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17 Education & Technology Group Inc.

17 Education & Technology Group Inc.YQ決算レポート

Nasdaq · 非必須消費財 · 教育サービス

McGraw Hill, Inc. is an American education science company that provides educational content, software, and services for students and educators across various levels—from K-12 to higher education and professional settings. They produce textbooks, digital learning tools, and adaptive technology to enhance learning experiences and outcomes. It is one of the "big three" educational publishers along with Houghton Mifflin Harcourt and Pearson Education. McGraw Hill also publishes reference and tra...

What changed in 17 Education & Technology Group Inc.'s 20-F — 2022 vs 2023

Top changes in 17 Education & Technology Group Inc.'s 2023 20-F

915 paragraphs added · 800 removed · 664 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

305 edited+132 added−61 removed590 unchanged
We conduct our business in mainland China through (i) our mainland China subsidiaries and (ii) the VIEs with which we have maintained contractual arrangements, and (iii) the subsidiaries of the VIEs. Laws and regulations of mainland China restrict and impose conditions on foreign investment in value-added telecommunications services and certain other businesses.
We conduct our business in mainland China through (i) our mainland China subsidiaries, (ii) the VIEs with which we have maintained contractual arrangements, and (iii) the subsidiaries of the VIEs. Laws and regulations of mainland China restrict and impose conditions on foreign investment in value-added telecommunications services and certain other businesses.
The relevant governmental authorities may, from time to time, conduct inspections or impose more stringent regulatory approach on compliance with the Opinions on Educational Apps and the relevant local rules.
The governmental authorities may, from time to time, conduct inspections or impose more stringent regulatory approach on compliance with the Opinions on Educational Apps and the relevant local rules.
In 2009, the State Administration of Taxation, or the SAT, issued the Circular of the State Administration of Taxation on Issues Relating to Identification of PRC-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance with the De Facto Standards of Organizational Management, or SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China.
In 2009, the State Administration of Taxation issued the Circular of the State Administration of Taxation on Issues Relating to Identification of PRC-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance with the De Facto Standards of Organizational Management, or SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China.
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.
In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021.
In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year.
In particular, the Alleviating Burden Opinion sets out a series of operating requirements on after-school tutoring institutions that provides, among other things, (i) local government authorities shall no longer approve any new after-school tutoring institutions providing tutoring services 18 on academic subjects (such institutions, the “Academic AST Institutions”) for students in compulsory education or grade ten to twelve, or those providing tutoring for pre-school-age children, (ii) all existing Academic AST Institutions shall be registered as non-profit entities; (iii) online Academic AST Institutions that have filed with the local education administration authorities shall be subject to review and re-approval procedures by competent government authorities, and any failure to obtain such approval will result in the cancellation of its previous filing and ICP license; (iv) Academic AST Institutions are prohibited from raising funds by listing on stock markets or conducting any capitalization activities and listed companies are prohibited from investing in Academic AST Institutions through capital markets fund raising activities or acquiring assets of Academic AST Institutions by paying cash or issuing securities; (v) foreign capital is prohibited from controlling or participating in any Academic AST Institutions through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities; (vi) online tutoring for preschool-age children is prohibited, and offline academic subjects (including foreign language) tutoring services for preschool-age children is also strictly prohibited and (vii) for non-academic tutoring, local authorities shall identify corresponding competent authorities for different tutoring categories, set forth standards and approve relevant non-academic tutoring institutions.
In particular, the Alleviating Burden Opinion sets out a series of operating requirements on after-school tutoring institutions that provides, among other things, (i) local government authorities shall no longer approve any new after-school tutoring institutions providing tutoring services on academic subjects (such institutions, the “Academic AST Institutions”) for students in compulsory education or grade ten to twelve, or those providing tutoring for pre-school-age children, (ii) all existing Academic AST Institutions shall be registered as non-profit entities; (iii) online Academic AST Institutions that have filed with the local education 20 administration authorities shall be subject to review and re-approval procedures by competent government authorities, and any failure to obtain such approval will result in the cancellation of its previous filing and ICP license; (iv) Academic AST Institutions are prohibited from raising funds by listing on stock markets or conducting any capitalization activities and listed companies are prohibited from investing in Academic AST Institutions through capital markets fund raising activities or acquiring assets of Academic AST Institutions by paying cash or issuing securities; (v) foreign capital is prohibited from controlling or participating in any Academic AST Institutions through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities; (vi) online tutoring for preschool-age children is prohibited, and offline academic subjects (including foreign language) tutoring services for preschool-age children is also strictly prohibited and (vii) for non-academic tutoring, local authorities shall identify corresponding competent authorities for different tutoring categories, set forth standards and approve relevant non-academic tutoring institutions.
To implement the Alleviating Burden Opinion, in September 2021, the Chinese Ministry of Education, or the MOE, published on its official website that the MOE, together with other government authorities, issued a circular requiring all Academic AST Institutions for students in compulsory education to complete registration as non-profit by the end of 2021 and a circular requiring all online Academic AST Institutions that have filed with the local education administration authorities and provide tutoring services on academic subjects to obtain the private school operating permit by the end of 2021, and all such Academic AST Institutions shall, before completing such registration or obtaining such permit as applicable, suspend enrollment of students and charging fees.
To implement the Alleviating Burden Opinion, in September 2021, the Chinese Ministry of Education published on its official website that the Chinese Ministry of Education, together with other government authorities, issued a circular requiring all Academic AST Institutions for students in compulsory education to complete registration as non-profit by the end of 2021 and a circular requiring all online Academic AST Institutions that have filed with the local education administration authorities and provide tutoring services on academic subjects to obtain the private school operating permit by the end of 2021, and all such Academic AST Institutions shall, before completing such registration or obtaining such permit as applicable, suspend enrollment of students and charging fees.
However, there have been no clarifications from the relevant authorities as of the date of this annual report as to the standards for determining whether an activity is one that “affects or may affect national security.” In addition, the Draft Regulations requires that data processors that process “important data” or are listed overseas must conduct an annual data security assessment by itself or commission a data security service 30 provider to do so, and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year.
However, there have been no clarifications from the relevant authorities as of the date of this annual report as to the standards for determining whether an activity is one that “affects or may affect national security.” In addition, the Draft Regulations requires that data processors that process “important data” or are listed overseas must conduct an annual data security assessment by itself or commission a data security service provider to do so, and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year.
If we fail to obtain and maintain required permits, to expand scope of such permits obtained by us in a timely manner or obtain or renew any permits and certificates, or fail to complete the necessary filings, recordation, renewals or registrations on a timely basis, we may be subject to fines, confiscation of the gains derived from our non-compliant operations, suspension of our non-compliant operations or claims for compensation of any economic loss suffered by the users of our products and services, and our business, financial conditions and operational results may be materially and adversely affected.
If we fail to obtain and maintain required permits, to expand scope of such permits obtained by us in a timely manner or obtain or renew any permits and certificates, or fail to complete the necessary filings, recordation, renewals or registrations on a timely basis, we may be subject to fines, confiscation of the gains derived from our non-compliant operations, suspension of our noncompliant operations or claims for compensation of any economic loss suffered by the users of our products and services, and our business, financial conditions and operational results may be materially and adversely affected.
In addition, under our Seventh memorandum and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may 65 prevent you from withdrawing the underlying Class A ordinary shares represented by your ADSs and from becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly.
In addition, under our Seventh memorandum and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members and/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the underlying Class A ordinary shares represented by your ADSs and from becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly.
There can be no assurance that once required, we will be able to obtain or maintain all the required approvals, licenses, permits and complete or maintain all necessary filings, recordation, renewals, expansion of scope, and registrations on a timely basis for our online education services, given the significant amount of discretion the PRC authorities may have in interpreting, implementing and enforcing relevant rules and regulations, as well as other factors beyond our control and anticipation.
There can be no assurance that once required, we will be able to obtain or maintain all the required approvals, licenses, permits and complete or maintain all necessary filings, recordation, renewals, expansion of scope, and registrations on a timely basis for our online education services, given the significant amount of discretion the PRC authorities may have in interpreting, implementing and enforcing rules and regulations, as well as other factors beyond our control and anticipation.
In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following: • actual or anticipated variations in our revenues, earnings, cash flow and changes or revisions of our expected results; • fluctuations in operating metrics; • announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; • announcements of new products, services and expansions by us or our competitors; • changes in financial estimates by securities analysts; • announcements of studies and reports relating to the quality of our product, service and SaaS offerings or those of our competitors; • changes in the performance or market valuations of other online education companies; • conditions in the online education market; • detrimental negative publicity about us, our competitors or our industry; • any share repurchase program; • additions or departures of key personnel; 61 • release of lockup or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; • regulatory developments affecting us or our industry; • general economic or political conditions affecting mainland China or elsewhere in the world; • fluctuations of exchange rates between the RMB and the U.S. dollar; and • potential litigation or regulatory investigations.
In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following: • actual or anticipated variations in our revenues, earnings, cash flow and changes or revisions of our expected results; 64 • fluctuations in operating metrics; • announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; • announcements of new products, services and expansions by us or our competitors; • changes in financial estimates by securities analysts; • announcements of studies and reports relating to the quality of our product, service and SaaS offerings or those of our competitors; • changes in the performance or market valuations of other online education companies; • conditions in the online education market; • detrimental negative publicity about us, our competitors or our industry; • any share repurchase program; • additions or departures of key personnel; • release of lockup or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; • regulatory developments affecting us or our industry; • general economic or political conditions affecting mainland China or elsewhere in the world; • fluctuations of exchange rates between the RMB and the U.S. dollar; and • potential litigation or regulatory investigations.
If we fail to complete the filing with the CSRC in a timely manner or at all, for any future offerings, listing or any other capital raising activities, which are subject to the filings under the Overseas Listing Trial Measures, due to our contractual arrangements, our ability to raise or utilize funds could be materially and adversely affected, and we may even need to unwind our contractual arrangements or restructure our business operations to rectify the failure to complete the filings.
If we fail to complete the filing with the CSRC in a timely manner or at all, for any future offerings, listing or any other capital raising activities, which are subject to the filings under the Overseas Listing Trial Measures, due to our contractual arrangements, our ability to raise or utilize 48 funds could be materially and adversely affected, and we may even need to unwind our contractual arrangements or restructure our business operations to rectify the failure to complete the filings.
Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained by us, would subject us to sanctions imposed by the CSRC or other mainland China regulatory authorities, which could include fines and penalties on our operations in mainland China, restrictions or limitations on our ability to pay dividends outside of mainland China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.
Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained by us, would subject us to sanctions imposed by the CSRC or other Chinese regulatory authorities, which could include fines and penalties on our operations in mainland China, restrictions or limitations on our ability to pay dividends outside of mainland China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.
If 22 we are unable to further enhance our brand recognition, or if our brand image is negatively impacted by any negative publicity relating to our company, solution or products, regardless of its veracity, we may not be able to expand the network of schools and teachers adopting our teaching and learning SaaS offerings or attract students to our other educational products and services successfully or efficiently, and our business and results of operations may be materially and adversely affected.
If we are unable to further enhance our brand recognition, or if our brand image is negatively impacted by any negative publicity relating to our company, solution or products, regardless of its veracity, we may not be able to expand the network of schools and teachers adopting our teaching and learning SaaS offerings or attract students to our other educational products and services successfully or efficiently, and our business and results of operations may be materially and adversely affected.
If the PRC government determines that we or the VIEs do not comply with applicable law, it could revoke the VIEs’ business and operating licenses, require the VIEs to discontinue or restrict 46 the VIEs’ operations, restrict the VIEs’ right to collect revenues, block the VIEs’ websites, require the VIEs to restructure our operations, impose additional conditions or requirements with which the VIEs may not be able to comply, impose restrictions on the VIEs’ business operations or on their customers, or take other regulatory or enforcement actions against the VIEs that could be harmful to their business.
If the PRC government determines that we or the VIEs do not comply with applicable law, it could revoke the VIEs’ business and operating licenses, require the VIEs to discontinue or restrict the VIEs’ operations, restrict the VIEs’ right to collect revenues, block the VIEs’ websites, require the VIEs to restructure our operations, impose additional conditions or requirements with which the VIEs may not be able to comply, impose restrictions on the VIEs’ business operations or on their customers, or take other regulatory or enforcement actions against the VIEs that could be harmful to their business.
Business Overview—Regulations—Regulation Relating to Online Publishing.” However, there is no assurance that local PRC authorities will not adopt different enforcement practice, or any PRC government will not issue more explicit interpretation and rules or promulgate new laws and regulations from time to time to further regulate the online education industry, which may subject us to additional licensing requirements to continue to operate our business.
Business Overview—Regulations—Regulation Relating to Online Publishing.” However, there is no assurance that local PRC authorities will not adopt different enforcement practice, or any PRC government will not issue more explicit interpretation and rules or promulgate new laws and regulations from time to time to further regulate the online education industry, which may subject us to 28 additional licensing requirements to continue to operate our business.
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 without the consent by the Chinese securities regulatory authorities and the other competent governmental agencies, no entity or individual may provide documents or materials related to securities business to any foreign party.
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 without the consent by the Chinese securities regulatory authorities and the other competent governmental agencies, no entity or individual may provide documents or materials related to securities business to any foreign 63 party.
If a lawsuit is brought against us or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.
If a lawsuit is brought against us 71 or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.
Business involving online payment services is subject to a number of risks that could materially and adversely affect third-party online payment service providers’ ability to provide payment processing and escrow services to us, including: 37 • dissatisfaction with these online payment services or decreased use of their services; • increasing competition, including from other established Chinese internet companies, payment service providers and companies engaged in other financial technology services; • changes to rules or practices applicable to payment systems that link to third-party online payment service providers; • breach of customers’ personal information and concerns over the use and security of information collected from buyers; • service outages, system failures or failures to effectively scale the system to handle large and growing transaction volumes; • increasing costs to third-party online payment service providers, including fees charged by banks to process transactions through online payment channels, which would also increase our cost of revenues; and • failure to manage funds accurately or loss of funds, whether due to employee fraud, security breaches, technical errors or otherwise.
Business involving online payment services is subject to a number of risks that could materially and adversely affect third-party online payment service providers’ ability to provide payment processing and escrow services to us, including: • dissatisfaction with these online payment services or decreased use of their services; • increasing competition, including from other established Chinese internet companies, payment service providers and companies engaged in other financial technology services; 40 • changes to rules or practices applicable to payment systems that link to third-party online payment service providers; • breach of customers’ personal information and concerns over the use and security of information collected from buyers; • service outages, system failures or failures to effectively scale the system to handle large and growing transaction volumes; • increasing costs to third-party online payment service providers, including fees charged by banks to process transactions through online payment channels, which would also increase our cost of revenues; and • failure to manage funds accurately or loss of funds, whether due to employee fraud, security breaches, technical errors or otherwise.
In addition, a significant component of our smart in-school classroom solution is powered by our AI programs, which address complex challenges such as autoscoring, speech recognition and evaluation and grammar error detection. We may incur significant expenses to remediate any defects in our AI programs or data analytics algorithms, or may not be able to correct them at all.
In addition, a significant component of our smart in-school classroom solution is powered by our Al programs, which address complex challenges such as autoscoring, speech recognition and evaluation and grammar error detection. We may incur significant expenses to remediate any defects in our AI programs or data analytics algorithms, or may not be able to correct them at all.
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 an adverse report 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 an adverse report 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 requirements differently from us.
Also, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. For example, on July 6, 50 2021, the relevant mainland China government authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
Also, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. For example, on July 6, 2021, the relevant mainland China government authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law.
Particularly, some of these flaws or defects may not become evident until the algorithm is put to actual usage or after its continued failure to accurately generate on-point personalized or localized study question recommendations. Even if the algorithm is properly designed, its performance may be affected by the quality and volume of student learning performance data 34 we aggregated.
Particularly, some of these flaws or defects may not become evident until the algorithm is put to actual usage or after its continued failure to accurately generate on-point personalized or localized study question recommendations. Even if the algorithm is properly designed, its performance may be affected by the quality and volume of student learning performance data we aggregated.
If any of our shareholders regulated by such policies fails to satisfy the applicable overseas direct investment filing or approval requirement timely or at all, it may be subject to penalties from the relevant mainland China authorities. The PRC government may at its discretion further restrict access in the future to foreign currencies for current account transactions.
If any of our shareholders regulated by such policies fails to satisfy the applicable overseas direct investment filing or approval requirement timely or at all, it may be subject to penalties from the mainland China authorities. The PRC government may at its discretion further restrict access in the future to foreign currencies for current account transactions.
It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ADSs or Class A ordinary shares.
It is unclear whether non-PRC 56 shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ADSs or Class A ordinary shares.
Pursuant to this regulation, critical information infrastructure, or the CII, means key network facilities or information systems of critical industries or sectors, such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defense science, the damage, malfunction or data leakage of which may endanger national security, people’s livelihoods or the public interest.
Pursuant to this regulation, critical information infrastructure means key network facilities or information systems of critical industries or sectors, such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defense science, the damage, malfunction or data leakage of which may endanger national security, people’s livelihoods or the public interest.
On February 7, 2021, the Anti-monopoly Commission of the State Council, published the Anti-Monopoly Guidelines for the Internet Platform Economy Sector that aims at specifying some of the circumstances under which an activity of internet platforms may be identified as monopolistic act as well as classifying that concentrations involving variable interest entities shall be subject to anti-monopoly review.
On February 7, 2021, the Anti-monopoly Commission of the State Council, published the Anti-Monopoly Guidelines for the Internet Platform Economy Sector that aims at specifying some of the circumstances under which an activity of internet platforms may be identified as monopolistic act as well as classifying that concentrations involving variable interest entities shall be subject to antimonopoly review.
As a result, we may incur significant reputational damage and market share loss. Any inability to adequately and promptly respond to changes in examination systems, admission standards, test materials, teaching methods and regulation changes in the PRC could render our products and services less attractive to educational authorities, schools, teachers, students and parents.
As a result, we may incur significant reputational damage and market share loss. 37 Any inability to adequately and promptly respond to changes in examination systems, admission standards, test materials, teaching methods and regulation changes in the PRC could render our products and services less attractive to educational authorities, schools, teachers, students and parents.
Although we implement various content moderation procedures, we cannot assure you that there will be no inappropriate or illegal content included in our educational content or applications and websites. In addition, certain of our educational content, which is designed internally based on our understanding of the relevant examination requirements and other factors, may be investigated by the regulatory authorities.
Although we implement various content moderation procedures, we cannot assure you that there will be no inappropriate or illegal content included in our educational content or applications and websites. In addition, certain of our educational content, which is designed internally based on our understanding of the examination requirements and other factors, may be investigated by the regulatory authorities.
Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a consolidated variable interest entity should be interpreted or enforced under law of mainland China. There remain significant uncertainties regarding the ultimate 47 outcome of such arbitration should legal action become necessary.
Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a consolidated variable interest entity should be interpreted or enforced under law of mainland China. There remain significant uncertainties regarding the ultimate outcome of such arbitration should legal action become necessary.
As a result, it is uncertain whether and on what basis a mainland China court would enforce a judgment rendered by a court in the United States. The custodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets.
As a result, it is uncertain whether and on what basis a mainland China court would enforce a judgment rendered by a court in the United States. 55 The custodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets.
If Shanghai Hexu and Beijing Yiqi Education fail to maintain their HNTE status, experience any increase in the enterprise income tax rate, or face any discontinuation, retroactive or future reduction or refund of any of the preferential tax treatments currently enjoyed, our business, financial condition and results of operations could be materially and adversely affected.
If Shanghai Hexu, Beijing Yiqi Education and Beijing Yiqi Development fail to maintain their HNTE status, experience any increase in the enterprise income tax rate, or face any discontinuation, retroactive or future reduction or refund of any of the preferential tax treatments currently enjoyed, our business, financial condition and results of operations could be materially and adversely affected.
Risk Factors—Risks Related to Doing Business in China—The 6 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 of our auditor in the past has deprived our investors with the benefits of such inspections.” and “Item 3. Key Information—D.
Risk Factors—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 of our auditor in the past has deprived our investors with the benefits of such inspections.” and “Item 3. Key Information—D.
For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties with respect to the legal system of mainland China could adversely affect us.” Permissions Required from mainland China Authorities for Our Operations Our operations in mainland China are governed by laws and regulations of mainland China.
For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties with respect to the mainland China legal system could adversely affect us.” Permissions Required from Chinese Authorities for Our Operations Our operations in mainland China are governed by laws and regulations of mainland China.
See “—Any failure by the VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.” Therefore, our contractual arrangements with the VIEs may not be as effective in ensuring our ability to direct the relevant portion of our business operations as direct ownership would be.
See “—Any failure by the VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.” Therefore, our contractual arrangements with the VIEs may not be as effective in ensuring our ability to direct the relevant portion of our business operations as direct ownership would be. 49 Any failure by the VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.
Our SaaS offerings are based on tailored combination of a number of standardized modules covering classroom, question bank, homework assignments, self-learning content and multi-role reporting to suit the needs of different users. We may need to develop more modules to satisfy different schools’ needs or changes in educational needs.
Our SaaS offerings are based on tailored combination of a number of standardized modules covering classroom, question bank, homework assignments, learning content and multi-role reporting to suit the needs of different users. We may need to develop more modules to satisfy different schools’ needs or changes in educational needs.
In accordance with the FIL Interpretations, any claim to invalidate an investment agreement will be supported by courts if such agreement is found to be entered into for purposes of making investments in the “prohibited industries” under the negative list or for purposes of investing in “restricted industries” while failing to satisfy the conditions set out in the Negative List.
