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Lucas GC Ltd

Lucas GC LtdLGCL财报

Nasdaq

What changed in Lucas GC Ltd's 20-F — 2023 vs 2024

Top changes in Lucas GC Ltd's 2024 20-F

378 paragraphs added · 368 removed · 293 edited across 5 sections

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

123 edited+49 added−31 removed527 unchanged
Risks Related to Doing Business in China ● Change in China’s economic, political or social conditions, laws, regulations or governmental policies could have a material adverse effect on our business, financial conditions and results of operations. ● Uncertainties with respect to the PRC legal system, including uncertainties regarding the interpretation and enforcement of laws, and sudden or unexpected changes of PRC laws and regulations with little advance notice could adversely affect us and limit the legal protections available to you and us, and the Chinese government may exert more oversight and control over offerings that are conducted overseas, which changes could materially hinder our ability to offer or continue to offer our securities, and cause the value of our securities to significantly decline or become worthless. ● The Chinese government has substantial oversight and influence over the manner in which we must conduct our business and may intervene or influence our operations at any time, which actions could impact our operations materially and adversely, and significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless. ● The PCAOB had historically been unable to inspect auditors in mainland China and Hong Kong in relation to their audit work.
Risks Related to Doing Business in China ● Change in China’s economic, political or social conditions, laws, regulations or governmental policies could have a material adverse effect on our business, financial conditions and results of operations. ● Uncertainties with respect to the PRC legal system, including uncertainties regarding the interpretation and enforcement of laws, and sudden or unexpected changes of PRC laws and regulations with little advance notice could adversely affect us and limit the legal protections available to you and us, and the Chinese government may exert more oversight and control over offerings that are conducted overseas, which changes could materially hinder our ability to continue to offer our securities, and cause the value of our securities to significantly decline or become worthless. ● The Chinese government has substantial oversight and influence over the manner in which we must conduct our business and may intervene or influence our operations at any time, which actions could impact our operations materially and adversely, and significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless. ● The PCAOB had historically been unable to inspect auditors in mainland China and Hong Kong in relation to their audit work.
These proceedings, investigations, claims and complaints could be initiated or asserted under or on the basis of a variety of laws in different jurisdictions, including data protection and privacy laws, trucker or consumer protection laws, labor and employment laws, anti-monopoly or competition laws, transportation laws, advertising laws, intellectual property laws, securities laws, tort laws, contract laws and property laws.
These proceedings, investigations, claims and complaints could be initiated or asserted under or on the basis of a variety of laws in different jurisdictions, including data protection and privacy laws, trucker or consumer protection laws, labor and employment laws, anti-monopoly or competition laws, transportation laws, advertising laws, intellectual property laws, securities laws, tort laws, contract laws and property laws.
There is no guarantee that we will be successful in defending ourselves in legal and administrative actions or in asserting our rights under various laws. If we fail to defend ourselves in these actions, we may be subject to restrictions, fines or penalties that will materially and adversely affect our operations.
There is no guarantee that we will be successful in defending ourselves in legal and administrative actions or in asserting our rights under various laws. If we fail to defend ourselves in these actions, we may be subject to restrictions, fines or penalties that will materially and adversely affect our operations.
Even if we are successful in our attempt to defend ourselves in legal and regulatory actions or to assert our rights under various laws and regulations, the process of communicating with relevant regulators, defending ourselves and enforcing our rights against the various parties involved may be expensive and time-consuming.
Even if we are successful in our attempt to defend ourselves in legal and regulatory actions or to assert our rights under various laws and regulations, the process of communicating with relevant regulators, defending ourselves and enforcing our rights against the various parties involved may be expensive and time-consuming.
Such a judgment must be for a fixed sum and must also come from a “competent” court as determined by the private international law rules applied by the Hong Kong courts.
Such a judgment must be for a fixed sum and must also come from a “competent” court as determined by the private international law rules applied by the Hong Kong courts.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: ● the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; ● the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; ● the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and ● the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: ● the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; ● the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; 47 ● the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and ● the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
These risks are discussed more fully below and include, but are not limited to, risks related to: Risks Related to Our Business and Industry ● We have a limited operating history under our current platforms and business model, which makes it difficult to evaluate our business and prospects, and any future changes to our business model could materially and adversely affect our business, financial condition and results of operations. ● Our growth depends on our ability to attract and retain a large number of users, and the loss of our users, or failure to attract new users, could materially and adversely affect our business. ● Because a substantial portion of the services we offer are recruitment services, if we fail to attract more corporate customers to our platforms, or if corporate customers decide to purchase less of our recruitment services for any reason, our revenues may stagnate or decline, and our business and prospects may be materially and adversely affected. ● Because a significant portion of the services we offer are outsourcing services, a decline in the demand or the market for outsourcing services could materially and adversely affect our business, prospects, financial condition and results of operations. ● Volatility in the financial and economic environment in the markets where we have operations could harm our business. ● If the market for freelancers and the services they offer is not sustained or develops more slowly than we expect, our growth may slow or stall. ● We face significant competition, which may cause us to suffer from a weakened market position that could materially and adversely affect our results of operations. ● Our historical revenue growth should not be considered indicative of our future performance. ● We have incurred negative cash flows in operating activities in the past and may incur operating losses in the future and may not maintain profitability. 4 ● We depend on a limited number of customers for a significant portion of our revenues and the loss of one or more of these customers could adversely affect our business, financial condition, and results of operations. ● We may fail to successfully enter necessary or desirable strategic alliances or make acquisitions or investments, and we may not be able to achieve the anticipated benefits from these alliances, acquisitions or investments we make. ● If we fail to maintain and improve the quality of our PaaS platforms, we may not be able to attract and retain users and corporate customers. ● If our technology capabilities in AI, data analytics and blockchain fail to yield satisfactory results or fail to improve, our platforms may not be able to effectively match our users with suitable positions from corporate customers or to optimally recommend positions for our users, and our user growth, retention, results of operations and business prospects may suffer consequently. ● Our users may engage in intentional or negligent misconduct or other improper activities on our platforms or otherwise misuse our platforms, which may damage our brand image and reputation, our business and our results of operations. ● If we fail to maintain and enhance our brand, our business, results of operations and prospects may be materially and adversely affected. ● Our platforms contain open-source software components, and failure to comply with the terms of the underlying licenses could restrict our ability to market or operate our platforms. ● If we are unable to protect our users’ personal information, we could be exposed to data loss, litigation, and liability, and our reputation could be significantly harmed. ● We are subject to a variety of laws and regulations regarding cybersecurity and data protection, and any failure to comply with applicable laws and regulations, including improper use or appropriation of personal information provided directly or indirectly by our customers or end users, could have a material adverse effect on our business, financial condition and results of operations. ● We are subject to to our leased properties. ● Any lack of requisite approvals, licenses or permits applicable to our business operation may have a material and adverse impact on our business, financial condition and results of operations. ● There could be adverse legal, tax, and other consequences if users on our platforms were to be classified as our employees or dispatched employees instead of independent contractors. ● Changes in laws and regulations related to the internet and fixed telecommunications or changes in the internet infrastructure and fixed telecommunications networks itself may diminish the demand for our services and could have a negative impact on our business. ● We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. ● We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
These risks are discussed more fully below and include, but are not limited to, risks related to: Risks Related to Our Business and Industry ● We have a limited operating history under our current platforms and business model, which makes it difficult to evaluate our business and prospects, and any future changes to our business model could materially and adversely affect our business, financial condition and results of operations. ● Our growth depends on our ability to attract and retain a large number of users, and the loss of our users, or failure to attract new users, could materially and adversely affect our business. ● Because a substantial portion of the services we offer are recruitment services, if we fail to attract more corporate customers to our platforms, or if corporate customers decide to purchase less of our recruitment services for any reason, our revenues may stagnate or decline, and our business and prospects may be materially and adversely affected. 5 ● Because a significant portion of the services we offer are outsourcing services, a decline in the demand or the market for outsourcing services could materially and adversely affect our business, prospects, financial condition and results of operations. ● Volatility in the financial and economic environment in the markets where we have operations could harm our business. ● If the market for freelancers and the services they offer is not sustained or develops more slowly than we expect, our growth may slow or stall. ● We face significant competition, which may cause us to suffer from a weakened market position that could materially and adversely affect our results of operations. ● Our historical revenue growth should not be considered indicative of our future performance. ● We have incurred negative cash flows in operating activities in the past and may incur operating losses in the future and may not maintain profitability. ● We depend on a limited number of customers for a significant portion of our revenues and the loss of one or more of these customers could adversely affect our business, financial condition, and results of operations. ● We may fail to successfully enter necessary or desirable strategic alliances or make acquisitions or investments, and we may not be able to achieve the anticipated benefits from these alliances, acquisitions or investments we make. ● If we fail to maintain and improve the quality of our PaaS platforms, we may not be able to attract and retain users and corporate customers. ● If our technology capabilities in AI, data analytics and blockchain fail to yield satisfactory results or fail to improve, our platforms may not be able to effectively match our users with suitable positions from corporate customers or to optimally recommend positions for our users, and our user growth, retention, results of operations and business prospects may suffer consequently. ● Our users may engage in intentional or negligent misconduct or other improper activities on our platforms or otherwise misuse our platforms, which may damage our brand image and reputation, our business and our results of operations. ● If we fail to maintain and enhance our brand, our business, results of operations and prospects may be materially and adversely affected. ● Our platforms contain open-source software components, and failure to comply with the terms of the underlying licenses could restrict our ability to market or operate our platforms. ● If we are unable to protect our users’ personal information, we could be exposed to data loss, litigation, and liability, and our reputation could be significantly harmed. ● We are subject to a variety of laws and regulations regarding cybersecurity and data protection, and any failure to comply with applicable laws and regulations, including improper use or appropriation of personal information provided directly or indirectly by our customers or end users, could have a material adverse effect on our business, financial condition and results of operations. ● We are subject to risks relating to our leased properties. ● Any lack of requisite approvals, licenses or permits applicable to our business operation may have a material and adverse impact on our business, financial condition and results of operations. 6 ● There could be adverse legal, tax, and other consequences if users on our platforms were to be classified as our employees or dispatched employees instead of independent contractors. ● Changes in laws and regulations related to the internet and fixed telecommunications or changes in the internet infrastructure and fixed telecommunications networks itself may diminish the demand for our services, and could have a negative impact on our business. ● We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position. ● We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
In particular, the Personal Information Protection Law provides that personal information processors should ensure the transparency and fairness of automated decision-making based on personal information, refrain from offering unreasonably differentiated transaction terms to different individuals and, when sending commercial promotions or information updates to individuals selected through automated decision-making, simultaneously offer such individuals an option not based on such individuals’ specific characteristics or a more convenient way for such individuals to turn off such promotions. 13 On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Outbound Data Transfer, or the Data Transfer Measures, which became effective on September 1, 2022, pursuant to which, to provide data abroad under any of the following circumstances, a data processor shall apply to the national cyberspace administration for the security assessment of the outbound data transfer through the local provincial cyberspace administration: (i) the data processor provides important data abroad; (ii) the critical information infrastructure operator or the data processor that has processed the personal information of over one million people provides personal information abroad; (iii) the data processor that has provided the personal information of over 100,000 people or the sensitive personal information of over 10,000 people cumulatively since January 1 of the previous year provides personal information abroad; and (iv) any other circumstance where an application for the security assessment of outbound data transfer is required by the national cyberspace administration.
In particular, the Personal Information Protection Law provides that personal information processors should ensure the transparency and fairness of automated decision-making based on personal information, refrain from offering unreasonably differentiated transaction terms to different individuals and, when sending commercial promotions or information updates to individuals selected through automated decision-making, simultaneously offer such individuals an option not based on such individuals’ specific characteristics or a more convenient way for such individuals to turn off such promotions. 18 On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Outbound Data Transfer, or the Data Transfer Measures, which became effective on September 1, 2022, pursuant to which, to provide data abroad under any of the following circumstances, a data processor shall apply to the national cyberspace administration for the security assessment of the outbound data transfer through the local provincial cyberspace administration: (i) the data processor provides important data abroad; (ii) the critical information infrastructure operator or the data processor that has processed the personal information of over one million people provides personal information abroad; (iii) the data processor that has provided the personal information of over 100,000 people or the sensitive personal information of over 10,000 people cumulatively since January 1 of the previous year provides personal information abroad; and (iv) any other circumstance where an application for the security assessment of outbound data transfer is required by the national cyberspace administration.
Any failure to maintain high-quality support, or a market perception that we do not maintain high-quality support, could harm our reputation or adversely affect our ability to market the benefits of our platforms to existing and prospective users. 9 In addition, we need to adapt, expand and improve our platforms and user interfaces to keep up with changing user preferences.
Any failure to maintain high-quality support, or a market perception that we do not maintain high-quality support, could harm our reputation or adversely affect our ability to market the benefits of our platforms to existing and prospective users. In addition, we need to adapt, expand and improve our platforms and user interfaces to keep up with changing user preferences.
In addition, if businesses have difficulty obtaining funding, business growth and new business formation may be impaired, which could also harm our business. 7 If the market for freelancers and the services they offer is not sustained or develops more slowly than we expect, our growth may slow or stall.
In addition, if businesses have difficulty obtaining funding, business growth and new business formation may be impaired, which could also harm our business. If the market for freelancers and the services they offer is not sustained or develops more slowly than we expect, our growth may slow or stall.
The liabilities and penalties resulting from such non-compliance may materially and adversely damage our business and results of operations. On December 15, 2019, the CAC, released the Provisions on Ecological Governance of Network Information Content, or PEGNIC, which came into force on March 1, 2020.
The liabilities and penalties resulting from such non-compliance may materially and adversely damage our business and results of operations. 24 On December 15, 2019, the CAC, released the Provisions on Ecological Governance of Network Information Content, or PEGNIC, which came into force on March 1, 2020.
Defending any actions brought by such affected users could be costly and require significant time and attention of our management and other resources, which would materially and adversely affect our business. If we fail to maintain and enhance our brand, our business, results of operations and prospects may be materially and adversely affected.
Defending any actions brought by such affected users could be costly and require significant time and attention of our management and other resources, which would materially and adversely affect our business. 14 If we fail to maintain and enhance our brand, our business, results of operations and prospects may be materially and adversely affected.
As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ordinary shares as a source for any future dividend income. 33 Our board of directors has complete discretion as to whether to distribute dividends.
As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ordinary shares as a source for any future dividend income. Our board of directors has complete discretion as to whether to distribute dividends.
Any failure in maintaining, protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations. We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
Any failure in maintaining, protecting or enforcing our intellectual property rights could have a material adverse effect on our business, financial condition and results of operations. 22 We may be subject to intellectual property infringement claims, which may be expensive to defend and may disrupt our business and operations.
If we are unable to do so, our results of operations and financial condition may be materially and adversely affected. We have incurred negative cash flows in operating activities in the past and may incur operating losses in the future and may not maintain profitability.
If we are unable to do so, our results of operations and financial condition may be materially and adversely affected. 11 We have incurred negative cash flows in operating activities in the past and may incur operating losses in the future and may not maintain profitability.
In addition, certain internet platforms in mainland China have reportedly been subject to heightened regulatory scrutiny in relation to cybersecurity matters. In April 2020, the PRC government promulgated the Cybersecurity Review Measures (the “2020 Cybersecurity Review Measures”), which came into effect on June 1, 2020.
In addition, certain internet platforms in mainland China have reportedly been subject to heightened regulatory scrutiny in relation to cybersecurity matters. 16 In April 2020, the PRC government promulgated the Cybersecurity Review Measures (the “2020 Cybersecurity Review Measures”), which came into effect on June 1, 2020.
Lee, our founder, chairman of the Board and CEO, and our other executive officers named in this annual report. While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services.
Howard Lee, our founder, chairman of the Board and CEO, and our other executive officers named in this annual report. While we have provided different incentives to our management, we cannot assure you that we can continue to retain their services.
Such deceleration may adversely affect our ability to continue expanding our user base. Our technology infrastructure may encounter disruptions or other outages caused by problems or defects in our technologies and systems, such as malfunctions in software or network overload.
Such deceleration may adversely affect our ability to continue expanding our user base. 21 Our technology infrastructure may encounter disruptions or other outages caused by problems or defects in our technologies and systems, such as malfunctions in software or network overload.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in these jurisdictions and if we use an accounting firm headquartered in one of these jurisdictions to issue an audit report by then, our ordinary shares may be prohibited from trading in the United States under the HFCA Act, and such delisting or the threat of delisting may materially and adversely affect the value of your investment.” Selected Financial Data The following selected consolidated statements of income and comprehensive income data for the years ended December 31, 2021, 2022 and 2023, selected consolidated balance sheets data as of December 31, 2022 and 2023, and selected consolidated cash flows data for the years ended December 31, 2021, 2022 and 2023 have been derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in these jurisdictions and if we use an accounting firm headquartered in one of these jurisdictions to issue an audit report by then, our ordinary shares may be prohibited from trading in the United States under the HFCA Act, and such delisting or the threat of delisting may materially and adversely affect the value of your investment.” 3 Selected Financial Data The following selected consolidated statements of income and comprehensive income data for the years ended December 31, 2022, 2023 and 2024, selected consolidated balance sheets data as of December 31, 2023 and 2024, and selected consolidated cash flows data for the years ended December 31, 2022, 2023 and 2024 have been derived from our audited consolidated financial statements, which are included in this annual report beginning on page F-1.
However, it is unclear how SAFE and competent banks will carry them out in practice. 31 In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, or at all, with respect to future loans to our PRC subsidiary or future capital contributions by us to our PRC subsidiary.
However, it is unclear how SAFE and competent banks will carry them out in practice. 41 In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, or at all, with respect to future loans to our PRC subsidiary or future capital contributions by us to our PRC subsidiary.
If any dispute arises between us and our current or former officers, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all. 17 The majority of our executive officers have no prior experience in operating a U.S. public company, and their inability to operate the public company aspects of our business could harm us.
If any dispute arises between us and our current or former officers, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all. 23 The majority of our executive officers have no prior experience in operating a U.S. public company, and their inability to operate the public company aspects of our business could harm us.
Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities. 25 You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based on foreign laws.
Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities. 33 You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based on foreign laws.
As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer. 35
As a result, you may not be afforded the same protections or information that would be made available to you were you investing in a U.S. domestic issuer.
In addition to market and industry factors, the price and trading volume for our ordinary shares may be highly volatile for factors specific to our own operations, including the following: ● variations in our income, earnings and cash flow; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● announcements of new services and expansions by us or our competitors; ● changes in financial estimates by securities analysts; ● detrimental adverse publicity about us, our services or our industry; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and ● potential litigation or regulatory investigations.
