecting our results of operations include the following: Consumption upgrade and greater adoption of IoT-enabled smart home technology in China Our business and operating results are affected by general factors influencing China’s broader consumer products and home appliances industries, including overall macroeconomic growth and increase in disposable income, overall consumption upgrade trends as well as public knowledge, acceptance and adoption of new and innovative technology such as IoT technology.
Operating Results Key Factors Affecting Our Results of Operations Key factors affecting our results of operations include the following: Consumption trend and adoption of IoT-enabled smart home technology in China Our business and operating results are affected by general factors influencing China’s broader consumer products and home appliances industries, including overall macroeconomic and consumer disposable income conditions, overall consumption trends, and in particular public knowledge, acceptance and adoption of new and innovative technology such as IoT technology.
Revenues from home water solutions decreased by 8.3% from RMB742.9 million in 2021 to RMB681.1 million (US$98.7 million) in 2022, primarily due to our product portfolio adjustment involving a decrease in small-flux water purifiers sales, partially offset by an increase in revenues from larger flux water purifiers. 106 Table of Contents Consumables .
Revenues from home water solutions decreased by 8.3% from RMB742.9 million in 2021 to RMB681.1 million in 2022, primarily due to our product portfolio adjustment involving a decrease in small-flux water purifiers sales, partially offset by an increase in revenues from larger flux water purifiers. Consumables .
Research and development expenses decreased by 3.8% from RMB311.8 million in 2021 to RMB300.0 million (US$43.5 million) in 2022, primarily due to a decrease in the share-based compensation expenses, as well as the our continued efforts in improving out research and development efficiency. Selling and marketing .
Research and development . Research and development expenses decreased by 3.8% from RMB311.8 million in 2021 to RMB300.0 million in 2022, primarily due to a decrease in the share-based compensation expenses, as well as the our continued efforts in improving out research and development efficiency. 100 Table of Contents Selling and marketing .
We recognize revenue for the sales to third-party customers in accordance with the applicable revenue recognition method for each of the distinct performance obligation identified. Sales of products is recognized upon acceptance by customers after delivery.
We recognize revenue for the sales to third-party customers in accordance with the applicable revenue recognition method for each of the distinct performance obligation identified. Sales of products is recognized upon acceptance by customers after delivery. Installation services revenues are recognized when the services are rendered.
Our smart kitchen products include refrigerators, oven steamers, dishwashers, range hoods and gas stoves. We also offer a diverse array of other smart products such as air conditioning systems, washing machines, water heaters, smart water kettles, sweeper robots, smart locks and other smart devices, among others.
We have continued to diversify and expand our smart kitchen products over recent years. Our smart kitchen products include refrigerators, oven steamers, dishwashers, range hoods and gas stoves. We also offer a diverse array of other smart products such as air conditioning systems, washing machines, water heaters, smart water kettles, sweeper robots, smart locks and other smart devices, among others.
Our accounts and notes payable turnover days were 80 days, 92 days and 140 days for the years ended December 31, 2020, 2021 and 2022, respectively.
Our accounts and notes payable turnover days were 92 days, 140 days and 143 days for the years ended December 31, 2021, 2022 and 2023, respectively.
General and administrative expenses consist primarily of salaries and welfare for general and administrative personnel and share-based compensation for management and administrative personnel. Within the total general and administrative expenses incurred in the year ended December 31, 2020, 2021 and 2022, RMB11.3 million, RMB9.1 million and RMB4.4 million (US$0.64 million) were share-based compensation expenses, respectively. Research and development .
General and administrative expenses consist primarily of salaries and welfare for general and administrative personnel and share-based compensation for management and administrative personnel. Within the total general and administrative expenses incurred in the year ended December 31, 2021, 2022 and 2023, RMB9.1 million, RMB4.4 million and RMB1.6 million (US$0.2 million) were share-based compensation expenses, respectively. Research and development.
Our selling and marketing expenses primarily consist of advertising and market promotion expenses, shipping expenses and salaries and welfare for sales and marketing personnel. We bear the advertising and marketing expenses for our Viomi-branded products. We do not bear such expenses for Xiaomi-branded products.
Our selling and marketing expenses primarily consist of advertising and market promotion expenses, shipping expenses, and salaries and welfare for sales and marketing personnel. We bear mainly the advertising and marketing expenses for our Viomi-branded products.
No Hong Kong profit tax has been levied as we did not have an assessable profit that was earned in or derived from the Hong Kong subsidiary during the periods presented. Hong Kong does not impose a withholding tax on dividends.
No Hong Kong profit tax has been levied as we did not have an assessable profit that was earned in or derived from the Hong Kong subsidiary during the periods presented.
For the year ended December 31, 2020, 2021 and 2022, research and development expenses were RMB265.7 million, RMB311.8 million and RMB300.0 million (US$43.5 million), accounting for 4.6%, 5.9% and 9.3% of our net revenues, respectively.
For the year ended December 31, 2021, 2022 and 2023, research and development expenses were RMB311.8 million, RMB300.0 million and RMB222.9 million (US$31.4 million), accounting for 5.9%, 9.3% and 8.9% of our net revenues, respectively.
The table below sets forth our gross profit in absolute amount and gross profit margins of products and services for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB ​ % RMB ​ % RMB ​ US$ ​ % Gross profit and gross profit margin ​ 1,082,956 ​ 18.6 ​ 1,198,068 ​ 22.6 ​ 737,093 ​ 106,868 ​ 22.8 ​ 104 Table of Contents Operating expenses Our operating expenses can be classified into three categories: general and administrative, research and development, and selling and marketing.
The table below sets forth our gross profit in absolute amount and gross profit margins of products and services for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ 2021 2022 2023 ​ RMB % RMB % RMB US$ % Gross profit and gross profit margin ​ 1,198,068 ​ 22.6 ​ 737,093 ​ 22.8 ​ 569,520 ​ 80,215 ​ 22.8 ​ 96 Table of Contents Operating expenses Our operating expenses can be classified into three categories: general and administrative, research and development, and selling and marketing.
Xiaomi is our strategic partner, shareholder and customer. Our strategic partnership with Xiaomi provides us access to Xiaomi’s ecosystem users, sales platforms and data resources and related support. Sales to Xiaomi, predominantly comprising Xiaomi-branded products, historically accounted for 49.6%, 43.3% and 43.4% of our net revenues in 2020, 2021 and 2022, respectively.
Our strategic partnership with Xiaomi provides us access to Xiaomi’s ecosystem users, sales platforms and data resources and related support. Sales to Xiaomi, predominantly comprising Xiaomi-branded products, historically accounted for 43.3%, 43.4% and 52.8% of our net revenues in 2021, 2022 and 2023, respectively.
Our cost of revenues was RMB4,742.7 million, RMB4,105.8 million and RMB2,495.6 million (US$361.8 million) for the years ended December 31, 2020, 2021 and 2022, respectively. Gross profit and gross profit margin Our gross profit margin is affected by changes in our product and business mix as well as our cost of revenues.
Our cost of revenues was RMB4,105.8 million, RMB2,495.6 million and RMB1,923.9 million (US$271.0 million) for the years ended December 31, 2021, 2022 and 2023, respectively. Gross profit and gross profit margin Our gross profit margin is affected by changes in our product and business mix as well as our cost of revenues.
As stipulated in the contracts, slow-moving goods are those unsold products after they are controlled by the e-commerce platforms for more than 30 days or 45 days or 60 days, depending on the different categories of products.
Sales returns and sales incentives - Sales to leading e-commerce platforms Our sales to leading e-commerce platforms started in 2018. As stipulated in the contracts, slow-moving goods are those unsold products after they are controlled by the e-commerce platforms for more than 30 days or 45 days or 60 days, depending on the different categories of products.
China Generally, our PRC subsidiaries, variable interest entities and their subsidiaries, which are considered PRC resident enterprises under PRC tax law, are subject to enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of 25%.
Hong Kong does not impose a withholding tax on dividends. 97 Table of Contents China Generally, our PRC subsidiaries, variable interest entities and their subsidiaries, which are considered PRC resident enterprises under PRC tax law, are subject to enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of 25%.
For the year ended December 31, 2020, 2021 and 2022, our selling and marketing expenses were RMB597.2 million, RMB751.0 million and RMB614.9 million (US$89.2 million), accounting for 10.3%, 14.2% and 19.0% of our revenues, respectively. Going forward, we intend to continue investing significant resources in our marketing, advertising and brand promotion efforts.
For the year ended December 31, 2021, 2022 and 2023, our selling and marketing expenses were RMB751.0 million, RMB614.9 million and RMB401.8 million (US$56.6 million), accounting for 14.2%, 19.0% and 16.1% of our revenues, respectively. Going forward, we intend to continue investing significant resources in our marketing, advertising and brand promotion efforts.
The following table sets forth our contractual obligations as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment Due by Period ​ ​ ​ ​ Less than ​ ​ ​ ​ ​ More than ​ Total 1 Year 1 - 3 Years 3 - 5 Years 5 Years ​ ​ (RMB in thousands) Operating lease obligation (1) ​ 16,975 ​ 13,103 ​ 3,872 ​ — ​ — ​ Note: (1) Operating lease obligation consist of the commitments under the lease agreements for our office premises and several factories.