In accordance with the interpretations, any claim to invalidate an investment agreement will be supported by courts if such agreement is found to be entered into for purposes of making investments in the “prohibited industries” under the negative list or for purposes of investing in “restricted industries” while failing to satisfy the conditions set out in the Negative List.
There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become subject to the prohibition on trading under the HFCAA. See “Item 3. Key Information—D.
There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become 8 subject to the prohibition on trading under the HFCAA. See “Item 3. Key Information—D.
We also cannot preclude the possibility that other misconduct by schools or teachers may subject us to more stringent regulatory requirements, or limits on our operation or promotional activities. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulation Related to Private Education” and “Item 4. Information on the Company—B.
We also cannot preclude the possibility that other misconduct by schools or teachers may subject us to more stringent 27 regulatory requirements, or limits on our operation or promotional activities. See “Item 4. Information on the Company—B. Business Overview—Regulations—Regulation Related to Private Education” and “Item 4. Information on the Company—B.
Insurance companies in mainland China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. We do not maintain any liability insurance or property insurance policies covering students, equipment and facilities for injuries, death or losses due to fire, earthquake, flood or any other disaster.
Insurance companies in mainland China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies. We do not maintain any liability insurance or property insurance policies covering students, equipment and facilities for injuries, death or losses due to fire, earthquake, flood or any 42 other disaster.
In the opinion of our PRC legal counsel, Tian Yuan Law Firm, (i) the ownership structure of the VIEs and our WFOEs does not result in any violation of laws and regulations of mainland China currently in effect; and (ii) the contractual arrangements among each of our WFOEs, our respective VIEs and their respective shareholders governed by laws of mainland China will not result in any violation of laws or regulations of mainland China currently in effect.
In the opinion of our PRC legal counsel, Tian Yuan Law Firm, (i) the ownership structure of the VIEs and our WFOEs does not result in any violation of laws and regulations of mainland China currently in effect; and (ii) the contractual arrangements among each of our WFOEs, our respective VIEs and their respective shareholders governed 47 by laws of mainland China will not result in any violation of laws or regulations of mainland China currently in effect.
Business Overview—Regulations—Regulation Relating to Internet Information Security and Privacy Protection.” The draft laws and regulations concerning cybersecurity and data security are in the process of being formulated and there are still uncertainties on how the newly promulgated laws and regulations concerning cybersecurity and data security will be interpreted and implemented by the relevant mainland China governmental authorities.
Business Overview—Regulations—Regulation Relating to Internet Information Security and Privacy Protection.” The draft laws and regulations concerning cybersecurity and data security are in the process of being formulated and there are still uncertainties on how the newly promulgated laws and regulations concerning cybersecurity and data security will be interpreted and implemented by the mainland China governmental authorities.
See “—The approval and/or other requirements of the CSRC or other mainland China governmental authorities may be required in connection with an offering under rules, regulations or policies of mainland China, and, if required, we cannot predict whether or how soon we will be able to obtain such approval or complete such other requirements.” for details.
See “—The approval and/or other requirements of the CSRC or other Chinese governmental authorities may be required in connection with an offering under rules, regulations or policies of mainland China, and, if required, we cannot predict whether or how soon we will be able to obtain such approval or complete such other requirements.” for details.
In addition, it is possible that any subsidiary that we own or are treated as owning for U.S. federal income tax purposes would also be a PFIC for such taxable years. 70 If we are a PFIC in any taxable year during which a U.S. holder (as defined in “Item 10. Additional Information—E.
In addition, it is possible that any subsidiary that we own or are treated as owning for U.S. federal income tax purposes would also be a PFIC for such taxable years. If we are a PFIC in any taxable year during which a U.S. holder (as defined in “Item 10. Additional Information—E.
Capitalization and Indebtedness Not Applicable. C. Reasons for the Offer and Use of Proceeds Not Applicable. 14 D. Risk Factors Summary of Risk Factors An investment in our ADSs or Class A ordinary shares involves significant risks. Below is a summary of material risks we and the VIEs face, organized under relevant headings.
Capitalization and Indebtedness Not Applicable. C. Reasons for the Offer and Use of Proceeds Not Applicable. D. Risk Factors Summary of Risk Factors An investment in our ADSs or Class A ordinary shares involves significant risks. Below is a summary of material risks we and the VIEs face, organized under relevant headings.
Our business, financial condition, results of operations and prospects have been and will be materially and adversely affected in 2022, 2023 and subsequent periods by the actions we have taken to date and the actions may take in the future in order to be in compliance with the Alleviating Burden Opinion and its implementation measures.
Our business, financial condition, results of operations and prospects have been and will be materially and adversely affected in 2022, 2023 and 2024 and subsequent periods by the actions we have taken to date and the actions may take in the future in order to be in compliance with the Alleviating Burden Opinion and its implementation measures.
These newly issued securities may have rights, preferences or privileges senior to those of existing shareholders. 41 We may not be able to achieve the benefits we expect from future investments and acquisitions. We may make equity investments in or acquisitions of additional businesses, assets and technologies that complement our existing business in the future.
These newly issued securities may have rights, preferences or privileges senior to those of existing shareholders. We may not be able to achieve the benefits we expect from future investments and acquisitions. We may make equity investments in or acquisitions of additional businesses, assets and technologies that complement our existing business in the future.
In particular, the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education and the implementation measures issued thereunder by the relevant PRC government authorities has materially and adversely affected and will materially and adversely affect our business, financial condition, results of operations and prospects.
In particular, the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education and the implementation measures issued thereunder by the PRC government authorities has materially and adversely affected and will materially and adversely affect our business, financial condition, results of operations and prospects.
As an education technology company, we face an increasing number of threats to our platform and computer systems, including unauthorized activity and access, system viruses, worms, malicious code, denial of service attacks, phishing attacks, and organized cyberattacks, any of which could breach our security and disrupt our platform and technology infrastructure.
As an education technology company, we face an increasing number of threats to our platform and computer systems, including unauthorized activity and access, system viruses, worms, malicious code, denial of service attacks, phishing attacks, and organized cyberattacks, any of which could breach our security and disrupt our platform and technology 31 infrastructure.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based 51 companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.
According to the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015 by the SAFE, local banks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment 56 registration, under SAFE Circular 37 from June 1, 2015.
According to the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015 by the SAFE, local banks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, under SAFE Circular 37 from June 1, 2015.
However, if the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong, and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we and investors in our ADSs would be deprived of the benefits of such PCAOB inspections again, which could cause investors and potential investors in the ADSs to lose confidence in our audit procedures and reported financial information and the quality of our financial statements. 59 Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China.
However, if the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong, and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we and investors in our ADSs would be deprived of the benefits of such PCAOB inspections again, which could cause investors and potential investors in the ADSs to lose confidence in our audit procedures and reported financial information and the quality of our financial statements. 62 Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China.
Our ability to effectively implement our strategies and grow our business will depend on a number of factors, including our ability to (i) continually develop and improve our teaching and learning SaaS offerings to make them more appealing to existing and prospective students, teachers and educational authorities; (ii) build up a large and efficient sales and distribution network and partnership network for our teaching and learning SaaS offerings; (iii) maintain and increase the number of customers of our other educational products and services, including our personalized self-directed learning product; (iv) maintain and expand the number of districts, schools and teachers that adopt our teaching and learning SaaS offerings; (v) effectively recruit, train, retain and motivate a large number of new employees, particularly our IT support staff, educational product and content development professionals and salespersons; (vi) innovate and adapt our products, services and solutions to meet evolving needs of current and potential students, including to address evolving market trends; (vii) maintain and increase our access to the data necessary for the development and performance of our solutions; (viii) maintain the proper functioning of teaching and learning SaaS offerings, and other business initiatives as we continue to collect data from our user base through our smart in-school classroom solution; (ix) continuously improve the algorithms underlying the products and the technologies; (x) adapt to a changing regulatory landscape governing privacy matters; (xi) continue to improve our operational, financial and management controls and efficiencies; (xii) successfully enhance and improve our technological systems and infrastructure; (xiii) protect and further develop our intellectual property rights; and (xiv) make sound business decisions in light of the scrutiny associated with operating as a public company.
Our ability to effectively implement our strategies and grow our business will depend on a number of factors, including our ability to (i) continually develop and improve our teaching and learning SaaS offerings to make them more appealing to existing and prospective students, teachers and educational authorities; (ii) build up a large and efficient sales and distribution network and partnership network for our teaching and learning SaaS offerings; (iii) maintain and increase the number of customers of our other educational products and services; (iv) maintain and expand the number of districts, schools and teachers that adopt our teaching and learning SaaS offerings; (v) effectively recruit, train, retain and motivate a large number of new employees, particularly our IT support staff, educational product and content development professionals and salespersons; (vi) innovate and adapt our products, services and solutions to meet evolving needs of current and potential students, including to address evolving market trends; (vii) maintain and increase our access to the data necessary for the development and performance of our solutions; (viii) maintain the proper functioning of teaching and learning SaaS offerings, and other business initiatives as we continue to collect data from our user base through our smart in-school classroom solution; (ix) continually improve the algorithms underlying the products and the technologies; (x) adapt to a changing regulatory landscape governing privacy matters; (xi) continue to improve our operational, financial and management controls and efficiencies; (xii) successfully enhance and improve our technological systems and infrastructure; (xiii) protect and further develop our intellectual property rights; and (xiv) make sound business decisions in light of the scrutiny associated with operating as a public company.
Any severe or prolonged slowdown in the global or Chinese economy may have a negative impact on our business, results of operations and financial condition, and continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.
Any severe or prolonged slowdown in the global or Chinese economy may have a negative impact on our business, results 44 of operations and financial condition, and continued turbulence in the international markets may adversely affect our ability to access the capital markets to meet liquidity needs.
On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which 54 came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of nonresident enterprise income tax.
On October 17, 2017, the State Administration of Taxation issued the Announcement of the State Administration of Taxation on Issues Concerning the Withholding of Non-resident Enterprise Income Tax at Source, or SAT Bulletin 37, which came into effect on December 1, 2017. The SAT Bulletin 37 further clarifies the practice and procedure of the withholding of nonresident enterprise income tax.
In addition, we may incur material impairment and severance charges resulting from termination of leases, dismissal of employees and other actions we take in light of the latest regulatory developments, which may have material adverse impact on our financial condition, results of operations and prospects.
In addition, we may incur material impairment and severance charges resulting from termination of leases, dismissal of employees 21 and other actions we take in light of the latest regulatory developments, which may have material adverse impact on our financial condition, results of operations and prospects.
The use of teaching and learning SaaS offerings at schools in mainland China has just emerged in recent years, and many administrators and teachers may have concerns regarding the effectiveness of such products as well as difficulties and time associated with the change of teaching habits.
The use of teaching and learning SaaS offerings at schools in mainland China has just emerged in recent years, and 23 many administrators and teachers may have concerns regarding the effectiveness of such products as well as difficulties and time associated with the change of teaching habits.
We have limited access to alternative networks or services in the event of disruptions, failures or other problems with mainland China’s internet infrastructure or the telecommunications networks provided by telecommunications service providers. We regularly serve a large number of parents, students and teachers.
We have limited access to alternative networks or services in the event of disruptions, failures or other problems with mainland China’s internet infrastructure or the telecommunications networks provided by telecommunications service providers. We regularly serve a large number 43 of parents, students and teachers.
It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi and U.S. dollar in the future. 42 Significant revaluation of the Renminbi may have a material and adverse effect on your investment.
It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi and U.S. dollar in the future. Significant revaluation of the Renminbi may have a material and adverse effect on your investment.
Under law of mainland China, legal documents for corporate transactions, including agreements and contracts are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with relevant mainland China market regulation administrative authorities.
Under law of mainland China, legal documents for corporate transactions, including agreements and contracts are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with mainland China market regulation administrative authorities.
We followed home country practice and did not hold an annual meeting of shareholders in 2022. In March 2022, our board of directors approved the amended and restated 2020 share incentive plan. We relied on the home country practice exemption and did not convene a shareholder meeting to approve the amended and restated 2020 share incentive plan.
We followed home country practice and did not hold an annual meeting of shareholders in 2023. In March 2022, our board of directors approved the amended and restated 2020 share incentive plan. We relied on the home country practice exemption and did not convene a shareholder meeting to approve the amended and restated 2020 share incentive plan.
If the PRC government otherwise find that we are in violation of any existing or future laws or regulations of mainland China or lack the necessary permits or licenses to operate our business, the relevant governmental authorities would have broad discretion in dealing with such violation, including, without limitation: • revoking the business licenses and/or operating licenses of such entities; • imposing fines on us; 45 • confiscating any of our income that they deem to be obtained through illegal operations; • discontinuing or placing restrictions or onerous conditions on our operations; • placing restrictions on our right to collect revenues; and • shutting down our servers or blocking our application/software.
If the PRC government otherwise find that we are in violation of any existing or future laws or regulations of mainland China or lack the necessary permits or licenses to operate our business, the governmental authorities would have broad discretion in dealing with such violation, including, without limitation: • revoking the business licenses and/or operating licenses of such entities; • imposing fines on us; • confiscating any of our income that they deem to be obtained through illegal operations; • discontinuing or placing restrictions or onerous conditions on our operations; • placing restrictions on our right to collect revenues; and • shutting down our servers or blocking our application/software.
The hypothetical book pre-tax earnings amount, not considering timing differences, is assumed to equal taxable income in mainland China. (2) Under the terms of VIE contractual arrangements, our WFOEs may charge the VIEs for services provided to VIEs.
The hypothetical book pre-tax earnings amount, not considering timing differences, is assumed to equal taxable income in mainland China. 10 (2) Under the terms of VIE contractual arrangements, our WFOEs may charge the VIEs for services provided to VIEs.
Although we continually back up our databases on both real-time and delayed bases, we may still lose 33 important operating data or suffer disruption to our operations if there is a failure of the database system or the backup system.
Although we continually back up our databases on both real-time and delayed bases, we may still lose important operating data or suffer disruption to our operations if there is a failure of the database system or the backup system.
A series of contractual agreements, including proxy agreement and powers of attorney, equity interest pledge agreement, exclusive management services and business cooperation agreement, and exclusive call option agreement, have been entered into by and among our WFOEs, the VIEs and their respective shareholders.
A series of contractual agreements, including proxy agreements and powers of attorney, equity interest pledge agreements, exclusive management services and business cooperation agreements, and exclusive call option agreements, have been entered into by and among our WFOEs, the VIEs and their respective shareholders.
The Foreign Investment Law does not explicitly classify whether the variable interest entities that we direct business operations through contractual arrangements would be deemed as foreign invested 48 enterprises if they are ultimately “controlled” by foreign investors.
The Foreign Investment Law does not explicitly classify whether the variable interest entities that we direct business operations through contractual arrangements would be deemed as foreign invested enterprises if they are ultimately “controlled” by foreign investors.
Information on the Company—B. Business Overview—Regulations—Regulation Relating to Advertising and Promotion.” The relevant PRC regulatory authorities have significant discretion in interpreting and implementing the PRC Advertising Law, PRC Pricing Law, the PRC Anti-Unfair Competition Law and the rules and regulations related thereto.
Information on the Company—B. Business Overview—Regulations—Regulation Relating to Advertising and Promotion.” The PRC regulatory authorities have significant discretion in interpreting and implementing the PRC Advertising Law, PRC Pricing Law, the PRC Anti-Unfair Competition Law and the rules and regulations related thereto.
Holders of our Class A ordinary shares are not subject to this discretionary proxy. You may not receive cash dividends or other distributions if the depositary decides it is impractical to make them available to you.
Holders of our Class A ordinary shares are not subject to this discretionary proxy. 69 You may not receive cash dividends or other distributions if the depositary decides it is impractical to make them available to you.
Although we have not experienced any significant refund requests in the past, if an increasing number of students request refunds, our cash flow, revenues and results of operations may be adversely affected.
Although we have not experienced any significant refund requests in the past, if an increasing number of students request refunds, our cash flow, revenues and results of operations may be adversely 22 affected.
Further, the Alleviating Burden Opinion provides that no advertisements for after-school tutoring shall be published or broadcasted in the network platforms and billboards displayed in the mainstream media, new media, public place and residential areas.
Further, the Alleviating Burden Opinion provides that no advertisements for after-school tutoring shall be published or broadcasted in the network platforms and billboards displayed in the 46 mainstream media, new media, public place and residential areas.
Our mainland China subsidiaries have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes for those employees who exercise their share options.
Our mainland China subsidiaries have obligations to file documents related to employee share options or restricted shares with tax authorities and to withhold individual income taxes for those employees who exercise their share options.
We may become 19 subject to fines or other penalties or be required to terminate certain operations, in which case our business, financial condition and results of operations could be materially and adversely affected further.
We may become subject to fines or other penalties or be required to terminate certain operations, in which case our business, financial condition and results of operations could be materially and adversely affected further.
As of the date of this annual report, each of 25 Shanghai Hexu and Beijing Yiqi Education Information Consultation Co., Ltd., or Beijing Yiqi Information, has obtained a Permit for Production and Operation of Radio and TV Programs.
As of the date of this annual report, each of Shanghai Hexu and Beijing Yiqi Education Information Consultation Co., Ltd., or Beijing Yiqi Information, has obtained a Permit for Production and Operation of Radio and TV Programs.
The Cybersecurity Review Measures further stipulates that network platform operators that hold personal information of over one million users and seek to list abroad shall apply with the Cybersecurity Review Office for a cybersecurity review.
The Revised Cybersecurity Review Measures further stipulates that network platform operators that hold personal information of over one million users and seek to list abroad shall apply with the Cybersecurity Review Office for a cybersecurity review.
As of the date of this annual report, we are not aware of any claim or challenge brought by any third parties concerning the 43 use of our leased properties without obtaining proper ownership proof.
As of the date of this annual report, we are not aware of any claim or challenge brought by any third parties concerning the use of our leased properties without obtaining proper ownership proof.
In addition, we may be unable to identify new areas with sufficient growth potential to expand our product offerings, and demand for our services and 21 products may not increase as rapidly as we expect.
In addition, we may be unable to identify new areas with sufficient growth potential to expand our product offerings, and demand for our services and products may not increase as rapidly as we expect.
The Cybersecurity Review Measures and the Draft Regulations remain unclear on whether the relevant requirements will be applicable to companies that are already listed in the United States, such as us.
The Revised Cybersecurity Review Measures and the Draft Regulations remain unclear on whether the relevant requirements will be applicable to companies that are already listed in the United States, such as us.
As such, the promotion, distribution and operation of our mobile applications are subject to such distribution channels’ standard terms and policies for application developers, which are subject to the interpretation of, and frequent changes by, these distribution channels.
As such, the promotion, distribution and operation of our mobile applications are subject to such distribution channels’ standard 36 terms and policies for application developers, which are subject to the interpretation of, and frequent changes by, these distribution channels.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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The Education Law stipulates that the government formulates plans for the development of education, establishes and operates schools and other types of educational institutions, and in principle, enterprises, institutions, social organizations and individuals are encouraged to operate schools and other types of educational organizations in accordance with PRC laws and regulations.
The PRC Education Law stipulates that the government formulates plans for the development of education, establishes and operates schools and other types of educational institutions, and in principle, enterprises, institutions, social organizations and individuals are encouraged to operate schools and other types of educational organizations in accordance with PRC laws and regulations.
Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the agreements that establish the structure for operating certain of our operations in China do not comply with regulations of mainland China relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations,” “Item 3.
Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the agreements that establish the structure for operating certain of our operations in mainland China do not comply with regulations of mainland China relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations,” “Item 3.
On July 24, 2021, the General Office of State Council and the General Office of Central Committee of the Communist Party of China jointly promulgated the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education, or the Alleviating Burden Opinion, which provides that, among other things, (i) local government authorities shall no longer approve new after-school tutoring institutions providing tutoring services on academic subjects, or Academic AST Institutions, for students in compulsory education, and the existing Academic AST Institutions shall be registered as non-profit; (ii) online Academic AST Institutions that have filed with the local education administration authorities shall be subject to review and re-approval procedures by competent government authorities, and any failure to obtain such approval will result in the cancellation of its previous filing and ICP license; (iii) Academic AST Institutions are prohibited from raising funds by listing on stock markets or conducting any capitalization activities and listed companies are prohibited from investing in Academic AST Institutions through capital markets fund raising activities, or acquiring assets of Academic AST Institutions by paying cash or issuing securities; and (iv) foreign capital is prohibited from controlling or participating in any Academic AST Institutions through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities.
On July 24, 2021, the General Office of State Council and the General Office of Central Committee of the Communist Party of China jointly promulgated the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education, or the Alleviating Burden Opinion, which provides that, among other things, (i) local government authorities shall no longer approve new after-school tutoring institutions providing tutoring services on academic subjects, or Academic AST Institutions, for students in compulsory education, and the existing Academic AST Institutions shall be registered as non-profit; (ii) online Academic AST Institutions 88 that have filed with the local education administration authorities shall be subject to review and re-approval procedures by competent government authorities, and any failure to obtain such approval will result in the cancellation of its previous filing and ICP license; (iii) Academic AST Institutions are prohibited from raising funds by listing on stock markets or conducting any capitalization activities and listed companies are prohibited from investing in Academic AST Institutions through capital markets fund raising activities, or acquiring assets of Academic AST Institutions by paying cash or issuing securities; and (iv) foreign capital is prohibited from controlling or participating in any Academic AST Institutions through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities.
The Opinions on Educational Apps also require, among others, that: (i) before such filing, the Educational App’s provider shall have obtained ICP License or completed ICP License filing and obtained the certificate and grade evaluation report for graded protection of cybersecurity; (ii) Educational Apps with main users under the age of 18 shall limit the users’ usage time, specify 83 the range of suitable ages, and strictly monitor content; (iii) before an Educational App is introduced as a mandatory app to students, such Educational App shall be approved by the applicable school through collective decision-making process and be filed with the competent educational authority; and (iv) Educational Apps adopted by educational authorities and schools as their uniformly used teaching or management tools shall not charge the students or parents any fees, and shall not offer any commercial advertisements or games.