In addition to market and industry factors, the price and trading volume for our ordinary shares may be highly volatile for factors specific to our own operations, including the following: ● variations in our income, earnings and cash flow; ● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; ● announcements of new services and expansions by us or our competitors; ● changes in financial estimates by securities analysts; ● our share repurchase program; ● detrimental adverse publicity about us, our services or our industry; ● additions or departures of key personnel; ● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and ● potential litigation or regulatory investigations.
In addition, as of the date of this annual report, we have nine additional patent applications that are pending in both the U.S. and China. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages.
In addition, as of the date of this annual report, we have eight additional patent applications that are pending in both the U.S. and China. Despite these measures, any of our intellectual property rights could be challenged, invalidated, circumvented or misappropriated, or such intellectual property may not be sufficient to provide us with competitive advantages.
As a result, we could be subject to penalties or incur significant liabilities in connection with labor disputes or investigations. 28 The M&A Rules and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions.
As a result, we could be subject to penalties or incur significant liabilities in connection with labor disputes or investigations. 37 The M&A Rules and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions.
If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, including the cybersecurity review under the Measures for Cybersecurity Review and the Draft Regulation on Network for Data Security (if implemented), are required for any of our future overseas offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected.
If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, including the cybersecurity review under the Measures for Cybersecurity Review and the Regulation on Network Data Security Management, are required for any of our future overseas offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected.
As of December 31, 2023, we had not received any notice that we are a critical information infrastructure operator from any government authority, nor had we received any request from the CAC to undergo a cybersecurity review in relation to our initial public offering.
As of December 31, 2024, we had not received any notice that we are a critical information infrastructure operator from any government authority, nor had we received any request from the CAC to undergo a cybersecurity review in relation to our initial public offering.
As of December 31, 2023, we had obtained the licenses, permits and registrations from the PRC government authorities that are material and necessary for our business operations in China.
As of December 31, 2024, we had obtained the licenses, permits and registrations from the PRC government authorities that are material and necessary for our business operations in China.
On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors.
On May 18, 2020, Nasdaq filed three proposals with the SEC to (i) apply minimum offering size requirement for companies primarily operating in “Restrictive Market”, (ii) adopt a new requirement relating to the qualification of management or board of director for Restrictive Market companies, and (iii) apply additional and more stringent criteria to an applicant or listed company based on the qualifications of the company’s auditors. 30 On May 20, 2020, the U.S.
In addition to the impact of COVID-19 as described above, our business could be materially and adversely affected by natural disasters, such as snowstorms, earthquakes, fires or floods, the outbreak of other widespread health epidemic, such as swine flu, avian influenza, severe acute respiratory syndrome, Ebola, or Zika or other events, such as wars, acts of terrorism, environmental accidents, power shortage or communication interruptions.
In addition to the impact of COVID-19 in recent years, our business could be materially and adversely affected by natural disasters, such as snowstorms, earthquakes, fires or floods, the outbreak of other widespread health epidemic, such as swine flu, avian influenza, severe acute respiratory syndrome, Ebola, or Zika or other events, such as wars, acts of terrorism, environmental accidents, power shortage or communication interruptions.
In 2021, 2022 and 2023, approximately 76.3%, 53.9% and 44.7% of our net revenues were generated from recruitment services for corporate customers, respectively. Corporate customers are by far the most important source of revenue for us, and attracting more corporate customers to our platforms is therefore of critical importance to us.
In 2022, 2023 and 2024, approximately 53.9%, 44.7% and 20.3% of our net revenues were generated from recruitment services for corporate customers, respectively. Corporate customers are by far the most important source of revenue for us, and attracting more corporate customers to our platforms is therefore of critical importance to us.
We may be required by PRC government authorities to file these lease agreements for registration within a time limit, and may be subject to a maximum fine of RMB10,000 for each lease agreement which in aggregate amounted to RMB80,000 for the eight unregistered lease agreements. 14 The ownership certificates or other similar proof of certain of our leased properties, including the documentation proving the lessors’ right to lease those properties to us, have not been provided to us by the relevant lessors.
We may be required by PRC government authorities to file these lease agreements for registration within a time limit, and may be subject to a maximum fine of RMB10,000 for each lease agreement which in aggregate amounted to RMB50,000 for the five unregistered lease agreements. 19 The ownership certificates or other similar proof of certain of our leased properties, including the documentation proving the lessors’ right to lease those properties to us, have not been provided to us by the relevant lessors.
According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.
According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC. 35 We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes.
Because a significant portion of the services we offer are outsourcing services, a decline in the demand or the market for outsourcing services could materially and adversely affect our business, prospects, financial condition and results of operations. In 2021, 2022 and 2023, approximately 17.4%, 39.4% and 48.4% of the services we offer relate to outsourcing services, respectively.
Because a significant portion of the services we offer are outsourcing services, a decline in the demand or the market for outsourcing services could materially and adversely affect our business, prospects, financial condition and results of operations. In 2022, 2023 and 2024, approximately 39.4%, 48.4% and 73.8% of the services we offer relate to outsourcing services, respectively.
As of the date of this annual report, we have ten patents registered in the U.S. and seven patents registered in China, all in the areas of artificial intelligence, data analytics and blockchain technology, 68 registered trademarks, 74 registered copyrights, and ten registered domain names.
As of the date of this annual report, we have ten patents registered in the U.S. and nine patents registered in China, all in the areas of artificial intelligence, data analytics and blockchain technology, 68 registered trademarks, 75 registered copyrights, and ten registered domain names.
For the years ended December 31, 2021, 2022 and 2023, we had 399, 391 and 582 corporate customers, respectively, and net revenues generated in relation to our five largest corporate customers in terms of contract amount accounted for approximately 25.6%, 23.3% and 15.9%, respectively.
For the years ended December 31, 2022, 2023 and 2024, we had 391, 582 and 463 corporate customers, respectively, and net revenues generated in relation to our five largest corporate customers in terms of contract amount accounted for approximately 23.3%, 15.9% and 23.6%, respectively.
In addition, pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Tax Evasion With Respect to Taxes On Income, and the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties issued in 2009 by the SAT, if a Hong Kong resident enterprise owns more than 25% of the equity interest of a PRC company at all times during the twelve-month period immediately prior to obtaining a dividend from such company, the 10% withholding tax on the dividend is reduced to 5%, provided that certain other conditions and requirements are satisfied at the discretion of the PRC tax authority, however, if the PRC tax authorities determine, in their discretion, that a company benefits from the reduced income tax rate due to a structure or arrangement that is primarily tax-driven, the PRC tax authorities may adjust the preferential tax treatment.
Furthermore, our shareholders whose jurisdictions of residence have tax treaties or arrangements with China may not qualify for benefits under these tax treaties or arrangements. 40 In addition, pursuant to the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Tax Evasion With Respect to Taxes On Income, and the Notice on Certain Issues with Respect to the Enforcement of Dividend Provisions in Tax Treaties issued in 2009 by the SAT, if a Hong Kong resident enterprise owns more than 25% of the equity interest of a PRC company at all times during the twelve-month period immediately prior to obtaining a dividend from such company, the 10% withholding tax on the dividend is reduced to 5%, provided that certain other conditions and requirements are satisfied at the discretion of the PRC tax authority, however, if the PRC tax authorities determine, in their discretion, that a company benefits from the reduced income tax rate due to a structure or arrangement that is primarily tax-driven, the PRC tax authorities may adjust the preferential tax treatment.
As of the date of this annual report, eight of our lease agreements had not been registered.
As of the date of this annual report, five of our lease agreements had not been registered.
We incurred negative cash flows in operating activities for the amounts of RMB15.1 million and RMB36.4 million (US$5.1 million) during the years ended December 31, 2022 and 2023, respectively, and we may incur operating losses in the foreseeable future.
We incurred negative cash flows in operating activities for the amounts of RMB15.1 million and RMB36.4 million and cash inflow of RMB20.2 million (US$2.8 million) during the years ended December 31, 2022, 2023 and 2024, respectively, and we may incur operating losses in the foreseeable future.
On May 20, 2020, the U.S. Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection.
Senate passed the HFCA Act requiring a foreign company to certify it is not owned or controlled by a foreign government if the PCAOB is unable to audit specified reports because the company uses a foreign auditor not subject to PCAOB inspection.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in these jurisdictions and if we use an accounting firm headquartered in one of these jurisdictions to issue an audit report by then, our ordinary shares may be prohibited from trading in the United States under the HFCA Act, and such delisting or the threat of delisting may materially and adversely affect the value of your investment. ● You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based on foreign laws. ● You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against us or our management named in this annual report based on Hong Kong laws. ● It may be difficult for overseas regulators to conduct investigations or collect evidence within China. ● It may be difficult for overseas shareholders and/or regulators to conduct investigations or collect evidence within Hong Kong. ● 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. ● The M&A Rules and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions. 5 Risks Related to Our Ordinary Shares ● The trading price of our ordinary shares is likely to be volatile, which could result in substantial losses to investors. ● If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ordinary shares, the market price for our ordinary shares and trading volume could decline. ● The sale or availability for sale of substantial amounts of our ordinary shares could adversely affect their market price. ● Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our ordinary shares for return on your investment. ● There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could subject U.S. investors in our ordinary shares or ordinary shares to significant adverse U.S. federal income tax consequences. ● You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law. ● Certain judgments obtained against us by our shareholders may not be enforceable. ● We are a “controlled company” within the meaning of the Nasdaq Stock Market listing rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. ● We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies may make our ordinary shares less attractive to investors. ● We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.
If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in these jurisdictions and if we use an accounting firm headquartered in one of these jurisdictions to issue an audit report by then, our ordinary shares may be prohibited from trading in the United States under the HFCA Act, and such delisting or the threat of delisting may materially and adversely affect the value of your investment. ● You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based on foreign laws. ● You may incur additional costs and procedural obstacles in effecting service of legal process, enforcing foreign judgments or bringing actions in Hong Kong against us or our management named in this annual report based on Hong Kong laws. ● It may be difficult for overseas regulators to conduct investigations or collect evidence within China. ● It may be difficult for overseas shareholders and/or regulators to conduct investigations or collect evidence within Hong Kong. ● 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. ● The M&A Rules and certain other PRC regulations may make it more difficult for us to pursue growth through acquisitions. 7 Risks Related to Our Ordinary Shares ● If we fail to comply with the continued listing requirements of Nasdaq, we would face possible delisting, which would result in a limited public market for our ordinary shares and make obtaining future debt or equity financing more difficult for us. ● The trading price of our ordinary shares is likely to be volatile, which could result in substantial losses to investors. ● If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ordinary shares, the market price for our ordinary shares and trading volume could decline. ● The sale or availability for sale of substantial amounts of our ordinary shares could adversely affect their market price. ● We cannot guarantee that any share repurchase program will be fully consummated or that any share repurchase program will enhance long-term shareholder value, and share repurchases could increase the volatility of the price of our ordinary shares and could diminish our cash reserves. ● Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our ordinary shares for return on your investment. ● There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year, which could subject U.S. investors in our ordinary shares or ordinary shares to significant adverse U.S. federal income tax consequences. ● You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law. ● Certain judgments obtained against us by our shareholders may not be enforceable. ● We are a “controlled company” within the meaning of the Nasdaq Stock Market listing rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies. ● We are an emerging growth company and the reduced disclosure requirements applicable to emerging growth companies may make our ordinary shares less attractive to investors. ● We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies. 8 Risks Related to Our Business and Industry We have a limited operating history under our current platforms and business model, which makes it difficult to evaluate our business and prospects, and any future changes to our business model could materially and adversely affect our business, financial condition and results of operations.
Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise.
As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise.
Our use of open-source software may also present additional security risks because the source code for open-source software is publicly available, which may make it easier for hackers and other third parties to determine how to breach our website and systems that rely on open-source software. Any of these risks could be difficult to eliminate or manage.
Our use of open-source software may also present additional security risks because the source code for open-source software is publicly available, which may make it easier for hackers and other third parties to determine how to breach our website and systems that rely on open-source software.
However, we could be subject to the filing requirements with the CSRC if we conduct subsequent offerings. See “Item 4.
However, we could be subject to the filing requirements with the CSRC if we conduct subsequent offerings. See “Item 4. Information on the Company — B.
If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our ordinary shares to decline.
If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our ordinary shares to decline. 44 The sale or availability for sale of substantial amounts of our ordinary shares could adversely affect their market price.
Information on the Company — Regulations — Regulations on M&A and Overseas Listings” We cannot assure you that we can complete the filing procedures, obtain the approvals or complete other compliance procedures in a timely manner, or at all, or that any completion of filing or approval or other compliance procedures would not be rescinded.
Business Overview — Regulations — Regulations on M&A and Overseas Listings.” 2 We cannot assure you that we can complete the filing procedures, obtain the approvals or complete other compliance procedures in a timely manner, or at all, or that any completion of filing or approval or other compliance procedures would not be rescinded.
Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas could materially and adversely hinder our ability to offer or continue to offer our securities, and cause the value of our securities to significantly decline or become worthless. 22 The Chinese government has substantial oversight and influence over the manner in which we must conduct our business and may intervene or influence our operations at any time, which actions could impact our operations materially and adversely, and significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless.
The Chinese government has substantial oversight and influence over the manner in which we must conduct our business and may intervene or influence our operations at any time, which actions could impact our operations materially and adversely, and significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of our securities to significantly decline or be worthless.
Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.
Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions.
As of December 31, 2023, we had approximately 638,020 active registered users on our proprietary platforms, Star Career and Columbus. We have experienced strong growth in the number of users on our platforms. The number of active registered users on both of our platforms grew by 48% from December 2022 to December 2023.
As of December 31, 2024, we had approximately 780,320 active registered users on our proprietary platforms, Star Career and Columbus. We have experienced strong growth in the number of users on our platforms. The number of active registered users on both of our platforms grew by 22% from December 2023 to December 2024.
We may be unable to monitor and ensure high-quality maintenance and upgrade of our technology and infrastructure, and our users may experience service outages and delays in accessing and using our platforms as we seek to source additional capacity.
However, our technology or infrastructure may not function properly at all times. We may be unable to monitor and ensure high-quality maintenance and upgrade of our technology and infrastructure, and our users may experience service outages and delays in accessing and using our platforms as we seek to source additional capacity.
As a result, subject to the conditions with regard to enforcement of judgments of United States courts being met, including but not limited to the above, a foreign judgment of United States of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the U.S. could be enforceable in Hong Kong.
As a result, subject to the conditions with regard to enforcement of judgments of United States courts being met, including but not limited to the above, a foreign judgment of United States of civil liabilities predicated solely upon the federal securities laws of the United States or the securities laws of any State or territory within the U.S. could be enforceable in Hong Kong. 34 It may be difficult for overseas regulators to conduct investigations or collect evidence within China.
Any disruption to our technology and causing interruptions to our website, applications, platforms or services could adversely affect our business and results of operations. 15 Our technology systems may also experience telecommunications failures, computer viruses, failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, user errors, or other attempts to harm our technology systems, which may result in the unavailability or slowdown of our platforms or certain functions, delays or errors in transaction processing, loss of data, inability to accept and fulfill orders, reduced gross merchandise volume and the attractiveness of our platforms.
Our technology systems may also experience telecommunications failures, computer viruses, failures during the process of upgrading or replacing software, databases or components, power outages, hardware failures, user errors, or other attempts to harm our technology systems, which may result in the unavailability or slowdown of our platforms or certain functions, delays or errors in transaction processing, loss of data, inability to accept and fulfill orders, reduced gross merchandise volume and the attractiveness of our platforms.
If any of the content posted or displayed on our online recruitment platform is deemed by the PRC government to violate any content restrictions, we may not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations. 18 PRC regulatory authorities may also conduct various reviews and inspections on our business operations, especially those related to content distribution, from time to time.
If any of the content posted or displayed on our online recruitment platform is deemed by the PRC government to violate any content restrictions, we may not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations.
In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated. 30 You may be subject to PRC income tax on dividends from us or on any gain realized on the transfer of our ordinary shares.
In addition, the Enterprise Income Tax Law and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.
Our operations could also be severely disrupted if our clients, users or other participants were affected by such natural disasters, health epidemics or other outbreaks. 20 We may be subject to social and natural catastrophic events that are beyond our control, such as natural disasters, health epidemics, riots, political and military upheavals and other outbreaks in the country or region where we have our operations or where a portion of our users are located.
We may be subject to social and natural catastrophic events that are beyond our control, such as natural disasters, health epidemics, riots, political and military upheavals and other outbreaks in the country or region where we have our operations or where a portion of our users are located.
If we fail to complete such filing procedures for any future overseas offering or listing in an overseas market, including our follow-on offerings, issuance of convertible bonds, offshore relisting after going-private transactions, and other equivalent offering activities, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on us, restrictions on or delays to our financing transactions offshore, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares.
If we fail to complete such filing procedures for any future overseas offering or listing in an overseas market, including our follow-on offerings, issuance of convertible bonds, offshore relisting after going-private transactions, and other equivalent offering activities, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on us, restrictions on or delays to our financing transactions offshore, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares. 32 On February 24, 2023, the CSRC, Ministry of Finance of the PRC, National Administration of State Secrets Protection and National Archives Administration of China jointly revised the Provisions on Strengthening Confidentiality and Archives Administration for Overseas Securities Offering and Listing which was issued by the CSRC, National Administration of State Secrets Protection and National Archives Administration of China in 2009, or the Provisions.
If our technology capabilities in AI, data analytics and blockchain fail to yield satisfactory results or fail to improve, our platforms may not be able to effectively match our users with suitable positions from corporate customers or to optimally recommend positions for our users, and our user growth, retention, results of operations and business prospects may suffer consequently.
If we are unable to improve or maintain the quality of our platforms, our business, prospects, financial condition and results of operations could be materially and adversely affected. 13 If our technology capabilities in AI, data analytics and blockchain fail to yield satisfactory results or fail to improve, our platforms may not be able to effectively match our users with suitable positions from corporate customers or to optimally recommend positions for our users, and our user growth, retention, results of operations and business prospects may suffer consequently.
Marcum Asia is not subject to the determinations announced by the PCAOB on December 16, 2021. The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting firms headquartered in mainland China and Hong Kong in the future and states that it has already made plans to resume regular inspections in early 2023 and beyond.