The following table sets forth our contractual obligations as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Payment Due by Period ​ ​ ​ ​ Less than ​ ​ ​ ​ ​ More than ​ Total 1 Year 1-3 Years 3-5 Years 5 Years ​ ​ (RMB in thousands) Operating lease obligation (1) ​ 6,679 ​ 3,738 ​ 2,736 ​ 205 ​ — ​ Note: (1) Operating lease obligation consist of the commitments under the lease agreements for our office premises and several factories.
We estimate the breakage portion based on historical customers’ requests and recognize estimated breakage as revenue in proportion to the pattern of rights exercised by end customers. The assessment of estimated breakage would be updated on a quarterly basis. Changes in estimated breakage should be accounted for by adjusting contract liabilities to reflect the remaining rights expected to be exercised.
We estimate the breakage portion based on historical customers’ requests and recognize estimated breakage as revenue in proportion to the pattern of rights exercised by end customers. The assessment of estimated breakage would be updated on a quarterly basis.
Revenue is recognized upon acceptance by this customer, which is considered at the time the control of the products is transferred to Xiaomi.
We also sell some Viomi-branded products to Xiaomi. Revenue is recognized upon acceptance by this customer, which is considered at the time the control of the products is transferred to Xiaomi.
Accounts and notes receivable Our accounts and notes receivable represent primarily accounts receivable from Xiaomi as well as accounts and notes receivable from third parties. As of December 31, 2020, 2021 and 2022, our accounts and notes receivable, net of allowance for doubtful accounts, were RMB1,036.4 million, RMB623.3 million and RMB602.1 million (US$87.3 million), respectively.
Accounts and notes receivable Our accounts and notes receivable represent primarily accounts receivable from Xiaomi as well as accounts and notes receivable from third parties. As of December 31, 2021, 2022 and 2023, our accounts and notes receivable, net of allowance for doubtful accounts, were RMB623.3 million, RMB602.1 million and RMB551.0 million (US$77.6 million), respectively.
General and administrative expenses increased by 24.6% from RMB97.7 million in 2021 to RMB121.7 million (US$17.6 million) in 2022, primarily due to an increase in the estimated allowance for accounts and notes receivables from a third-party client. Research and development .
Operating Expenses Our operating expenses decreased by 10.7% from RMB1,160.5 million in 2021 to RMB1,036.5 million in 2022. General and administrative . General and administrative expenses increased by 24.6% from RMB97.7 million in 2021 to RMB121.7 million in 2022, primarily due to an increase in the estimated allowance for accounts and notes receivables from a third-party client.
Accounts and notes payable Our accounts and notes payable represent primarily accounts and notes payable to contract manufacturers. As of December 31, 2020, 2021 and 2022, our accounts and notes payable were RMB1,001.4 million, RMB1,069.1 million and RMB844.1 million (US$122.4 million), respectively.
Accounts and notes payable Our accounts and notes payable represent primarily accounts and notes payable to contract manufacturers. As of December 31, 2021, 2022 and 2023, our accounts and notes payable were RMB1,069.1 million, RMB844.1 million and RMB666.3 million (US$93.9 million), respectively.
We believe that our cash and cash equivalents and restricted cash and our anticipated cash flows from operations will be sufficient to meet our current and anticipated needs for general corporate purposes for at least the next 12 months.
Our cash and cash equivalents primarily consist of cash on hand, demand deposits and highly liquid investments placed with banks. We believe that our cash and cash equivalents and restricted cash and our anticipated cash flows from operations will be sufficient to meet our current and anticipated needs for general corporate purposes for at least the next 12 months.
See footnote 13 to the Consolidated Financial Statements for more details. IoT @ Home portfolio We generate a significant portion of our revenues through sales of products under our IoT @ Home portfolio, which comprises smart kitchen products and other smart products. We have continued to diversify and expand our smart kitchen products over recent years.
For more details, see note 13 to our consolidated financial statements at the end of this annual report. IoT@Home portfolio products We generate a significant portion of our revenues through sales of products under our IoT@Home portfolio products, which comprises smart kitchen products and other smart products.
In addition, it may allocate a portion of its after-tax profits based on PRC accounting standards to discretionary reserve funds at its discretion. These reserves are not distributable as cash dividends. Historically, our PRC subsidiaries have not paid dividends to us, and it will not be able to pay dividends until it generates accumulated profits.
In addition, it may allocate a portion of its after-tax profits based on PRC accounting standards to discretionary reserve funds at its discretion. These reserves are not distributable as cash dividends.
Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our securities offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” 110 Table of Contents The following table sets forth a summary of our cash flows for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB RMB RMB US$ Selected Consolidated Cash Flow Data: ​ ​ ​ ​ Net cash provided by/(used in) operating activities 185,196 308,968 (284,169) (41,202) Net cash (used in)/provided by investing activities (433,083) (265,321) 314,547 45,604 Net cash (used in)/provided by financing activities (146,375) 17,133 113,563 16,465 Effect of exchange rate changes on cash and cash equivalents (34,034) (12,703) 46,482 6,739 Net (decrease)/increase in cash and cash equivalents and restricted cash (428,296) 48,077 190,423 27,606 Cash and cash equivalents and restricted cash at the beginning of the year 1,003,005 574,709 622,786 90,295 Cash and cash equivalents and restricted cash at the end of the year 574,709 622,786 813,209 117,901 ​ Operating activities Net cash used in operating activities was RMB284.2 million (US$41.2 million) in 2022.
Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our securities offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” The following table sets forth a summary of our cash flows for the periods presented: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB RMB RMB US$ Selected Consolidated Cash Flow Data: ​ ​ ​ ​ Net cash provided by/(used in) operating activities 308,968 (284,169) (103,228) (14,540) Net cash (used in)/provided by investing activities (265,321) 314,547 (198,926) (28,019) Net cash provided by financing activities 17,133 113,563 115,657 16,290 Effect of exchange rate changes on cash and cash equivalents (12,703) 46,482 9,643 1,360 Net increase/(decrease) in cash and cash equivalents and restricted cash 48,077 190,423 (176,854) (24,909) Cash and cash equivalents and restricted cash at the beginning of the year 574,709 622,786 813,209 114,538 Cash and cash equivalents and restricted cash at the end of the year 622,786 813,209 636,355 89,629 ​ Operating activities Net cash used in operating activities was RMB103.2 million (US$14.5 million) in 2023.
Our total accounts and notes receivable as of December 31, 2022 included RMB360.5 million (US$52.3 million) from Xiaomi and RMB130.2 million (US$18.9 million) from two e-commerce platforms. Our accounts and notes receivable turnover days were 65 days, 57 days and 69 days for the years ended December 31, 2020, 2021 and 2022, respectively.
Our total accounts and notes receivable as of December 31, 2023 included RMB324.2 million (US$45.7 million) from Xiaomi and RMB226.8 million (US$31.9 million) from two e-commerce platforms. Our accounts and notes receivable turnover days were 57 days, 69 days and 84 days for the years ended December 31, 2021, 2022 and 2023, respectively.
Under the cooperation agreement entered into between Xiaomi and us, we are responsible for design, research, development, production and delivery of designated products using the brand name of “Xiaomi,” or Xiaomi-branded products, and Xiaomi is responsible for commercial distributions and sales. We also sell some Viomi-branded products to Xiaomi.
Sales to Xiaomi From 2021 to 2023, we generated a substantial portion of our revenues from sales of products to Xiaomi. 105 Table of Contents Under the cooperation agreement entered into between Xiaomi and us, we are responsible for design, research, development, production and delivery of designated products using the brand name of “Xiaomi,” or Xiaomi-branded products, and Xiaomi is responsible for commercial distributions and sales.
Water purifiers products were previously entitled to second instalment payments, but such second instalment payment arrangement has terminated since the first quarter of 2020. 115 Table of Contents Sales to third-party customers, including: sales to leading e-commerce platforms and offline experience stores; and sales to customers directly through the online platforms operated by Xiaomi, third parties and us - Sales to leading e-commerce platforms and offline experience stores Pursuant to the contracts between leading e-commerce platforms/offline experience stores (the “e-commerce platforms and stores”) and us, the e-commerce platforms and stores have legal title and physical possession of the products upon acceptance and they would bear the inventory risk of loss due to physical damage before the products are transferred and accepted by end customers.
Sales to third-party customers, including: sales to leading e-commerce platforms and offline experience stores; and sales to customers directly through the online platforms operated by Xiaomi, third parties and us - Sales to leading e-commerce platforms and offline experience stores Pursuant to the contracts between leading e-commerce platforms/offline experience stores, or the E-Commerce Platforms and Stores, and us, the E-Commerce Platforms and Stores have legal title and physical possession of the products upon acceptance and they would bear the inventory risk of loss due to physical damage before the products are transferred and accepted by end customers.
The following table sets forth the components of our operating expenses, both in absolute amount and as a proportion of our net revenues, for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB ​ % RMB ​ % RMB ​ US$ ​ % Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ General and administrative ​ 68,914 ​ 1.2 ​ 97,730 ​ 1.8 ​ 121,702 ​ 17,645 ​ 3.8 Research and development ​ 265,680 ​ 4.6 ​ 311,786 ​ 5.9 ​ 299,950 ​ 43,489 ​ 9.3 Selling and marketing ​ 597,176 ​ 10.3 ​ 751,011 ​ 14.2 ​ 614,887 ​ 89,150 ​ 19 Total ​ 931,770 ​ 16.0 ​ 1,160,527 ​ 21.9 ​ 1,036,539 ​ 150,284 ​ 32.1 ​ General and administrative .