The Opinions on Educational Apps also require, among others, that: (i) before such filing, the Educational App’s provider shall have obtained ICP License or completed ICP License filing and obtained the certificate and grade evaluation report for graded protection of cybersecurity; (ii) Educational Apps with main users under the age of 18 shall limit the users’ usage time, specify the range of suitable ages, and strictly monitor content; (iii) before an Educational App is introduced as a mandatory app to students, such Educational App shall be approved by the applicable school through collective decision-making process and be filed with the competent educational authority; and (iv) Educational Apps adopted by educational authorities and schools as their uniformly used teaching or management tools shall not charge the students or parents any fees, and shall not offer any commercial advertisements or games.
Value-Added Tax Pursuant to the Provisional Regulations on PRC Value-added Tax and its implementation regulations, unless otherwise specified by relevant laws and regulations, any entity or individual engaged in the sales of goods, provision of processing, repairs and replacement services and importation of goods into mainland China is generally required to pay a value-added tax, or VAT, for revenues generated from sales of products, while qualified input VAT paid on taxable purchase can be offset against such output VAT.
Value-Added Tax Pursuant to the Provisional Regulations on PRC Value-added Tax and its implementation regulations, unless otherwise specified by laws and regulations, any entity or individual engaged in the sales of goods, provision of processing, repairs and replacement services and importation of goods into mainland China is generally required to pay a value-added tax, or VAT, for revenues generated from sales of products, while qualified input VAT paid on taxable purchase can be offset against such output VAT.
On July 13, 2006, the MIIT, issued the Circular on Strengthening the Administration of Foreign Investment in Value-added Telecommunications Services, which requires that (i) foreign investors can only operate a telecommunications business in mainland China through establishing a telecommunications enterprise with a valid telecommunications business operation license; (ii) domestic license holders are prohibited from leasing, transferring or selling telecommunications business operation licenses to foreign investors in any form, or providing any resource, sites or facilities to foreign investors to facilitate the unlicensed operation of telecommunications business in mainland China; (iii) value-added telecommunications services providers or their shareholders must directly own the domain names and registered trademarks they use in their daily operations; (iv) each value-added telecommunications services provider must have the necessary facilities for its approved business operations and maintain such facilities in the geographic regions covered by its license; and (v) all value-added telecommunications services providers should improve network and information security, enact relevant information safety administration regulations and set up emergency plans to ensure network and information safety.
On July 13, 2006, the MIT, issued the Circular on Strengthening the Administration of Foreign Investment in Value-added Telecommunications Services, which requires that (i) foreign investors can only operate a telecommunications business in mainland China through establishing a telecommunications enterprise with a valid telecommunications business operation license; (ii) domestic license holders are prohibited from leasing, transferring or selling telecommunications business operation licenses to foreign investors in any form, or providing any resource, sites or facilities to foreign investors to facilitate the unlicensed operation of telecommunications business in mainland China; (iii) value-added telecommunications services providers or their shareholders must directly own the domain names and registered trademarks they use in their daily operations; (iv) each value-added telecommunications services provider must have the necessary facilities for its approved business operations and maintain such facilities in the geographic regions covered by its license; and (v) all value-added telecommunications services providers should improve network and information security, enact relevant information safety administration regulations and set up emergency plans to ensure network and information safety.
Under the Audio-Visual Program Provisions, “internet audio-visual program services” is defined as activities of producing, redacting and integrating audio-visual programs, providing them to the general public via the internet, and providing service for other people to upload and transmit audio-visual programs, and providers of internet audio-visual program services 87 are required to obtain a License for Online Transmission of Audio-Visual Programs issued by the SAPPRFT, or complete certain registration procedures with the SAPPRFT.
Under the Audio-Visual Program Provisions, “internet audio-visual program services” is defined as activities of producing, redacting and integrating audio-visual programs, providing them to the general public via the internet, and providing service for other people to upload and transmit audio-visual programs, and providers of internet audio-visual program services are required to obtain a License for Online Transmission of Audio-Visual Programs issued by the SAPPRFT, or complete certain registration procedures with the SAPPRFT.
Provisions on the Cyber Protection of Children’s Personal Information also require that when collecting, storing, using, transferring and disclosing such personal information, network operators shall comply with certain regulatory requirements, including, without limitation, that network operators shall designate specific personnel to take charge of the protection of such personal information and shall strictly grant information access authorization for their staff to such personal information under the principle of minimal authorization.
Provisions on the Cyber Protection of Children’s Personal Information also require that when collecting, storing, using, transferring and disclosing such personal information, network operators shall comply 95 with certain regulatory requirements, including, without limitation, that network operators shall designate specific personnel to take charge of the protection of such personal information and shall strictly grant information access authorization for their staff to such personal information under the principle of minimal authorization.
Our products enable students to engage with a massive, proprietary library of localized learning content, access and complete their assignments online, and receive personalized homework and feedback based on issues identified in their homework and assessments For parents . We offer parents an effective, user-friendly way to monitor the academic performance and progress of their children.
Our products enable students to engage with a massive, proprietary library of localized learning content, access and complete their assignments online, and receive personalized homework and feedback based on issues identified in their homework and assessments 77 For parents . We offer parents an effective, user-friendly way to monitor the academic performance and progress of their children.
The preferential tax treatment continues as long as an enterprise can retain its “High and New Technology Enterprise” status. Under the PRC EIT Law, an enterprise established outside mainland China with its “de facto management body” located in mainland China is considered a “resident enterprise”, which means it can be treated as a domestic enterprise for enterprise income tax purposes.
The preferential tax treatment continues as long as an enterprise can retain its “High and New Technology Enterprise” status. Under the PRC EIT Law, an enterprise established outside mainland China with its “de facto management body” located in mainland China is considered a “resident enterprise,” which means it can be treated as a domestic enterprise for enterprise income tax purposes.
According to the ICP Measures, internet information service providers cannot produce, duplicate, publish or disseminate information that (i) is against any fundamental principles set out in the Constitution Law of China; (ii) endangers the national security, leaks the national secrets, incites to overthrow the national power, or undermines the national unity; (iii) damages the national honor or interests; (iv) incites the ethnic hatred and ethnic discrimination or undermines the solidarity among all ethnic groups; (v) undermines the national policies on religions and advocates religious cults and feudal superstition; (vi) disseminates rumors to disrupt the social order and undermines the social stability; (vii) disseminates the obscene materials, advocates gambling, violence, killing and terrorism, or instigates others to commit crimes; (viii) humiliates or defames others or infringes the legitimate rights and interests of others; and (ix) is otherwise prohibited by laws and regulations.
According to these measures, internet information service providers cannot produce, duplicate, publish or disseminate information that (i) is against any fundamental principles set out in the Constitution Law of China; (ii) endangers the national security, leaks the national secrets, incites to overthrow the national power, or undermines the national unity; (iii) damages the national honor or interests; (iv) incites the ethnic hatred and ethnic discrimination or undermines the solidarity among all ethnic groups; (v) undermines the national policies on religions and advocates religious cults and feudal superstition; (vi) disseminates rumors to disrupt the social order and undermines the social stability; (vii) disseminates the obscene materials, advocates gambling, violence, killing and terrorism, or instigates others to commit crimes; (viii) humiliates or defames others or infringes the legitimate rights and interests of others; and (ix) is otherwise prohibited by laws and regulations.
These insights have enabled us to gain a deep understanding about our users and the content of local exams so that we can develop 77 personalized exercise books, which are coupled with sophisticated automated grading and analysis capabilities through with our mobile app, allowing us to cater to each student’s learning needs.
These insights have enabled us to gain a deep understanding about our users and the content of local exams so that we can develop personalized exercise books, which are coupled with sophisticated automated grading and analysis capabilities through with our mobile app, allowing us to cater to each student’s learning needs.
The Revised Cybersecurity Review Measures provide that a critical information infrastructure operator, or CIIO, that purchases network products and services, and platform operators carrying out data processing activities which affect or may affect national security, shall apply for cybersecurity review and that a platform operator with more than one million users’ personal information aiming to list abroad must apply for cybersecurity review.
The Revised Cybersecurity Review Measures provide that a critical information infrastructure operator, that purchases network products and services, and platform operators carrying out data processing activities which affect or may affect national security, shall apply for cybersecurity review and that a platform operator with more than one million users’ personal information aiming to list abroad must apply for cybersecurity review.
Risk Factors—Risks Related to Our Business and 81 Industry—We face significant competition, and if we fail to compete efficiently, we may lose our market share or fail to gain additional market share, which would adversely impact our business, financial condition and results of operations.” Intellectual Property We highly value our intellectual property rights, which are fundamental to our success and competitiveness.
Risk Factors—Risks Related to Our Business and Industry—We face significant competition, and if we fail to compete efficiently, we may lose our market share or fail to gain additional market share, which would adversely impact our business, financial condition and results of operations.” Intellectual Property We highly value our intellectual property rights, which are fundamental to our success and competitiveness.
Furthermore, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract must have an unlimited term, with certain exceptions. All employers must compensate their employees equal to at least the local minimum wage standards.
Furthermore, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract must have an unlimited term, 101 with certain exceptions. All employers must compensate their employees equal to at least the local minimum wage standards.
We rely on a combination of copyright and trademark law, trade secret protection and confidentiality agreements with employees to protect our intellectual property rights. We have also adopted a comprehensive set of internal rules for intellectual property management. These guidelines set the obligations of our employees and create a reporting mechanism in connection with our intellectual property protection.
We rely on a combination of copyright and trademark law, trade secret protection and confidentiality agreements with employees to protect our intellectual property rights. We have also adopted a comprehensive set of internal rules for intellectual property management. These guidelines set the obligations of our employees and create a reporting 86 mechanism in connection with our intellectual property protection.
Through in-depth analysis of weaknesses and areas for 79 improvement on class-wide and personal levels and the identification of the underlying commonalities among questions in terms of difficulty levels and knowledge points, the recommendation system allows our in-school products to recommend homework sets tailored to maximize the effectiveness and efficiency of learning.
Through in-depth analysis of weaknesses and areas for improvement on class-wide and personal levels and the identification of the underlying commonalities among questions in terms of difficulty levels and knowledge points, the recommendation system allows our in-school products to recommend homework sets tailored to maximize the effectiveness and efficiency of learning.
Regulation Related to Private Education Education Law of the PRC The PRC Education Law, or the Education Law, which was promulgated on March 18, 1995, and last amended on April 29, 2021, sets forth provisions relating to the fundamental education systems of the PRC, including a school system of pre-school education, primary education, secondary education and higher education, a system of nine-year compulsory education and a system of education certificates.
Regulation Related to Private Education Education Law of the PRC The PRC Education Law, which was promulgated on March 18, 1995, and last amended on April 29, 2021, sets forth provisions relating to the fundamental education systems of the PRC, including a school system of pre-school education, primary education, secondary education and higher education, a system of nine-year compulsory education and a system of education certificates.
Records pertaining to the situation shall be kept and reported to the appropriate authorities. The Amended Implementation Rules also clarifies that social organizations and individuals are prohibited from controlling a private school that provides compulsory education or a non-profit private school that provides pre-school education through mergers and acquisitions and control agreements.
Records pertaining to the situation shall be kept and reported to the appropriate authorities. The Amended Implementation Rules also clarifies that social organizations and individuals are prohibited from controlling a private school that provides compulsory education or 87 a non-profit private school that provides pre-school education through mergers and acquisitions and control agreements.
Pursuant to the Provisions on Internet Security Supervision and Inspection by Public Security Organs, which was promulgated by the MPS on September 15, 2018 and became effective on November 1, 2018, the public security departments are authorized to carry out internet security supervision and inspection of the internet service providers from the following aspects, among others: (i) whether the service providers have completed the recordation formalities for online entities, and filed the basic information on and the changes of the accessing entities and users; (ii) whether they have established and implemented the cybersecurity management system and protocols, and appointed the persons responsible for cybersecurity; (iii) whether the technical measures for recording and retaining users’ registration information and weblog data are in place according to the law; (iv) whether they have taken technical measures to prevent computer viruses, network attacks and network intrusion; (v) whether they have adopted preventive measures to tackle the information that is prohibited to be issued or transmitted by the laws 89 and administrative regulations in the public information services; (vi) whether they provide technical support and assistance as required by laws to public security departments to safeguard national security and prevent and investigate on terrorist activities and criminal activities; and (vii) whether they have fulfilled the obligations of the grade-based cybersecurity protection and other obligations prescribed by the laws and administrative regulations.
Pursuant to the Provisions on Internet Security Supervision and Inspection by Public Security Organs, which was promulgated by the Ministry of Public Security on September 15, 2018 and became effective on November 1, 2018, the public security departments are authorized to carry out internet security supervision and inspection of the internet service providers from the following aspects, among others: (i) whether the service providers have completed the recordation formalities for online entities, and filed the basic information on and the changes of the accessing entities and users; (ii) whether they have established and implemented the cybersecurity management system and protocols, and appointed the persons responsible for cybersecurity; (iii) whether the technical measures for recording and retaining users’ registration information and weblog data are in place according to the law; (iv) whether they have taken technical measures to prevent computer viruses, network attacks and network intrusion; (v) whether they have adopted preventive measures to tackle the information that is prohibited to be issued or transmitted by the laws and administrative regulations in the public information services; (vi) whether they provide technical support and assistance as required by laws to public security departments to safeguard national security and prevent and investigate on terrorist activities and criminal activities; and (vii) whether they have fulfilled the obligations of the grade-based cybersecurity protection and other obligations prescribed by the laws and administrative regulations.
Any claim to invalidate an investment contract will be supported by courts if such investment contract is decided to be 85 entered into for purposes of making foreign investments in the “prohibited industries” under the negative list or for purposes of investing in the “restricted industries” without satisfaction of conditions set out in the negative list.
Any claim to invalidate an investment contract will be supported by courts if such investment contract is decided to be entered into for purposes of making foreign investments in the “prohibited industries” under the negative list or for purposes of investing in the “restricted industries” without satisfaction of conditions set out in the negative list.
On July 6, 2021, General Office of the State Council of the PRC together with another authority jointly promulgated the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law, or the Securities Activities Opinions, which called for the enhanced administration and supervision of overseas-listed China-based companies.
On July 6, 2021, General Office of the State Council of the PRC together with another authority jointly promulgated the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law, which called for the enhanced administration and supervision of overseas-listed China-based companies.
However, our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current and future laws, regulations and rules of mainland China. Accordingly, mainland China regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel.
However, our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current and future laws, regulations and rules of mainland China. Accordingly, Chinese regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel.
The PRC Cyber Security Law also provides that: (i) to collect and use personal information, network operators shall follow the principles of legitimacy, rightfulness and necessity, disclose rules of data collection and use, clearly express the purposes, means and scope of collecting and using the information, and obtain the consent of the persons whose data is gathered; (ii) network operators shall neither gather personal information unrelated to the services they provide, nor gather or use personal information in violation of the provisions of laws and administrative regulations or the scopes of consent given by the persons whose data is gathered; and shall dispose of personal information they have saved in accordance with the provisions of laws and administrative regulations and agreements reached with users; and (iii) network operators shall not divulge, tamper with or damage the personal information they have collected, and shall not provide the personal information to others without the consent of the persons whose data is collected.
The PRC Cyber Security Law also provides that: (i) to collect and use personal information, network operators shall follow the principles of legitimacy, rightfulness and necessity, disclose roles of data collection and use, clearly express the purposes, means and scope of collecting and using the information, and obtain the consent of the persons whose data is gathered; (ii) network operators shall neither gather personal information unrelated to the services they provide, nor gather or use personal information in violation of the provisions of laws and administrative regulations or the scopes of consent given by the persons whose data is gathered; and shall dispose of personal information they have saved in accordance with the provisions of laws and administrative regulations and agreements reached with users; and (iii) network operators shall not divulge, tamper with or damage the personal information they have collected, and shall not provide the personal information to others without the consent of the persons whose data is collected.
We price our teaching and learning SaaS offerings based on a number of factors, including the number of students and schools using our offerings, the particular combination of functions and hardware and the payment structure. 73 We believe our in-school offerings provide substantial benefits for teachers, students, parents and educational authorities: For teachers .
We price our teaching and learning SaaS offerings based on a number of factors, including the number of students and schools using our offerings, the particular combination of functions and hardware and the payment structure. We believe our in-school offerings provide substantial benefits for teachers, students, parents and educational authorities: For teachers .
Our teaching and learning SaaS offering not only improved the educational 75 quality and operational efficiency of public schools in Minhang District, but also served as a key data collection and analysis tool for the implementation of Minhang District’s data-driven Individualized Teaching initiative.
Our teaching and learning SaaS offering not only improved the educational quality and operational efficiency of public schools in the Minhang District but also served as a key data collection and analysis tool for the implementation of Minhang District’s data-driven individualized teaching initiative.
We continually update and improve content of our product after each semester based on students’ and parents’ feedback and the latest insights we have gained from our in-school products. Technology Technology is at the core of our business, driving our content development, product innovation and operational optimization.
We continually update and improve content of our product after each semester based on students’ and parents’ feedback and the latest insights we have gained from our in-school products. 83 Technology Technology is at the core of our business, driving our content development, product innovation and operational optimization.
Where the participation in concentration of undertakings by way of foreign-funded merger and acquisition of domestic enterprises or any other method which involves national security, the examination of concentration of undertakings shall be carried out pursuant to the provisions of this Law and examination of national security shall be carried out pursuant to the relevant provisions of the State.
Where the participation in concentration of undertakings by way of foreign-funded merger and acquisition of domestic enterprises or any other method which involves national security, the examination of concentration of undertakings shall be carried out pursuant to the provisions of this Law and examination of national security shall be carried out pursuant to the provisions of the State.
Leveraging our state-of-the-art algorithm technologies, our applications 76 automatically generate and recommend to teachers a wide variety of homework sets sourced from our proprietary content library. These homework sets are tailored according to a number of corresponding local and personal factors.
Leveraging our state-of-the-art algorithm technologies, our applications automatically generate and recommend to teachers a wide variety of homework sets sourced from our proprietary content library. These homework sets are tailored according to a number of corresponding local and personal factors.
In addition, we have established stringent internal protocols to prevent any unauthorized access or use of our user data. We have obtained the Level III Certification in Information Security and Protection issued by the relevant local branch of Ministry of Public Security.
In addition, we have established stringent internal protocols to prevent any unauthorized access or use of our user data. We have obtained the Level III Certification in Information Security and Protection issued by the local branch of Ministry of Public Security.
We also conduct system-wide vulnerability scanning and penetration test every year to continually improve our data security measures. 80 Content Moderation We are committed to maintaining a healthy and positive educational environment for students and other users.
We also conduct system-wide vulnerability scanning and penetration test every year to continually improve our data security measures. Content Moderation We are committed to maintaining a healthy and positive educational environment for students and other users.
Applicable PRC advertising laws, rules and regulations contain certain prohibitions on the content of advertisements in mainland China (including prohibitions on misleading content, superlative wording, socially destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest).
Applicable PRC advertising laws, rules and regulations contain certain prohibitions on the content of advertisements in mainland China (including prohibitions on misleading content, superlative wording, socially 99 destabilizing content or content involving obscenities, superstition, violence, discrimination or infringement of the public interest).
Under the exclusive call option agreement entered into by and among Guangzhou Qixuan, Beijing Yiqi Information and Beijing Yiqi Information’s shareholders in March 2022, Guangzhou Qixuan has the exclusive, unconditional and irrevocable right to require the shareholders of the Beijing Yiqi Information, upon occurrence of the following situations and subject to the requirements by Guangzhou Qixuan, to transfer any or all of the equity interest in Beijing Yiqi Information held by the shareholders to it and/or a third party designated by it for free or 105 considerations equivalent to the minimum purchase price permitted under the PRC laws and regulations: (1) Guangzhou Qixuan or the third party designated by it is permitted to hold any or all of the equity interest in Beijing Yiqi Information under the PRC laws; or (2) subject to the PRC laws, any situation as Guangzhou Qixuan thinks is appropriate or necessary.
Under the exclusive call option agreement entered into by and among Guangzhou Qixuan, Beijing Yiqi Information and Beijing Yiqi Information’s shareholders in March 2022, Guangzhou Qixuan has the exclusive, unconditional and irrevocable right to require the shareholders of the Beijing Yiqi Information, upon occurrence of the following situations and subject to the requirements by Guangzhou Qixuan, to transfer any or all of the equity interest in Beijing Yiqi Information held by the shareholders to it and/or a third party designated by it for free or considerations equivalent to the minimum purchase price permitted under the PRC laws and regulations: (1) Guangzhou Qixuan or the third party designated by it is permitted to hold any or all of the equity interest in Beijing Yiqi Information under the PRC laws; or (2) subject to the PRC laws, any situation as Guangzhou Qixuan thinks is 113 appropriate or necessary.
Regulation Relating to Foreign Exchange Regulation on Foreign Currency Exchange The principal regulations governing foreign currency exchange in mainland China are the PRC Foreign Exchange Administration Regulations, or the Foreign Exchange Administration Regulations, which were promulgated by the State Council on January 29, 1996 and last amended on August 5, 2008.
Regulation Relating to Foreign Exchange Regulation on Foreign Currency Exchange The principal regulations governing foreign currency exchange in mainland China are the PRC Foreign Exchange Administration Regulations, which were promulgated by the State Council on January 29, 1996 and last amended on August 5, 2008.
The scenarios covered include classroom solutions, question banks, homework assignments, self-directed learning and multi-role reporting, among others. This digitalization helps to increase the efficiency and effectiveness of homework assignments, as well as core teaching and learning scenarios.
The scenarios covered include 78 classroom solutions, question banks, homework assignments, self-directed learning and multi-role reporting, among others. This digitalization helps to increase the efficiency and effectiveness of homework assignments, as well as core teaching and learning scenarios.
If a foreign entity is included in the list of unreliable entities, the working committee may decide to take one or more of the following measures: (i) restricting or prohibiting the foreign entity from engaging in import or export activities related to China; (ii) restricting or prohibiting the foreign entity’s investment within the territory of China; (iii) restricting or prohibiting the entry of the foreign entity’s relevant personnel or transport vehicles into the territory of China; (iv) restricting or cancelling the work permit, stay or residence qualification of the foreign entity’s relevant personnel in China; (v) imposing a fine corresponding to the seriousness of the case against the foreign entity; or (vi) any other necessary measures.
If a foreign entity is included in the list of unreliable entities, the working committee may decide to take one or more of the following measures: (i) restricting or prohibiting the foreign entity from engaging in import or export activities related to China; (ii) restricting or prohibiting the foreign entity’s investment within the territory of China; (iii) restricting or prohibiting the entry of the foreign entity’s relevant personnel or transport vehicles into the territory of China; (iv) restricting or cancelling the work permit, stay or residence qualification of the foreign entity’s relevant personnel in China; (v) imposing a £me corresponding to the seriousness of the case against the foreign entity; or (vi) any other necessary measures.