The PCAOB is expected to continue to demand complete access to inspections and investigations against accounting firms headquartered in mainland China and Hong Kong in the future and states that it has already made plans to resume regular inspections in early 2023 and beyond.
According to this regulation, non-sensitive overseas investment projects are subject to record-filing requirements with the NDRC or its provincial branch. On September 6, 2014, the Ministry of Commerce promulgated the Administrative Measures on Overseas Investments, which took effect as of October 6, 2014.
On September 6, 2014, the Ministry of Commerce promulgated the Administrative Measures on Overseas Investments, which took effect as of October 6, 2014. According to this regulation, overseas investments of PRC enterprises that involve non-sensitive countries and regions and non-sensitive industries are subject to record-filing requirements with Ministry of Commerce or its provincial branch.
Risk Factors — Risks Related to Our Ordinary Shares — You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law” for risks associated with investing in us as a Cayman Islands exempted company. 26 It may be difficult for overseas shareholders and/or regulators to conduct investigations or collect evidence within Hong Kong.
Risk Factors — Risks Related to Our Ordinary Shares — You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law” for risks associated with investing in us as a Cayman Islands exempted company.
The trading price of our ordinary shares is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States.
The fluctuation in the trading price of our ordinary shares may continue to happen because of broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States.
Because a substantial portion of the services we offer are recruitment services, if we fail to attract more corporate customers to our platforms, or if corporate customers decide to purchase less of our recruitment services for any reason, our revenues may stagnate or decline, and our business and prospects may be materially and adversely affected.
If we fail to attract new users or fail to maintain existing users, our revenue may grow more slowly than expected and our business and financial performance could be materially and adversely affected. 9 Because a substantial portion of the services we offer are recruitment services, if we fail to attract more corporate customers to our platforms, or if corporate customers decide to purchase less of our recruitment services for any reason, our revenues may stagnate or decline, and our business and prospects may be materially and adversely affected.
Our gross profits increased by 20.2% from RMB179.1 million in 2021 to RMB215.2 million in 2022 and further increased by 94.5% from RMB215.2 million in 2022 to RMB418.6 million (US$59.0 million) in 2023. Our expansion has placed and will continue to place, substantial demands on our managerial, financial, operational, IT, and other resources.
Our gross profits increased by 94.5% from RMB215.2 million in 2022 to RMB418.6 million in 2023, and decrease by 14.6% from RMB418.6 million in 2023 to RMB357.4 million (US$49.0 million) in 2024. Our expansion has placed and will continue to place, substantial demands on our managerial, financial, operational, IT, and other resources.
We may be subject to potential liability in connection with pending or threatened legal proceedings and other matters, which could adversely affect our business or financial results. From time to time, we have become and may in the future become a party to various legal or administrative proceedings arising in the ordinary course of our business in China.
From time to time, we have become and may in the future become a party to various legal or administrative proceedings arising in the ordinary course of our business in China. We may also be subject to potential liability in connection with pending or threatened legal proceedings arising from breach of contract claims, anti-competition claims and other matters.
Therefore, our users may engage in illegal, obscene or incendiary conversations or engage in unethical or illegal activities via our platforms. 10 If user misconduct and misuse of our platforms for inappropriate or illegal purposes occur on our online recruitment platform, claims may be brought against us for torts, defamation, libel, negligence, copyright, patent or trademark infringement.
If user misconduct and misuse of our platforms for inappropriate or illegal purposes occur on our online recruitment platform, claims may be brought against us for torts, defamation, libel, negligence, copyright, patent or trademark infringement.
We believe that we are not subject to a cybersecurity review pursuant to the 2022 Cybersecurity Review Measures, as neither we nor any of our PRC subsidiaries qualify as (i) a critical information infrastructure operator, or (ii) an internet platform operator that has conducted any data processing activities that affected or may affect national security, or has held personal information of more than one million users as of the date of this annual report. 12 On November 14, 2021, the CAC released the draft Administrative Regulation on Network Data Security for public comments through December 13, 2021 (the “Draft Regulation on Network Data Security”).
We believe that we are not subject to a cybersecurity review pursuant to the 2022 Cybersecurity Review Measures, as neither we nor any of our PRC subsidiaries qualify as (i) a critical information infrastructure operator, or (ii) an internet platform operator that has conducted any data processing activities that affected or may affect national security, or has held personal information of more than one million users as of the date of this annual report.
To the extent those chops are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so. 32 Risks Related to Our Ordinary Shares The trading price of our ordinary shares is likely to be volatile, which could result in substantial losses to investors.
To the extent those chops are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so.
Further, adverse publicity resulting from such claims or proceedings could significantly harm our reputation which, in turn, may have an adverse effect on our business, financial condition and results of operations. 11 We are subject to a variety of laws and regulations regarding cybersecurity and data protection, and any failure to comply with applicable laws and regulations, including improper use or appropriation of personal information provided directly or indirectly by our customers or end users, could have a material adverse effect on our business, financial condition and results of operations.
We are subject to a variety of laws and regulations regarding cybersecurity and data protection, and any failure to comply with applicable laws and regulations, including improper use or appropriation of personal information provided directly or indirectly by our customers or end users, could have a material adverse effect on our business, financial condition and results of operations.
If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence and the market price of our shares may be materially and adversely affected.
If we fail to address and comply with these regulations and any subsequent changes, we may be subject to penalty and our business may be harmed. 25 If we fail to implement and maintain an effective system of internal controls, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud, and investor confidence and the market price of our shares may be materially and adversely affected.
Any network interruption or inadequacy that causes interruptions to our platforms, or failure to maintain the network and server or solve such problems in a timely manner, could reduce our user satisfaction, which in turn, could adversely affect our reputation, user base and our business, financial condition, results of operations and prospects. 16 We may not be able to prevent others from unauthorized use of our intellectual property, which could harm our business and competitive position.
Any network interruption or inadequacy that causes interruptions to our platforms, or failure to maintain the network and server or solve such problems in a timely manner, could reduce our user satisfaction, which in turn, could adversely affect our reputation, user base and our business, financial condition, results of operations and prospects.
We cannot predict how these regulations will affect our business operations or future strategy. For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our results of operations and financial condition.
For example, we may be subject to a more stringent review and approval process with respect to our foreign exchange activities, such as remittance of dividends and foreign-currency-denominated borrowings, which may adversely affect our results of operations and financial condition. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.
We may not be able to filter all the content generated by our users as it appears, especially in the context of instant messaging between users and corporate customers.
We may not be able to filter all the content generated by our users as it appears, especially in the context of instant messaging between users and corporate customers. Therefore, our users may engage in illegal, obscene or incendiary conversations or engage in unethical or illegal activities via our platforms.
We may choose to follow additional home country practice in the future. As a result, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
As a result, our shareholders may be afforded less protection than they otherwise would under rules and regulations applicable to U.S. domestic issuers.
We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. Substantially all of our current operations are conducted in China. In addition, a majority of our current directors and officers are nationals and residents of countries other than the United States.
In addition, a majority of our current directors and officers are nationals and residents of countries other than the United States. Substantially all of the assets of these persons are located outside the United States.
We are permitted to elect to rely on home country practice to be exempted from the corporate governance requirements. We have relied on home country practice exemption with respect to the requirement that a majority of the nominating and corporate governance committee members must be independent directors within 90 days of listing.
We have relied on home country practice exemption with respect to the requirement that a majority of the nominating and corporate governance committee members must be independent directors within 90 days of listing. We may choose to follow additional home country practice in the future.
If the market for freelancers and the services they offer does not achieve widespread adoption, or there is a reduction in demand for freelancer services, particularly demand for information technology services, our business, prospects, financial condition and results of operations could be materially and adversely affected.
If the market for freelancers and the services they offer does not achieve widespread adoption, or there is a reduction in demand for freelancer services, particularly demand for information technology services, our business, prospects, financial condition and results of operations could be materially and adversely affected. 10 We face significant competition, which may cause us to suffer from a weakened market position that could materially and adversely affect our results of operations.
Any of the foregoing could significantly increase our costs to serve corporate customers, harm our reputation and brand, subject us to rectification orders and fines, and cause us to significantly alter our existing business model and operations. As a result, our business, financial condition, results of operations and prospects will be materially and adversely affected.
Any of the foregoing could significantly increase our costs to serve corporate customers, harm our reputation and brand, subject us to rectification orders and fines, and cause us to significantly alter our existing business model and operations.
China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.
However, any economic reform policies or measures in China may from time to time be modified or revised. China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources.
While we expect our future acquisitions to enhance our value proposition to customers and improve our long-term profitability, there can be no assurance that we will realize our expectations within the time frame we envisage, if at all, or that we can continue to support the value we allocate to these acquired businesses, including their goodwill or other intangible assets.
While we expect our future acquisitions to enhance our value proposition to customers and improve our long-term profitability, there can be no assurance that we will realize our expectations within the time frame we envisage, if at all, or that we can continue to support the value we allocate to these acquired businesses, including their goodwill or other intangible assets. 12 We may need additional capital to pursue business objectives and respond to business opportunities, challenges or unforeseen circumstances, and financing may not be available on terms acceptable to us, or at all.

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Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

47 edited+8 added−12 removed168 unchanged
The NDRC and the MOFCOM promulgated the 2021 Negative List on December 27, 2021, which took effect on January 1, 2022 and uniformly set forth the ownership requirements, requirements for senior executives, and other special administrative measures for the access of foreign investment, and requires that, any domestic enterprise engaging in businesses prohibited by the 2021 Negative Lists, to issue securities and list and trade shares overseas must obtain pre-approval consent from relevant competent regulators; overseas investors must not engage in the operation and management of the enterprise, and the percentage of foreign shareholding is subject to the relevant provisions in the administrative measures for domestic securities investments by foreign investors.
The NDRC and the MOFCOM promulgated the 2021 Negative List on December 27, 2021, which took effect on January 1, 2022 and uniformly set forth the ownership requirements, requirements for senior executives, and other special administrative measures for the access of foreign investment, and requires that, any domestic enterprise engaging in businesses prohibited by the 2021 Negative List, to issue securities and list and trade shares overseas must obtain pre-approval consent from relevant competent regulators; overseas investors must not engage in the operation and management of the enterprise, and the percentage of foreign shareholding is subject to the relevant provisions in the administrative measures for domestic securities investments by foreign investors.
Recruitment Services Equipped with a well-established talent scout network and comprehensive technology infrastructure, our platforms Columbus and Star Career alleviate our corporate customers from the burden associated with discovering, training, managing and maintaining a sufficient number of skilled workers, allowing them to better focus on their core businesses. 36 We have experienced rapid growth of active registered users.
Recruitment Services Equipped with a well-established talent scout network and comprehensive technology infrastructure, our platforms Columbus and Star Career alleviate our corporate customers from the burden associated with discovering, training, managing and maintaining a sufficient number of skilled workers, allowing them to better focus on their core businesses. We have experienced rapid growth of active registered users.
The Foreign Investment Law provides that foreign invested entities shall not operate foreign prohibited industries and foreign invested entities operating in foreign restricted industries shall meet the investment conditions stipulated under the negative list. 41 In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that local governments shall abide by their commitments to the foreign investors; foreign-invested enterprises are allowed to issue stocks and corporate bonds; except for special circumstances, in which case statutory procedures shall be followed, and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; mandatory technology transfer is prohibited; and the capital contributions, profits, capital gains, proceeds out of asset disposal, licensing fees of intellectual property rights, indemnity or compensation legally obtained, or proceeds received upon settlement by foreign investors within China, may be freely remitted inward and outward in RMB or a foreign currency.
The Foreign Investment Law provides that foreign invested entities shall not operate foreign prohibited industries and foreign invested entities operating in foreign restricted industries shall meet the investment conditions stipulated under the negative list. 55 In addition, the Foreign Investment Law also provides several protective rules and principles for foreign investors and their investments in the PRC, including, among others, that local governments shall abide by their commitments to the foreign investors; foreign-invested enterprises are allowed to issue stocks and corporate bonds; except for special circumstances, in which case statutory procedures shall be followed, and fair and reasonable compensation shall be made in a timely manner, expropriation or requisition of the investment of foreign investors is prohibited; mandatory technology transfer is prohibited; and the capital contributions, profits, capital gains, proceeds out of asset disposal, licensing fees of intellectual property rights, indemnity or compensation legally obtained, or proceeds received upon settlement by foreign investors within China, may be freely remitted inward and outward in RMB or a foreign currency.
Thus, to empower HRs and hiring companies, we provide coordination and execution assistance via our talent scouts in the candidate sourcing and hiring process in daily recruitment practice to free HRs from the burdensome researching and administrative work. Our agent-centric recruitment services are mainly carried out by means of permanent employment recruitment services and flexible employment recruitment services.
Thus, to empower HRs and hiring companies, we provide coordination and execution assistance via our talent scouts in the candidate sourcing and hiring process in daily recruitment practice to free HRs from the burdensome researching and administrative work. 49 Our agent-centric recruitment services are mainly carried out by means of permanent employment recruitment services and flexible employment recruitment services.
Our extensive experience and quality of service not only secure long-term clients, but also create a word-of-mouth effect for developing new clients. Quality Control We believe that our ability to maintain the quality of our services is critical to our growth. Our quality assurance measures include the following: ● Internal quality control regulations and policies .
Our extensive experience and quality of service not only secure long-term clients, but also create a word-of-mouth effect for developing new clients. 52 Quality Control We believe that our ability to maintain the quality of our services is critical to our growth. Our quality assurance measures include the following: ● Internal quality control regulations and policies .
We currently do not have any business liability or disruption insurance. Our insurance coverage does not violate any mandatory provisions of PRC laws. We believe that such coverage is in line with industry norms in the PRC and is adequate and sufficient for our current operations. See “Item 3. Key Information — D.
We currently do not have any business liability or disruption insurance. 54 Our insurance coverage does not violate any mandatory provisions of PRC laws. We believe that such coverage is in line with industry norms in the PRC and is adequate and sufficient for our current operations. See “Item 3. Key Information — D.
Over 80% of our users remain active in a twelve-month period as of December 31, 2023, because our platform is useful for them to both make money by acting as a part-time talent scout or providing information to us on potential clients, and forward useful career development related contents developed by our platform to their friends via their social networks so that they can maintain an active linkage with their friends in a positive way, rather than posting rudimentary information or daily routines, many of which are uninteresting to their friends.
Over 80% of our users remain active in a twelve-month period as of December 31, 2024, because our platform is useful for them to both make money by acting as a part-time talent scout or providing information to us on potential clients, and forward useful career development related contents developed by our platform to their friends via their social networks so that they can maintain an active linkage with their friends in a positive way, rather than posting rudimentary information or daily routines, many of which are uninteresting to their friends.
According to Frost & Sullivan, we ranked fourth among the well-known platforms in the human capital management industry in China in terms of the number of patents we owned as of December 31, 2022. In addition, we ranked first among all these platforms in terms of the total numbers of patents registered in the U.S. as of December 31, 2022.
According to Frost & Sullivan, we ranked fourth among the well-known platforms in the human capital management industry in China in terms of the number of patents we owned as of December 31, 2022. In addition, we ranked first among all these platforms in terms of the total number of patents registered in the U.S. as of December 31, 2022.
Where an employer fails to pay or fully pay the housing provident fund, the housing provident fund management center shall order it to make payment within the prescribed period; if it fails to make payment within such prescribed period, the center may apply to the people’s court for enforcement. 47 Regulations on Stock Incentive Plans SAFE promulgated the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Listed Company, or SAFE Circular 7, on February 15, 2012.
Where an employer fails to pay or fully pay the housing provident fund, the housing provident fund management center shall order it to make payment within the prescribed period; if it fails to make payment within such prescribed period, the center may apply to the people’s court for enforcement. 63 Regulations on Stock Incentive Plans SAFE promulgated the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Listed Company, or SAFE Circular 7, on February 15, 2012.
Organizational Structure The following diagram illustrates our corporate structure as of the date of this annual report. Note: (1) Our founder, chairman of the Board, and CEO, Mr.
E. Organizational Structure The following diagram illustrates our corporate structure as of the date of this annual report. Note: (1) Our founder, chairman of the Board, and CEO, Mr.
Under the Copyright Law, the term of protection for software copyright is 50 years. 44 Domain Name Domain names are protected under the Administrative Measures for Internet Domain Names, or the Domain Name Measures, promulgated by the MIIT, effective on November 1, 2017. MIIT is the major regulatory body responsible for the administration of the PRC internet domain names.
Under the Copyright Law, the term of protection for software copyright is 50 years. 59 Domain Name Domain names are protected under the Administrative Measures for Internet Domain Names, or the Domain Name Measures, promulgated by the MIIT, effective on November 1, 2017. MIIT is the major regulatory body responsible for the administration of the PRC internet domain names.
Lucas GC Limited is not a Chinese operation company but a Cayman Island holding company with operations primarily conducted through its PRC subsidiaries. F. Property, Plant and Equipment Our corporate headquarters are located in Beijing, China.
Lucas GC Limited is not a Chinese operation company but a Cayman Islands holding company with operations primarily conducted through its PRC subsidiaries. F. Property, Plant and Equipment Our corporate headquarters are located in Beijing, China.
Howard Lee, owns approximately 61.9% equity interest in our Company through his wholly owned company, HTL Lucky Holding Limited, as of the date of this annual report. 51job, Inc. owns approximately 18.2% equity interest in our Company and MLT Holding Limited owns approximately 8.1% equity interest in our Company as of the date of this annual report.
Howard Lee, owns approximately 61.1% equity interest in our Company through his wholly owned company, HTL Lucky Holding Limited, as of the date of this annual report. 51job, Inc. owns approximately 18.2% equity interest in our Company and MLT Holding Limited owns approximately 7.1% equity interest in our Company as of the date of this annual report.
As of December 31, 2023, the approximate gross floor area of our leased properties was 612 square meters in aggregate and we did not have self-held properties. We lease our premises from unrelated third parties under operating lease agreements.
As of December 31, 2024, the approximate gross floor area of our leased properties was 548 square meters in aggregate and we did not have self-held properties. We lease our premises from unrelated third parties under operating lease agreements.
Pursuant to the Circular of the State Administration of Foreign Exchange on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies, promulgated on February 13, 2015 and implemented on June 1, 2015 and last amended and implemented on December 30 2019, the SAFE decided to further simplify and improve policies for the foreign exchange administration of direct investment around the entire nation, by cancelling two administrative approval items: confirmation of foreign exchange registration under domestic direct investment and confirmation of foreign exchange registration under overseas direct investment and, instead, banks shall directly examine and handle foreign exchange registration under domestic direct investment and foreign exchange registration under overseas direct investment, and the SAFE and its branch offices shall indirectly regulate the foreign exchange registration of direct investment through banks and simplifying the procedures for some foreign exchange transactions under direct investment.