The following table sets forth the components of our operating expenses, both in absolute amount and as a proportion of our net revenues, for the periods presented. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ General and administrative ​ 97,730 ​ 1.8 ​ 121,702 ​ 3.8 ​ 81,508 ​ 11,480 ​ 3.3 Research and development ​ 311,786 ​ 5.9 ​ 299,950 ​ 9.3 ​ 222,911 ​ 31,396 ​ 8.9 Selling and marketing ​ 751,011 ​ 14.2 ​ 614,887 ​ 19.0 ​ 401,766 ​ 56,588 ​ 16.1 Total ​ 1,160,527 ​ 21.9 ​ 1,036,539 ​ 32.1 ​ 706,185 ​ 99,464 ​ 28.3 ​ General and administrative .
The following table sets forth the breakdown of our net revenues by business lines both in absolute amounts and as a proportion of the net revenue for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB ​ % RMB % RMB US$ % Net revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ IoT @ Home portfolio 3,671,717 63.0 3,400,966 64.1 1,619,941 234,869 50.1 Home water solutions 883,325 15.2 742,912 14.0 681,054 98,744 21.1 Consumables 382,896 6.6 367,021 6.9 358,442 51,969 11.1 Small appliances and others (1) 887,686 15.2 792,936 15.0 573,294 83,120 17.7 Total 5,825,624 100.0 5,303,835 100.0 3,232,731 468,702 100.0 ​ Note : (1) Including sales of small appliances and rendering of services.
The following table sets forth the breakdown of our net revenues by business lines both in absolute amounts and as a proportion of the net revenue for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % Net revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ IoT@Home portfolio products 3,400,966 64.1 1,619,941 50.1 1,220,852 171,954 49.0 Home water solutions 742,912 14.0 681,054 21.1 604,012 85,073 24.2 Consumables 367,021 6.9 358,442 11.1 314,372 44,278 12.6 Small appliances and others (1) 792,936 15.0 573,294 17.7 354,150 49,881 14.2 Total 5,303,835 100.0 3,232,731 100.0 2,493,386 351,186 100.0 Note : (1) Including sales of small appliances and rendering of services.
(2)Share-based compensation expenses were allocated as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ ​ RMB RMB RMB US$ General and administrative expenses ​ 11,303 ​ 9,130 ​ 4,415 ​ 640 Research and development expenses 49,996 32,609 14,645 2,123 Selling and marketing expenses 10,904 5,666 500 72 Total 72,203 47,405 19,560 2,835 ​ Year Ended December 31, 2022 Compared to Year Ended December 31, 2021 Net revenues Our net revenues decreased by 39.0% from RMB5,303.8 million in 2021 to RMB3,232.7 million (US$468.7 million) in 2022, primarily due to a decrease in revenues from IoT@Home portfolio and small appliances and others.
(2) Share-based compensation expenses were allocated as follows: 98 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB RMB RMB US$ General and administrative expenses ​ 9,130 ​ 4,415 ​ 1,551 ​ 218 Research and development expenses 32,609 14,645 121 17 Selling and marketing expenses 5,666 500 (1,566) (221) Total 47,405 19,560 106 14 ​ Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 Net revenues Our net revenues decreased by 22.9% from RMB3,232.7 million in 2022 to RMB2,493.4 million (US$351.2 million) in 2023, primarily due to a decrease in revenues from the IoT@Home portfolio products as well as small appliances and others.
We base our estimates of sales return on historical results. We may provide sales incentives in the forms of discounts to end customers through online platforms in a bundle transaction. Revenue, recognized on a net basis after such sales incentives, are allocated based on the relative standalone selling prices for respective products.
We base our estimates of sales return on historical results. We may provide sales incentives in the forms of discounts to end customers through online platforms in a bundle transaction.
The customers cannot separately purchase the warranty and the warranty doesn’t provide the customer with additional service other than assurance that the product will function as expected. Therefore, these warranties are accounted for in accordance with ASC 460 Guarantees. At the time revenue is recognized, an estimate of warranty expenses is recorded.
We have the obligation, at the customer’s sole discretion, to either repair or replace the defective product. The customers cannot separately purchase the warranty and the warranty doesn’t provide the customer with additional service other than assurance that the product will function as expected. Therefore, these warranties are accounted for in accordance with ASC 460 Guarantees.
This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2020 ​ 2021 ​ 2022 ​ RMB % RMB % RMB US$ % Net revenues (1) ​ 5,825,624 ​ 100.0 ​ 5,303,835 ​ 100.0 ​ 3,232,731 ​ 468,702 ​ 100.0 Cost of revenues (4,742,668) (81.4) (4,105,767) (77.4) (2,495,638) (361,834) (77.2) Gross profit 1,082,956 18.6 1,198,068 22.6 737,093 106,868 22.8 Operating expenses (2) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development expenses (2) (265,680) (4.6) (311,786) (5.9) (299,950) (43,489) (9.3) Selling and marketing expenses (2) (597,176) (10.3) (751,011) (14.2) (614,887) (89,150) (19) General and administrative expenses (2) (68,914) (1.2) (97,730) (1.8) (121,702) (17,645) (3.8) Total operating expenses (931,770) (16.0) (1,160,527) (21.9) (1,036,539) (150,284) (32.1) Other income, net 32,795 0.6 27,128 0.5 22,135 3,209 0.7 Income/(loss) from operations 183,981 3.2 64,669 1.2 (277,311) (40,207) (8.6) Interest income and short-term investment income, net 31,968 0.5 28,589 0.5 10,368 1,503 0.3 Income/(loss) before income tax expenses 217,767 3.7 94,630 1.8 (264,456) (38,343) (8.2) Income tax expenses (43,321) (0.7) (5,739) (0.1) (18,174) (2,635) (0.5) Net Income/(loss) 174,446 3.0 88,891 1.7 (282,630) (40,978) (8.7) ​ Notes: (1) Includes RMB2,889.4 million, RMB2,295.6 and RMBRMB1,403.4 million (US$203.5 million) from sales to Xiaomi for the year ended December 31, 2020, 2021 and 2022, respectively.
This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Year Ended December 31, ​ ​ 2021 ​ 2022 ​ 2023 ​ RMB % RMB % RMB US$ % Net revenues (1) ​ 5,303,835 ​ 100.0 ​ 3,232,731 ​ 100.0 ​ 2,493,386 ​ 351,186 ​ 100.0 Cost of revenues (4,105,767) (77.4) (2,495,638) (77.2) (1,923,866) (270,971) (77.2) Gross profit 1,198,068 22.6 737,093 22.8 569,520 80,215 22.8 Operating expenses (2) : ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development expenses (2) (311,786) (5.9) (299,950) (9.3) (222,911) (31,396) (8.9) Selling and marketing expenses (2) (751,011) (14.2) (614,887) (19) (401,766) (56,588) (16.1) General and administrative expenses (2) (97,730) (1.8) (121,702) (3.8) (81,508) (11,480) (3.3) Total operating expenses (1,160,527) (21.9) (1,036,539) (32.1) (706,185) (99,464) (28.3) Other income, net 27,128 0.5 22,135 0.7 17,510 2,466 0.7 Income (loss) from operations 64,669 1.2 (277,311) (8.6) (119,155) (16,783) (4.8) Interest income and short-term investment income, net 28,589 0.5 10,368 0.3 29,893 4,210 1.2 Income (loss) before income tax expenses 94,630 1.8 (264,456) (8.2) (87,598) (12,339) (3.5) Income tax expenses (5,739) (0.1) (18,174) (0.5) (1,735) (244) (0.1) Net Income (loss) 88,891 1.7 (282,630) (8.7) (89,333) (12,583) (3.6) ​ Notes: (1) Includes RMB2,295.6, RMB1,403.4 million and RMB1,317.3 million (US$185.5 million) from sales to Xiaomi for the year ended December 31, 2021, 2022 and 2023, respectively.
As we continue to roll out new IoT products in other categories over time and generate additional revenues from our consumable products and small appliances and others, we expect our sources of revenues to continue to diversify both in terms of product as well as business mix.
In addition, as we continue to roll out new IoT products in other categories over time and generate additional revenues from our consumable products and small appliances and others, we expect our sources of revenues to continue to diversify both in terms of product as well as business mix. 95 Table of Contents Consumables We offer a range of consumable products complementary, and often essential, to our IoT products, which provide us with additional, recurring and ongoing revenue streams across the life cycle of our IoT products.
Judgment is required to determine standalone selling price for each distinct performance obligation and we then allocate the arrangement consideration to the separate accounting of each distinct performance obligation based on its relevant standalone selling price.
Changes in estimated breakage should be accounted for by adjusting contract liabilities to reflect the remaining rights expected to be exercised. 106 Table of Contents Judgment is required to determine standalone selling price for each distinct performance obligation and we then allocate the arrangement consideration to the separate accounting of each distinct performance obligation based on its relevant standalone selling price.