The Classified Catalog of Telecommunications Services (2015 Version), or the 2015 MIIT Catalog, effective on March 1, 2016 and as amended on June 6, 2019, defines information services as “the information services provided for users through public communications networks or internet by means of information gathering, development, processing and the construction of the information platform.” Moreover, information services continue to be classified as a category of VATS and are clarified to include information release and delivery services, information search and query services, information community platform services, information real-time interactive services, and information protection and processing services under the 2015 MIIT Catalog.
The Classified Catalog of Telecommunications Services (2015 Version), effective on March 1, 2016 and as amended on June 6, 2019, defines information services as “the information services provided for users through public communications networks or internet by means of information gathering, development, processing and the construction of the information platform.” Moreover, information services continue to be classified as a category of VATS and are clarified to include information release and delivery services, information search and query services, information community platform services, information real-time interactive services, and information protection and processing services under this Catalog.
The provincial communications administration bureaus, as local authorities in charge of regulating telecommunications services, may revoke the value-added telecommunications business operation licenses of those who fail to comply with the above requirements or fail to rectify such noncompliance within specified time limits. 86 Regulation Relating to Value-added Telecommunications Services On September 25, 2000, the State Council issued the PRC Regulations on Telecommunications, or the Telecommunications Regulations, as last amended on February 6, 2016, to regulate telecommunications activities in mainland China.
The provincial communications administration bureaus, as local authorities in charge of regulating telecommunications services, may revoke the value-added telecommunications business operation licenses of those who fail to comply with the above requirements or fail to rectify such noncompliance within specified time limits. 91 Regulation Relating to Value-added Telecommunications Services On September 25, 2000, the State Council issued the PRC Regulations on Telecommunications, or the Telecommunications Regulations, as last amended on February 6, 2016, to regulate telecommunications activities in mainland China.
The Ministry of Public Security, or MPS, has promulgated measures that prohibit use of the internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content.
The Ministry of Public Security has promulgated measures that prohibit use of the internet in ways which, among other things, result in a leakage of state secrets or a spread of socially destabilizing content.
Besides, the foreign investors of the company shall not be involved in the company’s operation and management, and their shareholding percentage shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities investments by foreign investors.
Besides, the foreign investors of the company shall not be involved in the company’s operation and management, and their shareholding percentage shall be subject, mutatis mutandis, to the regulations on the domestic securities investments by foreign investors.
In May 2013, we gained the ability to direct the business operations of Shanghai Hexu through Shanghai WFOE by entering 71 into a series of contractual arrangements with Shanghai Hexu and its shareholders.
In May 2013, we gained the ability to direct the business operations of Shanghai Hexu through Shanghai WFOE by entering into a series of contractual arrangements with Shanghai Hexu and its shareholders.
Specifically, the Algorithm Recommendation Provisions require that such service providers shall provide users with options that are not specific to their personal characteristics, or provide users with convenient options to cancel algorithmic recommendation services.
Specifically, the provisions require that such service providers shall provide users with options that are not specific to their personal characteristics, or provide users with convenient options to cancel algorithmic recommendation services.
If the employees fail to pay or the PRC subsidiaries fail to withhold their income taxes according to relevant laws and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC government authorities.
If the employees fail to pay or the PRC subsidiaries fail to withhold their income taxes according to laws and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC government authorities.
In October 2021, 17 Inspire Limited established a wholly-owned subsidiary in Hong Kong, 17 Legend Limited, which established a wholly-owned subsidiary in mainland China, Beijing Yiqi Hangfan Technology Co., Ltd., or Beijing 72 Yiqi Hangfan, in December 2021.
In October 2021, 17 Inspire Limited established a wholly-owned subsidiary in Hong Kong, 17 Legend Limited, which established a wholly-owned subsidiary in mainland China, Beijing Yiqi Hangfan Technology Co., Ltd., or Beijing Yiqi Hangfan, in December 2021.
We provide teachers with comprehensive educational content that we have fine-tuned over the past eight years, as well as a range of powerful tools that allow them to more efficiently execute their daily activities, including assigning personalized homework assignments, as encouraged by the Alleviating Burden Opinion, freeing them to concentrate on improving the quality of their teaching.
We provide teachers with comprehensive educational content that we have fine-tuned over the past nine years, as well as a range of powerful tools that allow them to more efficiently execute their daily activities, including assigning personalized homework assignments, as encouraged by the Alleviating Burden Opinion, freeing them to concentrate on improving the quality of their teaching.
Pursuant to the Foreign Investment Law, “foreign investors” means natural persons, enterprises, or other organizations of a foreign country, “foreign-invested enterprises”, or FIEs, means any enterprise established under PRC law that is wholly or partially invested by foreign investors and “foreign investment” means any foreign investor’s direct or indirect investment in mainland China, including: (i) establishing FIEs in mainland China either individually or jointly with other investors; (ii) obtaining stock shares, stock equity, property shares, other similar interests in Chinese domestic enterprises; (iii) investing in new projects in mainland China either individually or jointly with other investors; and (iv) making investment through other means provided by laws, administrative regulations, or State Council provisions.
Pursuant to the Foreign Investment Law, “foreign investors” means natural persons, enterprises, or other organizations of a foreign country, “foreign-invested enterprises,” means any enterprise established under PRC law that is wholly or partially invested by foreign investors and “foreign investment” means any foreign investor’s direct or indirect investment in mainland China, including: (i) establishing foreign invested enterprises in mainland China either individually or jointly with other investors; (ii) obtaining stock shares, stock equity, property shares, other similar interests in Chinese domestic enterprises; (iii) investing in new projects in mainland China either individually or jointly with other investors; and (iv) making investment through other means provided by laws, administrative regulations, or State Council provisions.
If we or the VIEs are found to be in violation of any existing or future laws or regulations of mainland China, or fail to obtain or maintain any of the required permits or approvals, the relevant mainland China 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 the VIEs are found to be in violation of any existing or future laws or regulations of mainland China, or fail to obtain or maintain any of the required permits or approvals, the Chinese regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D.
On December 25, 2018, the General Office of the MOE issued the Notice on Strictly Forbidding Harmful Apps in Primary and Secondary Schools, which stipulates, among other things, that (i) local primary schools, secondary schools and education departments, should conduct comprehensive investigations on Apps in their campus, and should call off using any Apps containing harmful content (such as commercial advertisements and internet games) or increasing the burden to the students, and (ii) a filing and reviewing system of learning Apps should be established.
On December 25, 2018, the General Office of the Chinese Ministry of Education issued the Notice on Strictly Forbidding Harmful Apps in Primary and Secondary Schools, which stipulates, among other things, that (i) local primary schools, secondary schools and education departments, should conduct comprehensive investigations on Apps in their campus, and should call off using any Apps containing harmful content (such as commercial advertisements and internet games) or increasing the burden to the students, and (ii) a filing and reviewing system of learning Apps should be established.
On September 19, 2019, the MOE, jointly with certain other PRC government authorities, issued the Guidance Opinions on Promoting the Healthy Development of Online Education, which provides, among others, that (i) social forces are encouraged to establish online education institutions, develop online education resources, and provide high quality education services; and (ii) an online education negative list shall be promulgated and industries not included in the negative list are open for all types of entities to enter into.
On September 19, 2019, the Chinese Ministry of Education, jointly with certain other PRC government authorities, issued the Guidance Opinions on Promoting the Healthy Development of Online Education, which provides, among others, that (i) social forces are encouraged to establish online education institutions, develop online education resources, and provide high quality education services; and (ii) an online education negative list shall be promulgated and industries not included in the negative list are open for all types of entities to enter into.
All employers are required to establish a system for labor safety and sanitation, strictly abide by state rules and standards and provide employees with appropriate workplace safety training. In addition, the PRC government has continued to introduce various new labor-related regulations after the PRC Labor Contract Law.
All employers are required to establish a system for labor safety and sanitation, strictly abide by state roles and standards and provide employees with appropriate workplace safety training. In addition, the PRC government has continued to introduce various new labor-related regulations after the PRC Labor Contract Law.
Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—Our current corporate structure and business operations may be affected by the Foreign Investment Law” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties with respect to the mainland China legal system could adversely affect us.” 107 D.
Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—Our current corporate structure and business operations may be affected by the Foreign Investment Law” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties with respect to the mainland China legal system could adversely affect us.” 115 D.
The New Filing Rules also set forth 99 certain regulatory red lines for overseas offerings and listings by domestic enterprises.
The New Filing Rules also set forth certain regulatory red lines for overseas offerings and listings by domestic enterprises.
Pursuant to the Notice of the Supreme People’s Court, the Supreme People’s Procuratorate and the MPS on Legally Punishing Criminal Activities Infringing upon the Personal Information of Citizens, issued on April 23, 2013, and the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information of Citizens, which was issued on May 8, 2017 and took effect on June 1, 2017, the following activities may constitute the crime of infringing upon a citizen’s personal information: (i) providing a citizen’s personal information to specified persons or releasing a citizen’s personal information online or through other methods in violation of relevant national provisions; (ii) providing legitimately collected information relating to a citizen to others without such citizen’s consent (unless the information is processed, not traceable to a specific person and not recoverable); (iii) collecting a citizen’s personal information in violation of applicable rules and regulations when performing a duty or providing services; or (iv) collecting a citizen’s personal information by purchasing, accepting or exchanging such information in violation of applicable rules and regulations.
Pursuant to the Notice of the Supreme People’s Court, the Supreme People’s Procuratorate and the Ministry of Public Security on Legally Punishing Criminal Activities Infringing upon the Personal Information of Citizens, issued on April 23, 2013, and the Interpretation of the Supreme People’s Court and the Supreme People’s Procuratorate on Several Issues regarding Legal Application in Criminal Cases Infringing upon the Personal Information of Citizens, which was issued on May 8, 2017 and took effect on June 1, 2017, the following activities may constitute the crime of infringing upon a citizen’s personal information: (i) providing a citizen’s personal information to specified persons or releasing a citizen’s personal information online or through other methods in violation of national provisions; (ii) providing legitimately collected information relating to a citizen to others without such citizen’s consent (unless the information is processed, not traceable to a specific person and not recoverable); (iii) collecting a citizen’s personal information in violation of applicable rules and regulations when performing a duty or providing services; or (iv) collecting a citizen’s personal information by purchasing, accepting or exchanging such information in violation of applicable rules and regulations.
On September 18, 2021, the MOE further published on its official website that the General Office of MOE, together with five other government authorities, issued a circular requiring all online Academic AST Institutions that have filed with the local education administration authorities to obtain the private school operating permit by the end of 2021, and all online Academic AST Institutions shall, before obtain such permit, suspend enrollment of students and charging fees.
On September 18, 2021, the Chinese Ministry of Education further published on its official website that the General Office of Chinese Ministry of Education, together with five other government authorities, issued a circular requiring all online Academic AST Institutions that have filed with the local education administration authorities to obtain the private school operating permit by the end of 2021, and all online Academic AST Institutions shall, before obtain such permit, suspend enrollment of students and charging fees.
The capital of an FIE and capital in Renminbi obtained by the FIE from foreign exchange settlement shall not be used for the 95 following purposes: (i) directly or indirectly used for payments beyond the business scope of the enterprises or payments as prohibited by relevant laws and regulations; (ii) directly or indirectly used for investment in securities unless otherwise provided by the relevant laws and regulations; (iii) directly or indirectly used for issuance of RMB entrusted loans, repayment of inter-enterprise loans (including advances by the third party) or repayment of bank loans that have been transferred to a third party; or (iv) directly or indirectly used for expenses related to the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).
The capital of a foreign invested enterprise and capital in Renminbi obtained by the foreign invested enterprise from foreign exchange settlement shall not be used for the following purposes: (i) directly or indirectly used for payments beyond the business scope of the enterprises or payments as prohibited by laws and regulations; (ii) directly or indirectly used for investment in securities unless otherwise provided by the laws and regulations; (iii) directly or indirectly used for issuance of RMB entrusted loans, repayment of inter-enterprise loans (including advances by the third party) or repayment of bank loans that have been transferred to a third party; or (iv) directly or indirectly used for expenses related to the purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).
In March 2022, Beijing Yiqi Hangfan, Beijing Yiqi Development and Beijing Yiqi Development’s shareholders entered into an equity interest pledge agreement, which includes terms substantially similar to the equity interest pledge agreement relating to Beijing Yiqi Information as described above. 103 In July 2022, Guangzhou Qixiang, Guangzhou Qili and Guangzhou Qili’s shareholders entered into an equity interest pledge agreement, which includes terms substantially similar to the equity interest pledge agreement relating to Beijing Yiqi Information as described above.
In March 2022, Beijing Yiqi Hangfan, Beijing Yiqi Development and Beijing Yiqi Development’s shareholders entered into an equity interest pledge agreement, which includes terms substantially similar to the equity interest pledge agreement relating to Beijing Yiqi Information as described above. 111 In July 2022, Guangzhou Qixiang, Guangzhou Qili and Guangzhou Qili’s shareholders entered into an equity interest pledge agreement, which includes terms substantially similar to the equity interest pledge agreement relating to Beijing Yiqi Information as described above.
The M&A Rules requires in some instances that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise where any of the following situations exist: (i) the transaction involves an important industry in China, (ii) the transaction may affect national economic security, or (iii) the PRC domestic enterprise has a well-known trademark or historical Chinese trade name in China.
The M&A Rules requires in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise where any of the following situations exist: (i) the transaction involves an important industry in China, (ii) the transaction may affect national economic security, or (iii) the PRC domestic enterprise has a well-known trademark or historical Chinese trade name in China.
Housing Fund According to the Administrative Regulations on the Administration of Housing Fund, which was promulgated on April 3, 1999 and last amended on March 24, 2019, housing fund paid and deposited both by employee themselves and their unit employer shall be owned by the employees.
Housing Fund According to the Administrative Regulations on Housing Fund, which was promulgated on April 3, 1999 and last amended on March 24, 2019, housing fund paid and deposited both by employee themselves and their unit employer shall be owned by the employees.
The PRC subsidiaries of such overseas-listed company 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.
The PRC subsidiaries of such overseas-listed company have obligations to file documents related to employee share options or restricted shares with competent tax authorities and to withhold individual income taxes of those employees who exercise their share options.
Property, Plant and Equipment Our principal regional executive offices are located in Beijing and Shanghai, China, and we have also leased offices in a number of other cities in China. Information on our leased properties as of December 31, 2022 is summarized below.
Property, Plant and Equipment Our principal regional executive offices are located in Beijing and Shanghai, China, and we have also leased offices in a number of other cities in China. Information on our leased properties as of December 31, 2023 is summarized below.
ITEM 4. INFORMATION ON THE COMPANY A. History and Development of the Company We set up Shanghai Hexu Information Technology Co., Ltd., or Shanghai Hexu, in December 2012. Our holding company, 17 Education & Technology Group Inc., was incorporated in October 2012.
ITEM 4. INFOR MATION ON THE COMPANY A. History and Development of the Company We set up Shanghai Hexu Information Technology Co., Ltd., or Shanghai Hexu, in December 2012. Our holding company, 17 Education & Technology Group Inc., was incorporated in October 2012.
According to the ICP Measures, any company that engages in the provision of commercial internet information services must obtain a sub-category VATS License for Internet Information Services, or the ICP License, from the relevant government authorities before providing any commercial internet information services within the PRC.
According to these measures, any company that engages in the provision of commercial internet information services must obtain a sub-category VATS License for Internet Information Services, or the ICP License, from the government authorities before providing any commercial internet information services within the PRC.
The Outbound Data Transfer Measures provide that a data processor providing data abroad in the following situations shall report security assessment for its outbound data transfer to the CAC: (i) a data processor provides important data abroad; (ii) a critical information infrastructure operator or a data processor processing the personal information of more than one million individuals provides personal information abroad; (iii) a data processor, who has cumulatively provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals abroad since January 1 of the previous year, provides personal information abroad; and (iv) other circumstances prescribed by the CAC for which report for security assessment for outbound data transfers is required.
The Outbound Data Transfer Measures provide that a data processor providing data abroad in the following situations shall report security assessment for its outbound data transfer to the Cyberspace Administration of China: (i) a data processor provides important data abroad; (ii) a critical information infrastructure operator or a data processor processing the personal information of more than one million individuals provides personal information abroad; (iii) a data processor, who has cumulatively provided personal information of 100,000 individuals or sensitive personal information of 10,000 individuals abroad since January 1 of the previous year, provides personal information abroad; and (iv) other circumstances prescribed by the Cyberspace Administration of China for which report for security assessment for outbound data transfers is required.
On July 20, 2018, the General Office of the State Council issued the Plan for Reforming the State and Local Tax Collection and Administration Systems, which stipulated that the SAT will become solely responsible for collecting social insurance premiums.
On July 20, 2018, the General Office of the State Council issued the Plan for Reforming the State and Local Tax Collection and Administration Systems, which stipulated that the State Administration of Taxation will become solely responsible for collecting social insurance premiums.
Under the Foreign Exchange Administration Regulations, Renminbi is generally freely convertible for payments of current account items, such as trade and service-related foreign exchange transactions and dividend payments, but not freely convertible for capital account items, such as direct investment, loan or investment in securities outside mainland China, unless prior approval of SAFE or its local counterparts has been obtained.
Under these regulations, Renminbi is generally freely convertible for payments of current account items, such as trade and service-related foreign exchange transactions and dividend payments, but not freely convertible for capital account items, such as direct investment, loan or investment in securities outside mainland China, unless prior approval of SAFE or its local counterparts has been obtained.
The M&A Rules further requires that the MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council, are triggered.
The M&A Rules further requires that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State Council, are triggered.
The exclusive management services and business 104 cooperation agreement shall remain in force during the business operation period of Guangzhou Qixuan and Beijing Yiqi Information unless otherwise terminated earlier by consensus of the all parties to the exclusive management services and business cooperation agreement.
The exclusive management services and business cooperation agreement shall remain in force during 112 the business operation period of Guangzhou Qixuan and Beijing Yiqi Information unless otherwise terminated earlier by consensus of the all parties to the exclusive management services and business cooperation agreement.
We developed our teaching and learning SaaS offerings by building upon our deep understanding of teaching and learning scenarios, AI capabilities, data insights, content and brand power that we have accumulated over the past ten years.
We developed our teaching and learning SaaS offerings by building upon our deep understanding of teaching and learning scenarios, Al capabilities, data insights, content and brand power that we have accumulated over the past ten years.
Our New Teaching and Learning SaaS Offerings We launched our teaching and learning SaaS offerings in September 2021 as an upgrade to our smart in-school classroom solutions, leveraging the experience and insights we have gained and our leading market position.
Our Current Teaching and Learning SaaS Offerings We launched our teaching and learning SaaS offerings in September 2021 as an upgrade to our smart in-school classroom solutions, leveraging the experience and insights we have gained and our leading market position.
These opinions proposed to revise the relevant regulation governing the overseas issuance and listing of shares by such companies and clarified the responsibilities of competent domestic industry regulators and government authorities. The Securities Activities Opinions also call for improving laws and regulations on data security, cross-border data flow and management of confidential information.
These opinions proposed to revise the regulation governing the overseas issuance and listing of shares by such companies and clarified the responsibilities of competent domestic industry regulators and government authorities. These opinions also call for improving laws and regulations on data security, cross-border data flow and management of confidential information.
Under SAFE Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents (including individuals and entities) for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while “round trip investment” refers to direct investment in mainland China by PRC residents through SPVs, namely, establishing FIEs to obtain the ownership, control rights and management rights.
Under SAFE Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents (including individuals and entities) for the purpose of seeking offshore financing or making offshore investment, using legitimate onshore or offshore assets or interests, while “round trip investment” refers to direct investment in mainland China by PRC residents through SPVs, namely, establishing foreign invested enterprises to obtain the ownership, control rights and management rights.
The Administrative Measures on Internet Information Services, or the ICP Measures, promulgated by the PRC State Council and as last amended on January 8, 2011, sets forth more specific rules on the provision of internet information services.
The Administrative Measures on Internet Information Services, promulgated by the PRC State Council and as last amended on January 8, 2011, sets forth more specific rules on the provision of internet information services.
On February 3, 2015, the SAT issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers or Assets by Non-PRC Resident Enterprises, or SAT Bulletin 7, which extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign intermediate holding company.
On February 3, 2015, the State Administration of Taxation issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers or Assets by Non-PRC Resident Enterprises, or SAT Bulletin 7, which extends its tax jurisdiction to transactions involving the transfer of taxable assets through offshore transfer of a foreign intermediate holding company.
PBOC established a cross-broader financing regulation system based on the capital or net assets of the micro main body under macro prudential rules, and the legal entities and financial institutions established in mainland China including the branches of foreign banks registered in mainland China but excluding government financing vehicles and real estate enterprise, may carry out cross-border financing of foreign currency in accordance with relevant regulations of such system.
The People’s Bank of China established a cross-broader financing regulation system based on the capital or net assets of the micro main body under macro prudential rules, and the legal entities and financial institutions established in mainland China including the branches of foreign banks registered in mainland China but excluding government financing vehicles and real estate enterprise, may carry out cross-border financing of foreign currency in accordance with regulations of such system.
Dividends generated after January 1, 2008 and payable by an FIE in mainland China to its foreign enterprise investors are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with mainland China that provides for a preferential withholding arrangement.
Dividends generated after January 1, 2008 and payable by a foreign invested enterprise in mainland China to its foreign enterprise investors are subject to a 10% withholding tax, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with mainland China that provides for a preferential withholding arrangement.
We wound down and deregistered Beijing Xiaofeng in April 2021, because it was not engaged in material business activities. On November 17, 2021, we changed the ratio of ADSs to Class A ordinary shares (the “ADS Ratio”) from two ADSs to five Class A ordinary shares to one ADS to ten Class A ordinary shares.
We wound down and deregistered Beijing Xiaofeng in April 2021, because it was not engaged in material business activities. On November 17, 2021, we changed the ratio of ADSs to Class A ordinary shares, or the ADS Ratio, from two ADSs to five Class A ordinary shares to one ADS to ten Class A ordinary shares.
The PRC EIT Law applies a uniform 25% enterprise income tax rate to both FIEs and domestic enterprises, except where tax incentives are granted to special industries and projects. Enterprises qualifying as “High and New Technology Enterprises” are entitled to a preferential 15% enterprise income tax rate rather than the 25% statutory tax rate.
The PRC EIT Law applies a uniform 25% enterprise income tax rate to both foreign invested enterprises and domestic enterprises, except where tax incentives are granted to special industries and projects. Enterprises qualifying as “High and New Technology Enterprises” are entitled to a preferential 15% enterprise income tax rate rather than the 25% statutory tax rate.
The Regulations on Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, as last amended on March 29, 2022, are the key regulations for foreign direct investment in telecommunications companies in mainland China.
The Regulations on Administration of Foreign-Invested Telecommunications Enterprises as last amended on March 29, 2022, are the key regulations for foreign direct investment in telecommunications companies in mainland China.
SAFE Circular 37 provides that, before making contribution into an SPV, PRC residents are required to complete foreign exchange registration with SAFE or its local branch.
SAFE Circular 37 provides that, before malting contribution into an SPV, PRC residents are required to complete foreign exchange registration with SAFE or its local branch.
As of December 31, 2022, we had a team of 164 technology professionals, whose expertise spans a broad range of related fields, from automatic speech recognition and evaluation, computer vision, algorithm engineering, big data analytics to operational and infrastructure maintenance.
As of December 31, 2023, we had a team of technology professionals, whose expertise spans a broad range of related fields, from automatic speech recognition and evaluation, computer vision, algorithm engineering, big data analytics to operational and infrastructure maintenance.