The designated foreign exchange bank shall handle the formalities for the domestic institution after an authenticity check. 61 Pursuant to the Circular of the State Administration of Foreign Exchange on Further Simplifying and Improving the Direct Investment-related Foreign Exchange Administration Policies, promulgated on February 13, 2015 and implemented on June 1, 2015 and last amended and implemented on December 30 2019, the SAFE decided to further simplify and improve policies for the foreign exchange administration of direct investment around the entire nation, by cancelling two administrative approval items: confirmation of foreign exchange registration under domestic direct investment and confirmation of foreign exchange registration under overseas direct investment and, instead, banks shall directly examine and handle foreign exchange registration under domestic direct investment and foreign exchange registration under overseas direct investment, and the SAFE and its branch offices shall indirectly regulate the foreign exchange registration of direct investment through banks and simplifying the procedures for some foreign exchange transactions under direct investment.
We charge those who enroll in training classes enrollment fees that are determined by us based upon our training material development costs or the costs of training courses sourced from the third-party providers. Taking the CCRP certificate training program that is self-developed by us as an example.
We charge those who enroll in training classes enrollment fees that are determined by us based upon our training material development costs or the costs of training courses sourced from the third-party providers. Taking the Certified Career Resources Planner (“CCRP”) certificate training program that is self-developed by us as an example.
Our technologies are well recognized by industry peers. For example, in January 2022, we were nominated to be one of the “Technologically Advanced Small and Medium-sized Enterprises” in the City of Beijing, an honorable designation awarded by the MIIT of China.
For example, in January 2022, we were nominated to be one of the “Technologically Advanced Small and Medium-sized Enterprises” in the City of Beijing, an honorable designation awarded by the MIIT of China.
On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Outbound Data Transfer, which became effective on September 1, 2022, pursuant to which, to provide data abroad, including where the data collected and generated by data handlers are stored in China and can be accessed or invoked by overseas institutions, organizations or individuals, under any of the following circumstances, a data processor shall apply to the national cyberspace administration for the security assessment of the outbound data transfer through the local provincial cyberspace administration: (i) the data processor provides important data abroad; (ii) the critical information infrastructure operator or the data processor that has processed the personal information of over one million people provides personal information abroad; (iii) the data processor that has provided the personal information of over 100,000 people or the sensitive personal information of over 10,000 people cumulatively since January 1 of the previous year provides personal information abroad; and (iv) any other circumstance where an application for the security assessment of outbound data transfer is required by the national cyberspace administration.
On July 7, 2022, the CAC promulgated the Measures for the Security Assessment of Outbound Data Transfer, which became effective on September 1, 2022, pursuant to which, to provide data abroad, including where the data collected and generated by data handlers are stored in China and can be accessed or invoked by overseas institutions, organizations or individuals, under any of the following circumstances, a data processor shall apply to the national cyberspace administration for the security assessment of the outbound data transfer through the local provincial cyberspace administration: (i) the data processor provides important data abroad; (ii) the critical information infrastructure operator or the data processor that has processed the personal information of over one million people provides personal information abroad; (iii) the data processor that has provided the personal information of over 100,000 people or the sensitive personal information of over 10,000 people cumulatively since January 1 of the previous year provides personal information abroad; and (iv) any other circumstance where an application for the security assessment of outbound data transfer is required by the national cyberspace administration. 58 On March 22, 2024, the CAC promulgated the Provisions on Promoting and Regulating Cross-border Data Flows, which stipulate that, if the data have not been informed or publicly announced as important data by relevant PRC departments or regions, data processors are not required to apply for security assessment for cross-border provision of the data as important data.
As of the date of this annual report, we hold ten patents registered in the U.S. and seven patents registered in China, 68 registered trademarks, 74 registered copyrights, and ten registered domain names along with nine additional patent applications that are pending in the U.S. and China, all in the areas of artificial intelligence, data analytics and blockchain technologies.
As of the date of this annual report, we hold ten patents registered in the U.S. and nine patents registered in China, 68 registered trademarks, 75 registered copyrights, and ten registered domain names along with eight additional patent applications that are pending in the U.S. and China, all in the areas of artificial intelligence, data analytics and blockchain technologies. 51 Our technologies are well recognized by industry peers.
The SCNPC enacted the Decisions on the Maintenance of Internet Security on December 28, 2000, which was latest amended on August 27, 2009, providing that the following activities conducted through the internet are subject to criminal liabilities: (i) gaining improper entry into any of the computer information networks relating to state affairs, national defensive affairs, or cutting-edge science and technology; (ii) violation of relevant provisions of the State in the form of unauthorized interruption of any computer network or communication service, as a result of which the computer network or communication system cannot function normally; (iii) spreading rumor, slander or other harmful information via the internet for the purpose of inciting subversion of the state political power; (iv) stealing or divulging state secrets, intelligence or military secrets via internet; (v) spreading false or inappropriate commercial information; or (vi) infringing on the intellectual property.
The SCNPC enacted the Decisions on the Maintenance of Internet Security on December 28, 2000, which was latest amended on August 27, 2009, providing that the following activities conducted through the internet are subject to criminal liabilities: (i) gaining improper entry into any of the computer information networks relating to state affairs, national defensive affairs, or cutting-edge science and technology; (ii) violation of relevant provisions of the State in the form of unauthorized interruption of any computer network or communication service, as a result of which the computer network or communication system cannot function normally; (iii) spreading rumor, slander or other harmful information via the internet for the purpose of inciting subversion of the state political power; (iv) stealing or divulging state secrets, intelligence or military secrets via internet; (v) spreading false or inappropriate commercial information; or (vi) infringing on the intellectual property. 57 On November 7, 2016, the SCNPC promulgated the Cyber Security Law of the PRC, which became effective on June 1, 2017, pursuant to which, network operators shall comply with laws and regulations and fulfill their obligations to safeguard security of the network when conducting business and providing services.
As of December 31, 2021, 2022 and 2023, we had approximately 318,970, 431,220 and 638,020 active registered users, respectively.
As of December 31, 2022, 2023 and 2024, we had approximately 431,220, 638,020 and 780,320 active registered users, respectively.
Many factors contribute to our competitiveness, including an established social network based on acquaintances and linking various users, agent-centric business model to drive the operation of social networks, low frequency, high price and non-standard services, and continuously improved platform matching efficiency by data analytics and artificial intelligence technology. 39 As our business continues to grow rapidly, we face significant competition from a number of online and offline platforms and services to attract and retain users.
Many factors contribute to our competitiveness, including an established social network based on acquaintances and linking various users, agent-centric business model to drive the operation of social networks, low frequency, high price and non-standard services, and continuously improved platform matching efficiency by data analytics and artificial intelligence technology.
According to the Circular on Optimizing Administration of Foreign Exchange to Support the Development of Foreign-related Business, or Circular 8 issued by the SAFE on April 10, 2020, eligible enterprises are allowed to make domestic payments by using their capital funds, foreign credits and the income under capital accounts of overseas listing, with no need to provide the evidentiary materials concerning authenticity of such capital for banks on a transaction-by-transaction basis in advance, provided that their capital use shall be authentic and in line with provisions, and conform to the prevailing administrative regulations on the use of income under capital accounts.
According to the Circular of the State Administration of Foreign Exchange on Further Promoting Cross-Border Trade and Investment Facilitation, which was promulgated and implemented by the SAFE on October 23, 2019, non-investment foreign-funded enterprises are allowed to lawfully make domestic equity investments by using their capital on the premise of no violation of the Negative List and the authenticity and compliance with the regulations of domestic investment projects. 60 According to the Circular on Optimizing Administration of Foreign Exchange to Support the Development of Foreign-related Business, or Circular 8 issued by the SAFE on April 10, 2020, eligible enterprises are allowed to make domestic payments by using their capital funds, foreign credits and the income under capital accounts of overseas listing, with no need to provide the evidentiary materials concerning authenticity of such capital for banks on a transaction-by-transaction basis in advance, provided that their capital use shall be authentic and in line with provisions, and conform to the prevailing administrative regulations on the use of income under capital accounts.
And based on the Announcement on Certain Issues with Respect to the “Beneficial Owner” in Tax Treaties issued by the SAT on February 3, 2018 and effective from April 1, 2018, if an applicant’s business activities do not constitute substantive business activities, it could result in the negative determination of the applicant’s status as a “beneficial owner”, and consequently, the applicant could be precluded from enjoying the above-mentioned reduced income tax rate of 5% under the Double Tax Avoidance Arrangement.
And based on the Announcement on Certain Issues with Respect to the “Beneficial Owner” in Tax Treaties issued by the SAT on February 3, 2018 and effective from April 1, 2018, if an applicant’s business activities do not constitute substantive business activities, it could result in the negative determination of the applicant’s status as a “beneficial owner”, and consequently, the applicant could be precluded from enjoying the above-mentioned reduced income tax rate of 5% under the Double Tax Avoidance Arrangement. 62 Regulations on PRC Value-Added Tax According to the Interim Regulation of PRC on Value Added Tax promulgated by the State Council on December 13, 1993 and last revised on November 19, 2017, the value added tax (“VAT”) rate to be imposed on HR services shall be 6%.
We invest substantial resources to improve our technology and data infrastructure, strengthen our data processing and analytic capabilities, develop new solutions that are complementary to existing ones and find ways to better serve our users and corporate customers.
We believe it will have a positive effect on increasing the transaction closing rates. We invest substantial resources to improve our technology and data infrastructure, strengthen our data processing and analytic capabilities, develop new solutions that are complementary to existing ones and find ways to better serve our users and corporate customers.
For the years ended December 31, 2021, 2022 and 2023, net revenues from our recruitment services amounted to RMB497.5 million, RMB413.0 million and RMB659.0 million (US$92.8 million), respectively.
For the years ended December 31, 2022, 2023 and 2024, net revenues from our recruitment services amounted to RMB413.0 million, RMB659.0 million and RMB216.1 million (US$29.6 million), respectively.
The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations.
The revised Provisions require that, including but not limited to (a) a domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals or entities including securities companies, securities service providers and overseas regulators, any documents and materials that contain state secrets or working secrets of government agencies, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level; and (b) domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant individuals and entities including securities companies, securities service providers and overseas regulators, any other documents and materials that, if leaked, will be detrimental to national security or public interest, shall strictly fulfill relevant procedures stipulated by applicable national regulations. 64 On or after March 31, 2023, any failure or perceived failure by the Company or PRC subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in that the relevant entities would be held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime.
In January 2016, the State Administration of Taxation, or SAT, the Ministry of Science and Technology, and the Ministry of Finance, or MOF, jointly issued the Administrative Rules for the Certification of High and New Technology Enterprises, specifying the criteria and procedures for the certification of High and New Technology Enterprises. 46 Regulations Relating to Dividend Withholding Tax Pursuant to the EIT Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rate of 10%.
Regulations Relating to Dividend Withholding Tax Pursuant to the EIT Law and its implementation rules, if a non-resident enterprise has not set up an organization or establishment in the PRC or has set up an organization or establishment but the income derived has no actual connection with such organization or establishment, it will be subject to a withholding tax on its PRC-sourced income at a rate of 10%.
For the years ended December 31, 2021, 2022 and 2023, our gross profit amounted to RMB179.1 million, RMB215.2 million and RMB418.6 million (US$59.0 million), respectively, representing a year-over-year increase of 20.2% and 94.5%, respectively.
For the years ended December 31, 2022, 2023 and 2024, our gross profit amounted to RMB215.2 million, RMB418.6 million and RMB357.4 million (US$49.0 million), respectively, representing an increase of 94.5% and a decrease of 14.6%, respectively.
Where a project is carried out by two or more investors together, the investor making a larger amount of investment shall be responsible for applying for the approval or record-filing after obtaining the consent of other investors. 45 Pursuant to the Administrative Measures on Overseas Investment issued by MOFCOM on September 6, 2014 and became effective on October 6, 2014, where the outbound investment carried out by an enterprise involves sensitive countries and regions and sensitive industries, verification management shall be implemented, and archive filing management shall be implemented for other circumstances of outbound investment of an enterprise.
Pursuant to the Administrative Measures on Overseas Investment issued by MOFCOM on September 6, 2014 and became effective on October 6, 2014, where the outbound investment carried out by an enterprise involves sensitive countries and regions and sensitive industries, verification management shall be implemented, and archive filing management shall be implemented for other circumstances of outbound investment of an enterprise.
As of the date of this annual report, we have not received any claim from any third party against us on the ground of infringement of such party’s right to data protection as provided by the PRC Civil Code or any applicable laws and regulations in the PRC, nor have we been subject to any administrative penalties due to violation of applicable data protection and privacy laws and regulations in China. 40 Insurance We participate in various government statutory social security plans, including a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan and a housing provident fund.
As of the date of this annual report, we have not received any claim from any third party against us on the ground of infringement of such party’s right to data protection as provided by the PRC Civil Code or any applicable laws and regulations in the PRC, nor have we been subject to any administrative penalties due to violation of applicable data protection and privacy laws and regulations in China.
Our business of connecting individual users with business customers constitutes an intermediary service, and our contracts with business customers are intermediation contracts under the Contract Law and the Civil Code, as a result, the performances, explanation and disputes under such contacts shall be regulated by the Contract Law and the Civil Code. 42 We have obtained such human resource services licenses which remain in full force and effect as of the date of this annual report.
Our business of connecting individual users with business customers constitutes an intermediary service, and our contracts with business customers are intermediation contracts under the Contract Law and the Civil Code, as a result, the performances, explanation and disputes under such contacts shall be regulated by the Contract Law and the Civil Code.
Any organization or individual that need to obtain personal information of others shall obtain such information legally and ensure the safety of such information, and shall not illegally collect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal information of others. 43 On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the PRC, or the Personal Information Protection Law, which became effective on November 1, 2021, pursuant to which, personal information processors shall be responsible for their personal information processing activities, and take necessary measures to guarantee the security of the personal information they process.
On August 20, 2021, the SCNPC promulgated the Personal Information Protection Law of the PRC, or the Personal Information Protection Law, which became effective on November 1, 2021, pursuant to which, personal information processors shall be responsible for their personal information processing activities, and take necessary measures to guarantee the security of the personal information they process.
Data Security Our platform is based on analyzing the behaviors, profiles and interests of our users and their acquaintances in their own private mobile networks. Unless their acquaintances actively register themselves on our platform, either through our Star Career or Columbus applications or Tencent’s mini-program, we do not collect personal information about our users’ acquaintances.
Unless their acquaintances actively register themselves on our platform, either through our Star Career or Columbus applications or Tencent’s mini-program, we do not collect personal information about our users’ acquaintances.
As of December 31, 2023, we had approximately 638,020 active registered users on our proprietary platforms, Star Career and Columbus, through which the users of our platforms will receive customized job recommendations and work as talent scouts to source suitable candidates for our corporate customers through their own trusted and private social network, as well as receive trainings and other value-added services.
As of December 31, 2024, we had approximately 780,320 active registered users on our proprietary platforms, Star Career and Columbus , through which the users of our platforms will receive customized job recommendations and work as talent scouts to source suitable candidates for our corporate customers through their own trusted and private social network, as well as receive trainings and other value-added services. 48 For the years ended December 31, 202 2, 2023 and 2024, our total revenue amounted to RMB766.6 million, RMB1,474.0 million and RMB1,063.4 million (US$145.7 million), respectively, representing an increase of 92.3% and a decrease of 27.9%, respectively.
Our continued success depends upon our ability to protect our core technology and intellectual property. We rely on a combination of confidentiality clauses, contractual commitments, trade secret protections, copyrights, trademarks, patents, and other legal rights to protect our intellectual property and know-how.
We rely on a combination of confidentiality clauses, contractual commitments, trade secret protections, copyrights, trademarks, patents, and other legal rights to protect our intellectual property and know-how. We enter into confidentiality and proprietary rights agreements with our employees, consultants and business partners, and we control access to and distribution of our proprietary information.
As of the date of this annual report, we hold ten patents registered in the U.S. and seven patents registered in China, 68 registered trademarks, 74 registered copyrights, and ten registered domain names along with nine additional patent applications that are pending in the U.S. and China.
As of the date of this annual report, we hold ten patents registered in the U.S. and nine patents registered in China, 68 registered trademarks, 75 registered copyrights, and ten registered domain names along with eight additional patent applications that are pending in the U.S. and China. 53 According to Frost & Sullivan, we ranked fourth among the well-known platforms in the human capital management industry in China in terms of the number of patents we owned as of December 31, 2022.
On June 29, 2018, the State Council issued the Interim Regulations for the Human Resources Market, effective on October 1, 2018, according to which, the human resources services (the “HR services”) providers include public HR service providers established by the relevant PRC governmental authorities and commercial HR service providers.
In addition, this regulation also reiterates the requirements under the Employment Promotion Law that as a talent intermediary service agency, we are prohibited from providing fake information, making false promises and publishing fake recruitment advertisement. 56 On June 29, 2018, the State Council issued the Interim Regulations for the Human Resources Market, effective on October 1, 2018, according to which, the human resources services (the “HR services”) providers include public HR service providers established by the relevant PRC governmental authorities and commercial HR service providers.
In addition, we ranked first among all these platforms in terms of the total number of patents registered in the U.S. as of December 31, 2022. 38 The core pillars that support the foundation of our technologies and platforms are: ● Artificial intelligence and machine learning.
In addition, we ranked first among all these platforms in terms of the total numbers of patents registered in the U.S. as of December 31, 2022. Our continued success depends upon our ability to protect our core technology and intellectual property.
Our team of human capital management experts and AI/machine learning scientists constantly refine the learning models and AI methods. As we process and analyze more data, we uncover more features from data that are used to further improve our capabilities. ● Data Analytics.
As we process and analyze more data, we uncover more features from data that are used to further improve our capabilities. ● Data Analytics. Our rich set of proprietary and patented data analytics algorithms collaborate with our AI/machine learning models to offer advanced, predictive, and prescriptive analytics to our corporate customers. ● Blockchain.
We develop, train, and test our patented machine learning models and AI systems that offer industry-specific and actionable insights for our users. Our platforms offer real-time personalized recommendations. Our systems match up providers and requestors with the most relevant products and services based on their interests, behaviors, profiles and historical transaction records.
The core pillars that support the foundation of our technologies and platforms are: ● Artificial intelligence and machine learning. We develop, train, and test our patented machine learning models and AI systems that offer industry-specific and actionable insights for our users. Our platforms offer real-time personalized recommendations.