Accounts and notes payable turnover days for a given period are equal to average of the balances of accounts and notes payable, at the beginning and the end of the period divided by cost of revenues during the period and multiplied by the number of days during the period. 112 Table of Contents Material cash requirements Our material cash requirements as of December 31, 2022 and any subsequent interim period primarily include our capital expenditures, contractual obligations and capital commitments.
Accounts and notes payable turnover days for a given period are equal to average of the balances of accounts and notes payable, at the beginning and the end of the period divided by cost of revenues during the period and multiplied by the number of days during the period.
Sales to third-party channels as well as Viomi Store, our proprietary e-commerce platform, which constitute the vast majority of our Viomi-branded products business, accounted for 50.4%, 56.7% and 56.6% of our net revenues in 2020, 2021 and 2022, respectively. We introduced our premium water purifier sub-brand “Quanxian” in September 2020, with introduction of a series of large-flux water purifiers.
Sales to third-party channels as well as Viomi Store, our proprietary e-commerce platform, which constitute the vast majority of our Viomi-branded products business, accounted for 56.7%, 56.6% and 47.2% of our net revenues in 2021, 2022 and 2023, respectively. Xiaomi is our strategic partner, shareholder and customer.
Revenues from consumables decreased by 4.1% from RMB382.9 million in 2020 to RMB367.0 million in 2021, primarily due to decreased demands for purifier filter products. Small appliances and others .
Revenues from consumables decreased by 12.3% from RMB358.4 million in 2022 to RMB314.4million (US$44.3 million) in 2023, primarily due to decreased demands for purifier filter products. Small appliances and others .
As we continue to grow our business and introduce additional new products, both self-branded and Xiaomi-branded, to improve connectivity and synergies across our IoT @ Home platform and further promote the IoT @ Home lifestyle experience, we expect to deliver additional growth through repeat customer purchases, bundled sales, as well as additional monetization of our consumable products and value-added businesses.
As we continue to expand our product offerings and enhance connectivity and synergies across our IoT@Home platform, we aim to promote the IoT@Home lifestyle experience. Our strategy includes fostering growth through repeat customer purchases, bundled sales, and the monetization of our consumable products and value-added services.
Net cash provided by operating activities was RMB185.2 million in 2020. The difference between net cash provided by operating activities and our net income of RMB174.4 million was primarily due to RMB130.5 million used for working capital, partially offset by the adjustment of RMB72.2 million in share-based compensation, RMB54.3 million in depreciation and amortization and RMB22.6 million in inventory write-down.
The difference between net cash used in operating activities and our net loss of RMB89.3 million (US$12.6 million) was primarily due to RMB124.2 million used for working capital, partially offset by the adjustment of RMB64.9 million in depreciation and amortization, RMB13.9 million in allowance for doubtful accounts, and RMB31.1 million in inventory write-down.
Recent Accounting Pronouncements See Item 17 of Part III, “Financial Statements—Note 2—Significant accounting policies—Recently issued accounting pronouncements.” C. Research and Development, Patents and Licenses, Etc. See “Item 4. Information on the Company—B. Business Overview—Research and Development” and “—Intellectual Property.” D.
Recent Accounting Pronouncements See “Recently issued accounting pronouncements not yet adopted” included in note 2 to our consolidated financial statements at the end of this annual report. 104 Table of Contents C. Research and Development, Patents and Licenses, Etc. See “Item 4. Information on the Company—B. Business Overview—Research and Development” and “—Intellectual Property.” D.
The reserves established are regularly monitored based upon historical experience and any actual claims charged against the reserve. Warranty reserves are recorded as cost of revenues.
At the time revenue is recognized, an estimate of warranty expenses is recorded. The reserves established are regularly monitored based upon historical experience and any actual claims charged against the reserve. Warranty reserves are recorded as cost of revenues. 107 Table of Contents Net realizable value (“NRV”) of inventories Inventories are stated at the lower of cost or NRV.
While we expect the proportion of our revenues generated from our sales to Xiaomi to gradually decrease going forward, maintaining a mutually beneficial relationship with Xiaomi, including potential additional product collaborations, will continue to be important to our operations and future growth. 102 Table of Contents Seasonality We generally expect to experience seasonally higher sales in the second and fourth quarters, primarily attributable to the major shopping festivals and promotional activities across major e-commerce platforms in China, such as “618,” “Double Eleven” and “Double Twelve.” Given the impact of this seasonality, timely and effective forecasting and product supply and introductions for the peak seasons are critical to our operations.
Seasonality We generally expect to experience seasonally higher sales in the second and fourth quarters, primarily attributable to the major shopping festivals and promotional activities across major e-commerce platforms in China, such as “618,” “Double Eleven” and “Double Twelve.” Given the impact of this seasonality, timely and effective forecasting and product supply and introductions for the peak seasons are critical to our operations. 94 Table of Contents Key Components of Our Results of Operations Net revenues We derive our revenues from four key business lines: (i) our IoT@Home portfolio products, (ii) home water solutions, (iii) consumables, and (iv) small appliances and others.
Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” For the foreseeable future, we intend to use all the undistributed earnings of our variable interest entities and their subsidiaries incorporated in the PRC for our business operations and do not plan to have our PRC subsidiaries distribute any dividend.
Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or ADS holders.” Results of Operations The following table sets forth a summary of our consolidated income for the periods presented, both in absolute amount and as a proportion of our net revenues for the periods presented.
As a Cayman Islands exempted company and offshore holding company, we are permitted under PRC laws and regulations to provide funding to our wholly foreign-owned subsidiaries in China only through loans or capital contributions, subject to the approval of government authorities and limits on the amount of capital contributions and loans.
The unrestricted portion, or amounts otherwise available for transfer in the form of dividends, loans or advances amounted to RMB1,022.0 million, RMB748.4 million and RMB695.4 million (US$97.9 million) as of December 31, 2021, 2022 and 2023, respectively. 101 Table of Contents As a Cayman Islands exempted company and offshore holding company, we are permitted under PRC laws and regulations to provide funding to our wholly foreign-owned subsidiaries in China through loans, subject to the approval of government authorities and limits on the amount, or we may make additional capital contributions to our wholly foreign-owned subsidiary in China.
As of December 31, 2020, 2021 and 2022, our inventory was RMB439.4 million, RMB576.4 million and RMB 502.3 million (US$72.8 million), respectively. Our inventory turnover days was 33 days, 45 days and 79 days for the years ended December 31, 2020, 2021 and 2022, respectively.
Working capital turnover Inventories Our inventory consists of finished products and raw materials. As of December 31, 2021, 2022 and 2023, our inventory was RMB576.4 million, RMB502.3 million and RMB442.2 million (US$62.3 million), respectively. Our inventory turnover days was 45 days, 79 days and 90 days for the years ended December 31, 2021, 2022 and 2023, respectively.
We used RMB433.1 million in investing activities in 2020, mainly as a result of RMB3,256.2 million used for the purchase of short-term investments and RMB215.6 million used for placement of short-term deposit, partially offset by RMB2,874.2 million from the maturity of short-term investments and RMB215.0 million from maturities of short-term deposits.
Investing activities We used RMB198.9 million (US$28.0 million) in investing activities in 2023, mainly as a result of RMB190.4 million used for the placement of short-term deposits, RMB110.1 million used for the purchase of equipment, RMB110.9 million used for the purchase of short-term investments, partially offset by RMB238.3 million received from the maturity of short-term investments.
In addition, to further diversify and strengthen our overall channel penetration and presence, we have expanded cooperation to increase our overall points of sales, particularly through cooperation with various O2O outlets of major e-commerce retailers, as well as establishing strategic partnership with leading domestic home design enterprises such as KUKA, all of which are expected to increase our end-points of sales and overall consumer awareness of our brand, products and concept.
Additionally, to diversify and strengthen our channel penetration, we have increased cooperation with various O2O outlets of major e-commerce retailers and have formed strategic partnerships with leading domestic home design companies such as KUKA. These initiatives are designed to expand our sales endpoints and enhance consumer awareness of our brand, products, and concepts.
Our contractual obligations mainly represent operating lease obligations, which consist of the commitments under the lease agreements for our office premises and several factories.
We currently plan to fund these expenditures with our current cash and cash equivalents, restricted cash, short-term investments and cash flow generated from our operating activities. Our contractual obligations mainly represent operating lease obligations, which consist of the commitments under the lease agreements for our office premises and several factories.
Warranty We offer product warranty pursuant to standard product quality required by the PRC Consumer Protection Law. The warranty period is calculated starting from the date when products are sold to the end customers. We have the obligation, at the customer’s sole discretion, to either repair or replace the defective product.
Revenue, recognized on a net basis after such sales incentives, are allocated based on the relative standalone selling prices for respective products. - Warranty We offer product warranty pursuant to standard product quality required by the PRC Consumer Protection Law. The warranty period is calculated starting from the date when products are sold to the end customers.
Operating Expenses Our operating expenses decreased by 10.7% from RMB1,160.5 million in 2021 to RMB1,036.5 million (US$150.3 million) in 2022. General and administrative .
Our gross margin remained stable at 22.8% in 2022 and 2023. Operating Expenses Our operating expenses decreased by 31.9% from RMB1,036.5 million in 2022 to RMB706.2 million (US$99.5 million) in 2023. General and administrative .