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Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Therefore, our PRC subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, current PRC regulations permit our PRC subsidiaries to pay dividends to 122 us only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.
Therefore, our PRC subsidiaries are allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, current PRC regulations permit our PRC subsidiaries to pay dividends to us only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations.
Organization Structure—Contractual Arrangements with the VIEs and Their Respective Shareholders.” For restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see “—Organizational Structure.” All of our revenues have been, and we expect they are likely to continue to be, in the form of Renminbi.
Organizational Structure—Contractual Arrangements with the VIEs and Their Respective Shareholders.” For restrictions and limitations on liquidity and capital resources as a result of our corporate structure, see “—Organizational Structure.” All of our revenues have been, and we expect they are likely to continue to be, in the form of Renminbi.
The Alleviating Burden Opinion provides that any violation of the foregoing shall be rectified. The Alleviating Burden Opinion further states that the administration and supervision over academic subjects tutoring institutions for students on grade ten to twelve shall be implemented by reference to the relevant provisions of the Alleviating Burden Opinion. See “Item 4. Information on the Company—B.
The Alleviating Burden Opinion provides that any violation of the foregoing shall be rectified. The Alleviating Burden Opinion further states that the administration and supervision over academic subjects tutoring institutions for students on grade ten to twelve shall be implemented by reference to the provisions of the Alleviating Burden Opinion. See “Item 4. Information on the Company—B.
For example, on July 24, 2021, the 108 General Office of State Council and the General Office of Central Committee of the Communist Party of China jointly promulgated the Alleviating Burden Opinion, which provides, among others, that (i) Academic AST Institutions are prohibited from raising funds by listing on stock markets or conducting any capitalization activities; (ii) foreign capital is prohibited from controlling or participating in any Academic AST Institutions through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities; (iii) online tutoring for preschool-age children is prohibited, and offline academic subjects (including foreign language) tutoring services for preschool-age children is also strictly prohibited.
For example, on July 24, 2021, the General Office of State Council and the General Office of Central Committee of the Communist Party of China jointly promulgated the Alleviating Burden Opinion, which provides, among others, that (i) Academic AST Institutions are prohibited from raising funds by listing on stock markets or conducting any capitalization activities; (ii) foreign capital is prohibited 116 from controlling or participating in any Academic AST Institutions through mergers and acquisitions, entrusted operation, joining franchise or variable interest entities; (iii) online tutoring for preschool-age children is prohibited, and offline academic subjects (including foreign language) tutoring services for preschool-age children is also strictly prohibited.
E. Critical Accounting Estimates We prepare financial statements in accordance with GAAP, which requires us to make judgments, estimates and assumptions that affect the reported amounts of our assets and liabilities and the disclosure of our contingent assets and liabilities at the end of each fiscal period and the reported amounts of revenues and expenses during each fiscal period.
Critical Accounting Estimates We prepare financial statements in accordance with GAAP, which requires us to make judgments, estimates and assumptions that affect the reported amounts of our assets and liabilities and the disclosure of our contingent assets and liabilities at the end of each fiscal period and the reported amounts of revenues and expenses during each fiscal period.
In 2022, due to the cessation of the Company's online K-12 tutoring services by the end of 2021 in order to be compliant with the PRC regulations, we derived all of our net revenues from teaching and learning SaaS offerings and our other educational products and services.
In 2022 and 2023, due to the cessation of the Company’s online K-12 tutoring services by the end of 2021 in order to be compliant with the PRC regulations, we derived all of our net revenues from teaching and learning SaaS offerings and our other educational products and services.
In addition, our wholly foreign-owned subsidiaries in mainland 124 China are permitted to pay dividends to us only out of its accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations.
In addition, our wholly foreign-owned subsidiaries in mainland China are permitted to pay dividends to us only out of its accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations.
As gross billings has material limitations as an analytical metric and may not be calculated in the same manner by all companies, it may not be comparable to other 120 similarly titled measures used by other companies.
As gross billings has material limitations as an analytical metric and may not be calculated in the same manner by all companies, it may not be comparable to other similarly titled measures used by other companies.
Our prepaid expenses and other current assets primarily consist of prepaid value added taxes, prepaid other service fees, receivables for disposal of property and equipment, deposits, receivables from third-party payment platforms, prepaid rental expenses and others.
Our prepaid expenses and other current assets primarily consist of prepaid value added taxes, prepaid other service fees, deposits, receivables from third-party payment platforms, interest receivables, prepaid rental expenses, receivables for disposal of property and equipment 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.” 114 Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods presented, both in absolute amount and as a percentage of our net revenues for the periods presented.
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.” 122 Results of Operations The following table sets forth a summary of our consolidated results of operations for the periods presented, both in absolute amount and as a percentage of our net revenues for the periods presented.
No provision for Hong Kong profits tax was made as we had no estimated assessable profit that was subject to Hong Kong profits tax during 2020, 2021 and 2022. PRC Generally, our PRC subsidiaries, VIEs and VIEs’ subsidiaries are subject to enterprise income tax on their taxable income in mainland China at a statutory rate of 25%.
No provision for Hong Kong profits tax was made as we had no estimated assessable profit that was subject to Hong Kong profits tax during 2021, 2022 and 2023. PRC Generally, our PRC subsidiaries, VIEs and VIEs’ subsidiaries are subject to enterprise income tax on their taxable income in mainland China at a statutory rate of 25%.
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 product development services with us. Other than as shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2022.
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 product development services with us. Other than as shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2023.
ITEM 5. OPERATING AND FIN ANCIAL REVIEW AND PROSPECTS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties about our business and operations.
item 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties about our business and operations.
Their current HNTE statuses are set to expire in 2024 and 2023 respectively. Our educational services are subject to VAT at the rate of 3% for small-scale-VAT-payer entities or at the rate of 6% or 13% for general-VAT-payer entities in accordance with PRC tax rules.
Their current HNTE statuses are set to expire in 2023, 2024 and 2025, respectively. 121 Our educational services are subject to VAT at the rate of 3% for small-scale-VAT-payer entities or at the rate of 6% or 13% for general-VAT-payer entities in accordance with PRC tax rules.
Other sales and marketing expenses decreased from RMB283.2 million in 2021 to negative RMB17.0 million (negative US$2.5 million) in 2022, primarily due to decreased advertising expenditures, rental cost and the cancellation of loyalty points previously granted to customers of our free in-school products. Research and development expenses .
Other sales and marketing expenses decreased from RMB283.2 million in 2021 to negative RMB17.0 million in 2022, primarily due to decreased advertising expenditures, rental cost and the cancellation of loyalty points previously granted to customers of our free in-school products. Research and development expenses.
Our general and administrative expenses consist primarily of (i) salaries and welfare for our general and administrative personnel and (ii) other general and administrative expenses, including rental and depreciation expenses. We expect our general and administrative expenses to decrease in absolute amounts in the future as we continuously improve our organizational efficiency.
Our general and administrative expenses consist primarily of (i) salaries and welfare for our general and administrative personnel and (ii) other general and administrative expenses, including rental and depreciation expenses. We expect our general and administrative expenses to decrease in absolute amounts in the future as we continually improve our organizational efficiency.
Salaries and welfare for our general and administrative personnel decreased from RMB259.3 million in 2021 to RMB139.9 million (US$20.3 million) in 2022, primarily due to staff optimization in line with business adjustment. • Other expenses .
Salaries and welfare for our general and administrative personnel decreased from RMB259.3 million in 2021 to RMB139.9 million in 2022, primarily due to staff optimization in line with business adjustment. • Other expenses.
Other general and administrative expenses decreased from RMB186.2 million in 2021 to RMB81.1 million (US$11.8 million) in 2022 due to decreases in rental cost, depreciation and professional service expenses primarily incurred prior to the implementation of the Alleviating Burden Opinion. Impairment for property and equipment, right-of-use assets and rental deposits.
Other general and administrative expenses decreased from RMB186.2 million in 2021 to RMB81.1 million in 2022 due to decreases in rental cost, depreciation and professional service expenses primarily incurred prior to the implementation of the Alleviating Burden Opinion. Impairment for property and equipment, right-of-use assets and rental deposits.
Salaries and welfare for our sales and marketing personnel decreased from RMB432.2 million in 2021 to RMB96.1 million (US$13.9 million) in 2022, primarily due to staff optimization in line with business adjustment. • Other expenses .
Salaries and welfare for our sales and marketing personnel decreased from RMB432.2 million in 2021 to RMB96.1 million in 2022, primarily due to staff optimization in line with business adjustment. • Other expenses.
The success of our other educational products and services, including our personalized self-directed learning product, will depend on our ability to efficiently combine our insights into the academic profiles of students of different background and our accumulated content library into a well-designed integral package that helps students effectively achieve their learning goals, as well as to attract students to pay for it in a cost-efficient way. 109 Our ability to manage our operational efficiency Our operating margins depend on our ability to control our costs and realize additional operation leverage as we continue to operate.
The success of our other educational products and services will depend on our ability to efficiently combine our insights into the academic profiles of students of different background and our accumulated content library into a well-designed integral package that helps students effectively achieve their learning goals, as well as to attract students to pay for it in a cost-efficient way. 117 Our ability to manage our operational efficiency Our operating margins depend on our ability to control our costs and realize additional operation leverage as we continue to operate.
Our general and administrative expenses decreased from RMB445.4 million in 2021 to RMB221.0 million (US$32.0 million) in 2022, including RMB83.6 million (US$12.1 million) of share-based compensation expenses, primarily due to staff optimization in line with business adjustment. • Salaries and welfare .
Our general and administrative expenses decreased from RMB445.4 million in 2021 to RMB221.0 million in 2022, including RMB83.6 million of share-based compensation expenses, primarily due to staff optimization in line with business adjustment. • Salaries and welfare.
The table below sets forth a reconciliation of our gross billings of online K-12 tutoring services to net revenues of our online K-12 tutoring services for the periods indicated: For the Year Ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in thousands) Net revenues of online K-12 tutoring services 1,218,564 2,128,610 — — Add: VAT and surcharges 73,114 125,788 — — Add: ending deferred revenue related to online K-12 tutoring services 564,911 — — — Add: ending refund liability related to online K-12 tutoring services 22,869 — — — Less: beginning deferred revenue related to online K-12 tutoring services 218,919 564,911 — — Less: beginning refund liability related to online K-12 tutoring services 5,907 22,869 — — Gross billings of online K-12 tutoring services (non-GAAP) 1,654,632 1,666,618 — — As a result of the change of our business models under the latest regulatory environment, a number of operating information and non-GAAP metrics we provided previously are no longer relevant and will not be provided for future periods.
The table below sets forth a reconciliation of our gross billings of online K-12 tutoring services to net revenues of our online K-12 tutoring services for the periods indicated: For the Year Ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in thousands) Net revenues of online K-12 tutoring services 2,128,610 — — — Add: VAT and surcharges 125,788 — — — Add: ending deferred revenue related to online K-12 tutoring services — — — — Add: ending refund liability related to online K-12 tutoring services — — — — Less: beginning deferred revenue related to online K-12 tutoring services 564,911 — — — Less: beginning refund liability related to online K-12 tutoring services 22,869 — — — Gross billings of online K-12 tutoring services (non-GAAP) 1,666,618 — — — As a result of the change of our business models under the latest regulatory environment, a number of operating information and non-GAAP metrics we provided previously are no longer relevant and will not be provided for future periods.
Cost of revenues Our cost of revenues decreased from RMB878.2 million in 2021 to RMB206.2 million (US$29.9 million) in 2022, which was largely in line with the decrease in net revenues. • Compensation costs.
Cost of revenues Our cost of revenues decreased from RMB878.2 million in 2021 to RMB206.2 million in 2022, which was largely in line with the decrease in net revenues. • Compensation costs.
Interest income Our interest income decreased from RMB24.6 million in 2021 to RMB11.4 million (US$1.6 million) in 2022, primarily due to a decrease in our cash and cash equivalents. Net loss As a result of the foregoing, our net loss decreased from RMB1,441.9 million in 2021 to RMB177.9 million (US$25.8 million) in 2022.
Interest income Our interest income decreased from RMB24.6 million in 2021 to RMB11.4 million in 2022, primarily due to a decrease in our cash and cash equivalents. Net loss As a result of the foregoing, our net loss decreased from RMB1,441.9 million in 2021 to RMB177.9 million in 2022.
We did not recognize impairment losses in 2022. 117 Loss from operations Our loss from operations decreased from RMB1,473.5 million in 2021 to RMB211.1 million (US$30.6 million) in 2022. Loss from operations as a percentage of net revenues in 2022 was negative 39.7%, narrowing from negative 67.5% in 2021. The improvement was due to improvement in overall operational efficiency.
We did not recognize impairment losses in 2022. 127 Loss from operations Our loss from operations decreased from RMB1,473.5 million in 2021 to RMB211.1 million in 2022. Loss from operations as a percentage of net revenues in 2022 was negative 39.7%, narrowing from negative 67.5% in 2021. The improvement was due to improvement in overall operational efficiency.
Actual results could differ from those estimates. Our contracts with customers may include promises to transfer multiple goods and services. Determining whether different goods and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Estimation of refund liabilities may also require significant judgment.
Actual results could differ from those estimates. Our contracts with customers may include promises to transfer multiple goods and services. Determining whether different goods and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
The difference between net cash used in operating activities and net loss of RMB177.9 million (US$25.8 million) in the same period was due to adjustments for noncash items that primarily include share-based compensation of RMB129.6 million (US$18.8 million) and noncash lease expenses of RMB34.2 million (US$5.0 million), and changes in operating assets and liabilities that primarily include a decrease of RMB233.1 million (US$33.8 million) in accrued expenses and other current liabilities, a decrease of RMB121.0 million (US$17.5 million) in operating lease liabilities and a decrease of RMB201.5 million (US$29.2 million) in deferred revenue and customer advances, partially offset by a decrease of RMB89.7 million (US$13.0 million) in operating lease right-of-use assets.
The difference between net cash used in operating activities and net loss of RMB177.9 million in the same period was due to adjustments for noncash items that primarily include share-based compensation of RMB129.6 million and noncash lease expenses of RMB34.2 million, and changes in operating assets and liabilities that primarily include a decrease of RMB233.1 million in accrued expenses and other current liabilities, a decrease of RMB121.0 million in operating lease liabilities and a decrease of RMB201.5 million in deferred revenue and customer advances, partially offset by a decrease of RMB89.7 million in operating lease right-of-use assets.
Investing activities Net cash used in investing activities in 2022 was RMB8.9 million (US$1.3 million), primarily due to investment in available-for-sale investments of RMB19.5 million (US$2.8 million) and purchase of property and equipment of RMB2.8 million (US$0.4 million), partially offset by proceeds from disposal of property and equipment of RMB13.4 million (US$1.9 million).
Net cash used in investing activities in 2022 was RMB8.9 million, primarily due to investment in available-for-sale investments of RMB19.5 million and purchase of property and equipment of RMB2.8 million, partially offset by proceeds from disposal of property and equipment of RMB13.4 million.
Failure to renew and maintain requested licenses or permits in a timely manner or obtain newly required ones due to adverse changes in regulations or policies could have a material adverse impact on our business, financial condition and results of operations,” and “The approval and/or other requirements of the CSRC or other mainland China governmental authorities may be required in connection with an offering under rules, regulations or policies of mainland China, and, if required, we cannot predict whether or how soon we will be able to obtain such approval or complete such other requirements.” Specific Factors Affecting Our Results of Operations Besides the general factors affecting the education industry in China, our results of operations are affected by the following specific factors relating to our business: Our ability to execute new business strategies We launched our teaching and learning SaaS offerings and personalized self-directed learning product, which was a major component of our other educational products and services, in 2022, after the implementation of the Alleviating Burden Opinion in July 2021.
Failure to renew and maintain requested licenses or permits in a timely manner or obtain newly required ones due to adverse changes in regulations or policies could have a material adverse impact on our business, financial condition and results of operations,” and “The approval and/or other requirements of the CSRC or other Chinese governmental authorities may be required in connection with an offering under rules, regulations or policies of mainland China, and, if required, we cannot predict whether or how soon we will be able to obtain such approval or complete such other requirements.” Specific Factors Affecting Our Results of Operations Besides the general factors affecting the education industry in China, our results of operations are affected by the following specific factors relating to our business: Our ability to execute new business strategies We launched our teaching and learning SaaS offerings in September 2021, after the implementation of the Alleviating Burden Opinion in July 2021.
Net revenues from our teaching and learning SaaS offerings increased from nil in 2021 to RMB115.4 million (US$16.7 million) in 2022. • Other educational products and services. Net revenues from our other educational products and services increased from RMB55.9 million in 2021 to RMB415.7 million (US$60.3 million) in 2022.
Net revenues from our teaching and learning SaaS offerings increased from nil in 2021 to RMB115.4 million in 2022. • Other educational products and services. Net revenues from our other educational products and services increased from RMB55.9 million in 2021 to RMB415.7 million in 2022.
Our sales and marketing expenses decreased from RMB1,412.9 million in 2021 to RMB79.1 million (US$11.5 million) in 2022, including RMB17.3 million (US$2.5 million) of share-based compensation expenses.
Our sales and marketing expenses decreased from RMB1,412.9 million in 2021 to RMB79.1 million in 2022, including RMB17.3 million of share-based compensation expenses.
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 from January 1, 2022 to December 31, 2022 that are reasonably likely to have a material 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 effect on our 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. 132 E.
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 making loans or additional capital contributions to our PRC subsidiaries and the VIEs in mainland China, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” Operating activities Net cash used in operating activities in 2022 was RMB463.9 million (US$67.3 million).
Risk Factors—Risks Related to Doing Business in China—Mainland China regulation of loans to and direct investment in mainland China entities by offshore holding companies and governmental regulation of currency conversion may delay or prevent us from making loans or additional capital contributions to our mainland China subsidiaries and the VIEs in China, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” Operating activities Net cash used in operating activities in 2023 was RMB212.1 million (US$29.9 million).
Leveraging our unique insights into the academic performance of tens of millions of students at these schools, we offer other educational products and services, such as our personalized self-directed learning product, to complement students’ in-school learning with a higher level of personalization.
Leveraging our unique insights into the academic performance of tens of millions of students at these schools, we offer other educational products and services to complement students’ in-school learning with a higher level of personalization.
For the year ended December 31, 2022, we derived revenue primarily from our teaching and learning SaaS offering and our other education products and services. 125 For teaching and learning SaaS offerings where we provide customers an access to our hosted applications and platforms on a subscription model, we identify SaaS subscription as one performance obligation and recognize revenue ratably over the subscription period.
For the year ended December 31, 2023, we derived revenue primarily from our teaching and learning SaaS offering. For teaching and learning SaaS offerings contracts where we provide customers an access to our hosted applications and platforms on a subscription model, we identify SaaS subscription as one performance obligation and recognize revenue ratably over the subscription period.
Our research and development expenses decreased from RMB800.2 million in 2021 to RMB235.8 million (US$34.2 million) in 2022, including RMB28.6 million (US$4.2 million) of share-based compensation expenses, primarily due to staff optimization in line with business adjustment. • Salaries and welfare .
Our research and development expenses decreased from RMB800.2 million in 2021 to RMB235.8 million in 2022, including RMB28.6 million of share-based compensation expenses, primarily due to staff optimization in line with business adjustment. • Salaries and welfare. Salaries and welfare for our research and development personnel decreased from RMB639.2 million in 2021 to RMB176.8million in 2022.
As of December 31, 2020, 2021 and 2022, our cash, cash equivalents and restricted cash were RMB2,835.1 million, RMB1,180.9 million and RMB718.1 million (US$104.1 million), respectively. Our cash and cash equivalents primarily consist of cash on hand and deposits with original maturities of three months or less.
As of December 31, 2021, 2022 and 2023, our cash, cash equivalents and restricted cash were RMB1,180.9 million, RMB718.1 million RMB306.9 million (US$43.2 million), respectively. Our cash and cash equivalents primarily consist of cash on hand and deposits with original maturities of three months or less.
As of December 31, 2020, 2021 and 2022, our prepaid expenses and other current assets were RMB211.4 million, RMB161.8 million and RMB140.9 million (US$20.4 million), respectively.
As of December 31, 2021, 2022 and 2023, our prepaid expenses and other current assets were RMB161.8 million, RMB140.9 million and RMB94.8 million (US$13.4 million), respectively.
Our compensation costs primarily include salaries, welfare and service fees for our (i) instructors and tutors of our online K-12 tutoring services and (ii) consultants and other staff who provide services for customers of our other educational products and services. Educational products and materials .
Our compensation costs primarily include salaries, welfare and service fees for (i) our staff and consultants who provide services for customers of our teaching and learning SaaS offerings and other educational products and services, and (ii) instructors and tutors of our online K-12 tutoring services in 2021. Hardware cost.
Our other costs of revenues decreased from RMB184.8 million in 2021 to RMB34.9 million (US$5.1 million) in 2022, primarily due to decreased rental costs for office space and livestreaming space, depreciation, bandwidth cost, cancellation of loyalty points previously granted to customers of online K-12 tutoring services, as well as other administrative costs in line with our business adjustment.
Our other costs of revenues decreased from RMB184.8 million in 2021 to RMB34.9 million in 2022, primarily due to decreased rental costs for office space and livestreaming space, depreciation, bandwidth cost, cancellation of loyalty points previously granted to customers of online K-12 tutoring services, as well as other administrative costs in line with our business adjustment. 126 Gross profit As a result of the foregoing, our gross profit decreased from RMB1,306.3 million in 2021 to RMB324.9 million in 2022.
Our research and development expenses consist primarily of (i) salaries and welfare for technology and content development personnel of our in-school and after-school operations and (ii) other expenses associated with our research and development activities, including rental, development and depreciation expenses. We expect our research and development expenses to be relatively stable in the foreseeable future.
Our research and development expenses consist primarily of (i) salaries and welfare for technology and content development personnel of our in-school and after-school operations and (ii) other expenses associated with our research and development activities, including rental, development and depreciation expenses.
Net revenues from other educational products and services in 2020 and 2021 primarily consisted of the subscription fees we charged for our membership-based premium educational content, with subscription periods ranging from 15 days to one year.
In 2021 and 2023, net revenues from other educational products and services primarily consisted of the subscription fees we charged for our membership-based premium educational content, with subscription periods ranging from 15 days to one year. In 2022, a majority of our net revenues from other educational products and services came from our personalized self-directed learning product.
The following table sets forth the components of our general and administrative expenses by amounts and percentages of our net revenues for the periods presented: For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) General and administrative expenses Salaries and welfare 347,090 26.8 259,272 11.9 139,929 20,288 26.3 Other expenses 73,024 5.6 186,168 8.5 81,100 11,758 15.3 Total 420,114 32.4 445,440 20.4 221,029 32,046 41.6 Taxation Cayman Islands We and one of our subsidiaries, 17 Technology Limited, are exempted companies incorporated in Cayman Islands.