Information Technology Services Our information technology services are aimed at generating sales leads for our corporate customers who offer products and services that our users and their acquaintances may find interesting.
For the years ended December 31, 2022, 2023 and 2024, net revenues from our other services amounted to RMB51.6 million, RMB101.0 million and RMB62.2 million (US$8.5 million), respectively. Information Technology Services Our information technology services are aimed at generating sales leads for our corporate customers who offer products and services that our users and their acquaintances may find interesting.
The second one is a fully distributed referral tracking system that monitors referral transactions. Thus, the monetization of referrals is possible because the transaction’s traceability and transparency foster trust among participants. We believe it will have a positive effect on increasing the transaction closing rates.
Our platforms offer two novel services to our users based on our patented blockchain technology. The first one is a secure, reliable, and trusted credentials vault for our users. The second one is a fully distributed referral tracking system that monitors referral transactions. Thus, the monetization of referrals is possible because the transaction’s traceability and transparency foster trust among participants.
Attributable to our network of high-skilled freelancers and specialized companies, our corporate customers are able to delegate certain tasks to third-party contractors through us and focus on developing their businesses in a more cost-efficient way. 37 For the years ended December 31, 2021, 2022 and 2023, net revenues from our outsourcing services amounted to RMB113.8 million, RMB301.9 million and RMB714.0 million (US$100.6 million), respectively, representing a year-over-year growth of 165.3% and 136.5%, respectively.
Our outsourcing services help us build a close partnership with large corporations, differentiating us from traditional human capital management companies. Attributable to our network of high-skilled freelancers and specialized companies, our corporate customers are able to delegate certain tasks to third-party contractors through us and focus on developing their businesses in a more cost-efficient way.
Even if our efforts are successful, we may incur significant costs in defending our rights. From time to time, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights.
From time to time, third parties may initiate litigation against us alleging infringement of their proprietary rights or declaring their non-infringement of our intellectual property rights. Data Security Our platform is based on analyzing the behaviors, profiles and interests of our users and their acquaintances in their own private mobile networks.
We enter into confidentiality and proprietary rights agreements with our employees, consultants and business partners, and we control access to and distribution of our proprietary information. We intend to protect our intellectual properties vigorously, but there can be no assurance that our efforts will be successful.
We intend to protect our intellectual properties vigorously, but there can be no assurance that our efforts will be successful. Even if our efforts are successful, we may incur significant costs in defending our rights.
Our service fees and the forms of the outsourcing service agreement are usually determined on a case-by-case basis and are subject to market conditions and mutual negotiations each time an order is placed. Pursuant to the outsourcing service agreement that we sign with the corporate customers, we will receive scheduled payments upon project acceptance and satisfaction of key performance indicators.
Pursuant to the outsourcing service agreement that we sign with the corporate customers, we will receive scheduled payments upon project acceptance and satisfaction of key performance indicators. Other Services We launched other services as value-added services in August 2021, which include information technology services and training services.
Removed
For the years ended December 31, 2021, 2022 and 2023, our total revenue amounted to RMB652.2 million, RMB766.6 million and RMB1,474.0 million (US$207.6 million), respectively, representing a year-over-year increase of 17.5% and 92.3%, respectively.
Added
For the years ended December 31, 2022, 2023 and 2024, net revenues from our outsourcing services amounted to RMB301.9 million, RMB714.0 million and RMB785.1 million (US$107.6 million), respectively, representing a year-over-year growth of 136.5% and 10.0%, respectively. 50 Our service fees and the forms of the outsourcing service agreement are usually determined on a case-by-case basis and are subject to market conditions and mutual negotiations each time an order is placed.
Removed
Our outsourcing services help us build a close partnership with large corporations, differentiating us from traditional human capital management companies.
Added
Our systems match up providers and requestors with the most relevant products and services based on their interests, behaviors, profiles and historical transaction records. Our team of human capital management experts and AI/machine learning scientists constantly refine the learning models and AI methods.
Removed
Other Services We launched other services as value-added services in August 2021, which include information technology services and training services. For the years ended December 31, 2021, 2022 and 2023, net revenues from our other services amounted to RMB41.0 million, RMB51.6 million and RMB101.0 million (US$14.2 million), respectively.
Added
As our business continues to grow rapidly, we face significant competition from a number of online and offline platforms and services to attract and retain users.
Removed
According to Frost & Sullivan, we ranked fourth among the well-known platforms in the human capital management industry in China in terms of the number of patents we owned as of December 31, 2022.
Added
Insurance We participate in various government statutory social security plans, including a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan and a housing provident fund.
Removed
Our rich set of proprietary and patented data analytics algorithms collaborate with our AI/machine learning models to offer advanced, predictive, and prescriptive analytics to our corporate customers. ● Blockchain. Our platforms offer two novel services to our users based on our patented blockchain technology. The first one is a secure, reliable, and trusted credentials vault for our users.
Added
We have obtained such human resource services licenses which remain in full force and effect as of the date of this annual report.
Removed
In addition, this regulation also reiterates the requirements under the Employment Promotion Law that as a talent intermediary service agency, we are prohibited from providing fake information, making false promises and publishing fake recruitment advertisement.
Added
Any organization or individual that need to obtain personal information of others shall obtain such information legally and ensure the safety of such information, and shall not illegally collect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal information of others.
Removed
On November 7, 2016, the SCNPC promulgated the Cyber Security Law of the PRC, which became effective on June 1, 2017, pursuant to which, network operators shall comply with laws and regulations and fulfill their obligations to safeguard security of the network when conducting business and providing services.
Added
Where a project is carried out by two or more investors together, the investor making a larger amount of investment shall be responsible for applying for the approval or record-filing after obtaining the consent of other investors.
Removed
On March 22,2024, the CAC promulgated the Provisions on Promoting and Regulating Cross-border Data Flows, which stipulate that, if the data have not been informed or publicly announced as important data by relevant PRC departments or regions, data processors are not required to apply for security assessment for cross-border provision of the data as important data.
Added
In January 2016, the State Administration of Taxation, or SAT, the Ministry of Science and Technology, and the Ministry of Finance, or MOF, jointly issued the Administrative Rules for the Certification of High and New Technology Enterprises, specifying the criteria and procedures for the certification of High and New Technology Enterprises.
Removed
According to the Circular of the State Administration of Foreign Exchange on Further Promoting Cross-Border Trade and Investment Facilitation, which was promulgated and implemented by the SAFE on October 23, 2019, non-investment foreign-funded enterprises are allowed to lawfully make domestic equity investments by using their capital on the premise of no violation of the Negative List and the authenticity and compliance with the regulations of domestic investment projects.
Removed
The designated foreign exchange bank shall handle the formalities for the domestic institution after an authenticity check.
Removed
Regulations on PRC Value-Added Tax According to the Interim Regulation of PRC on Value Added Tax promulgated by the State Council on December 13, 1993 and last revised on November 19, 2017, the VAT rate to be imposed on HR services shall be 6%.
Removed
On or after March 31, 2023, any failure or perceived failure by the Company or PRC subsidiaries to comply with the above confidentiality and archives administration requirements under the revised Provisions and other PRC laws and regulations may result in that the relevant entities would be held legally liable by competent authorities, and referred to the judicial organ to be investigated for criminal liability if suspected of committing a crime. 48 E.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

95 edited+21 added−29 removed95 unchanged
This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The results of operations in any period are not necessarily indicative of the results that may be expected for any future period.
This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The results of operations in any period are not necessarily indicative of the results that may be expected for any future period.
Our net revenues are presented net of business tax and surcharge.
Our net revenues are presented net of business tax and surcharge.
This increase was primarily attributable to the increase of recognized of deferred tax assets for net operating loss carry forward due to the additional deduction of research and development expenses.
This increase was primarily attributable to the increase of recognized deferred tax assets for net operating loss carry forward due to the additional deduction of research and development expenses.
For the year ended December 31, 2022, our net cash provided by financing activities was RMB3.4 million, which was primarily attributable to proceeds from proceeds from short-term borrowings of RMB9.1 million, repayments of short-term borrowings of RMB3.1 million, and payment for deferred offering cost of RMB2.5 million.
For the year ended December 31, 2022, our net cash provided by financing activities was RMB3.4 million, which was primarily attributable to proceeds from short-term borrowings of RMB9.1 million, repayments of short-term borrowings of RMB3.1 million, and payment for deferred offering cost of RMB2.5 million.
For the years ended December 31, Variance 2022 2023 Amount Percentage RMB % RMB US$ % RMB % (In thousands, except percentages) Total revenues 766,571 100.0 1,473,958 207,603 100.0 707,387 92.3 Cost of revenues (551,373 ) (71.9 ) (1,055,406 ) (148,651 ) (71.6 ) (504,033 ) 91.4 Gross profit 215,198 28.1 418,552 58,952 28.4 203,354 94.5 Operating expenses Selling and marketing expenses (55,974 ) (7.3 ) (84,917 ) (11,960 ) (5.8 ) (28,943 ) 51.7 General and administrative expenses (47,733 ) (6.2 ) (108,376 ) (15,264 ) (7.4 ) (60,643 ) 127.0 Research and development expenses (79,868 ) (10.4 ) (157,543 ) (22,189 ) (10.7 ) (77,675 ) 97.3 Total operating expenses (183,575 ) (23.9 ) (350,836 ) (49,413 ) (23.8 ) (167,261 ) 91.1 Operating profit 31,623 4.2 67,716 9,539 4.6 36,093 114.1 Other income/(expenses) Financial income/(expenses), net 63 - (893 ) (126 ) (0.1 ) (956 ) (1,517.5 ) Other income, net 4,130 0.5 3,478 490 0.2 (652 ) (15.8 ) Total other income, net 4,193 0.5 2,585 364 0.1 (1,608 ) (38.3 ) Income before income tax expense 35,816 4.7 70,301 9,903 4.7 34,485 96.3 Income tax benefit 595 0.1 7,880 1,110 0.5 7,285 1,224.4 Net income 36,411 4.8 78,181 11,013 5.2 41,770 114.7 Net revenues Our net revenues increased by approximately RMB707.4 million, or 92.3%, from RMB766.6 million for the year ended December 31, 2022 to RMB1,474.0 million (US$207.6 million) for the year ended December 31, 2023, primarily attributable to a surge increase of net revenues from both outsourcing services and recruitment service.
For the years ended December 31, Variance 2022 2023 Amount Percentage RMB % RMB US$ % RMB % (In thousands, except percentages) Total revenues 766,571 100.0 1,473,958 207,603 100.0 707,387 92.3 Cost of revenues (551,373 ) (71.9 ) (1,055,406 ) (148,651 ) (71.6 ) (504,033 ) 91.4 Gross profit 215,198 28.1 418,552 58,952 28.4 203,354 94.5 Operating expenses Selling and marketing expenses (55,974 ) (7.3 ) (84,917 ) (11,960 ) (5.8 ) (28,943 ) 51.7 General and administrative expenses (47,733 ) (6.2 ) (108,376 ) (15,264 ) (7.4 ) (60,643 ) 127.0 Research and development expenses (79,868 ) (10.4 ) (157,543 ) (22,189 ) (10.7 ) (77,675 ) 97.3 Total operating expenses (183,575 ) (23.9 ) (350,836 ) (49,413 ) (23.8 ) (167,261 ) 91.1 Operating profit 31,623 4.2 67,716 9,539 4.6 36,093 114.1 Other (expenses) income Financial (expenses) income, net 63 — (893 ) (126 ) (0.1 ) (956 ) (1,517.5 ) Other income, net 4,130 0.5 3,478 490 0.2 (652 ) (15.8 ) Total other income, net 4,193 0.5 2,585 364 0.1 (1,608 ) (38.3 ) Income before income tax benefit 35,816 4.7 70,301 9,903 4.7 34,485 96.3 Income tax benefit 595 0.1 7,880 1,110 0.5 7,285 1,224.4 Net income 36,411 4.8 78,181 11,013 5.2 41,770 114.7 74 Net revenues Our net revenues increased by approximately RMB707.4 million, or 92.3%, from RMB766.6 million for the year ended December 31, 2022 to RMB1,474.0 million for the year ended December 31, 2023, primarily attributable to a surge increase of net revenues from both outsourcing services and recruitment service.
The following table sets forth a breakdown of our net revenues, each expressed in the absolute amount and as a percentage of our total net revenues, for the periods indicated: For the years ended December 31, Variance 2022 2023 Amount Percentage RMB % RMB US$ % RMB % (In thousands, except percentages) Net revenues: Recruitment service 413,047 53.9 659,049 92,825 44.7 246,002 59.6 Outsourcing service 301,890 39.4 713,957 100,559 48.4 412,067 136.5 Others 51,634 6.7 100,952 14,219 6.9 49,318 95.5 Total revenues 766,571 100.0 1,473,958 207,603 100.0 707,387 92.3 55 Net revenues from recruitment services increased by approximately RMB246.0 million, or 59.6%, from RMB413.0 million for the year ended December 31, 2022 to RMB659.0 million (US$92.8 million) for the year ended December 31, 2023.
The following table sets forth a breakdown of our net revenues, each expressed in the absolute amount and as a percentage of our total net revenues, for the periods indicated: For the years ended December 31, Variance 2022 2023 Amount Percentage RMB % RMB US$ % RMB % (In thousands, except percentages) Net revenues: Recruitment service 413,047 53.9 659,049 92,825 44.7 246,002 59.6 Outsourcing service 301,890 39.4 713,957 100,559 48.4 412,067 136.5 Others 51,634 6.7 100,952 14,219 6.9 49,318 95.5 Total revenues 766,571 100.0 1,473,958 207,603 100.0 707,387 92.3 Net revenues from recruitment services increased by approximately RMB246.0 million, or 59.6%, from RMB413.0 million for the year ended December 31, 2022 to RMB659.0 million for the year ended December 31, 2023.
We identify only one performance obligation to provide those services and recognize revenue over time based on the amount of a fixed total price, or a fixed unit price times key performance indicators or hours charged. The contract payment is not subject to any variable consideration, refund, cancellation, or termination provision.
We identify only one performance obligation to provide those services and recognize revenue over time based on the amount of a fixed total price, or a fixed unit price times key performance indicators or hours charged. 85 The contract payment is not subject to any variable consideration, refund, cancellation, or termination provision.
For the years ended December 31, Variance 2022 2023 Amount Percentage RMB % RMB US$ % RMB % (In thousands, except percentages) Gross profits: Recruitment service 96,323 23.3 145,659 20,516 22.1 49,336 51.2 Outsourcing service 100,928 33.4 237,483 33,449 33.3 136,555 135.3 Others 17,947 34.8 35,410 4,987 35.1 17,463 97.3 Total gross profits 215,198 28.1 418,552 58,952 28.4 203,354 94.5 As a result of the foregoing, we recorded a gross profit of RMB215.2 million and RMB418.6 million (US$59.0 million) for the years ended December 31, 2022 and 2023, respectively, representing gross profit margin of 28.1% and 28.4% in 2022 and 2023, respectively.
For the years ended December 31, Variance 2022 2023 Amount Percentage RMB % RMB US$ % RMB % (In thousands, except percentages) Gross profits: Recruitment service 96,323 23.3 145,659 20,516 22.1 49,336 51.2 Outsourcing service 100,928 33.4 237,483 33,449 33.3 136,555 135.3 Others 17,947 34.8 35,410 4,987 35.1 17,463 97.3 Total gross profits 215,198 28.1 418,552 58,952 28.4 203,354 94.5 As a result of the foregoing, we recorded a gross profit of RMB215.2 million and RMB418.6 million for the years ended December 31, 2022 and 2023, respectively, representing gross profit margin of 28.1% and 28.4% in 2022 and 2023, respectively.
Outsourcing services We derive net revenues from service fees paid by corporate customers for providing overall outsourcing solutions, mostly IT-related services, based on their specific requirements. 52 Other services We launched other services as value-added services in August 2021, which is to provide information technology services and training services for corporate customers.
Outsourcing services We derive net revenues from service fees paid by corporate customers for providing overall outsourcing solutions, mostly IT-related services, based on their specific requirements. Other services We launched other services as value-added services in August 2021, which is to provide information technology services and training services for corporate customers.
In addition, these restrictions have no impact on the ability for us to meet our cash obligations. 63 To utilize the proceeds, we may make additional capital contributions to our PRC subsidiary, establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, or make loans to the PRC subsidiaries.
In addition, these restrictions have no impact on the ability for us to meet our cash obligations. To utilize the proceeds, we may make additional capital contributions to our PRC subsidiary, establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, or make loans to the PRC subsidiaries.
The following table sets forth a breakdown of our cost of revenues by revenue streams, expressed as an absolute amount and as a percentage of the total cost of revenues, for the periods indicated.
The following table sets forth a breakdown of our cost of revenues by revenue streams, expressed as an absolute amount and as a percentage of the total net revenues, for the periods indicated.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS Overview We are the largest technology-driven online agent-centric human capital management service provider targeting professionals based on PaaS in China in terms of the number of active users in the human resources industry as of June 30, 2022 and total net revenues for the year ended December 31, 2021.
ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS A. Operating Results Overview We are the largest technology-driven online agent-centric human capital management service provider targeting professionals based on PaaS in China in terms of the number of active users in the human resources industry as of June 30, 2022 and total net revenues for the year ended December 31, 2021.
Cost related to other services increased by approximately RMB31.9 million, or 94.6%, from RMB33.7 million for the year ended December 31, 2022 to RMB65.5 million (US$9.2 million) for the year ended December 31, 2023, primarily attributable to the increase in cost paid to workers in preparation of expansion on insurance data collection and promotion services, generally in line with our revenue growth in other services.
Cost related to other services increased by approximately RMB31.9 million, or 94.6%, from RMB33.7 million for the year ended December 31, 2022 to RMB65.5 million for the year ended December 31, 2023, primarily attributable to the increase in cost paid to workers in preparation of expansion on insurance data collection and promotion services, generally in line with our revenue growth in other services.
Selling and marketing expenses Our selling and marketing expenses increased by 51.7% from RMB56.0 million for the year ended December 31, 2022 to RMB84.9 million (US$12.0 million) for the year ended December 31, 2023, as a result of continuous investment in brand promotion of our proprietary platforms, Star Career and Columbus for promotion activities that directly contribute to new user growth and acquisition of customer leads .
Selling and marketing expenses Our selling and marketing expenses increased by 51.7% from RMB56.0 million for the year ended December 31, 2022 to RMB84.9 million for the year ended December 31, 2023, as a result of continuous investment in brand promotion of our proprietary platforms, Star Career and Columbus for promotion activities that directly contribute to new user growth and acquisition of customer leads .