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Item 6. [Reserved]

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

46 edited+6 added−2 removed44 unchanged
The award agreements evidencing options shall contain the terms established by the Administrator for that Award, as well as any other terms, provisions, or restrictions that the administrator may impose on the option or any ordinary shares subject to the option. Exercise of Awards .
The award agreements evidencing awards shall contain the terms established by the administrator for that award, as well as any other terms, provisions, or restrictions that the administrator may impose on the award or any ordinary shares subject to the award of option. Exercise of Options.
The plan administrator will determine the participants who are to receive awards, the type or types of awards to be granted, the number of awards to be granted, and the terms and conditions of each award grant. The plan administrator can amend outstanding awards and interpret the terms of the 2018 Plan and any award agreement. Award Agreement.
The plan administrator will determine the participants who are to receive awards, the type or types of awards to be granted, the number of awards to be granted, and the terms and conditions of each award grant. The plan administrator can amend outstanding awards and interpret the terms of the 2018 Plan and any award agreement under the 2018 Plan.
The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
The audit committee is responsible for, among other things: ● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors; ● reviewing with the independent auditors any audit problems or difficulties and management’s response; ● discussing the annual audited financial statements with management and the independent auditors; 112 Table of Contents ● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures; ● reviewing and approving all proposed related party transactions; ● meeting separately and periodically with management and the independent auditors; and monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
Viomi Limited is wholly owned by a trust established for the benefit of Mr. Xiaoping Chen and his family. The abovementioned certain employees granted an irrevocable voting proxy for all their ordinary shares to Mr. Xiaoping Chen. (2) Represents 67,636,364 Class B ordinary shares and 2,800,000 Class A ordinary shares held by Viomi Limited, a British Virgin Islands company.
Viomi Limited is wholly owned by a trust established for the benefit of Mr. Xiaoping Chen and his family. The abovementioned certain employees granted an irrevocable voting proxy for all their ordinary shares to Mr. Xiaoping Chen. (2) Represents 67,636,364 Class B ordinary shares and 2,200,000 Class A ordinary shares held by Viomi Limited, a British Virgin Islands company.
The nominating and corporate governance committee is responsible for, among other things: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; 125 Table of Contents ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
The nominating and corporate governance committee is responsible for, among other things: ● selecting and recommending to the board nominees for election by the shareholders or appointment by the board; ● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity; ● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.
Jun Li satisfy the “independence” requirements of Rule 5605(c)(2) of the Listing Rules of the Nasdaq and Rule 10A-3 under the Exchange Act. We have determined that Ms. Jinling Zhang qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
Jun Li satisfy the “independence” requirements of Rule 560(c)(2) of the Listing Rules of the Nasdaq and Rule 10A-3 under the Exchange Act. We have determined that Ms. Jinling Zhang qualifies as an “audit committee financial expert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.
Awards granted under the 2018 Plan are evidenced by an award agreement that sets forth the terms and conditions for each grant.
Award Agreement. Awards granted under the 2018 Plan are evidenced by an award agreement that sets forth the terms, conditions and limitations for each grant.
We are required under PRC law to make contributions to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. We enter into standard confidentiality and employment agreements with our key employees.
We are required under PRC laws to make contributions to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. We enter into standard confidentiality and employment agreements with our key employees.
We believe that we maintain a good working relationship with our employees, and we have not experienced any material labor disputes.
We believe that we maintain a good working relationship with our employees, and we have not experienced any material labor disputes. E.
The following table summarizes, as of December 31, 2022, the awards granted under the 2015 Plan and 2018 Plan to our directors and executive officers, excluding awards that were forfeited or cancelled after the relevant grant dates. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Share ​ ​ ​ ​ ​ Underlying ​ Exercise Price ​ ​ ​ Date of Name Options (US$/Share) Date of Grant Expiration Chen Xiaoping ​ * ​ 1.1 ​ May 6, 2020 ​ April 1, 2030 ​ Note: * Less than 1% of our total outstanding shares.
The following table summarizes, as of December 31, 2023, the awards granted under the 2015 Plan or the 2018 Plan to our directors and executive officers, excluding awards that were forfeited or cancelled after the relevant grant dates. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Share ​ ​ ​ ​ ​ Underlying ​ Exercise Price ​ ​ ​ Date of Name Options (US$/Share) Date of Grant Expiration Chen Xiaoping ​ * ​ 1.1 ​ May 6, 2020 ​ April 1, 2030 * Less than 1% of our total outstanding shares.
Prior to that, he served multiple positions in Midea Group Co., Ltd from 1999 to 2014, including vice president of development department and he was in charge of the research & development center from 2013 to 2014. Mr.
Prior to that, he served multiple positions in Midea Group Co., Ltd from 1999 to 2014, including vice president of development department, and he was in charge of its research & development center from 2013 to 2014. Mr.
Prior to joining South China Agricultural University in July 2007, Mr. Jun Li served as the sales and services manager in Wuyang-Honda Motors (Guangzhou) Co., Ltd from July 1998 to August 2002. Mr. Jun Li received his master’s degree in mechatronic engineering in 2004 and his doctor’s degree in vehicle engineering in 2007, both from South China University of Technology.
Jun Li served as the sales and services manager in Wuyang-Honda Motors (Guangzhou) Co., Ltd from July 1998 to August 2002. Mr. Jun Li received his master’s degree in mechatronic engineering in 2004 and his doctor’s degree in vehicle engineering in 2007, both from South China University of Technology.
Board Diversity Matrix The board diversity matrix below sets forth the information on each director’s voluntary self-identified characteristics pursuant to Rule 5606 of the Listing Rules of Nasdaq. ​ ​ ​ ​ ​ ​ Board Diversity Matrix As of February 28, 2023 ​ ​ ​ ​ Country of Principal Executive Offices: PRC ​ ​ ​ Foreign Private Issuer Yes ​ ​ ​ Disclosure Prohibited Under Home Country Law No ​ ​ ​ Total Number of Directors 5 ​ ​ ​ 126 Table of Contents ​ Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity ​ ​ ​ ​ ​ 1 4 0 — Part II: Demographic Background ​ ​ ​ ​ Underrepresented Individual in Home Country Jurisdiction — ​ ​ ​ LGBTQ+ — ​ ​ ​ Did Not Disclose Demographic Background — ​ ​ ​ ​ D.
Board Diversity Matrix The board diversity matrix below sets forth the information on each director’s voluntary self-identified characteristics pursuant to Rule 5606 of the Listing Rules of Nasdaq. ​ ​ ​ ​ ​ ​ Board Diversity Matrix As of February 29, 2024 ​ ​ ​ ​ Country of Principal Executive Offices: PRC ​ ​ ​ 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 ​ ​ ​ ​ ​ 1 4 0 — Part II: Demographic Background ​ ​ ​ ​ Underrepresented Individual in Home Country Jurisdiction — ​ ​ ​ LGBTQ+ — ​ ​ ​ Did Not Disclose Demographic Background — ​ ​ ​ ​ 114 Table of Contents D.
In general, the plan administrator determines the vesting schedule, which is set forth in the relevant award agreement. Transfer Restrictions . Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as otherwise provided by the plan administrator. Termination.
In general, the plan administrator determines the vesting schedule, which is set forth in the relevant award agreement. Transfer Restrictions . Awards may not be transferred in any manner by the recipient, except as otherwise provided in the 2015 Plan, such as by will or the laws of descent and distribution. Termination.
Each committee’s members and functions are described below. 124 Table of Contents Audit Committee . Our audit committee consists of Ms. Jinling Zhang and Mr. Jun Li. Ms. Jinling Zhang is the chairman of our audit committee. We have determined that Ms. Jinling Zhang and Mr.
Each committee’s members and functions are described below. Audit Committee . Our audit committee consists of Ms. Jinling Zhang and Mr. Jun Li. Ms. Jinling Zhang is the chairman of our audit committee. We have determined that Ms. Jinling Zhang and Mr.
Our PRC subsidiaries and VIEs are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. 2015 Share Incentive Plan In September 2015, our shareholders and board of directors adopted the 2015 Share Incentive Plan, which we refer to as the 2015 Plan in this annual report, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of our business.
Our PRC subsidiaries and VIEs are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. 2015 Share Incentive Plan In September 2015, our shareholders and board of directors adopted the 2015 Share Incentive Plan, or the 2015 Plan, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of our business.
These shares, however, are not included in the computation of the percentage ownership of any other person. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares Beneficially Owned ​ ​ Class A ​ Class B ​ % of total ​ % of ​ ​ ​ Ordinary ​ Ordinary ​ ordinary ​ aggregate ​ ​ Shares Shares shares voting power ** Directors and Executive Officers*: ​ ​ ​ ​ Xiaoping Chen (1) ​ 3,190,612 ​ 68,536,366 ​ 34.6 % 60.8 % De Liu — — — — ​ Jinling Zhang ​ Weijiang Wu — — — — ​ Jun Li — — — — ​ All Directors and Executive Officers as a Group 3,190,612 68,536,366 34.6 % 60.8 % Principal Shareholders: ​ Viomi Limited (2) 2,800,000 67,636,364 34.0 % 59.9 % Shunwei Talent Limited (3) 32,111,364 — 15.5 % 2.8 % Red Better Limited (4) 330,000 33,818,182 16.5 % 29.9 % ​ Notes: * Unless otherwise stated, the business address of our directors and executive officers is Wansheng Square, Rm 1302 Tower C, Xingang East Road, Haizhu District, Guangzhou, Guangdong, Guangdong, 510220, People’s Republic of China.