The following table sets forth the components of our general and administrative expenses by amounts and percentages of our net revenues for the periods presented: For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) General and administrative expenses Salaries and welfare 259,272 11.9 139,929 26.3 99,301 13,986 58.1 Other expenses 186,168 8.5 81,100 15.3 54,960 7,741 32.1 Total 445,440 20.4 221,029 41.6 154,261 21,727 90.2 Taxation Cayman Islands We and one of our subsidiaries, 17 Technology Limited, are exempted companies incorporated in Cayman Islands.
Other research and development expenses decreased from RMB160.9 million in 2021 to RMB59.1 million (US$8.6 million) in 2022, primarily due to decreases in rental cost, depreciation and content development cost related to online K-12 tutoring services. General and administrative expenses .
The decrease was primarily due to staff optimization in line with business adjustment. • Other expenses. Other research and development expenses decreased from RMB160.9 million in 2021 to RMB59.1 million in 2022, primarily due to decreases in rental cost, depreciation and content development cost related to online K-12 tutoring services. General and administrative expenses.
Recently Issued Accounting Pronouncements A list of recently issued accounting pronouncements that are relevant to us is included in note 2 to our consolidated financial statements included elsewhere in this annual report. Inflation To date, inflation in China has not materially affected our results of operations.
Recently Issued Accounting Pronouncements A list of recently issued accounting pronouncements that are relevant to us is included in note 2 to our consolidated financial statements included elsewhere in this annual report. B.
Salaries and welfare for our research and development personnel decreased from RMB639.2 million in 2021 to RMB176.8million (US$25.6 million) in 2022. The decrease was primarily due to staff optimization in line with business adjustment. • Other expenses .
Salaries and welfare for our research and development personnel decreased from RMB176.8 million in 2022 to RMB129.9 million (US$18.3 million) in 2023. The decrease was primarily due to staff optimization in line with business adjustment. • Other expenses.
As of December 31, 2022, 31.3% and 68.7% of our cash and cash equivalents were held in mainland China and Hong Kong, respectively, of which 23.6% were denominated in Renminbi and 76.4% were denominated in U.S. dollars. As of December 31, 2022, 21.8% of cash and cash equivalents were held by the VIEs and their subsidiaries.
As of December 31, 2023, 43.6% and 56.4% of our cash and cash equivalents were held in mainland China and Hong Kong, respectively, of which 18.7% were denominated in Renminbi and 81.3% were denominated in U.S. dollars. As of December 31, 2023, 14.1% of cash and cash equivalents were held by the VIEs and their subsidiaries.
Our net revenues increased by 68.8% from RMB1,294.4 million in 2020 to RMB2,184.5 million in 2021, and further decreased by 75.7% to RMB531.1 million (US$77.0 million) in 2022. We generated a net loss of RMB1,339.9 million, RMB1,441.9 million and RMB177.9 million (US$25.8 million) in 2020, 2021 and 2022, respectively.
Our net revenues decreased by 75.7% from RMB2,184.5 million in 2021 to RMB531.1 million in 2022, and further decreased by 67.8% to RMB171.0 million (US$24.1 million). We generated a net loss of RMB1,441.9 million, RMB177.9 million and RMB311.8 million (US$43.9 million) in 2021, 2022 and 2023, respectively.
However, in order to comply with the latest PRC regulations, pursuant which prohibit providing tutoring services relating to academic subjects to K-12 students, we ceased offering the K-12 Academic AST Services in December 2021.
In compliance with the latest PRC regulations, which prohibit the provision of tutoring services relating to academic subjects to K-12 students, we ceased offering the K-12 Academic AST Services by the end of December 2021.
Net cash generated from financing activities in 2021 was RMB1.0 million, primarily attributable to proceeds received from exercise of share options of RMB10.5 million, partially offset by payment for the IPO issuance cost of RMB9.6 million.
Net cash generated from financing activities in 2021 was RMB1.0 million, primarily attributable to proceeds received from exercise of share options of RMB10.5 million, partially offset by payment for the IPO issuance cost of RMB9.6 million. Material Cash requirements Our material cash requirements as of December 31, 2023 mainly include capital expenditure and operating lease obligations.
The following table sets forth a breakdown of our total net revenues by amounts and percentages for the periods presented: For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Net revenues Teaching and learning SaaS offerings — — — — 115,365 16,726 21.7 Other educational products and services 75,807 5.9 55,910 2.6 415,699 60,271 78.3 Online K-12 tutoring services 1,218,564 94.1 2,128,610 97.4 — — — Total 1,294,371 100.0 2,184,520 100.0 531,064 76,997 100.0 Our online K-12 tutoring services contributed 94.1% and 97.4%, respectively, of our total revenues in 2020 and 2021.
The following table sets forth a breakdown of our total net revenues by amounts and percentages for the periods presented: For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) Net revenues Teaching and learning SaaS offerings — — 115,365 21.7 149,119 21,003 87.2 Other educational products and services 55,910 2.6 415,699 78.3 21,843 3,076 12.8 Online K-12 tutoring services 2,128,610 97.4 — — — — — Total 2,184,520 100.0 531,064 100.0 170,962 24,079 100.0 Our online K-12 tutoring services contributed 97.4% of our total revenues in 2021.
The following table sets forth the components of our operating expenses by amounts and percentages of our net revenues for the periods presented: For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Sales and marketing expenses 1,097,932 84.9 1,412,873 64.7 79,129 11,473 14.9 Research and development expenses 614,770 47.5 800,163 36.6 235,846 34,194 44.4 General and administrative expenses 420,114 32.4 445,440 20.4 221,029 32,046 41.6 Impairment for property and equipment, right-of-use assets and rental deposits — — 121,294 5.6 — — — Total 2,132,816 164.8 2,779,770 127.3 536,004 77,713 100.9 Sales and marketing expenses .
The following table sets forth the components of our operating expenses by amounts and percentages of our net revenues for the periods presented: For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) Sales and marketing expenses 1,412,873 64.7 79,129 14.9 101,260 14,262 59.2 Research and development expenses 800,163 36.6 235,846 44.4 167,932 23,653 98.2 General and administrative expenses 445,440 20.4 221,029 41.6 154,261 21,727 90.2 Impairment for property and equipment, right-of-use assets and rental deposits 121,294 5.6 — — — — — Total 2,779,770 127.3 536,004 100.9 423,453 59,642 247.6 Sales and marketing expenses.
The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. Shanghai Hexu Information Technology Co., Ltd and Beijing Yiqi Education & Technology Co., Ltd. qualified as High and New Technology Enterprises, or HNTEs, in 2022 and 2021 respectively, which reduced their enterprise income tax rate to 15%.
Beijing Yiqi Education & Technology Co., Ltd., Shanghai Hexu Information Technology Co., Ltd. and Beijing Yiqi Education Technology Development Co., Ltd. qualified as High and New Technology Enterprises, or HNTEs, in 2021, 2022 and 2023 respectively, which reduced their enterprise income tax rate to 15%.
The following table sets forth the components of our research and development expenses by amounts and percentages of our net revenues for the periods presented: For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Research and development expenses Salaries and welfare 480,536 37.1 639,214 29.3 176,765 25,628 33.3 Other expenses 134,234 10.4 160,949 7.3 59,081 8,566 11.1 Total 614,770 47.5 800,163 36.6 235,846 34,194 44.4 General and administrative expenses .
The following table sets forth the components of our research and development expenses by amounts and percentages of our net revenues for the periods presented: For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) Research and development expenses Salaries and welfare 639,214 29.3 176,765 33.3 129,869 18,292 76.0 Other expenses 160,949 7.3 59,081 11.1 38,063 5,361 22.2 Total 800,163 36.6 235,846 44.4 167,932 23,653 98.2 120 General and administrative expenses.
Operating expenses Our operating expenses consist of sales and marketing expenses, research and development expenses, general and administrative expenses, and impairment for property and equipment, right-of-use assets and rental deposits.
Our other costs primarily include rental costs for our office space, costs for the bandwidth, depreciation of the properties and equipment and other administrative and technical costs. 119 Operating expenses Our operating expenses consist of sales and marketing expenses, research and development expenses, general and administrative expenses, and impairment for property and equipment, right-of-use assets and rental deposits.
There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable 113 on instruments executed in, or brought within the jurisdiction of the Cayman Islands. In addition, the Cayman Islands currently does not impose withholding tax on dividend payments.
The Cayman Islands currently levies no taxes on corporations based upon profits, income, gains or appreciation. There are no other taxes likely to be material to us levied by the Government of the Cayman Islands, except for stamp duties, which may be applicable on instruments executed in, or after execution brought within, the jurisdiction of the Cayman Islands.
Our compensation costs decreased from RMB608.9 million in 2021 to RMB112.4 million (US$16.3 million) in 2022, primarily due to staff optimization in line with our business adjustment. • Educational products and materials.
Our compensation costs decreased from RMB608.9 million in 2021 to RMB112.4 million in 2022, primarily due to staff optimization in line with our business adjustment. • Educational products and materials. Our educational products and materials decreased from RMB83.4 million in 2021 to RMB49.8 million in 2022, primarily due to the cessation of our online K-12 tutoring services. • Other costs.
Liquidity and Capital Resources The following table sets forth a selected of our cash flows for the years presented: For the Year Ended December 31, 2020 2021 2022 RMB RMB RMB US$ (in thousands) Net cash used in operating activities (522,988 ) (1,506,692 ) (463,926 ) (67,263 ) Net cash used in investing activities (89,504 ) (117,603 ) (8,931 ) (1,296 ) Net cash generated from (used in) financing activities 2,797,421 952 (33,857 ) (4,909 ) Effect of exchange rate changes (38,499 ) (30,891 ) 43,942 6,372 Net increase/(decrease) in cash, cash equivalents and restricted cash 2,146,430 (1,654,234 ) (462,772 ) (67,096 ) Cash, cash equivalents and restricted cash at the beginning of the year 688,702 2,835,132 1,180,898 171,214 Cash, cash equivalents and restricted cash at the end of the year 2,835,132 1,180,898 718,126 104,118 To date, we have financed our operating and investing activities primarily through cash from historical equity and debt financing activities.
Liquidity and Capital Resources The following table sets forth a selected of our cash flows for the years presented: For the Year Ended December 31, 2021 2022 2023 RMB RMB RMB US$ (in thousands) Net cash used in operating activities (1,506,692 ) (463,926 ) (212,075 ) (29,872 ) Net cash used in investing activities (117,603 ) (8,931 ) (161,141 ) (22,697 ) Net cash generated from (used in) financing activities 952 (33,857 ) (51,357 ) (7,234 ) Effect of exchange rate changes (30,891 ) 43,942 13,376 1,887 Net decrease in cash, cash equivalents and restricted cash (1,654,234 ) (462,772 ) (411,197 ) (57,916 ) Cash, cash equivalents and restricted cash at the beginning of the year 2,835,132 1,180,898 718,126 101,146 Cash, cash equivalents and restricted cash at the end of the year 1,180,898 718,126 306,929 43,230 129 To date, we have financed our operating and investing activities primarily through cash from historical equity and debt financing activities.
In light of the foregoing limitations, you should not consider gross billings as a substitute for, or superior to, net revenues prepared in accordance with GAAP. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.
In light of the foregoing limitations, you should not consider gross billings as a substitute for, or superior to, net revenues prepared in accordance with GAAP.
For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Net revenues Teaching and learning SaaS offerings — — — — 115,365 16,726 21.7 Other educational products and services 75,807 5.9 55,910 2.6 415,699 60,271 78.3 Online K-12 tutoring services 1,218,564 94.1 2,128,610 97.4 — — — Total net revenues 1,294,371 100.0 2,184,520 100.0 531,064 76,997 100.0 Cost of revenues (1) (495,671 ) (38.3 ) (878,236 ) (40.2 ) (206,208 ) (29,897 ) (38.8 ) Gross profit 798,700 61.7 1,306,284 59.8 324,856 47,100 61.2 Operating expenses (1) Sales and marketing expenses (1,097,932 ) (84.9 ) (1,412,873 ) (64.7 ) (79,129 ) (11,473 ) (14.9 ) Research and development expenses (614,770 ) (47.5 ) (800,163 ) (36.6 ) (235,846 ) (34,194 ) (44.4 ) General and administrative expenses (420,114 ) (32.4 ) (445,440 ) (20.4 ) (221,029 ) (32,046 ) (41.6 ) Impairment for property and equipment, right-of-use assets and rental deposits — — (121,294 ) (5.6 ) — — — Total operating expenses (2,132,816 ) (164.8 ) (2,779,770 ) (127.3 ) (536,004 ) (77,713 ) (100.9 ) Loss from operations (1,334,116 ) (103.1 ) (1,473,486 ) (67.5 ) (211,148 ) (30,613 ) (39.7 ) Interest income 8,422 0.7 24,573 1.2 11,352 1,646 2.1 Interest expense (2,925 ) (0.2 ) — — — — — Foreign currency exchange (loss) gain (15,557 ) (1.2 ) 2,326 0.1 159 23 — Other income, net 4,268 0.3 4,674 0.2 21,765 3,156 4.1 Loss before provision for income tax (1,339,908 ) (103.5 ) (1,441,913 ) (66.0 ) (177,872 ) (25,788 ) (33.5 ) Net loss (1,339,908 ) (103.5 ) (1,441,913 ) (66.0 ) (177,872 ) (25,788 ) (33.5 ) Note: (1) Share-based compensation expenses were allocated as follows: For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Share-based compensation expenses Sales and marketing expenses 35,077 2.7 25,776 1.2 17,305 2,509 3.3 Research and development expenses 68,688 5.3 60,002 2.7 28,624 4,150 5.4 General and administrative expenses 252,273 19.5 109,436 5.0 83,629 12,125 15.7 Total 356,038 27.5 195,214 8.9 129,558 18,784 24.4 115 Year ended December 31, 2022 compared to year ended December 31, 2021 Net revenues Our net revenues decreased from RMB2,184.5 million in 2021 to RMB531.1 million (US$77.0 million) in 2022, representing a year-over-year decrease of 75.7%.
For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) Net revenues Teaching and learning SaaS offerings — — 115,365 21.7 149,119 21,003 87.2 Other educational products and services 55,910 2.6 415,699 78.3 21,843 3,076 12.8 Online K-12 tutoring services 2,128,610 97.4 — 0.0 — — — Total net revenues 2,184,520 100.0 531,064 100.0 170,962 24,079 100.0 Cost of revenues (1) (878,236 ) (40.2 ) (206,208 ) (38.8 ) (90,259 ) (12,713 ) (52.8 ) Gross profit 1,306,284 59.8 324,856 61.2 80,703 11,366 47.2 Operating expenses (1) Sales and marketing expenses (1,412,873 ) (64.7 ) (79,129 ) (14.9 ) (101,260 ) (14,262 ) (59.2 ) Research and development expenses (800,163 ) (36.6 ) (235,846 ) (44.4 ) (167,932 ) (23,653 ) (98.2 ) General and administrative expenses (445,440 ) (20.4 ) (221,029 ) (41.6 ) (154,261 ) (21,727 ) (90.2 ) Impairment for property and equipment, right-of-use assets and rental deposits (121,294 ) (5.6 ) — — — — — Total operating expenses (2,779,770 ) (127.3 ) (536,004 ) (100.9 ) (423,453 ) (59,642 ) (247.6 ) Loss from operations (1,473,486 ) (67.5 ) (211,148 ) (39.7 ) (342,750 ) (48,276 ) (200.4 ) Interest income 24,573 1.2 11,352 2.1 27,811 3,917 16.3 Foreign currency exchange gain (loss) 2,326 0.1 159 0.0 (801 ) (113 ) (0.5 ) Other income, net 4,674 0.2 21,765 4.1 3,958 557 2.3 Loss before provision for income tax (1,441,913 ) (66.0 ) (177,872 ) (33.5 ) (311,782 ) (43,915 ) (182.3 ) Net loss (1,441,913 ) (66.0 ) (177,872 ) (33.5 ) (311,782 ) (43,915 ) (182.3 ) Note: (1) Share-based compensation expenses were allocated as follows: 123 For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) Share-based compensation expenses Sales and marketing expenses 25,776 1.2 17,305 3.3 17,243 2,429 10.1 Research and development expenses 60,002 2.7 28,624 5.4 26,954 3,796 15.8 General and administrative expenses 109,436 5.0 83,629 15.7 39,498 5,563 23.1 Total 195,214 8.9 129,558 24.4 83,695 11,788 49.0 Year ended December 31, 2023 compared to year ended December 31, 2022 Net revenues Our net revenues decreased from RMB531.1 million in 2022 to RMB171.0 million (US$24.1 million) in 2023, representing a year-over-year decrease of 67.8%.
We compensate for these limitations by relying primarily on our GAAP results and using gross billings only as a supplemental measure.
We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure. 128 We compensate for these limitations by relying primarily on our GAAP results and using gross billings only as a supplemental measure.
Net cash used in investing activities in 2020 was RMB89.5 million, primarily due to RMB89.5 million used in purchase of property and equipment. 123 Financing activities Net cash used in financing activities in 2022 was RMB33.9 million (US$4.9 million), primarily attributable to repurchase of ordinary shares of RMB33.9 million (US$4.9 million).
Financing activities Net cash used in financing activities in 2023 was RMB51.4 million (US$7.2 million), primarily attributable to repurchase of ordinary shares of RMB51.4 million (US$7.2 million). Net cash used in financing activities in 2022 was RMB33.9 million, primarily attributable to repurchase of ordinary shares of RMB33.9 million.
We expect our sales and marketing expenses to decrease substantially in absolute amounts in the foreseeable future due to regulatory requirements and continuous cost optimization. 112 The following table sets forth the components of our sales and marketing expenses by amounts and percentages of our net revenues for the periods presented: For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Sales and marketing expenses Promotional course expenses 487,499 37.7 697,470 31.9 — — — Salaries and welfare 258,881 20.0 432,201 19.8 96,130 13,938 18.1 Other expenses 351,552 27.2 283,202 13.0 (17,001 ) (2,465 ) (3.2 ) Total 1,097,932 84.9 1,412,873 64.7 79,129 11,473 14.9 Research and development expenses .
The following table sets forth the components of our sales and marketing expenses by amounts and percentages of our net revenues for the periods presented: For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) Sales and marketing expenses Salaries and welfare 432,201 19.8 96,130 18.1 58,857 8,290 34.4 Other expenses 283,202 13.0 (17,001 ) (3.2 ) 42,403 5,972 24.8 Promotional course expenses 697,470 31.9 — — — — — Total 1,412,873 64.7 79,129 14.9 101,260 14,262 59.2 Research and development expenses.
Net cash used in operating activities in 2020 was RMB523.0 million.
Net cash used in operating activities in 2022 was RMB463.9 million.
For teaching and learning SaaS offerings contracts that contain purchasing of software license and SaaS subscription, we conclude that software license and subscribed SaaS are distinct since each of their functionalities has utility on their own.
Therefore, we determine the hardware and subscribed SaaS represent one performance obligation, as they are highly interdependent and interrelated, and the related revenue is recognized ratably over the SaaS subscription period. 133 For teaching and learning SaaS offerings contracts that contain purchasing of software license and SaaS subscription, we conclude that software license and subscribed SaaS are distinct since each of their functionalities has utility on their own.
Material Cash requirements Our material cash requirements as of December 31, 2022 mainly include capital expenditure and operating lease obligations. Our capital expenditures are primarily related to leasehold improvements and purchase of electronic equipment. Our capital expenditures were RMB89.5 million, RMB129.4 million and RMB2.8 million (US$0.4 million) in 2020, 2021 and 2022, respectively.
Our capital expenditures are primarily related to leasehold improvements and purchase of electronic equipment. Our capital expenditures were RMB129.4 million and RMB2.8 million and RMB26.6 million (US$3.7 million) in 2021, 2022 and 2023, respectively. 131 Our operating lease obligations relate to our leases of offices and operation space.
Total Within one year One to three years Three to five years More than five years (RMB in thousands) Operating lease commitments (1) 28,349 17,963 10,386 — — Note: (1) Represents minimum payments under non-cancelable operating leases related to offices, excluding short-term leases.
The following table sets forth our operating lease obligations as of December 31, 2023. Total Within one year One to three years Three to five years More than five years (RMB in thousands) Operating lease commitments (1) 19,927 8,813 9,081 2,033 — Note: (1) Represents minimum payments under non-cancelable operating leases related to offices, excluding short-term leases.
Our general and administrative expenses increased from RMB420.1 million in 2020 to RMB445.4 million in 2021, including RMB109.4 million of share-based compensation expenses. • Salaries and welfare . Salaries and welfare for our general and administrative personnel decreased from RMB347.1 million in 2020 to RMB259.3 million in 2021, primarily due to the impact of the share-based compensation expenses.
Salaries and welfare for our general and administrative personnel decreased from RMB139.9 million in 2022 to RMB99.3 million (US$14.0 million) in 2023, primarily due to the impact of the share-based compensation expenses. • Other expenses.
Operating expenses Our total operating expenses decreased from RMB2,779.8 million in 2021 to RMB536.0 million (US$77.7 million) in 2022, including RMB129.6 million (US$18.8 million) of share-based compensation expenses. 116 Sales and marketing expenses .
The decrease was generally in line with the decrease in our net revenues. Our gross margin increased from 59.8% in 2021 to 61.2% in 2022 due to improvement in our operation leverage. Operating expenses Our total operating expenses decreased from RMB2,779.8 million in 2021 to RMB536.0 million in 2022, including RMB129.6 million of share-based compensation expenses. Sales and marketing expenses.
We expect our cost of revenues to decrease in absolute amounts in the foreseeable future due to our continuous cost optimization. 111 The following table sets forth the components of our cost of revenues by amounts and percentages of our net revenues for the periods presented: For the Year Ended December 31, 2020 2021 2022 RMB % RMB % RMB US$ % (in thousands, except for percentages) Compensation costs 327,590 25.3 608,903 27.9 112,386 16,294 21.2 Educational products and materials 67,656 5.2 84,575 3.9 58,944 8,546 11.1 Other costs 100,425 7.8 184,758 8.4 34,878 5,057 6.5 Total 495,671 38.3 878,236 40.2 206,208 29,897 38.8 Compensation costs.
The following table sets forth the components of our cost of revenues by amounts and percentages of our net revenues for the periods presented: For the Year Ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (in thousands, except for percentages) Compensation costs 608,903 27.9 112,386 21.2 42,310 5,959 24.7 Hardware cost 1,225 0.1 9,104 1.7 27,282 3,843 16.0 Educational products and materials 83,350 3.8 49,840 9.4 390 55 0.2 Other costs 184,758 8.4 34,878 6.5 20,277 2,856 11.9 Total 878,236 40.2 206,208 38.8 90,259 12,713 52.8 Compensation costs.
Our educational products and materials primarily include costs of educational products and materials of our other educational products and services, teaching materials provided to students of our paid courses and the logistics costs. Other costs.
Our hardware cost is cost of hardware utilized for our teaching and learning SaaS offerings. Educational products and materials. Our educational products and materials primarily include costs of educational materials of our other educational products and services, and the logistics costs.
This decrease was primarily driven by the cessation of our online K-12 tutoring services by the end of 2021 and the steady progress of our business transformation.
This decrease was primarily driven by the cessation of our online K-12 tutoring services by the end of 2021 and the steady progress of our business transformation. Our other educational products and services have generated the majority of our net revenue, as we leveraged our existing user base to quickly ramp-up our offering in this space.
Historically, we generated the vast majority of our revenues from our online K-12 tutoring services, which accounted for 94.1% and 97.4% of our total net revenues in 2020 and 2021, respectively.
Historically, we generated the vast majority of our revenues from our online K-12 tutoring services, which accounted for 97.4% of our total net revenues in 2021. However, in order to comply with the latest PRC regulations, pursuant which prohibit providing tutoring services relating to academic subjects to K-12 students, we ceased offering the K-12 Academic AST Services in December 2021.
Risk Factors—Risks Related to Our Business and Industry—Significant uncertainties exist in relation to the interpretation and implementation of, or proposed changes to, the PRC laws, regulations and policies regarding the online private education industry, which could adversely affect our business, financial condition, results of operations and prospects.” In addition, the PRC government regulates various aspects of our business and operations, including the qualification, licensing or filing requirements for entities that provide education services and limitations on foreign investments in the education industry.
Risk Factors—Risks Related to Our Business and Industry—Significant uncertainties exist in relation to the interpretation and implementation of, or proposed changes to, the PRC laws, regulations and policies regarding the online private education industry.
Our educational products and materials decreased from RMB84.6 million in 2021 to RMB58.9 million (US$8.5 million) in 2022, primarily due to the cessation of our online K-12 tutoring services. • Other costs.
Our educational products and materials decreased from RMB49.8 million in 2022 to RMB0.4 million (US$0.1 million) in 2023, primarily due to cost reduction in learning materials of other educational products and services. • Other costs.
Salaries and welfare expenses encompass those for technology and content development staff for both of our in-school and after-school operations.
Salaries and welfare expenses encompass those for technology and content development staff for both of our in-school and after-school operations. Our research and development expenses decreased as a percentage of our net revenues from 2021 to 2023 as our operational scale expanded as well as we enhanced our cost control capabilities.
Other general and administrative expenses increased from RMB73.0 million in 2020 to RMB186.2 million in 2021 due to an increase in rental expenses and professional service expenses mainly prior to the implementation of the Alleviating Burden Opinion. Impairment for property and equipment, right-of-use assets and rental deposits.
Other general and administrative expenses decreased from RMB81.1 million in 2022 to RMB55.0 million (US$7.7 million) in 2023 due to decreases in rental cost, depreciation and professional service expenses. Impairment for property and equipment, right-of-use assets and rental deposits.
The difference between net cash used in operating activities and net loss of RMB1,339.9 million in the same period was due to adjustments for noncash items that primarily include share-based compensation of RMB356.0 million and noncash lease expenses of RMB63.0 million, and a decrease in working capital mainly resulted from an increase of RMB354.1 million in deferred revenue due to our rapid business expansion, an increase of RMB213.4 million in accrued expenses and other current liabilities and an increase of RMB123.1 million in operating lease liabilities, partially offset by an increase of RMB184.5 in operating lease right-of-use assets attributable to additional leased properties to support our business expansion and an increase of RMB145.1 million in prepaid expenses and other current assets.
The difference between net cash used in operating activities and net loss of RMB311.8 million (US$43.9 million) in the same period was due to adjustments for noncash items that primarily include share-based compensation of RMB83.7 million (US$11.8 million), depreciation of property and equipment of RMB16.2 million (US$2.3 million) and noncash lease expenses of RMB16.8 million (US$2.4 million), and changes in operating assets and liabilities that primarily include an increase of RMB31.2 million (US$4.4 million) in accounts receivable, a decrease of RMB23.7 million (US$3.3 130 million) in accrued expenses and other current liabilities, partially offset by a decrease of RMB30.6 million (US$4.3 million) in prepaid expenses and other current assets.
In 2022, we derived all of our net revenues from teaching and learning SaaS offerings and our other educational products and services. The majority of our net revenue in 2022 came from our other educational products and services, which in 2022 consisted primarily of our personalized self-directed learning product.
This has materially and adversely affected our financial condition and results of operations in 2022 and 2023. 118 In 2022 and 2023, we derived all of our net revenues from teaching and learning SaaS offerings and our other educational products and services.
Year ended December 31, 2021 compared to year ended December 31, 2020 Net revenues Our net revenues increased from RMB1,294.4 million in 2020 to RMB2,184.5 million in 2021, representing a year-over-year increase of 68.8%. This increase was primarily driven by an increase in net revenues from online K-12 tutoring services. • Online K-12 tutoring services.
Year ended December 31, 2022 compared to year ended December 31, 2021 Net revenues Our net revenues decreased from RMB2,184.5 million in 2021 to RMB531.1 million in 2022, representing a year-over-year decrease of 75.7%.