Our other non-operating income, net increased from approximately RMB4.1 million for the year ended December 31, 2022 to approximately RMB3.5 million (US$0.5 million) for the year ended December 31, 2023, which was primarily attributable to the increased additional VAT deduction. Financial expenses mainly consist of interest income and expense, bank charges and exchange gain or loss.
Our other non-operating income, net increased from approximately RMB4.1 million for the year ended December 31, 2022 to approximately RMB3.5 million for the year ended December 31, 2023, which was primarily attributable to the increased additional VAT deduction. Financial expenses mainly consist of interest income and expense, bank charges and exchange gain or loss.
Our estimation of allowance for doubtful accounts considers factors such as the age of the amounts due, the customer’s payment history, credit-worthiness and other specific circumstances related to the accounts. An allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable.
Our estimation of allowance for credit losses considers factors such as the age of the amounts due, the customer’s payment history, credit-worthiness and other specific circumstances related to the accounts. An allowance for credit losses is recorded in the period in which a loss is determined to be probable.
Operating expenses Our operating expenses increased from RMB183.6 million for the year ended December 31, 2022 to RMB350.8 million (US$49.4 million) for the year ended December 31, 2023, representing a year-over-year increase of 91.1%, primarily due to the following: General and administrative expenses Our general and administrative expenses increased by 127.0% from RMB47.7 million for the year ended December 31, 2022 to RMB108.4 million (US$15.3 million) for the year ended December 31, 2023, which was primarily attributable to an increase of RMB60.1 million (US$8.5 million) in Certified Career Resources Planner Certificate user support operation expenses as the user number increased and more experts from various industries were invited to maintain activity level of users; offset by an increase in productivity of operations resulting in a decrease of RMB7.9 million (US$1.1 million) in professional service fee. 57 Research and development expenses Our research and development expenses increased by 97.3% from RMB79.9 million for the year ended December 31, 2022 to RMB157.5 million (US$22.2 million) for the year ended December 31, 2023, which was primarily attributable to (i) an increase of RMB74.0 million (US$10.4 million) in technologies services expenses resulting from the continuous investments in AI-enabled technologies including Generative Pre-trained Transformer (GPT) and related artificial intelligence generated content technologies (AIGC), and investments in our proprietary platforms, Star Career and Columbus , which gave us a cutting edge in business expansion and market competition; and (ii) a total increase of RMB3.4 million (US$0.5 million) in other expenses related to research and development functions.
Operating expenses Our operating expenses increased from RMB183.6 million for the year ended December 31, 2022 to RMB350.8 million for the year ended December 31, 2023, representing a year-over-year increase of 91.1%, primarily due to the following: General and administrative expenses Our general and administrative expenses increased by 127.0% from RMB47.7 million for the year ended December 31, 2022 to RMB108.4 million for the year ended December 31, 2023, which was primarily attributable to an increase of RMB60.1 million in Certified Career Resources Planner Certificate user support operation expenses as the user number increased and more experts from various industries were invited to maintain activity level of users; offset by an increase in productivity of operations resulting in a decrease of RMB7.9 million in professional service fee. 76 Research and development expenses Our research and development expenses increased by 97.3% from RMB79.9 million for the year ended December 31, 2022 to RMB157.5 million for the year ended December 31, 2023, which was primarily attributable to (i) an increase of RMB74.0 million in technologies services expenses resulting from the continuous investments in AI-enabled technologies including Generative Pre-trained Transformer (GPT) and related artificial intelligence generated content technologies (AIGC), and investments in our proprietary platforms, Star Career and Columbus , which gave us a cutting edge in business expansion and market competition; and (ii) a total increase of RMB3.4 million in other expenses related to research and development functions.
Therefore, the amendment under 2021 SPA should be accounted for as a modification, and the difference between the fair value of redeemable preferred shares of non-controlling interest immediately before and after the modification should be recognized as reduction of accumulated deficit as a deemed dividend. 74
Therefore, the amendment under 2021 SPA should be accounted for as a modification, and the difference between the fair value of redeemable preferred shares of non-controlling interest immediately before and after the modification should be recognized as reduction of accumulated deficit as a deemed dividend. 87
Cost of revenues Our cost of revenues increased by approximately RMB504.0 million, or 91.4%, from RMB551.4 million for the year ended December 31, 2022 to RMB1,055.4 million (US$148.7 million) for the year ended December 31, 2023, primarily attributable to the increase in cost related to recruitment services and outsourcing services as a result of our business growth.
Cost of revenues Our cost of revenues increased by approximately RMB504.0 million, or 91.4%, from RMB551.4 million for the year ended December 31, 2022 to RMB1,055.4 million for the year ended December 31, 2023, primarily attributable to the increase in cost related to recruitment services and outsourcing services as a result of our business growth.
The recovery of these industries required a substantial workforce, thereby increasing the demand for recruitment services. Net revenues from outsourcing services increased by approximately RMB412.1 million, or 136.5%, from RMB301.9 million for the year ended December 31, 2022 to RMB714.0 million (US$100.6 million) for the year ended December 31, 2023.
The recovery of these industries required a substantial workforce, thereby increasing the demand for recruitment services. Net revenues from outsourcing services increased by approximately RMB412.1 million, or 136.5%, from RMB301.9 million for the year ended December 31, 2022 to RMB714.0 million for the year ended December 31, 2023.
Net revenues from other services increased by RMB49.3 million, or 95.5%, from RMB51.6 million for the year ended December 31, 2022 to RMB101.0 million (US$14.2 million) for the year ended December 31, 2023. The increase was mainly because of the business expansion on insurance data collection and promotion services.
Net revenues from other services increased by RMB49.3 million, or 95.5%, from RMB51.6 million for the year ended December 31, 2022 to RMB101.0 million for the year ended December 31, 2023. The increase was mainly because of the business expansion on insurance data collection and promotion services.
Inflation Since our inception, inflation in China has not materially affected our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for 2021, 2022 and 2023, were an increase of 1.5%, 1.8% and 2.0%, respectively.
Inflation Since our inception, inflation in China has not materially affected our results of operations. According to the National Bureau of Statistics of China, the year-over-year percent changes in the consumer price index for 2022, 2023 and 2024, were an increase of 1.8%, 2.0%, and 0.2%, respectively.
The following table sets forth a breakdown of our cost of revenues by revenue streams, expressed as an absolute amount and as a percentage of the total cost of revenues, for the periods indicated.
The following table sets forth a breakdown of our cost of revenues by revenue streams, expressed as an absolute amount and as a percentage of the net revenues, for the periods indicated.
For the years ended December 31, Variance 2022 2023 Amount Percentage RMB % RMB US$ % RMB % (In thousands, except percentages) Cost of revenues: Recruitment service 316,724 41.3 513,390 72,309 34.8 196,666 62.1 Outsourcing service 200,962 26.2 476,474 67,110 32.3 275,512 137.1 Others 33,687 4.4 65,542 9,232 4.5 31,855 94.6 Total cost of revenues 551,373 71.9 1,055,406 148,651 71.6 504,033 91.4 Cost related to recruitment services increased by approximately RMB196.7 million, or 62.1%, from RMB316.7 million for the year ended December 31, 2022 to RMB513.4 million (US$72.3 million) for the year ended December 31, 2023, primarily attributable to the increase in cost paid to flexible workers, talent scouts and other third-party services providers, generally in line with our revenue growth in recruitment services. 56 Cost related to outsourcing services increased by approximately RMB275.5 million, or 137.1%, from RMB201.0 million for the year ended December 31, 2022 to RMB476.5 million (US$67.1 million) for the year ended December 31, 2023, primarily attributable to the increase in cost paid to workers and third-party services providers engaged in the solution process, generally in line with our revenue growth in outsourcing services.
For the years ended December 31, Variance 2022 2023 Amount Percentage RMB % RMB US$ % RMB % (In thousands, except percentages) Cost of revenues: Recruitment service 316,724 41.3 513,390 72,309 34.8 196,666 62.1 Outsourcing service 200,962 26.2 476,474 67,110 32.3 275,512 137.1 Others 33,687 4.4 65,542 9,232 4.5 31,855 94.6 Total cost of revenues 551,373 71.9 1,055,406 148,651 71.6 504,033 91.4 75 Cost related to recruitment services increased by approximately RMB196.7 million, or 62.1%, from RMB316.7 million for the year ended December 31, 2022 to RMB513.4 million for the year ended December 31, 2023, primarily attributable to the increase in cost paid to flexible workers, talent scouts and other third-party services providers, generally in line with our revenue growth in recruitment services.
Our financial expenses, changed from RMB62,777 for the year ended December 31, 2022 to financial income of RMB0.9 million (US$0.1 million) for the year ended December 31, 2023 primarily due to the increased bank interest expenses. Income taxes Our income tax benefits were RMB0.6 million and RMB7.9 million (US$1.1 million) for the years ended December 31, 2022 and 2022, respectively.
Our financial expenses, changed from RMB62,777 for the year ended December 31, 2022 to financial income of RMB0.9 million for the year ended December 31, 2023 primarily due to the increased bank interest expenses. Income taxes Our income tax benefits were RMB0.6 million and RMB7.9 million for the years ended December 31, 2022 and 2023, respectively.
See “Risk Factors — Risks Relating to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of this offering to make loans or additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” We are able to use all of the net proceeds from this offering for investment in our PRC operations by funding our PRC subsidiary through capital contributions, which is not subject to any statutory limit on the amount under PRC laws and regulations.
Risk Factors — Risks Related to Doing Business in China — PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of our subsequent offerings to make loans or additional capital contributions to our PRC subsidiaries in China, which could materially and adversely affect our liquidity and our ability to fund and expand our business.” We are able to use all of the net proceeds from this offering for investment in our PRC operations by funding our PRC subsidiary through capital contributions, which is not subject to any statutory limit on the amount under PRC laws and regulations.
We consider our critical accounting estimates include (i) allowance for doubtful accounts for accounts receivable; (ii) useful lives of software; (iii) valuation allowance of deferred tax assets, and (iv) valuation of redeemable preferred shares of non-controlling interest. Accounts receivable, net Accounts receivable, net are stated at the original amount less allowances for doubtful accounts.
We consider our critical accounting estimates include (i) allowance for credit losses for accounts receivable; (ii) useful lives of software; (iii) valuation allowance of deferred tax assets, and (iv) valuation of redeemable preferred shares of non-controlling interest. 83 Accounts receivable, net Accounts receivable, net are stated at the original amount less allowances for credit losses.
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, 2023 to December 31, 2023 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial 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, 2025 that are reasonably likely to have a material and adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that would cause the disclosed financial information to be not necessarily indicative of future results of operations or financial conditions.
Unfavorable changes in any of these general factors could materially and adversely affect our business and results of operations. 49 Specific Factors Affecting Our Results of Operations While our business is influenced by general factors affecting the on-demand employment services market and workforce operational solution market in China generally, our results of operations are also directly affected by certain company-specific factors, including the following major factors: Our ability to expand our portfolio of users through delivering services with higher efficiency for human capital management Our core competitive strengths derive from our massive multidimensional data insights, powerful AI algorithm and big data capacity which enable us to effectively process the data and continuously improve our two-way matching accuracy.
Specific Factors Affecting Our Results of Operations While our business is influenced by general factors affecting the on-demand employment services market and workforce operational solution market in China generally, our results of operations are also directly affected by certain company-specific factors, including the following major factors: Our ability to expand our portfolio of users through delivering services with higher efficiency for human capital management Our core competitive strengths derive from our massive multidimensional data insights, powerful AI algorithm and big data capacity which enable us to effectively process the data and continuously improve our two-way matching accuracy.
While we currently see no material obstacles to completing the filing and registration procedures with respect to future capital contributions and loans to our PRC subsidiaries, we cannot assure you that we will be able to complete these filings and registrations on a timely basis, or at all.
While we currently see no material obstacles to completing the filing and registration procedures with respect to future capital contributions and loans to our PRC subsidiaries, we cannot assure you that we will be able to complete these filings and registrations on a timely basis, or at all. See “Item 3. Key Information — D.
Other income, net Other income, net consists of other non-operating income, net and financial expenses, net. Other non-operating income, net mainly consists of (i) additional deduction of VAT; and (ii) investment income, proceeds of interest from maturities of short-term investments.
Other income, net Other income, net consists of other non-operating income, net and financial expenses, net. Other non-operating income, net mainly consists of (i) additional deduction of VAT; (ii) investment income, proceeds of interest from maturities of short-term investments and (iii) income from disposal of subsidiaries.
Financing activities For the year ended December 31, 2023, our net cash provided by financing activities was RMB29.4 million (US$4.1 million), which was primarily attributable to proceeds from proceeds from short-term borrowings of RMB63.3 million (US$8.9 million), and offset by repayments of short-term borrowings of RMB29.8 million (US$4.2 million), and payment for deferred offering cost of RMB4.0 million (US$0.6 million).
For the year ended December 31, 2023, our net cash provided by financing activities was RMB29.4 million, which was primarily attributable to proceeds from proceeds from short-term borrowings of RMB63.3 million, and offset by repayments of short-term borrowings of RMB29.8 million, and payment for deferred offering cost of RMB4.0 million.
General and administrative expenses Our general and administrative expenses mainly consist of (i) payroll expenses, (ii) users support operation expenses, (iii) rental and depreciation expenses related to general and administrative functions, (iv) professional service fees including those related to IPO activities, (v) credit impairment losses and (vi) office and miscellaneous expenses.
General and administrative expenses Our general and administrative expenses mainly consist of (i) payroll expenses, (ii) users support operation expenses, (iii) rental and depreciation expenses related to general and administrative functions, (iv) professional service fees, (v) credit impairment losses and (vi) office and miscellaneous expenses.
Other income, net Total other income, net decreased by 38.3% from RMB4.2 million for the year ended December 31, 2022 to RMB 2.6 million (US$0.4 million) for the year ended December 31, 2023.
Other income, net Total other income, net decreased by 38.3% from RMB4.2 million for the year ended December 31, 2022 to RMB 2.6 million for the year ended December 31, 2023.
We believe that our continued investment in research and development is critical to our growth and expect that our research and development expenses will continue to increase in absolute amount as we seek to upgrade our PaaS platform and AI-enabled technologies to support our business growth.
We believe that our continued investment in research and development is critical to our growth and expect that our research and development expenses will continue to increase in absolute amount as we seek to upgrade our PaaS platform and AI-enabled technologies to support the clients’ demand.
See “Regulations — Regulations Relating to Foreign Exchange.” We expect approximately 20% of the net proceeds from this offering to be used to fund operations of our offshore subsidiaries and 80% of the net proceeds to be used to fund operations of our subsidiaries in the PRC in the form of RMB.
Business Overview — Regulations — Regulations Relating to Foreign Exchange.” We expect approximately 20% of the net proceeds from this offering to be used to fund operations of our offshore subsidiaries and 80% of the net proceeds to be used to fund operations of our subsidiaries in the PRC in the form of RMB.
Gross profits and margin The following table sets forth a breakdown of our gross profit, margin by revenue streams, expressed as an absolute amount and as a percentage of the total gross profit for the periods indicated.
Gross profits and margin The following table sets forth a breakdown of our gross profit, margin by revenue streams, expressed as an absolute amount and as a percentage of their corresponding revenues for the periods indicated.
Gross profits and margin The following table sets forth a breakdown of our gross profit, margin by revenue streams, expressed as an absolute amount and as a percentage of the total gross profit for the periods indicated.
Gross profits and margin The following table sets forth a breakdown of our gross profit, margin by revenue streams, expressed as an absolute amount and as a percentage of their corresponding revenues for the periods indicated.
Additionally, upon payments of dividends to our shareholders, no BVI withholding tax will be imposed. 68 Hong Kong Our subsidiaries, Lucas GC Limited (HK) is incorporated in Hong Kong and is subject to Hong Kong profits tax rate.
Additionally, upon payments of dividends to our shareholders, no BVI withholding tax will be imposed. Hong Kong Our subsidiaries, Lucas Star Global Limited and Lucas GC Limited (HK) are incorporated in Hong Kong and are subject to Hong Kong profits tax rate.
As of December 31, 2021, 2022 and 2023, we recognized valuation allowance of deferred tax assets of RMB1.7 million, RMB3.4 million and RMB3.0 million (US$0.4 million), respectively. 73 Valuation of redeemable preferred shares of non-controlling interest From year 2018 to 2021, Lucas Group China Limited, the operating subsidiary of the Group in the PRC, issued a series of shares to investors.
As of December 31, 2022, 2023 and 2024, we recognized valuation allowance of deferred tax assets of RMB3.4 million, RMB3.0 million and RMB10.2 million (US$1.4 million), respectively. 86 Valuation of redeemable preferred shares of non-controlling interest From year 2018 to 2021, Lucas Group China Limited, the operating subsidiary of the Group in the PRC, issued a series of shares to investors.
The increase was primarily driven by the increase of our corporate customers, which was attributable to (i) our marketing efforts in business line expansion; and (ii) the growing demands of corporate customers to develop IT system to optimize the business processes and reduce labor cost.
The increase was primarily driven by the increase of our corporate customers, which was attributable to (i) our continuing marketing efforts in business line expansion, (ii) the growing demands of customers to develop IT system to optimize the business processes and reduce labor cost, and (iii) our diversified products which can meet the needs of different customers.
To date, we have financed our working capital requirements from cash flow from operations, debt financings and capital contributions from our existing shareholders. We had cash and cash equivalents of RMB48.5 million and RMB30.1 million (US$4.2 million), and restricted cash of RMB0.8 million and RMB0.1 million (US$14) as of December 31, 2022 and 2023, respectively.
To date, we have financed our working capital requirements from cash flow from operations, debt financings and capital contributions from our existing shareholders. We had cash and cash equivalents of RMB30.1 million and RMB30.4 million (US$4.2 million), and restricted cash of RMB0.1 million and RMB1.3 million (US$0.2 million ) as of December 31, 2023 and 2024, respectively.
Net income As a result of the foregoing, our net income decreased by RMB3.4 million, from RMB39.8 million for the year ended December 31, 2021 to RMB36.4 million for the year ended December 31, 2022. 62 B. Liquidity and Capital Resources In assessing our liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments.
Net income As a result of the foregoing, our net income increased by RMB41.8 million, from RMB36.4 million for the year ended December 31, 2022 to RMB78.2 million for the year ended December 31, 2023. B. Liquidity and Capital Resources In assessing our liquidity, we monitor and analyze our cash on-hand and our operating and capital expenditure commitments.