These shares, however, are not included in the computation of the percentage ownership of any other person. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Ordinary Shares Beneficially Owned ​ ​ Class A ​ Class B ​ % of total ​ % of ​ ​ ​ Ordinary ​ Ordinary ​ ordinary ​ aggregate ​ ​ Shares Shares shares voting power ** Directors and Executive Officers*: ​ ​ ​ ​ Xiaoping Chen (1) ​ 2,590,632 ​ 68,536,366 ​ 34.7 ​ 60.9 ​ De Liu — — — ​ — ​ Jinling Zhang ​ ​ ​ ​ ​ ​ Weijiang Wu — — — ​ — ​ Jun Li — — — ​ — ​ All Directors and Executive Officers as a Group 2,590,632 68,536,366 34.7 ​ 60.9 ​ Principal Shareholders: ​ ​ ​ ​ ​ ​ Viomi Limited (2) 2,200,000 67,636,364 34.1 ​ 60.1 ​ Shunwei Talent Limited (3) 32,111,364 — 15.7 ​ 2.8 ​ Red Better Limited (4) 330,000 33,818,182 16.7 ​ 30.0 ​ Notes: * Unless otherwise stated, the business address of our directors and executive officers is Wansheng Square, Rm 1302 Tower C, Xingang East Road, Haizhu District, Guangzhou, Guangdong, 510220, People’s Republic of China.
The award agreements evidencing awards shall contain the terms established by the Administrator for that Award, as well as any other terms, provisions, or restrictions that the administrator may impose on the option or any ordinary shares subject to the option. 123 Table of Contents Exercise of Options.
The award agreements evidencing the awards shall contain the terms established by the plan administrator for that award, as well as any other terms, provisions, or restrictions that the plan administrator may impose on the award or any ordinary shares subject to the award of option. 110 Table of Contents Exercise of Awards .
E.Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our shares as of February 28, 2023 by: ● each of our directors and executive officers; and ● each of our principal shareholders who beneficially own 5% or more of our total outstanding shares on an as-converted basis.
Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our shares as of February 29, 2024 by: ● each of our directors and executive officers; and ● each of our principal shareholders who beneficially own 5% or more of our total outstanding shares on an as-converted basis.
We may also terminate an executive officer’s employment without cause upon 60-day advance written notice. In such case of termination by us, we will provide severance payments to the executive officer as may be agreed between us and the executive officer. The executive officer may resign at any time with a 60-day advance written notice.
We may also terminate an executive officer’s employment without cause upon 60-day advance written notice. In such case of termination by us, we will provide severance payments to the executive officer as may be agreed between us and the executive officer.
Compensation of Directors and Executive Officers In 2022, we paid an aggregate of approximately RMB2.9 million (US$0.4 million) in cash to our executive officers, and RMB1.1 million (US$0.2 million) to our independent directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
Compensation of Directors and Executive Officers In 2023, we paid an aggregate of approximately RMB3.2 million (US$0.5 million) in cash to our executive officers, and RMB1.1 million (US$0.2 million) to our independent directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
Wu received his bachelor’s degree in engineering from Huazhong University of Science & Technology in 1998. 121 Table of Contents Mr. Jun Li has served as our independent director since September 2019. Mr. Li is a professor, Ph. D. supervisor, and the Deputy Dean of College of Engineering in South China Agricultural University.
Wu received his bachelor’s degree in engineering from Huazhong University of Science & Technology in 1998. Mr. Jun Li has served as our independent director since September 2019. Mr. Li is a professor, Ph. D. supervisor, and the Deputy Dean of College of Engineering in South China Agricultural University. Prior to joining South China Agricultural University in July 2007, Mr.
The maximum aggregate number of shares which may be issued pursuant to all awards is 17,672,728, plus an annual increase on the first day of each of the fiscal years of the Company after the completion of our initial public offering during the term of this Plan commencing, by (i) an amount equal to 1% of the total number of the then outstanding shares or (ii) such fewer number of Shares as may be determined by the Board.
The maximum aggregate number of shares which may be issued pursuant to all awards is 17,672,728, plus an annual increase on the first day of each of the fiscal years of the Company during the term of this Plan commencing with the first fiscal year beginning January 1, 2019, by (i) an amount equal to 1% of the total number of the then outstanding shares or (ii) such fewer number of Shares as may be determined by the Board.
The following paragraphs summarize the terms of the 2018 Plan. Types of Awards. The Plan permits the awards of options, restricted shares and restricted share units. Plan Administration. The board of directors or a committee designated by the board of directors or another committee, within its delegated authority, acts as the plan administrator.
The following paragraphs summarize the terms of the 2018 Plan. Types of Awards. The 2018 Plan permits the awards of options, restricted shares and restricted share units. Plan Administration. The 2018 Plan may be administered by our board of directors or a committee designated by our board of directors or another committee, within its delegated authority.
Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third party received by us and for which we have confidential obligations.
The executive officer may resign at any time with a 60-day advance written notice. 109 Table of Contents Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third party received by us and for which we have confidential obligations.
As of December 31, 2022, other employees as a group held outstanding options to purchase 18,742,616 ordinary shares of our company, at a weighted average exercise price of US$0.79 per share. Shares awarded to Mr. Xiaoping Chen In August 2018, we issued 4,000,000 class A ordinary shares at par value to Mr.
As of December 31, 2023, other employees as a group held outstanding options to purchase 13,518,426 ordinary shares of our company, at a weighted average exercise price of US$0.80 per share. Shares awarded to Mr. Xiaoping Chen In August 2018, we issued 4,000,000 class A ordinary shares at par value to Mr.
The following table sets forth the numbers of our employees categorized by function as of December 31, 2022: ​ ​ ​ ​ ​ As of ​ ​ December 31, Function: 2022 Research and development ​ 342 Manufacturing 252 Sales and marketing 263 General administration 59 Total 916 ​ We invest significant resources in the recruitment and training of our employees in support of our fast-growing business operations.
The following table sets forth the numbers of our employees categorized by function as of December 31, 2023: ​ ​ ​ ​ ​ As of ​ ​ December 31, Function: 2023 Research and development ​ 289 Manufacturing 170 Sales and marketing 230 General administration 61 Total 750 ​ We invest significant resources in the recruitment and training of our employees in support of our fast-growing business operations.
Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as otherwise provided by the plan administrator. Termination and Amendment of the 2018 Plan.
Awards may not be transferred in any manner by the recipient, except as otherwise provided in the 2018 Plan, such as by will or the laws of descent and distribution. 111 Table of Contents Termination and Amendment of the 2018 Plan.
As of December 31, 2022, the maximum of shares that may be issued under the 2018 Share Incentive Plan was 26,008,171. As of December 31, 2022, awards to purchase 15,084,757 ordinary shares have been granted and are outstanding under the 2018 Plan, excluding awards that were forfeited or cancelled after the relevant grant dates.
As of December 31, 2023, the maximum of shares that may be issued under the 2018 Share Incentive Plan was 28,082,111. As of December 31, 2023, awards to purchase 11,528,462 ordinary shares have been granted and are outstanding under the 2018 Plan, excluding awards that were forfeited or cancelled after the relevant grant dates.
As of December 31, 2022, awards to purchase 4,657,859 ordinary shares have been granted and are outstanding under the 2015 Plan, excluding awards that were exercised, forfeited or cancelled after the relevant grant dates. 122 Table of Contents The following paragraphs summarize the terms of the 2015 Plan. Types of Awards .
As of December 31, 2023, awards to purchase 2,989,964 ordinary shares have been granted and are outstanding under the 2015 Plan, excluding awards that were exercised, forfeited or cancelled after the relevant grant dates. The following paragraphs summarize the terms of the 2015 Plan. Types of Awards . The 2015 Plan permits the awards of options and restricted shares.
De Liu’s business address is Xiaomi Campus, No. 33 Xierqi Middle Road, Haidian District, Beijing, 100085, China. ** For each person or group included in this column, percentage of total voting power represents voting power based on both Class A and Class B ordinary shares beneficially owned by such person or group with respect to all outstanding shares of our Class A and Class B ordinary shares as a single class.
Jun Li’s business address is No. 483 Wushan Road, Tianhe District, Guangzhou, Guangdong, 510642, People’s Republic of China. ** For each person or group included in this column, percentage of total voting power represents voting power based on both Class A and Class B ordinary shares beneficially owned by such person or group with respect to all outstanding shares of our Class A and Class B ordinary shares as a single class.
The 2018 Plan has a term of ten years, provided that our board of directors may terminate or amend the plan at any time and for any reason. However, no such action may adversely affect in any material way any awards previously granted unless agreed by the recipient.
The 2018 Plan has a term of twenty years, provided that our board of directors may terminate or amend the plan at any time. However, no such action may adversely affect in any material way any awards previously granted without prior written consent of the recipient, subject to certain exceptions.