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Item 6. [Reserved]

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

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Gan has served as an operating partner of Hillhouse Capital Group since 2018, responsible for providing consulting services to invested companies. From 2011 to 2016, Mr. Gan worked in several positions at Meituan (HKEX: 3690), including as chief operation officer and president of the in-store food voucher business unit. From 2000 to 2011, Mr.
Mr. Gan has served as an operating partner of Hillhouse Capital Group since 2018, responsible for providing consulting services to invested companies. From 2011 to 2016, Mr. Gan worked in several positions at Meituan (HKEX: 3690), including as chief operation officer and president of the in-store food voucher business unit. From 2000 to 2011, Mr.
Our board of directors determines the exercise price for each option grant in its absolute discretion, which in any event should not be less than the par value of the share and is stated in the relevant award letter.
Our board of directors determines the exercise price for each option grant in its absolute discretion, which in any event should not be less than the par value of the share and is stated in the relevant award letter.
The date of expiration of each grant may be determined by our board of directors, which should not be later than the tenth anniversary of the date of grant in respect of such option. Transfer Restrictions .
The date of expiration of each grant may be determined by our board of directors, which should not be later than the tenth anniversary of the date of grant in respect of such option. Transfer Restrictions.
Our compensation committee consists of Bing Yuan, Jiawei Gan and Minghui Wu. Jiawei Gan is the chairperson of our compensation committee. We have determined that each of Bing Yuan, Jiawei Gan and Minghui Wu satisfy the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules.
Compensation Committee. Our compensation committee consists of Bing Yuan, Jiawei Gan and Minghui Wu. Jiawei Gan is the chairperson of our compensation committee. We have determined that each of Bing Yuan, Jiawei Gan and Minghui Wu satisfy the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules.
Our Class B ordinary shares are convertible at any time by the holder into Class A ordinary shares on a one-for-one basis, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. (1) Represents 58,453,168 Class B ordinary shares held by Fluency Holding Ltd., a British Virgin Islands limited liability company.
Our Class B ordinary shares are convertible at any time by the holder into Class A ordinary shares on a one-for-one basis, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. 145 (1) Represents 58,453,168 Class B ordinary shares held by Fluency Holding Ltd., a British Virgin Islands limited liability company.
Information regarding beneficial ownership is reported as of December 31, 2021, based on the information contained in the Schedule 13G jointly filed by H Capital I, L.P., H Capital I GP, L.P., H Capital I GP, Ltd., H Capital II, L.P., H Capital II GP, L.P., H Capital II GP, Ltd., H Capital IV, L.P., H Capital IV GP, L.P., H Capital IV GP, Ltd., H Capital V, L.P., H Capital V GP, L.P. and H Capital V GP, Ltd. and Xiaohong Chen with SEC on February 16, 2021.
Information regarding beneficial ownership is reported as of December 31, 2021, based on the information contained in the Schedule 13G jointly filed by H Capital I, L.P., H Capital I GP, L.P., H Capital I GP, Ltd., H Capital II, L.P., H Capital D GP, L.P., H Capital D GP, Ltd., H Capital IV, L.P., H Capital IV GP, L.P., H Capital IV GP, Ltd., H Capital V, L.P., H Capital V GP, L.P. and H Capital V GP, Ltd. and Xiaohong Chen with SEC on February 16, 2021.
In 2020 and 2021, we engaged the third-party service provider through service outsourcing agreements to help us recruit, train and manage tutors at our request and settle monthly payment of fees to tutors. The tutors entered into employment or service contracts with the third-party service provider and were not our employees.
In 2021, we engaged the third-party service provider through service outsourcing agreements to help us recruit, train and manage tutors at our request and settle monthly payment of fees to tutors. The tutors entered into employment or service contracts with the third-party service provider and were not our employees.
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. 134 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. Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs.
Success Tycoon Limited is a company wholly-owned by Sunwei Chen. The business address of Sunwei Chen is c/o 16/F, Shing Lee Commercial Building, 8 Wing Kut Street, Central, Hong Kong. The business address of Walden Investments Group Limited is 16/F, Shing Lee Commercial Building, 8 Wing Kut Street, Central, Hong Kong.
Success Tycoon Limited is a company wholly-owned by Sunwei Chen. The business address of Sunwei Chen is c/o 16/F, Siting Lee Commercial Building, 8 Wing Kut Street, Central, Hong Kong. The business address of Walden Investments Group Limited is 16/F, Shing Lee Commercial Building, 8 Wing Kut Street, Central, Hong Kong.
The following paragraphs summarize the principal terms of the 2015 Plan. 128 Grant of options. The 2015 Plan permits us to grant a certain amount of options to eligible employees to subscribe for a specified number of our ordinary shares at a specified price during specified time periods. Plan Administration .
The following paragraphs summarize the principal terms of the 2015 Plan. Grant of options. The 2015 Plan permits us to grant a certain amount of options to eligible employees to subscribe for a specified number of our ordinary shares at a specified price during specified time periods. Plan Administration.
The following paragraphs summarize the principal terms of the 2018 Plan. 129 Grant of options. The 2018 Plan permits us to grant a certain amount of options to eligible employees to subscribe for a specified number of our ordinary shares at a specified price during specified time periods. Plan Administration .
The following paragraphs summarize the principal terms of the 2018 Plan. Grant of options. The 2018 Plan permits us to grant a certain amount of options to eligible employees to subscribe for a specified number of our ordinary shares at a specified price during specified time periods. Plan Administration.
Minghui Wu is China Cyberport Building, No. 1 Wangjing North Road, Chaoyang District, Beijing, 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 held by such person or group with respect to all outstanding shares of our Class A and Class B ordinary shares as a single class.
Minghui Wu is China Cyberport Building, No. 1 Wangling North Road, Chaoyang District, Beijing, 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 held 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 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. 133 Compensation Committee .
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 141 • monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
The maximum aggregate number of ordinary shares that may be issued pursuant to all options under the 2015 Plan is 59,899,375 ordinary shares.
The maximum aggregate number of ordinary 136 shares that may be issued pursuant to all options under the 2015 Plan is 59,899,375 ordinary shares.
Each holder of our Class A ordinary shares is entitled to one vote per share. Each holder of our Class B ordinary shares is entitled to thirty votes 137 per share.
Each holder of our Class A ordinary shares is entitled to one vote per share. Each holder of our Class B ordinary shares is entitled to thirty votes per share.
Fluency Holding Ltd. is wholly owned by Simple Prosperity Limited, which is wholly owned by Vistra Trust (Singapore) Pte. Limited, the trustee of Sunny Trust. Mr. Andy Chang Liu is the settler of Sunny Trust, and Mr. Andy Chang Liu and his family members are the beneficiaries of Sunny Trust.
Fluency Holding Ltd. is wholly owned by Simple Prosperity Limited, which is wholly owned by Vista Trust (Singapore) Pte. Limited, the trustee of Sunny Trust. Mr. Andy Chang Liu is the settler of Sunny Trust, and Mr. Andy Chang Liu and his family members are the beneficiaries of Sunny Trust.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. 138 F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company. 146 F. Disclosure of a Registrant’s Action to Recover Erroneously Awarded Compensation Not applicable.
The business address of Jasmine City Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. The business address of Success Tycoon Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands.
The business address of Jasmine City Limited is Vistra Corporate Services Centre, Wickhams Cay II, Road Town, Tortola, VGI110, British Virgin Islands. The business address of Success Tycoon Limited is Vistra Corporate Services Centre, Wickham Cay II, Road Town, Tortola, VG1110, British Virgin Islands.
Board Practices Board of Directors Our board of directors consists of six directors. A director is not required to hold any shares in our company by way of qualification.
Board Practices Board of Directors Our board of directors consists of seven directors. A director is not required to hold any shares in our company by way of qualification.
Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of directors. 135 Board Diversity Matrix Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of directors.
Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of directors. 143 Board Diversity Matrix Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of directors.
The 5,130,305 restricted share units granted to Mr. Liu had become fully vested upon the completion of our initial public offering. As of the date of this report, 22,317,373 ordinary shares remain available to be issued pursuant to future grants of options under the 2020 Plan. The following paragraphs summarize the principal terms of the 2020 Plan. Type of Awards.
The 5,130,305 restricted share units granted to Mr. Liu had become fully vested upon the completion of our initial public offering. As of the date of this report, 32,784,050 ordinary shares remain available to be issued pursuant to future grants of options under the 2020 Plan. The following paragraphs summarize the principal terms of the 2020 Plan. Type of Awards.
E. Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of February 28, 2023 by: • each of our directors and executive officers; and • each of our principal shareholders who beneficially owns 5% or more of our total outstanding ordinary shares.
Share Ownership Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares as of February 29, 2024 by: • each of our directors and executive officers; and • each of our principal shareholders who beneficially owns 5% or more of our total outstanding ordinary shares.
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 6 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 0 6 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 D.
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 7 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 1 6 — — Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction — LGBTQ+ — Did Not Disclose Demographic Background — D.
(3) Represents (i) 22,308,979 Class A ordinary shares held by H Capital I, L.P., (ii) 13,552,176 Class A ordinary shares held by H Capital II, L.P., (iii) 12,611,931 Class A ordinary shares held by H Capital IV, L.P., and (iv) 9,500,000 Class A ordinary shares represented by 950,000 ADSs, held by H Capital V, L.P.
Kuanghao Zhang. (4) Represents (i) 22,308,979 Class A ordinary shares held by H Capital I, L.P., (ii) 13,552,176 Class A ordinary shares held by H Capital II, L.P., (iii) 12,611,931 Class A ordinary shares held by H Capital IV, L.P., and (iv) 9,500,000 Class A ordinary shares represented by 190,000 ADSs, held by H Capital V, L.P.
The business address of Fluency Holding Ltd. is Quastisky Building, PO Box 4389, Road Town, Tortola, British Virgin Islands. 6,611,302 Class B ordinary shares held by Fluency Holding Ltd. have been pledged as collateral for a secured loan. (2) Represents 6,370,168 Class A ordinary shares held by Mr. Qin Wen.
The business address of Fluency Holding Ltd. is Quastislcy Building, PO Box 4389, Road Town, Tortola, British Virgin Islands. 6,611,302 Class B ordinary shares held by Fluency Holding Ltd. have been pledged as collateral for a secured loan. (2) Represents 6,900,000 Class A ordinary shares held by Mr. Qin Wen. (3) Represents 3,999,999 Class A ordinary shares held by Mr.
(6) Represents (i) 25,550,628 Class A ordinary shares (including 25,550,625 Class A ordinary shares in the form of ADSs) held by Walden Investments Group Limited, a British Virgin Islands limited liability company, (ii) 10,000,000 Class A ordinary shares represented by 1,000,000 ADSs, held by Success Tycoon Limited, a British Virgin Islands limited liability company, and (iii) 42,220 Class A ordinary shares represented by 4,222 ADSs, held by Sunwei Chen.
(5) Represents (i) 25,550,628 Class A ordinary shares (including 25,550,625 Class A ordinary shares in the form of ADSs) held by Walden Investments Group Limited, a British Virgin Islands limited liability company, (ii) 10,000,000 Class A ordinary shares represented by 200,000 ADS, held by Success Tycoon Limited, a British Virgin Islands limited liability company, and (iii) 42,220 Class A ordinary shares represented by 844 ADSs, held by Sunwei Chen.
ITEM 6. DIRECTORS, SENIOR MANA GEMENT AND EMPLOYEES A. Directors and Executive Officers The following table sets forth information regarding our directors and executive officers as of the date of this annual report.
item 6. DIRECTO RS, SENIOR MANAGEMENT AND EMPLOYEES A. Directors and Executive Officers The following table sets forth information regarding our directors and executive officers as of the date of this annual report.
Specifically, each executive officer has agreed not to (i) approach our suppliers, clients, direct or end customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of us for the purpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our 132 express consent; (iii) seek directly or indirectly, to solicit the employment or services of, or hire or engage, any person who is known to be employed or engaged by us; or (iv) otherwise interfere with our business or accounts.
In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and typically for one year following the last date of employment. 140 Specifically, each executive officer has agreed not to (i) approach our suppliers, clients, direct or end customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as a representative of us for the purpose of doing business with such persons or entities that will harm our business relationships with these persons or entities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our express consent; (iii) seek directly or indirectly, to solicit the employment or services of, or hire or engage, any person who is known to be employed or engaged by us; or (iv) otherwise interfere with our business or accounts.
As of February 28, 2023, options to purchase 23,313,890 ordinary shares under the 2020 Plan have been 130 granted and remain outstanding, and 5,130,305 restricted share units under the 2020 Plan were granted to Mr. Andy Chang Liu, our founder, chairman and chief executive officer, each evidencing the rights to receive one Class B ordinary share upon vesting.
As of February 29, 2024, options to purchase 21,137,426 ordinary shares under the 2020 Plan have been granted and remain outstanding, and 5,130,305 restricted share units under the 2020 Plan were granted to Mr. Andy Chang Liu, our founder, chairman and chief executive officer, each evidencing the rights to receive one Class B ordinary share upon vesting.
Yuan received his bachelor’s degree in English from Nanjing University in July 1990 and received his master’s degree in international relations in June 1993 and his Juris Doctor degree in June 1998 from Yale University. Mr. Minghui Wu has served as our independent director since December 2021. Mr. Wu is chairman and CEO of MiningLamp Technology Co Ltd.
Yuan received his bachelor’s degree in English from Nanjing University in July 1990 and received his master’s degree in international relations in June 1993 and his Juris Doctor degree in June 1998 from Yale University. Mr. Minghui Wu has served as our independent director since December 2021. Mr.
Our directors also owe to our company a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances.
Our directors must also exercise their powers only for a proper purpose. Our directors also owe to our company a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances.
Before that, Mr. Yuan served as a managing director of the investment banking division of Morgan Stanley Asia Limited from April 2004 to June 2008. Prior to that, Mr.
Prior to joining Hony Capital, Mr. Yuan served as a managing director of the special situation group of Morgan Stanley Asia Limited from 2008 to 2009. Before that, Mr. Yuan served as a managing director of the investment banking division of Morgan Stanley Asia Limited from April 2004 to June 2008. Prior to that, Mr.
Under the applicable regulations in mainland China, we are required to participate in various government-sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where our employees are based. 136 We believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes.
Under the applicable regulations in mainland China, we are required to participate in various government-sponsored employee benefit plans, including certain social insurance, housing funds and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of employees up to a maximum amount specified by the local government from time to time at locations where our employees are based.
As of February 28, 2023, our employees other than directors and executive officers as a group held options to purchase 32,850,261 ordinary shares, each with an exercise price of US$0.0014 per share, and are entitled to receive 533,334 ordinary shares subject to the applicable vesting schedules of unvested restricted shares. 131 The following table summarizes, as of February 28, 2023, the outstanding options and unvested restricted shares that we had granted to our directors and executive officers.
As of February 29, 2024, our employees other than directors and executive officers as a group held options to purchase 28,044,375 ordinary shares, each with an exercise price of US$0.0014 per share, and are entitled to receive 133,333 ordinary shares subject to the applicable vesting schedules of unvested restricted shares. 139 The following table summarizes, as of February 29, 2024, the outstanding options and unvested restricted shares that we had granted to our directors and executive officers.
The calculations in the table below are based on 428,186,361 Class A ordinary shares and 58,453,168 Class B ordinary shares issued and outstanding as of February 28, 2023. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
The calculations in the table below are based on 329,138,479 Class A ordinary shares and 58,453,168 Class B ordinary shares issued and outstanding as of February 29, 2024. Beneficial ownership is determined in accordance with the rules and regulations of the SEC.
Directors and Executive Officers Age Position/Title Andy Chang Liu 44 Founder, Chairman and Chief Executive Officer Qin Wen 38 Director and Chief Operating Officer Kuanghao Zhang 35 Senior Vice President Michael Chao Du 37 Director and Chief Financial Officer Jiawei Gan 53 Independent Director Bing Yuan 54 Independent Director Minghui Wu 41 Independent Director Mr.
Directors and Executive Officers Age Position/Title Andy Chang Liu 45 Founder, Chairman and Chief Executive Officer Qin Wen 39 Director and Chief Operating Officer Kuanghao Zhang 36 Senior Vice President Michael Chao Du 38 Director and Chief Financial Officer Na Ai 45 Director and Vice President Jiawei Gan 54 Independent Director Bing Yuan 55 Independent Director Minghui Wu 42 Independent Director Mr.
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.
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. 142 Duties of Directors Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly, and a duty to act in what they consider in good faith to be in our best interests.
Wu is also a joint creator of the HAO AI theoretical framework. Mr. Wu has 20 years of experience in software engineering and research, and holds more than 130 patents in China and internationally. Mr. Wu received a bachelor’s degree in fundamental mathematics and a master’s degree in computer software and theory from Peking University. Mr.
Wu has 20 years of experience in software engineering and research, and holds more than 130 patents in China and internationally. Mr. Wu received a bachelor’s degree in fundamental mathematics and a master’s degree in computer software and theory from Peking University. Mr. Wu also received a master’s degree from AlLab at Peking University. B.
The following table sets forth the numbers of our full-time employees categorized by function as of December 31, 2022: Function Number of Employees Content development 36 Technology 164 Operation 121 Sales and marketing 51 General and administrative 108 Total 480 We enter into standard labor contracts with our full-time employees with non-compete and confidentiality provisions.
The following table sets forth the numbers of our full-time employees categorized by function as of December 31, 2023: Function Number of Employees Content development 8 Technology 74 Operation 254 Sales and marketing 105 General and administrative 62 Total 503 We enter into standard labor contracts with our full-time employees with non-compete and confidentiality provisions.
Employees We had a total of 480 employees as of December 31, 2022. As of December 31, 2022, substantially all of our employees were based in mainland China.
Employees We had a total of 1,459, 480 and 503 employees as of December 31, 2021, 2022 and 2023, respectively. As of December 31, 2023, substantially all of our employees were based in mainland China.
To our knowledge, as of February 28, 2023, 354,067,040 of our ordinary shares were held by record holders in the United States, which was The Bank of New York Mellon, the depositary of our ADS program.
To our knowledge, as of February 29, 2024, 360,372,985 of our ordinary shares were held by record holders in the United States, which was The Bank of New York Mellon, the depositary of our ADS program.
(5) 44,100,592 — 44,100,592 9.1 2.0 Walden Investments Entities (6) 35,592,848 — 35,592,848 7.3 1.6 Notes: * Less than 1% of our total outstanding shares. ** Except as indicated otherwise below, the business address of our directors and executive officers is 16/F, Block B, Wangjing Greenland Center, Chaoyang District, Beijing 100102, People’s Republic of China.
(1) — 58,453,168 58,453,168 15.1 84.2 H Capital Entities (4) 57,973,086 — 57,973,086 15.0 2.8 Walden Investments Entities (5) 35,592,848 — 35,592,848 9.2 1.7 Notes: * Less than 1% of our total outstanding shares. ** Except as indicated otherwise below, the business address of our directors and executive officers is 16/F, Block B, Wangling Greenland Center, Chaoyang District, Beijing 100102, People’s Republic of China.
Name Ordinary Shares Underlying Outstanding Options Exercise Price (US$/Share) Date of Grant Date of Expiration Qin Wen * 0.0014 July 10, 2021 July 10, 2031 * 0.0014 January 10, 2022 January 10, 2032 Kuanghao Zhang * (1) — August 6, 2018 December 1, 2018 October 10, 2020 — * 0.0014 July 10, 2021 July 10, 2031 * 0.0014 January 10, 2022 January 10, 2032 Michael Chao Du * (1) — February 17, 2020 October 10, 2020 — * 0.0014 July 10, 2021 July 10, 2031 * 0.0014 January 10, 2022 January 10, 2032 Total 3,134,114 Note: * Less than 1% of our total ordinary shares as of February 28, 2023.
Name Ordinary Shares Underlying Outstanding Options Exercise Price (US$/Share) Date of Grant Date of Expiration Qin Wen * (1) — July 10, 2017 — * (1) — January 10, 2019 — * (1) — October 10, 2020 — * 0.0014 July 10, 2021 July 10, 2031 * 0.0014 January 10, 2022 January 10, 2032 Kuanghao Zhang * (1) — August 6, 2018 — * (1) — October 10, 2018 — * (1) — January 10, 2019 — * 0.0014 July 10, 2021 July 10, 2031 * 0.0014 January 10, 2022 January 10, 2032 Michael Chao Du * (1) — February 17, 2020 — * (1) — October 10, 2020 — * 0.0014 July 10, 2021 July 10, 2031 * 0.0014 January 10, 2022 January 10, 2032 Na Ai * (1) — May 14, 2015 — * (1) — August 25, 2015 — * (1) — July 1, 2016 — * (1) — October 10, 2020 — * 0.0014 July 10, 2021 July 10, 2031 * 0.0014 January 10, 2022 January 10, 2032 Total 1,775,974 Note: * Less than 1% of our total ordinary shares as of February 29, 2024.
Ordinary Shares Beneficially Owned Class A Ordinary Shares Class B Ordinary Shares Total Ordinary Shares % of Beneficial Ownership % of Aggregate Voting Power Directors and Executive Officers**: Andy Chang Liu (1) — 58,453,168 58,453,168 12.0 80.4 Qin Wen (2) 6,370,168 — 6,370,168 1.3 0.3 Kuanghao Zhang * — * * * Michael Chao Du * — * * * Jiawei Gan * — * * * Bing Yuan — — — — — Minghui Wu — — — — — All Directors and Executive Officers as a Group 11,658,527 58,453,168 70,111,695 14.4 80.9 Principal Shareholders: Fluency Holding Ltd.
Ordinary Shares Beneficially Owned Class A Ordinary Shares Class B Ordinary Shares Total Ordinary Shares % of Beneficial Ownership % of Aggregate Voting Power Directors and Executive Officers**: Andy Chang Liu (1) — 58,453,168 58,453,168 15.1 84.2 Qin Wen (2) 6,900,000 — 6,900,000 1.8 0.3 Kuanghao Zhang (3) 3,999,999 — 3,999,999 1.0 0.2 Michael Chao Du * — * * * Na Ai * — * * * Jiawei Gan * — * * * Bing Yuan — — — — — Minghui Wu — — — — — All Directors and Executive Officers as a Group 14,997,666 58,453,168 73,450,834 19.0 84.9 Principal Shareholders: Fluency Holding Ltd.
As of February 28, 2023, options to purchase 2,528,208 ordinary shares under the 2018 Plan have been granted and remain outstanding, excluding options that were exercised, forfeited or canceled after the relevant grant dates, 2,182,167 unvested restricted shares are outstanding, and 5,196,256 ordinary shares remain available to be issued pursuant to future grants of options under the 2018 Plan.
As of February 29, 2024, options to purchase 1,770,728 ordinary shares under the 2018 Plan have been granted and remain outstanding, excluding options that were exercised, forfeited or canceled after the relevant grant dates, 766,666 137 unvested restricted shares are outstanding, and 5,264,626 ordinary shares remain available to be issued pursuant to future grants of options under the 2018 Plan.
Du worked as an analyst in the merger and acquisition team at KPMG Corporate Finance Limited. Mr. Du received his bachelor’s degree in economics and finance from the University of Hong Kong in 2008. Mr. Jiawei Gan has served as our independent director since December 2020. Mr.
Du worked as an analyst in the merger and acquisition team at KPMG Corporate Finance Limited. Mr. Du received his bachelor’s degree in economics and finance from the University of Hong Kong in 2008. Ms. Na Ai has served as our director since December 2023 and our vice president of the human resources, or HR, department since April 2015.
As of February 28, 2023, options to purchase 11,208,163 ordinary shares under the 2015 Plan have been granted and remain outstanding, excluding options that were exercised, forfeited or canceled after the relevant grant dates, 1,485,281 unvested restricted shares are outstanding, and 4,756,399 ordinary shares remain available to be issued pursuant to future grants of options under the 2015 Plan.
As of February 29, 2024, options to purchase 9,736,221 ordinary shares under the 2015 Plan have been granted and remain outstanding, excluding options that were exercised, forfeited or canceled after the relevant grant dates, 1,142,641 unvested restricted shares are outstanding, and 5,239,201 ordinary shares remain available to be issued pursuant to future grants of options under the 2015 Plan.
As of February 28, 2023, the maximum aggregate number of ordinary shares that may be issued pursuant to all awards under the 2020 Plan is 51,520,421 ordinary shares.
As of February 29, 2024, the maximum aggregate number of ordinary shares 138 that may be issued pursuant to all awards under the 2020 Plan is 61,470,854 ordinary shares.
In addition to salaries and benefits, we generally provide performance-based bonuses for our full-time employees and commission-based compensation for our sales and marketing staff members. As of December 31, 2022, we had nil dedicated and full-time tutors outsourced by a third-party service provider as we ceased offering tutoring services related to K-12 Academic AST Services at the end of 2021.
As of December 31, 2023 and 2022, we had nil dedicated and full-time tutors outsourced by a third-party service provider as we ceased offering tutoring services related to K-12 Academic AST Services at the end of 2021.
Founded in 2022, Rockets Capital is a China-based private equity firm focused on venture and growth stage investments in Smart EV industry value chain, clean energy and frontier technology areas. Prior to co-founding Rockets Capital, Mr. Yuan served as the chief operating officer of Hony Capital, and a member of Hony Capital’s executive committee, responsible for its equity investment operations.
Mr. Bing Yuan has served as our independent director since December 2020. Mr. Yuan is a co-founder and the managing partner of Rockets Capital. Founded in 2022, Rockets Capital is a China-based private equity firm focused on venture and growth stage investments in Smart EV industry value chain, clean energy and frontier technology areas. Prior to co-founding Rockets Capital, Mr.
Gan worked in several positions at Alibaba Group (NYSE: BABA), including as vice president of sales, senior director of sales 127 operation team, internet operation director and marketing director, focusing on sales and marketing. Mr.
Gan worked in several positions at Alibaba Group (NYSE: BABA), including as vice president of sales, senior director of sales operation team, internet operation director and marketing director, focusing on sales and marketing. Mr. Gan received his bachelor’s degree in food engineering from Zhejiang Gongshang University in 1995 and his EMBA degree from China Europe International Business School in 2011.
The applicable vesting schedule, or other vesting schedule as may be otherwise determined by our board of directors, for each grantee is specified in the relevant award letter. Exercise of Options .
The applicable vesting schedule, or other vesting schedule as may be otherwise determined by our board of directors, for each grantee is specified in the relevant award letter. Exercise of Options. Subject to certain terms and conditions under the 2015 Plan, an option cannot be exercised prior to the 180 th day after the completion of our initial public offering.
The business address of H Capital Entities is Floor 4, Willow, House, Cricket Square, PO Box 268, Grand Cayman KY1-1104, Cayman Islands. (4) Represents 45,798,690 Class A ordinary shares held by CL Lion Investment III Limited, a British Virgin Islands company.
The business address of H Capital Entities is Floor 4, Willow, House, Cricket Square, PO Box 268, Grand Cayman KY1-1104, Cayman Islands.
Mr. Yuan joined Hony Capital in April 2009 and has served as a managing director of private equity department since January 2010, and as head of private equity department since July 2012. Prior to joining Hony Capital, Mr. Yuan served as a managing director of the special situation group of Morgan Stanley Asia Limited from 2008 to 2009.
Yuan served as the chief operating officer of Hony Capital, and a member of Hony Capital’s executive committee, responsible for its equity investment operations. Mr. Yuan joined Hony Capital in April 2009 and has served as a managing director of private equity department since January 2010, and as head of private equity department since July 2012.
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 For the year ended December 31, 2023, we paid an aggregate of RMB22.8 million (US$3.2 million) in cash to our executive officers and our non-executive directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our directors and executive officers.
(“Mining Lamp”), a leading artificial intelligence (“AI”) and data analytics company he founded in 2014 that helps public service organizations and businesses with digital transformation. Prior to founding MiningLamp, Mr. Wu founded Miaozhen Systems in 2006, a platform for internet user behavior and marketing analytics, and served as its chairman until it was acquired by Mining Lamp in 2019. Mr.
Wu is chairman and CEO of MiningLamp Technology Co Ltd., or Mining Lamp, a leading AI and data analytics company he founded in 2014 that helps public service organizations and businesses with digital transformation. Prior to founding MiningLamp, Mr.
Removed
Gan received his bachelor’s degree in food engineering from Zhejiang Gongshang University in 1995 and his EMBA degree from China Europe International Business School in 2011. Mr. Bing Yuan has served as our independent director since December 2020. Mr. Yuan is a co-founder and the managing partner of Rockets Capital.
Added
Prior to joining us, she served as the head of the HR department at Weibo (NASDAQ: WB and HKEX: 9898), a leading social media in China, from May 2012 to March 2015. Prior to that, Ms.
Removed
Wu also received a master's degree from AILab at Peking University. B. Compensation of Directors and Executive Officers For the year ended December 31, 2022, we paid an aggregate of RMB26.2 million (US$3.8 million) in cash to our executive officers and our non-executive directors.
Added
Ai held multiple roles at Lenovo (HKEX: 992), a multinational technology company in China, including HR director and HR senior manager at the research and technology department from July 2008 to July 2011 and from July 2005 to July 2008, respectively.
Removed
Subject to certain terms and conditions under the 2015 Plan, an option cannot be exercised prior to the 180 th day after the completion of our initial public offering.
Added
She also served as an operation manager and corporate development supervisor at 135 Lenovo Research from June 2003 to July 2005 and from July 2001 to June 2003, respectively. Ms. Ai received her bachelor’s degree in economics and hotel management from Beijing International Studies University in July 1999. Mr. Jiawei Gan has served as our independent director since December 2020.
Removed
In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and typically for one year following the last date of employment.
Added
Wu founded Miaozhen Systems in 2006, a platform for internet user behavior and marketing analytics, and served as its chairman until it was acquired by Mining Lamp in 2019. Mr. Wu is also a joint creator of the HAO AI theoretical framework. Mr.
Removed
Duties of Directors Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly, and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose.
Added
In addition to salaries and benefits, we generally provide performance-based bonuses for our full-time employees and commission-based compensation for our sales and marketing staff members.
Removed
(1) — 58,453,168 58,453,168 12.0 80.4 H Capital Entities (3) 57,973,086 — 57,973,086 11.9 2.7 CL Lion Investment III Limited (4) 45,798,690 — 45,798,690 9.4 2.1 Esta Investments Pte. Ltd.
Added
We believe that we maintain a good working relationship with our employees, and we have not experienced any major labor disputes. 144 E.
Removed
Information regarding beneficial ownership is reported as of December 31, 2022, based on the information contained in the Schedule 13G/A filed by CL Lion Investment III Limited with SEC on February 6, 2023. CPEChina Fund II, L.P. and CPEChina Fund IIA, L.P. beneficially own 86.3% and 13.7% of the equity interests of CL Lion Investment III Limited, respectively.
Removed
The general partner of CPEChina Fund II, L.P. and CPEChina Fund IIA, L.P. is Citron PE Associates II, L.P., of which the general partner is Citron PE Funds II Limited, a company wholly owned by CITICPE Holdings Limited.
Removed
The largest shareholder of CITICPE Holdings Limited is CLSA Global Investments Management Limited, which beneficially owns 35% of the equity interest of CITICPE Holdings Limited. CLSA Global Investments Management Limited is wholly owned by CLSA, B.V., which is wholly owned by CITIC Securities International Company Limited. CITIC Securities International Company Limited is wholly owned by CITIC Securities Company Limited.
Removed
The registered address of CL Lion Investment III Limited is Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands. (5) Represents 44,100,592 Class A ordinary shares held by Esta Investments Pte. Ltd., a Singapore private company.
Removed
Information regarding beneficial ownership is reported as of December 31, 2022, based on the information contained in the Schedule 13G/A jointly filed by Temasek Holdings (Private) Limited, Tembusu Capital Pte. Ltd. and Esta Investments Pte. Ltd. with SEC on February 8, 2023. Esta Investments Pte. Ltd. is wholly owned by Tembusu Capital Pte.
Removed
Ltd., which is wholly owned by Temasek Holdings (Private) Limited. Temasek Holdings (Private) Limited is wholly owned by the Minister of Finance in Singapore. The business address of Esta Investments Pte. Ltd. is 60B Orchard Road, #06-18, the Atrium@Orchard, Singapore 238891.