The following five steps are applied to achieve the core principle of this standard: 1. Identification of the contract, or contracts, with the customer; 2. Identification of the performance obligations in the contract; 3. Determination of the transaction price; 4. Allocation of the transaction price to the performance obligations in the contract; and 5.
Net revenues are presented net of business tax and surcharges. The following five steps are applied to achieve the core principle of this standard: 1. Identification of the contract, or contracts, with the customer; 2. Identification of the performance obligations in the contract; 3. Determination of the transaction price; 4.
The contract consideration is determined by the days flexible workers have worked times their workday pay rate. Revenue from flexible employment services is recognized over time as the customers can simultaneously receive and consume the benefits in the period the flexible workers provide the service. The contract payment is not subject to any variable consideration, refund, cancellation, or termination provision.
Revenue from flexible employment services is recognized over time as the customers can simultaneously receive and consume the benefits in the period the flexible workers provide the service. The contract payment is not subject to any variable consideration, refund, cancellation, or termination provision.
We identify only one performance obligation in flexible employment recruitment services as the contract comprises of a series of distinct services that are substantially the same and have the same pattern of transfer to the corporate customers, which is to provide flexible workers in accordance with the demand orders.
We identify only one performance obligation in flexible employment recruitment services as the contract comprises of a series of distinct services that are substantially the same and have the same pattern of transfer to the corporate customers, which is to provide flexible workers in accordance with the demand orders. 84 The contract consideration is determined by the days flexible workers have worked times their workday pay rate.
Customers generally make the payment within one or two months after monthly reconciliation of service considerations with us. 72 Principal versus agent considerations For all the services provided, we consider ourselves the principal and recognizes revenue on a gross basis as we control the services through the following key considerations: ● We reserve the right to accept or reject the contracts or orders with the customers without involvement of the third parties, and direct the selected third-parties to provide services to the customers on our behalf.
Principal versus agent considerations For all the services provided, we consider ourselves the principal and recognizes revenue on a gross basis as we control the services through the following key considerations: ● We reserve the right to accept or reject the contracts or orders with the customers without involvement of the third parties, and direct the selected third-parties to provide services to the customers on our behalf.
For the year ended December 31, 2022, our net cash used in operating activities was RMB15.1 million, which was primarily attributable to (i) net income of RMB36.4 million, adjusted for depreciation of software and equipment of RMB3.3 million, and amortization of right-of-use assets of RMB0.6 million; (ii) a net decrease of advance to supplier of RMB4.5 million, net of the decrease of accounts payable, due to the decrease of prepayment for technology outsourcing service, recruitment service and brand promotion, and timely payment for accounts payable, offset by (i) an increase of accounts receivable of RMB44.9 million due to continuously increased corporate customers as a result of business expansion and higher penetration in market; (ii) a decrease of contract liabilities of RMB9.8 million due to less recognition of contract obligation with advance payments; and (iii) a decrease of accrued expenses and other current liabilities of RMB2.3 million due to timely repayment.
For the year ended December 31, 2023, our net cash used in operating activities was RMB36.4 million, which was primarily attributable to (i) net income of RMB78.2 million, adjusted for depreciation of software and equipment of RMB4.3 million, provision for credit losses of RMB11.7 million, and amortization of right-of-use assets of RMB0.7 million; (ii) a net increase of advance to supplier of RMB125.4 million, and decrease of accounts payable of RMB51.8 million, due to the increase of prepayment for technology outsourcing service, recruitment service and brand promotion as market demand recovery; (iii) a decrease in contract liabilities of RMB11.2 million due to less recognition of contract obligation with advance payments; (iv) an increase in deferred tax assets, net of RMB7.9 million as we expanded R&D investment for new products; offset by a decrease of accounts receivable of RMB63.7million due to collection from customers. 79 For the year ended December 31, 2022, our net cash used in operating activities was RMB15.1 million, which was primarily attributable to (i) net income of RMB36.4 million, adjusted for depreciation of software and equipment of RMB3.3 million, and amortization of right-of-use assets of RMB0.6 million; (ii) a net decrease of advance to supplier of RMB4.5 million, net of the decrease of accounts payable, due to the decrease of prepayment for technology outsourcing service, recruitment service and brand promotion, and timely payment for accounts payable, offset by (i) an increase of accounts receivable of RMB44.9 million due to continuously increased corporate customers as a result of business expansion and higher penetration in market; (ii) a decrease of contract liabilities of RMB9.8 million due to less recognition of contract obligation with advance payments; and (iii) a decrease of accrued expenses and other current liabilities of RMB2.3 million due to timely repayment.
Some of our accounting policies require a higher degree of judgment than others in their application. 69 The critical accounting policies, judgments and estimates that we believe to have the most significant impact on our consolidated financial statements are described below, which should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual report.
The critical accounting policies, judgments and estimates that we believe to have the most significant impact on our consolidated financial statements are described below, which should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual report.
However, loans by us to our PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE and capital contributions to our PRC subsidiaries are subject to the requirement of making necessary registration with competent governmental authorities in the PRC. 67 We may be unable to use these proceeds to grow our business until our PRC subsidiaries receive such proceeds in the PRC.
However, loans by us to our PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE and capital contributions to our PRC subsidiaries are subject to the requirement of making necessary registration with competent governmental authorities in the PRC.
The cash and cash equivalents and restricted cash disaggregated by currency denomination are as follows: As of December 31, 2022 As of December 31, 2023 Amount RMB equivalent Amount RMB equivalent (In thousands) Cash, cash equivalents and restricted cash: RMB 48,312 48,312 30,014 30,014 USD - - - 2 HKD 181 161 118 107 Restricted cash: USD - - 14 100 RMB 841 841 - - Total 49,314 30,223 We believe our current working capital is sufficient to support our operations for the next twelve months.
The cash and cash equivalents and restricted cash disaggregated by currency denomination are as follows: As of December 31, 2023 As of December 31, 2024 Amount RMB equivalent Amount RMB equivalent (In thousands) Cash, cash equivalents and restricted cash: RMB 30,014 30,014 6,802 6,802 USD - 2 1,961 14,312 HKD 118 107 9,859 9,266 Restricted cash: USD 14 100 - - RMB - - 1,281 1,281 Total 30,223 31,661 77 We believe our current working capital is sufficient to support our operations for the next twelve months.
Capital Expenditures We made capital expenditures of RMB24.1 million, RMB13.7 million and RMB12.1 million (US$1.7 million) for the years ended December 31, 2021,2022 and 2023, respectively. Our capital expenditures consisted primarily of expenditures related to software and equipment to support our platform-based operation.
Capital Expenditures We made capital expenditures of RMB13.7 million, RMB12.1 million and RMB44.7 million (US$6.1 million) for the years ended December 31, 2022, 2023 and 2024, respectively. Our capital expenditures consisted primarily of expenditures related to software and equipment to support our platform-based operation. We plan to fund our future capital expenditures with our existing cash balance.
The following table sets forth the components of operating expenses, in absolute amounts and as a percentage of our total net revenues for the periods indicated: For the years ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (In thousands, except percentages) Operating expenses Selling and marketing expenses 33,304 5.1 55,974 7.3 84,917 11,960 5.8 General and administrative expenses 38,428 5.9 47,733 6.2 108,376 15,264 7.4 Research and development expenses 70,246 10.8 79,868 10.4 157,543 22,189 10.7 Total operating expenses 141,978 21.8 183,575 23.9 350,836 49,413 23.9 Selling and marketing expenses Our selling and marketing expenses mainly consist of advertising expenses and market promotion expenses for promotion activities that directly contribute to new user growth and acquisition of customer leads.
The following table sets forth the components of operating expenses, in absolute amounts and as a percentage of our total net revenues for the periods indicated: For the years ended December 31, 2022 2023 2024 RMB % RMB % RMB US$ % (In thousands, except percentages) Operating expenses Selling and marketing expenses 55,974 7.3 84,917 5.8 74,514 10,208 7.0 General and administrative expenses 47,733 6.2 108,376 7.4 86,261 11,818 8.1 Research and development expenses 79,868 10.4 157,543 10.7 168,616 23,100 15.9 Total operating expenses 183,575 23.9 350,836 23.9 329,391 45,126 31.0 Selling and marketing expenses Our selling and marketing expenses mainly consist of advertising expenses and market promotion expenses for promotional activities that directly contribute to new user growth and acquisition of customer leads.
As of December 31, 2022 and December 31, 2023, we had approximately 431,220 and 638,020 active registered users, respectively.
As of December 31, 2023 and December 31, 2024, we had approximately 638,020 and 780,320 active registered users, respectively.
In accordance with ASC 606, we should recognize revenue to depict the transfer of promised services to customers in an amount that reflects the consideration to we expect to receive in exchange for those services, reduced by value added tax. Net revenues are presented net of business tax and surcharges.
Revenue recognition We recognize revenue pursuant to ASC 606, Revenue from Contracts with Customers (“ASC 606”). In accordance with ASC 606, we should recognize revenue to depict the transfer of promised services to customers in an amount that reflects the consideration to we expect to receive in exchange for those services, reduced by value added tax.
We recognized RMB5.3 million, RMB0.1 million and RMB11.5 million (US$1.6 million) credit losses for accounts receivable for the years ended December 31, 2021, 2022 and 2023.
We recognized allowance of credit losses of RMB0.1 million, RMB11.5 million and reversal of credit losses of RMB3.6 million (US$0.5 million) for accounts receivable for the years ended December 31, 2022, 2023 and 2024.
Cost of revenues The following table sets forth a breakdown of our cost of revenues both in absolute amount and as a percentage of our total net revenues for the periods presented: For the years ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (In thousands, except percentages) Cost of revenues: Recruitment service 373,206 57.2 316,724 41.3 513,390 72,309 34.8 Outsourcing service 74,561 11.4 200,962 26.2 476,474 67,110 32.3 Others 25,386 3.9 33,687 4.4 65,542 9,232 4.5 Total cost of revenues 473,153 72.5 551,373 71.9 1,055,406 148,651 71.6 Cost related to our recruitment services primarily consists of service fees paid to flexible workers, talent scouts, other third-party service providers involved in the service process.
Cost of revenues The following table sets forth a breakdown of our cost of revenues both in absolute amount and as a percentage of our total net revenues for the periods presented: For the years ended December 31, 2022 2023 2024 RMB % RMB % RMB US$ % (In thousands, except percentages) Cost of revenues: Recruitment service 316,724 41.3 513,390 34.8 132,657 18,174 12.4 Outsourcing service 200,962 26.2 476,474 32.3 529,963 72,605 49.8 Others 33,687 4.4 65,542 4.5 43,387 5,944 4.2 Total cost of revenues 551,373 71.9 1,055,406 71.6 706,007 96,723 66.4 68 Cost related to our recruitment services primarily consists of service fees paid to flexible workers, talent scouts, and other third-party service providers involved in the service process.
Any transfer of funds by us to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration or filing with relevant governmental authorities in China.
We may be unable to use these proceeds to grow our business until our PRC subsidiaries receive such proceeds in the PRC. Any transfer of funds by us to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by or registration or filing with relevant governmental authorities in China.
Recognition of the revenue when, or as, a performance obligation is satisfied. Recruitment services Recruitment services consist of flexible employment recruitment services and permanent employment recruitment services.
Allocation of the transaction price to the performance obligations in the contract; and 5. Recognition of the revenue when, or as, a performance obligation is satisfied. Recruitment services Recruitment services consist of flexible employment recruitment services and permanent employment recruitment services.
Cost related to outsourcing services and other services increased by approximately RMB134.7 million, or 134.8%, from RMB99.9 million for the year ended December 31, 2021 to RMB234.6 million for the year ended December 31, 2022, primarily attributable to the increase in cost paid to workers and third-party services providers engaged in the solution process, generally in line with our revenue growth in outsourcing services and other services.
Cost related to outsourcing services increased by approximately RMB275.5 million, or 137.1%, from RMB201.0 million for the year ended December 31, 2022 to RMB476.5 million for the year ended December 31, 2023, primarily attributable to the increase in cost paid to workers and third-party services providers engaged in the solution process, generally in line with our revenue growth in outsourcing services.
The following table sets forth a breakdown of our net revenues both in absolute amount and as a percentage of our total net revenues for the periods presented: For the years ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (In thousands, except percentages) Net revenues: Recruitment service 497,486 76.3 413,047 53.9 659,049 92,825 44.7 Outsourcing service 113,774 17.4 301,890 39.4 713,957 100,559 48.4 Others 40,985 6.3 51,634 6.7 100,952 14,219 6.9 Total revenues 652,245 100.0 766,571 100.0 1,473,958 207,603 100.0 Recruitment services Recruitment services consist of flexible employment recruitment services and permanent employment recruitment services.
The following table sets forth a breakdown of our net revenues both in absolute amount and as a percentage of our total net revenues for the periods presented: For the years ended December 31, 2022 2023 2024 RMB % RMB % RMB US$ % (In thousands, except percentages) Net revenues: Recruitment service 413,047 53.9 659,049 44.7 216,083 29,603 20.3 Outsourcing service 301,890 39.4 713,957 48.4 785,096 107,558 73.8 Others 51,634 6.7 100,952 6.9 62,230 8,525 5.9 Total revenues 766,571 100.0 1,473,958 100.0 1,063,409 145,686 100.0 Recruitment services Recruitment services consist of flexible employment recruitment services and permanent employment recruitment services.
Financial expenses mainly consist of interest income and expense, bank charges and exchange gain or loss. 54 Results of Operations For the years ended December 31, 2022 and 2023 The following tables set forth a summary of our consolidated results of operations, in absolute amount and as a percentage of our net revenues for the years ended December 31, 2022 and 2023.
For the years ended December 31, 2022 and 2023 The following tables set forth a summary of our consolidated results of operations, in absolute amount and as a percentage of our net revenues for the years ended December 31, 2022 and 2023.
The following table sets forth the breakdown of our gross profit and gross profit margin by revenue streams for the periods indicated: For the years ended December 31, 2021 2022 2023 RMB % RMB % RMB US$ % (In thousands, except percentages) Gross profits: Recruitment service 124,280 25.0 96,323 23.3 145,659 20,516 22.1 Outsourcing service 39,213 34.5 100,928 33.4 237,483 33,449 33.3 Others 15,599 38.1 17,947 34.8 35,410 4,987 35.1 Total gross profits 179,092 27.5 215,198 28.1 418,552 58,952 28.4 53 Operating expenses Our operating expenses include general and administrative expenses, research and development expenses and selling and marketing expenses.
The following table sets forth the breakdown of our gross profit and gross profit margin by revenue streams for the periods indicated: For the years ended December 31, 2022 2023 2024 RMB % RMB % RMB US$ % (In thousands, except percentages) Gross profits: Recruitment service 96,323 23.3 145,659 22.1 83,426 11,429 38.6 Outsourcing service 100,928 33.4 237,483 33.3 255,133 34,953 32.5 Others 17,947 34.8 35,410 35.1 18,843 2,581 30.3 Total gross profits 215,198 28.1 418,552 28.4 357,402 48,963 33.6 Operating expenses Our operating expenses include general and administrative expenses, research and development expenses and selling and marketing expenses.
We have developed into a comprehensive social network platform providing various services targeting professionals spanning multiple industries in China, including recruitment services, outsourcing services, information technology services and training services. Please see the section entitled “Business” for more details. Since the launch of our platforms, we have experienced rapid growth.
We have developed into a comprehensive social network platform providing various services targeting professionals spanning multiple industries in China, including recruitment services, outsourcing services, information technology services and training services. Please see “Item 4. Information on the Company – B. Business Overview” for more details.
Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.
We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity.
Our ability to attract, retain and connect potential job seekers cost-effectively Our operational cost is affected by the number of users on our platform and the amount of service fees we paid to flexible workers and third-party labor service companies.
Our results of operations have shown that this synergistic and thriving business model allows us to penetrate the recruitment market at scale without direct salesforce. 66 Our ability to attract, retain and connect potential job seekers cost-effectively Our operational cost is affected by the number of users on our platform and the amount of service fees we paid to flexible workers and third-party labor service companies.
Our working capital was approximately RMB136.1 million (US$19.2 million) as of December 31, 2023.
Our working capital was approximately RMB125.9 million (US$17.2 million) as of December 31, 2024.
For the year ended December 31, 2021, our net cash used in investing activities was RMB47.8 million, which was primarily attributable to (i) purchase of software and equipment of RMB24.1 million; and (ii) sales of short-term investments of RMB26.8 million and purchases of short-term investment of RMB50.6 million.
For the year ended December 31, 2023, our net cash used in investing activities was RMB12.1 million, which was primarily attributable to purchase of software and equipment of RMB12.1 million.
According to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to our PRC subsidiaries are subject to the registration with State Administration for Market Regulation in its local branches, and registration with a local bank authorized by SAFE.
According to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to our PRC subsidiaries are subject to the registration with State Administration for Market Regulation in its local branches, and registration with a local bank authorized by SAFE. 81 To remit the proceeds of the offering, we must take the steps legally required under the PRC laws, for example, we will open a special foreign exchange account for capital account transactions, remit the offering proceeds into such special foreign exchange account and apply for settlement of the foreign exchange.
Since our inception, we have introduced various value-added services built around our customers’ recruitment needs and have successfully expanded our service offerings.
Since our inception, we have introduced various value-added services built around our customers’ recruitment needs and have successfully expanded our service offerings. These efforts have effectively helped us attract more users and broaden revenue channels, thus driving our business and revenue growth.
Customers generally make the payment within one or two months after the completion of candidates’ probation period and acceptance of billing from us. Outsourcing services We enter into contracts with corporate customers to provide outsourcing services, mostly IT-related services, including construction of IT system, development of module or software with specific functions.
Outsourcing services We enter into contracts with corporate customers to provide outsourcing services, mostly IT-related services, including construction of IT system, development of module or software with specific functions.
Accurate matching results allow us to attract more users and accumulate more data, which in turn improve the matching efficiency and optimize the user experience, creating a positive feedback loop. Our results of operations have shown that this synergistic and thriving business model allows us to penetrate the recruitment market at scale without direct salesforce.
Accurate matching results allow us to attract more users and accumulate more data, which in turn improve the matching efficiency and optimize the user experience, creating a positive feedback loop.
Key Components of Our Results of Operations Net revenues We generate revenues from (i) recruitment services including flexible employment recruitment services and permanent employment recruitment services, (ii) outsourcing services, and (iii) other services including information technology services and training services.