Red Better Limited is wholly owned by Fast Pace Limited, a British Virgin Islands company wholly owned by Xiaomi Corporation. To our knowledge, as of February 28, 2023, 121,376,577 of our Class A ordinary shares were held by one record holder in the United States, which is the depositary of our ADS program.
Red Better Limited is wholly owned by Fast Pace Limited, a British Virgin Islands company wholly owned by Xiaomi Corporation. To our knowledge, as of February 29, 2024, we had 123,961,299 Class A ordinary shares that were held by one record holder residing in the United States, that being Deutsche Bank Trust Company Americas, the depositary of our ADS program.
Our company has the right to seek damages if a duty owed by our directors is breached. In certain limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached.
Our company has the right to seek damages if a duty owed by our directors is breached.
The plan shall terminate in September 2025, provided that our board of directors may terminate the plan at any time and for any reason. 2018 Share Incentive Plan In June 2018, our shareholders and board of directors adopted the 2018 Share Incentive Plan, which we refer to as the 2018 Plan in this annual report, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of our business.
The plan has a term of twenty years, provided that our board of directors may terminate the plan in whole or in part at any time. 2018 Share Incentive Plan In June 2018, our shareholders and board of directors adopted the 2018 Share Incentive Plan, or the 2018 Plan, to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of our business.
(1) Represents (i) 2,800,000 Class A ordinary shares and 67,636,364 Class B ordinary shares beneficially owned by Viomi Limited, a British Virgin Islands company, and (ii) 900,002 Class B ordinary shares and 390,612 Class A ordinary shares in the form of ADS beneficially owned by certain employees.
(1) Represents (i) 2,200,000 Class A ordinary shares and 67,636,364 Class B ordinary shares beneficially owned by Viomi Limited, a British Virgin Islands company, (ii) 900,002 Class B ordinary shares and 190,632 Class A ordinary shares in the form of ADS beneficially owned by certain employees, and (iii) 200,000 Class A ordinary shares in the form of ADSs issuable pursuant to options exercisable within 60 days following February 29, 2024.
Employees We had 916 employees as of December 31, 2022.
Employees We had 1,470 employees as of December 31, 2021, 916 employees as of December 31, 2022, and 750 employees as of December 31, 2023.
The calculations in the table below are based on 207,301,316 ordinary shares outstanding, consisting of 104,446,766 Class A ordinary shares (excluding 19,129,815 Class A ordinary shares that were issued to our depositary bank and reserved for future grants under our share incentive plans) and 102,854,550 Class B ordinary shares outstanding as of February 28, 2023. 127 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 204,697,094 ordinary shares outstanding, consisting of 101,932,544 Class A ordinary shares (excluding 12,801,249 Class A ordinary shares that were issued to our depositary bank and reserved for future grants under our share incentive plans and 11,427,510 Class A ordinary shares that were repurchased by us) and 102,764,550 Class B ordinary shares outstanding as of February 29, 2024. 115 Table of Contents Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
The 2015 Plan permits the awards of options and restricted shares. Plan Administration . The board of directors or one or more committees designated by the board of directors or another committee, within its delegated authority, acts as the plan administrator.
Plan Administration . The plan may be administered by our board of directors or one or more committees designated by our board of directors or another committee within its delegated authority.
The exercise price per share subject to an option will be determined by the committee, which will be specified in applicable award agreement. Eligibility. We may grant awards to our employees, consultants, and directors, as determined by the committee. Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the relevant award agreement.
We may grant awards to our employees, consultants, and directors of us or any of our subsidiaries as defined in the 2018 Plan, as determined by the plan administrator. Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the relevant award agreement. Transfer Restrictions.
Directors and Senior Management The following table sets forth information regarding our directors and executive officers as of the date of this annual report. ​ ​ Directors and Executive Officers ​ Age ​ Position/Title Xiaoping Chen ​ 48 ​ Founder, Chairman of the Board of Directors and Chief Executive Officer De Liu ​ 49 ​ Director Jinling Zhang ​ 51 ​ Independent Director Weijiang Wu ​ 46 ​ Independent Director Jun Li ​ 44 ​ Independent Director ​ Mr.
Directors and Executive Officers Age Position/Title Xiaoping Chen ​ 49 ​ Founder, Chairman of the Board of Directors and Chief Executive Officer De Liu ​ 50 ​ Director Jinling Zhang ​ 52 ​ Independent Director Weijiang Wu ​ 47 ​ Independent Director Jun Li ​ 45 ​ Independent Director ​ 108 Table of Contents Mr.
The exercise price of an award will be determined by the plan administrator, which will be specified in applicable award agreement. Each option shall expire not more than 10 years after its date of grant. Eligibility . We may grant awards to our officers, employees, consultants, and all members of the board of directors. Vesting Schedule .
The exercise price of an award will be determined by the plan administrator, which will be specified in applicable award agreement. Each option shall expire not more than 20 years after its date of grant, subject to certain exceptions with respective to incentive stock options.
The maximum aggregate number of ordinary shares that may be issued pursuant to all awards under the 2015 Plan is 12,727,272 shares.
Our board of directors amended the 2015 Plan in October 2023 to extend the effective term from 10 years to 20 years, among other changes, subject to certain exceptions with respect to incentive stock options. The maximum aggregate number of ordinary shares that may be issued pursuant to all awards under the 2015 Plan is 12,727,272 shares.
As of February 28, 2023, none of our Class B ordinary shares are held by U.S. record holders.
As of February 29, 2024, none of our Class B ordinary shares are held by U.S. record holders. The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States.
The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States. 128 Table of Contents We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. F. ​ ​ Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation 116 Table of Contents Not applicable.
Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs.
In certain limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached. 113 Table of Contents Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs.
Removed
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A.
Added
ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES A. Directors and Senior Management The following table sets forth information regarding our directors and executive officers as of the date of this annual report.
Removed
F. ​ ​ Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable.
Added
Each restricted share shall vest or be repurchased by the Company not more than 20 years after the date of its grant, subject to earlier termination. Eligibility . We may grant awards to officers, employees, members of the board of directors, consultants or advisors of us or any of our affiliates, subject to certain restrictions. Vesting Schedule .
Added
Our board of directors amended the 2018 Plan in October 2023 to extend the effective term from 10 years to 20 years, among other changes, subject certain exceptions with respect to incentive stock options.
Added
The exercise price per share subject to an option will be determined by the plan administrator, which will be specified in applicable award agreement. The term of any option shall not exceed twenty years, subject to certain exceptions. Eligibility.
Added
Mr. De Liu’s business address is Xiaomi Campus, No. 33 Xierqi Middle Road, Haidian District, Beijing, 100085, People’s Republic of China. Ms. Jinling Zhang’s business address is 601, North Building, Tower C, Raycom InfoTech Park, No. 2 Kexueyuan South Road, Haidian District, Beijing, 100080, People’s Republic of China. Mr.
Added
Weijiang Wu’s business address is No. 388 Baibu Avenue, Baibu Town, Haiyan County, Jiaxing, Zhejiang, 314312, People’s Republic of China. Mr.

Item 7. Management's Discussion & Analysis

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

11 edited+2 added−11 removed9 unchanged
Our cooperation with and sales to Xiaomi extends to a diversified range of products, which currently include Xiaomi-branded water purification systems, water purifier filters, range-hoods and gas stoves, dishwashers, sweeper robots, blenders as well as other complimentary products such as kettles and water quality meters.
Our cooperation with and sales to Xiaomi extends to a diversified range of products, which currently include Xiaomi-branded water purification systems, water purifier filters, range-hoods and gas stoves, dishwashers, sweeper robots, blenders as well as other complementary products such as kettles and water quality meters.
Xiaoping Chen’s wholly-owned entity Viomi Limited to award his contribution to our company’s rapid development. Our Relationship with Xiaomi Xiaomi is our strategic partner, shareholder and customer. Our strategic partnership with Xiaomi provides us access to Xiaomi’s ecosystem users, sales platforms and data resources and related support.
Xiaoping Chen’s wholly-owned entity Viomi Limited to award his contribution to our company’s rapid development. ​ 117 Table of Contents Our Relationship with Xiaomi Xiaomi is our strategic partner, shareholder and customer. Our strategic partnership with Xiaomi provides us access to Xiaomi’s ecosystem users, sales platforms and data resources and related support.
Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Employment Agreements and Indemnification Agreements.” Share Incentive Plans See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—2015 Share Incentive Plan” and “2018 Share Incentive Plan.” Private Placements In August 2018, we issued 4,000,000 class A ordinary shares to Mr.
Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—2015 Share Incentive Plan” and “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—2018 Share Incentive Plan.” Private Placements In August 2018, we issued 4,000,000 class A ordinary shares to Mr.
The retail prices of our products on Youpin’s platform shall be no higher than the sales price from any other e-commerce merchants or our official offline sales channel, including in the event of sales or promotion. Transaction with Xiaomi In 2022, we recorded RMB1,403.4 million (US$203.5 million) in revenues from Xiaomi primarily for the sales of Xiaomi-branded products.
The retail prices of our products on Youpin’s platform shall be no higher than the sales price from any other e-commerce merchants or our official offline sales channel, including in the event of sales or promotion. Transaction with Xiaomi In 2023, we recorded RMB1,317.3 million (US$185.5 million) in revenues from Xiaomi primarily for the sales of Xiaomi-branded products.