Item 7. Management's Discussion & Analysis

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

8 edited+1 added−2 removed10 unchanged
Expenses of Registration . We will bear all registration expenses in connection with any demand, piggyback or Form F-3 registration, other than the selling expenses or other amounts payable to underwriter(s), brokers or the depositary bank in connection with such offering by the holders. Termination of Obligations .
We will bear all registration expenses in connection with any demand, piggyback or Form F-3 registration, other than the selling expenses or other amounts payable to underwriter(s), brokers or the depositary bank in connection with such offering by the holders. Termination of Obligations.
If the offering involves an underwriting of our equity securities and the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of securities to be underwritten, the managing underwriter(s) may exclude shares from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting will be allocated, (i) first, to us, (ii) second, to Shunwei Capital Entities, H Capital Entities, Esta Investments Pte Ltd. and DST Asia IV on a pro rata basis according to the number of registrable securities then outstanding held by each such holder, (iii) third, to Precise Asset Investments Limited, (iv) fourth, to the other holders requesting inclusion of their registrable securities in such registration statement on a pro rata basis based on the total number of shares of registrable securities then held by each such holder, and (v) fifth, to holders of other securities of us; provided, however, that the right of the underwriter(s) to exclude shares (including registrable securities) from the registration and underwriting as described above will be restricted so that (i) the number of registrable securities included in any such registration is not reduced below 25% of the aggregate number of shares of registrable securities for which inclusion has been requested; and (ii) all shares that are not registrable securities and are held by any other person, including, without limitation, any person who is our employee, officer or director will first be excluded from such registration and underwriting before any registrable securities are so excluded.
If the offering involves an underwriting of our equity securities and the managing underwriter(s) determine(s) in good faith that marketing factors require a limitation of the number of securities to be underwritten, the managing underwriter(s) may exclude shares from the registration and the underwriting, and the number of shares that may be included in the registration and the underwriting will be allocated, (i) first, to us, (ii) second, to Shunwei Capital Entities, H Capital Entities, Esta Investments Pte Ltd. and DST Asia Won a pro rata basis according to the number of registrable securities then outstanding held by each such holder, (iii) third, to Precise Asset Investments Limited, (iv) fourth, to the other holders requesting inclusion of their registrable securities in such registration statement on a pro rata basis based on the total number of shares of registrable securities then held by each such holder, and (v) fifth, to holders of other securities of us; provided, however, that the right of the underwriter(s) to exclude shares (including registrable securities) from the registration and underwriting as described above will be restricted so that (i) the number of registrable securities included in any such registration is not reduced below 25% of the aggregate number of shares of registrable securities for which inclusion has been requested; and (ii) all shares that are not registrable securities and are held by any other person, including, without limitation, any person who is our employee, officer or director will first be excluded from such registration and underwriting before any registrable securities are so excluded.
We have a right to defer filing of a registration statement for a period of not more than 90 days after receipt of the request of the initiating holders on the condition that we furnish to the 139 holders requesting registration a certificate signed by our president or our 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.
We have a right to defer filing of a registration statement for a period of not more than 90 days after receipt of the request of the initiating holders on the condition that we furnish to the holders requesting registration a certificate signed by our president or our 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.
Further, if the holders initiating the registration request intend to distribute the registrable securities covered by their request by means of an underwriting and the underwriter(s) advise(s) us that marketing factors require a limitation of the number of securities to be underwritten, then we will so advise all holders of registrable securities which would otherwise be registered and underwritten pursuant hereto, and the number of registrable securities that may be included in the underwriting will be reduced as required by the underwriter(s) and allocated (i) first, to Shunwei Capital Entities, H Capital Entities, Esta Investments Pte Ltd. and DST Asia IV on a pro rata basis according to the number of registrable securities then outstanding held by each such holder, (ii) second, to Precise Asset Investments Limited, and (iii) third, to the other holders of registrable securities on a pro rata basis according to the number of registrable securities then outstanding held by each such holder requesting registration; provided, however, that the number of shares of registrable securities to be included in such underwriting and registration will not be reduced unless all other securities are first entirely excluded from the underwriting and registration including, without limitation, all shares that are not registrable securities and are held by any other person, including, without limitation, any person who is our employee, officer or director; provided further, that at least 25% of shares of registrable securities requested by the holders to be included in such underwriting and registration must be so included.
Further, if the holders initiating the registration request intend to 147 distribute the registrable securities covered by their request by means of an underwriting and the underwriter(s) advise(s) us that marketing factors require a limitation of the number of securities to be underwritten, then we will so advise all holders of registrable securities which would otherwise be registered and underwritten pursuant hereto, and the number of registrable securities that may be included in the underwriting will be reduced as required by the underwriter(s) and allocated (i) first, to Shunwei Capital Entities, H Capital Entities, Esta Investments Pte Ltd. and DST Asia Won a pro rata basis according to the number of registrable securities then outstanding held by each such holder, (ii) second, to Precise Asset Investments Limited, and (iii) third, to the other holders of registrable securities on a pro rata basis according to the number of registrable securities then outstanding held by each such holder requesting registration; provided, however, that the number of shares of registrable securities to be included in such underwriting and registration will not be reduced unless all other securities are first entirely excluded from the underwriting and registration including, without limitation, all shares that are not registrable securities and are held by any other person, including, without limitation, any person who is our employee, officer or director; provided further, that at least 25% of shares of registrable securities requested by the holders to be included in such underwriting and registration must be so included.
Ltd. and DST Asia IV on a pro rata basis according to the number of registrable securities then outstanding held by each such holder, (ii) second, to Precise Asset Investments Limited, and (iii) third, to the other holders of registrable securities on a pro rata basis according to the number of registrable securities then outstanding held by each such holder requesting registration; provided, however, that the number of shares of registrable securities to be included in such 140 underwriting and registration will not be reduced unless all other securities are first entirely excluded from the underwriting and registration including, without limitation, all shares that are not registrable securities and are held by any other person, including, without limitation, any person who is our employee, officer or director; provided further, that at least 25% of shares of registrable securities requested by the holders to be included in such underwriting and registration must be so included.
Ltd. and DST Asia Won a pro rata basis according to the number of registrable securities then outstanding held by each such holder, (ii) second, to Precise Asset Investments Limited, and (iii) third, to the other holders of registrable securities on a pro rata basis according to the number of registrable securities then outstanding held by each such holder requesting registration; provided, however, that the number of shares of registrable securities to be included in such underwriting and registration will not be reduced unless all other securities are first entirely excluded from the underwriting and registration including, without limitation, all shares that are not registrable securities and are held by any other person, including, without limitation, any person who is our employee, officer or director; provided further, that at least 25% of shares of registrable securities requested by the holders to be included in such underwriting and registration must be so included. 148 Expenses of Registration.
ITEM 7. MAJOR SHAREHOLDERS AND REL ATED PARTY TRANSACTIONS A. Major Shareholders See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” B. Related Party Transactions Contractual Arrangements with the VIEs See “Item 4. Information on the Company—C. Organizational Structure.” Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—B.
item 7. MAJO R SHAREHOLDERS AND RELATED PARTY TRANSACTIONS A. Major Shareholders See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” B. Related Party Transactions Contractual Arrangements with the VIEs See “Item 4. Information on the Company—C. Organizational Structure.” Employment Agreements and Indemnification Agreements See “Item 6. Directors, Senior Management and Employees—B.
Shareholders Agreement We entered into the sixth amended and restated shareholders agreement with our shareholders in November 2020. The sixth amended and restated shareholders agreement provides for certain shareholders’ rights, including information and inspection rights, right of participation, right of first refusal and co-sale rights, drag-along rights and contains provisions governing our board of directors and other corporate governance matters.
The sixth amended and restated shareholders agreement provides for certain shareholders’ rights, including information and inspection rights, right of participation, right of first refusal and co-sale rights, drag-along rights and contains provisions governing our board of directors and other corporate governance matters.
Compensation of Directors and Executive Officers—Employment Agreements and Indemnification Agreements.” Share Incentive Plans See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Share Incentive Plan.” Transactions with Our Shareholders and Related Entities Transactions with Fluency Holding Ltd . Fluency Holding Ltd. is an entity wholly owned by Mr.
Compensation of Directors and Executive Officers—Employment Agreements and Indemnification Agreements.” Share Incentive Plans See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Share Incentive Plan.” Transactions with Our Shareholders Transactions with Mr. Andy Chang Liu. In March 2024, we entered into a share purchase agreement with Mr.
Removed
Andy Chang Liu, our founder, chairman and chief executive officer. In 2015, we entered into a loan agreement with Fluency Holding Ltd., pursuant to which Fluency Holding Ltd. borrowed US$1.5 million from us in connection with personal affairs. The loan is unsecured and non-interest bearing.
Added
Andy Chang Liu, our founder, chairman and chief executive officer, pursuant to which we proposed to issue, and Mr. Andy Chang Liu proposed to subscribe for 58,453,168 Class B ordinary shares of the Company for an aggregate consideration of US$3,109,708.54. Shareholders Agreement We entered into the sixth amended and restated shareholders agreement with our shareholders in November 2020.
Removed
In 2017, we repurchased 792,522 ordinary shares held by Fluency Holding Ltd. for a consideration of US$1.1 million, to partially settle the loan of US$1.5 million. In September 2020, we repurchased 115,324 ordinary shares held by Fluency Holding Ltd. to settle the loan.

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