As of December 31, 2022, the amount due from Xiaomi was RMB360.5 million (US$52.3 million). In 2021, we recorded RMB2,295.6 million (US$360.2 million) in revenues from Xiaomi primarily for the sales of Xiaomi-branded products. As of December 31, 2021, the amount due from Xiaomi was RMB409.3 million (US$64.2 million).
As of December 31, 2022, the amount due from Xiaomi was RMB360.5 million. 119 Table of Contents In 2021, we recorded RMB2,295.6 million in revenues from Xiaomi primarily for the sales of Xiaomi-branded products. As of December 31, 2021, the amount due from Xiaomi was RMB409.3 million.
The shareholders agreement provides for certain special rights, including right of first refusal, co-sale rights, preemptive rights and contains provisions governing the board of directors and other corporate governance matters. Those corporate governance provisions, as well as special rights, except the registration rights, have automatically terminate upon the completion of our initial public offering.
The shareholders agreement provides for certain special rights, including right of first refusal, co-sale rights, preemptive rights and contains provisions governing the board of directors and other corporate governance matters.
This agreement can be terminated earlier by Xiaomi, among other reasons, if (i) we breach the material obligation underlying this agreement and purchase order, (ii) except as prohibited by applicable bankruptcy laws, we declare bankruptcy, or if we are unable to repay due loans, or perform contracts, or if our assets are transferred to or taken by other creditors, (iii) the products fail to meet Xiaomi’s requirements, and Xiaomi determines that there is no value to remedy or the products still fail the requirement after three times’ remedies, (iv) we fail to deliver the products on time without reasonable cause and Xiaomi’s prior written consent, and (v) we fail to store the data to clouds designated by Xiaomi, cause disputes of violating users’ personal information, or disclose user data to any third party without Xiaomi’s consent.
This agreement can be terminated prior to the expiration date by Xiaomi, among other reasons, if (i) we breach the material obligation underlying this agreement and purchase order, (ii) except as prohibited by applicable bankruptcy laws, we declare bankruptcy, or if we are unable to repay due loans, or perform contracts, or if our assets are transferred to or taken by other creditors, (iii) the products fail to meet Xiaomi’s requirements, and Xiaomi determines that there is no value to remedy or the products still fail the requirement after three times’ remedies, (iv) we delay the delivery of the products without reasonable causes and Xiaomi’s prior written consent, or (v) we fail to store the data to the Xiaomi Ecosystem Cloud or other server designated by Xiaomi, cause disputes of violating users’ personal information, or disclose user data to any third party without Xiaomi’s consent. ​ 118 Table of Contents Under the business cooperation agreement, (i) these products are exclusively designed for and can only be sold to Xiaomi, (ii) Xiaomi shall purchase these products at a price that covers all of our costs of raw materials, outsourcing manufacture, models and logistics, in connection with the manufacture and delivery of these products, and (iii) Xiaomi and we shall share gross profits, derived from sales of these products, the retail prices of which were set by Xiaomi and us together.
A business cooperation agreement provides the terms and conditions of the latter pattern. We also sell products through Xiaomi’s online e-commerce channel, Youpin, and are charged of commissions pursuant to a commission sales agreement.
A business cooperation agreement provides the terms and conditions of the latter pattern. We also sell products through Xiaomi’s online e-commerce channel, Youpin, and are charged of commissions pursuant to a commission sales agreement. In 2023, revenues generated from sales to Xiaomi, predominantly comprising Xiaomi-branded products, was RMB1,317.3 million (US$185.5 million), accounting for 52.8% of our net revenues.
We recognized RMB97.2 million, RMB106.9 million and RMB41.6 million (US$6.0 million) in commission fees and other expenses to Xiaomi in 2020, 2021 and 2022, respectively, which was incurred by selling our own self-branded products on Youpin. 131 Table of Contents C. Interests of Experts and Counsel Not applicable.
We purchased RMB33.8 million, RMB30.9 million and RMB26.3 million (US$3.7 million) of products and services from Xiaomi in 2021, 2022 and 2023, respectively. We recognized RMB106.9 million, RMB41.6 million and RMB35.1 million (US$5.0 million) in commission fees and other expenses to Xiaomi in 2021, 2022 and 2023, respectively, which was incurred by selling our own Viomi-branded products on Youpin. C.
In 2022, revenues generated from sales to Xiaomi, predominantly comprising Xiaomi-branded products, was RMB1,403.4 million (US$203.5 million), accounting for 43.4% of our net revenues. 130 Table of Contents Business cooperation agreement The current business cooperation agreement entered into in 2017 with Xiaomi governs the design, production and sales to Xiaomi in relation to certain specified product categories, including some SKUs of Xiaomi-branded water purification systems, water purifier filters, as well as other complementary products such as kettles and water quality meters.
Business cooperation agreement The currently effective business cooperation agreement with Xiaomi that was renewed in May 2023 governs the design, production and sales to Xiaomi in relation to certain specified product categories, including some SKUs of Xiaomi-branded water purification systems, water purifier filters, as well as other complementary products such as kettles and water quality meters.
In 2020, we recorded RMB2,889.4 million in revenues from Xiaomi primarily for the sales of Xiaomi-branded products. As of December 31, 2020, the amount due from Xiaomi was RMB697.1 million. We purchased RMB50.8 million, RMB33.8 million and RMB30.9 million (US$4.5 million) of products and services from Xiaomi in 2020, 2021 and 2022, respectively.
As of December 31, 2023, the amount due from Xiaomi was RMB324.2 million (US$45.7 million). In 2022, we recorded RMB1,403.4 million in revenues from Xiaomi primarily for the sales of Xiaomi-branded products.
Removed
Registration rights granted to shareholders We have granted certain registration rights to our shareholders under the shareholders agreement. Set forth below is a description of the registration rights. Demand Registration Rights.
Added
Those corporate governance provisions, as well as special rights, except the registration rights, automatically terminated upon the completion of our initial public offering, and the registration rights terminated on September 27, 2023. Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Employment Agreements and Indemnification Agreements.” Share Incentive Plans See “Item 6.
Removed
At any time after the earlier of (i) July 21, 2021 or (ii) one year following the closing of an initial public offering, holders of at least 25% of the redeemable convertible class B ordinary shares and preferred shares (or ordinary shares issued on the conversion of redeemable convertible class B ordinary shares and preferred shares) then outstanding has the right to demand that we file a registration statement covering at least 20% (or any lesser percentage if the anticipated gross proceeds to us from such proposed offering would exceed US$5.0 million) of the registrable securities.
Added
This contract will remain in effect until March 21, 2025.
Removed
We have the right to defer filing of a registration statement for a period of not more than 90 days (except for a registration statement on Form F-3, which shall be 60 days) after the receipt of the request of the initiating holders if we furnish to the holders requesting registration a certificate signed by our president or chief executive officer stating that in the good faith judgment of our board of directors, it would be materially detrimental to us and our shareholders for such registration statement to be filed at such time.
Removed
However, we cannot exercise the deferral right more than once in any 12-month period. We are obligated to effect no more than two demand registrations, other than demand registration to be effected pursuant to registration statement on Form F-3, for which an unlimited number of demand registrations shall be permitted. Piggyback Registration Rights.
Removed
If we propose to file a registration statement for a public offering of our securities, we must offer our shareholders an opportunity to include in the registration all or any part of the registrable securities held by such holders.
Removed
If the managing underwriters of any underwritten offering determine in good faith that marketing factors require a limitation of the number of shares to be underwritten, the managing underwriters may exclude shares from the registration and the underwriting, and the number of shares that may be included in the registration and underwriting shall be allocated first, to us, second to each of the holders requesting inclusion of their registrable securities on a pro rata basis, and third to holders of other securities of us. 129 Table of Contents Form F-3 Registration Rights.
Removed
Our shareholders may request us in writing to file an unlimited number of registration statements on Form F-3 so long as such registration offerings are in excess of US$500,000. We shall effect the registration of the securities on Form F-3 as soon as practicable, except in certain circumstances. Expenses of Registration.
Removed
We will bear all registration expenses, other than selling expenses, underwriting discounts and commissions, and fees for special counsel of the holders participating in such registration, incurred in connection with any demand, piggyback or Form F-3 registration. Termination of Registration Rights.
Removed
Our shareholders’ registration rights will terminate on the earlier of (i) the date that is the fifth anniversary of the closing of our initial public offering, (ii) upon our termination, liquidation, dissolution, and liquidation event and (iii) with respect to any shareholder, when the registrable securities proposed to be sold by such shareholder may then be sold without registration in any 90-day period pursuant to Rule 144 under the Securities Act.
Removed
This contract contains an auto-renewal provision, and was most recently renewed in September 2021 for two years.
Removed
Under the business cooperation agreement, (i) these products are exclusively designed for and can only be sold to Xiaomi, (ii) Xiaomi shall purchase these products at a price that covers all of our costs of raw materials, outsourcing manufacture, models and logistics, in connection with the manufacture and delivery of these products, and (iii) Xiaomi and we shall share gross profits, derived from sales of these products, the retail prices of which were set by Xiaomi and us together.

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