Our ability to maintain and improve the functionality of our technology infrastructure in line with our business scale will be a key driver for our sustainable growth. 67 Key Components of Our Results of Operations Net revenues We generate revenues from (i) recruitment services including flexible employment recruitment services and permanent employment recruitment services, (ii) outsourcing services, and (iii) other services including information technology services and training services.
Upon the completion of the probation period, the customer accepts the qualified candidate and we have fulfilled our obligation of permanent candidate placement.
Upon the completion of the probation period, the customer accepts the qualified candidate and we have fulfilled our obligation of permanent candidate placement. Hence, revenue from permanent employment services is recognized at a point in time when the candidate passes the probation period.
These efforts have effectively helped us attract more users and broaden revenue channels, thus driving our business and revenue growth. 50 Our ability to control costs and expenses and enhance operational efficiency Our results of operations have been, and will continue to be, affected by our ability to control costs and expenses and enhance our operational efficiency.
Our ability to control costs and expenses and enhance operational efficiency Our results of operations have been, and will continue to be, affected by our ability to control costs and expenses and enhance our operational efficiency.
Our financial expenses, changed from RMB68,210 for the year ended December 31, 2021 to financial income of RMB62,777 for the year ended December 31, 2022 primarily due to the increased exchange loss. Income taxes Our income tax benefits were RMB0.2 million and RMB0.6 million for the years ended December 31, 2021 and 2022, respectively.
Our financial expenses, changed from RMB0.9 million for the year ended December 31, 2023 to RMB1.6 million (US$0.2 million) for the year ended December 31, 2024 primarily due to the increased bank interest expenses. 73 Income taxes Our income tax benefits were RMB7.9 million and RMB10.2 million (US$1.4 million) for the years ended December 31, 2023 and 2024, respectively.
Research and development expenses Our research and development expenses mainly consist of (i) payroll expenses, (ii) technologies service expenses related to platform development and data analysis to support our business operations, and (iii) other expenses related to research and development functions.
We will continue to seek to optimize the cost structure of our company to control the relative level of general and administrative expenses as a percentage of our net revenues. 69 Research and development expenses Our research and development expenses mainly consist of (i) payroll expenses, (ii) technologies service expenses related to platform development and data analysis to support our business operations, and (iii) other expenses related to research and development functions.
Net income As a result of the foregoing, our net income increased by RMB41.8 million, from RMB36.4 million for the year ended December 31, 2022 to RMB78.2 million (US$11.0 million) for the year ended December 31, 2023. 58 For the years ended December 31, 2021 and 2022 The following tables set forth a summary of our consolidated results of operations, in absolute amount and as a percentage of our net revenues for the years ended December 31, 2021 and 2022.
Results of Operations For the years ended December 31, 2023 and 2024 The following tables set forth a summary of our consolidated results of operations, in absolute amount and as a percentage of our net revenues for the years ended December 31, 2023 and 2024.
A 10% increase in our credit losses would have decreased our net income before tax by 1.3%, 0.0% and 1.5% for the years ended December 31, 2021, 2022 and 2023, respectively. 70 Revenue recognition We recognize revenue pursuant to ASC 606, Revenue from Contracts with Customers (“ASC 606”).
A 10% increase or reversal in our credit impairment losses would have decreased our net income before tax by 0.0%, 1.5% for the years ended December 31, 2022 and 2023 and increased our net income before tax by 1.2% for the year ended December 31, 2024, respectively.
We also continue to invest in talents, particularly experienced marketing personnel, research and development engineers and other tech-related talents to support our market expansion strategies. Our ability to maintain and improve the functionality of our technology infrastructure in line with our business scale will be a key driver for our sustainable growth.
We also continue to invest in talents, particularly experienced marketing personnel, research and development engineers and other tech-related talents to support our market expansion strategies.

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Item 6. [Reserved]

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

25 edited+7 added−3 removed60 unchanged
The audit committee is responsible for, among other things: ● selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; ● annually reviewing and reassessing the adequacy of our audit committee charter; ● meeting separately and periodically with management and the independent registered public accounting firm; and ● reporting regularly to the board of directors.
The audit committee is responsible for, among other things: ● selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm; 91 ● reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response; ● reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act; ● discussing the annual audited financial statements with management and the independent registered public accounting firm; ● reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies; ● annually reviewing and reassessing the adequacy of our audit committee charter; ● meeting separately and periodically with management and the independent registered public accounting firm; and ● reporting regularly to the board of directors.
From 2006 to 2013, he worked as the senior research and development manager and senior engineer in Feinno Communication Tech Co., Ltd, in charge of developing Fetion, an instant message service product developed by the company. Mr. Tang received a bachelor’s degree in Information Technology at Beijing University of Aeronautics and Astronautics in 2005. Dr.
From 2006 to 2013, he worked as the senior research and development manager and senior engineer in Feinno Communication Tech Co., Ltd, in charge of developing Fetion, an instant message service product developed by the company. Mr. Tang received a bachelor’s degree in Information Technology at Beijing University of Aeronautics and Astronautics in 2005. 88 Dr.
Risk Factors — Risks Related to Doing Business in China — Our insurance coverage may not be adequate, which could expose us to significant costs and business disruptions.” We typically enter into standard employment and confidentiality agreements with our senior management and core personnel.
Risk Factors — Risks Related to Doing Business in China — Our insurance coverage may not be adequate, which could expose us to significant costs and business disruptions.” 93 We typically enter into standard employment and confidentiality agreements with our senior management and core personnel.
Wong received his bachelor’s degree of Business Administration (with honor) from the Chinese University of Hong Kong, and his master’s degree in Business and master’s degree in Computer Science and Ph.D. in Computer Science from University of California at Irvine. 75 Mr. Jeremy Wegerer has been our independent director since 2022. Mr.
Wong received his bachelor’s degree of Business Administration (with honor) from the Chinese University of Hong Kong, and his master’s degree in Business and master’s degree in Computer Science and Ph.D. in Computer Science from University of California at Irvine. Mr. Jeremy Wegerer has been our independent director since 2022. Mr.
Lee worked in the U.S. for Alcatel Corporation as Director of Strategy from 2000 to 2002 and in Xylan Corporation (acquired by Alcatel) as Financial Planning Manager from 1997 to 2000. Mr. Lee holds ten U.S. patents and six Chinese patents, all in the areas of Artificial Intelligence, Data Analytics and Blockchain. Mr.
Lee worked in the U.S. for Alcatel Corporation as Director of Strategy from 2000 to 2002 and in Xylan Corporation (acquired by Alcatel) as Financial Planning Manager from 1997 to 2000. Mr. Lee holds ten U.S. patents and nine Chinese patents, all in the areas of Artificial Intelligence, Data Analytics and Blockchain. Mr.
Wegerer is a certified public account with more than ten years of financial accounting experience in China and the U.S. Before joining us, Mr. Wegerer spent 15 years working as a pioneer in digital education and PaaS industry.
Wegerer is a certified public accountant with more than ten years of financial accounting experience in China and the U.S. Before joining us, Mr. Wegerer spent 15 years working as a pioneer in digital education and PaaS industry.
He has published 45 papers in prestigious journals and presented many of them in international conferences. He holds 11 U.S. patents and six Chinese patents. Dr.
He has published 45 papers in prestigious journals and presented many of them in international conferences. He holds 11 U.S. patents and nine Chinese patents. Dr.
He is also our chairman of the board of directors and chief executive officer. From 2016 to present, he has been the CEO in our operating subsidiary in China, Lucas Group China Limited. From 2010 to 2016, Mr. Lee worked at Western Digital Corporation, most lately as the vice president of corporate development. From 2008 to 2010, Mr.
He is also our chief executive officer. From 2016 to present, he has been the CEO in our operating subsidiary in China, Lucas Group China Limited. From 2010 to 2016, Mr. Lee worked at Western Digital Corporation, most lately as the vice president of corporate development. From 2008 to 2010, Mr.
(3) Represents 6,418,580 ordinary shares held by MLT Holding Limited, a British Virgin Islands company. MLT Holding Limited is wholly owned by Ms. Luting Meng. The registered address of MLT Holding Limited is ICS Corporate Services (BVI) Limited, Sea Meadow House, P.O. Box 116, Road Town, Tortola, British Virgin Islands.
(3) Represents 5,622,947 ordinary shares held by MLT Holding Limited, a British Virgin Islands company. MLT Holding Limited is wholly owned by Ms. Luting Meng. The registered address of MLT Holding Limited is ICS Corporate Services (BVI) Limited, Sea Meadow House, P.O. Box 116, Road Town, Tortola, British Virgin Islands.
Number of ordinary shares Percentage of beneficial ownership Directors and Executive Officers* Howard Lee (1) 49,219,966 61.9 % Brian Lin — — Harry Tang — — Wang-chan Wong — — Jeremy Wegerer — — Stanley Ho — — Michael Carter — — All Directors and Executive Officers as a Group 49,219,966 61.9 % Principal Shareholders: HTL Lucky Holding Limited (1) 49,219,966 61.9 % 51job, Inc.
Number of ordinary shares Percentage of beneficial ownership Directors and Executive Officers* Howard Lee (1) 48,555,354 61.1 % Brian Lin — — Harry Tang — — Wang-chan Wong — — Jeremy Wegerer — — Stanley Ho — — Michael Carter — — All Directors and Executive Officers as a Group 48,555,354 61.1 % Principal Shareholders: HTL Lucky Holding Limited (1) 48,555,354 61.1 % 51job, Inc.
The nominating and corporate governance committee is responsible for, among other things: ● recommending nominees to the board of directors for election or re-election to the board of directors, or for appointment to fill any vacancy on the board of directors; ● reviewing annually with the board of directors the current composition of the board of directors with regards to characteristics such as independence, age, skills, experience and availability of service to us; 77 ● selecting and recommending to the board of directors the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.
The nominating and corporate governance committee is responsible for, among other things: ● recommending nominees to the board of directors for election or re-election to the board of directors, or for appointment to fill any vacancy on the board of directors; ● reviewing annually with the board of directors the current composition of the board of directors with regards to characteristics such as independence, age, skills, experience and availability of service to us; ● selecting and recommending to the board of directors the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself; and ● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance. 92 Duties of Directors Directors and officers generally owe fiduciary duties to our Company, and not to our Company’s individual shareholders.
A director is not required to hold any shares in our company to qualify to serve as a director. A director may vote with respect to any contract, proposed contract, or arrangement in which he or she is materially interested subject to the Nasdaq Stock Market Listing R ules and disqualification by the chairperson of the relevant board meeting .
A director may vote with respect to any contract, proposed contract, or arrangement in which he or she is materially interested subject to the Nasdaq Stock Market Listing R ules and disqualification by the chairperson of the relevant board meeting .
Duties of Directors Directors and officers generally owe fiduciary duties to our Company, and not to our Company’s individual shareholders. Our shareholders may not have a direct cause of action against our directors. Under Cayman Islands law, our directors have a fiduciary duty to act honestly, in good faith and with a view to our best interests.
Our shareholders may not have a direct cause of action against our directors. Under Cayman Islands law, our directors have a fiduciary duty to act honestly, in good faith and with a view to our best interests. Our directors also owe to our Company a duty to act with skill and care.
Directors and Executive Officers Age Position Howard Lee 55 Founder, Chairman of the Board and CEO Brian Lin 40 CFO Harry Tang 40 CTO Wang-chan Wong 69 Director Jeremy Wegerer 53 Independent Director Stanley Ho 56 Independent Director Michael Carter 78 Independent Director Mr. Howard Lee has been our chairman of the board of directors since 2022.
Directors and Executive Officers Age Position Howard Lee 56 Founder, Chairman of the Board and CEO Brian Lin 41 CFO Harry Tang 41 CTO Wang-chan Wong 70 Director Jeremy Wegerer 54 Independent Director Stanley Ho 57 Independent Director Michael Carter 79 Independent Director Mr. Howard Lee has been our chairman of the board of directors since 2022.
These ordinary shares, however, are not included in the computation of the percentage ownership of any other person. The percentage of beneficial ownership of our ordinary is based on 79,563,300 ordinary shares issued and outstanding as of the date of this annual report. See “— B.
These ordinary shares, however, are not included in the computation of the percentage ownership of any other person. The percentage of beneficial ownership of our ordinary is based on 79,467,057 ordinary shares issued and outstanding (excluding 96,243 ordinary shares repurchased as treasury shares) as of the date of this annual report. See “— B.
Our directors also owe to our Company a duty to act with skill and care. It was previously considered that a director needs not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.
It was previously considered that a director needs not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience.
Function As of December 31, 2023 Number % of Total Employees Research and Development 103 28.5 % Sales and Marketing 78 21.6 % Operations 159 44.1 % General Administration 21 5.8 % Total 361 100.0 % As required by regulations in China, we participate in various government statutory social security plans, including a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan and a housing provident fund for permanent employees.
Function As of December 31, 2024 Number % of Total Employees Research and Development 106 33.2 % Sales and Marketing 68 21.3 % Operations 126 39.5 % General Administration 19 6.0 % Total 319 100.0 % As required by regulations in China, we participate in various government statutory social security plans, including a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan and a housing provident fund for permanent employees.
Clawback Policy In April 2024, we adopted a clawback policy in compliance with the SEC rules and the Nasdaq Stock Market listing standards to recover any excess incentive-based compensation from current and former executive officers after an accounting restatement. See Exhibit 97.1. 76 C. Board Practices Board of Directors Our board of directors consists of five directors.
Clawback Policy In April 2024, we adopted a clawback policy in compliance with the SEC rules and the Nasdaq Stock Market listing standards to recover any excess incentive-based compensation from current and former executive officers after an accounting restatement.
Our officers are elected by and serve at the discretion of the board of directors. 78 D. Employees As of December 31, 2023, we had 361 full time employees, permanent and contractors included, all of whom are based in China. The following table sets forth the numbers of our employees categorized by function as of December 31, 2023.
Our officers are elected by and serve at the discretion of the board of directors. D. Employees We had 245, 361 and 319 full time employees, permanent and contractors included, respectively, as of December 31, 2022, 2023 and 2024, all of whom are based in China.
(2) 14,498,220 18.2 % MLT Holding Limited (3) 6,418,580 8.1 % Notes: * For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by 79,563,300, being the number of ordinary shares as of the date of this annual report. ** For each person or group included in this column, percentage of total voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our ordinary shares as a single class. † Except as otherwise indicated below, the business address of our directors and executive officers is Room 5A01, 4th Floor, Air China Building, Xiaoyun Road, Sanyuanqiao, Chaoyang District, Beijing 100027, China.
(2) 14,498,220 18.2 % MLT Holding Limited (3) 5,622,947 7.1 % Notes: * For each person and group included in this table, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by 79,467,057, being the number of ordinary shares issued and outstanding as of the date of this annual report. ** For each person or group included in this column, percentage of total voting power is calculated by dividing the voting power beneficially owned by such person or group by the voting power of all of our ordinary shares as a single class. † Except as otherwise indicated below, the business address of our directors and executive officers is Room 5A01, 4th Floor, Air China Building, Xiaoyun Road, Sanyuanqiao, Chaoyang District, Beijing 100027, China. 94 (1) Represents 48,555,354 ordinary shares held by HTL Lucky Holding Limited, a British Virgin Islands company, which is a wholly owned subsidiary of HTL Star Holding Limited.
Our PRC subsidiaries are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers.
We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund.
He worked as the director of instruction and research information systems of Stanford University from 1980 to 1989 and as the assistant professor of history at Dartmouth College from 1973 to 1980. Dr. Carter received his bachelor’s degree of History in 1968, master’s degree of History in 1971 and doctoral degree of History in 1974, all from Stanford University.
He worked as the director of instruction and research information systems of Stanford University from 1980 to 1989 and as the assistant professor of history at Dartmouth College from 1973 to 1980. Dr.
(1) Represents 49,219,966 ordinary shares held by HTL Lucky Holding Limited, a British Virgin Islands company, which is a wholly owned subsidiary of HTL Star Holding Limited. HTL Star Holding Limited is wholly owned by Mr. Howard Lee. The registered address of HTL Lucky Holding Limited is ICS Corporate Services (BVI) Limited, Sea Meadow House, P.O.
HTL Star Holding Limited is wholly owned by Mr. Howard Lee. The registered address of HTL Lucky Holding Limited is ICS Corporate Services (BVI) Limited, Sea Meadow House, P.O. Box 116, Road Town, Tortola, British Virgin Islands. (2) Represents 14,498,220 ordinary shares held by 51job, Inc., a Cayman Islands company.
Under these agreements, each of our executive officers is employed for a specified time period.
Employment Agreements and Indemnification Agreements We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for a specified time period.
Compensation For the year ended December 31, 2023, we paid an aggregate of approximately RMB1.0 million (US$0.1 million) in cash and benefits to our directors and executive officers. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors.
Carter received his bachelor’s degree of History in 1968, master’s degree of History in 1971 and doctoral degree of History in 1974, all from Stanford University. 89 B. Compensation For the year ended December 31, 2024, we paid an aggregate of approximately RMB1.3 million (US$0.2 million) in cash and benefits to our directors and executive officers.
Removed
Board Diversity The table below provides certain information regarding the diversity of our board of directors as of the date of this annual report.
Added
See Exhibit 97. 90 Outstanding Equity Awards at Fiscal Year-End We adopted our 2024 Plan in November 2024, to attract and retain best available personnel, provide additional incentives to employees, officers, directors and consultants and promote the success of our business. Set forth below is a summary of the key terms of the Plan: Authorized Shares .
Removed
Board Diversity Matrix Country of Principal Executive Offices People’s Republic of China Foreign Private Issuer Yes Disclosure Prohibited under Home Country Law No Total Number of Directors 5 Female Male Non-Binary Did Not Disclose Gender Part I: Gender Identity Directors 0 5 0 0 Part II: Demographic Background Underrepresented Individual in Home Country Jurisdiction 0 LGBTQ+ 0 Did Not Disclose Demographic Background 0 B.
Added
Under the Plan, the maximum number of ordinary shares authorized is 11,800,000. Type of Awards . The Plan permits the awards of options, restricted shares, and local awards. Plan Administration . Our board of directors or a committee which will be constituted according to the applicable laws administers the Plan (the “Administrator”).
Removed
Box 116, Road Town, Tortola, British Virgin Islands. HTL Lucky Holding Limited acquired 29,284,260 ordinary shares from the Company on August 15, 2022 and acquired 19,935,706 ordinary shares from WXS Holding Limited on November 7, 2022. 79 (2) Represents 14,498,220 ordinary shares held by 51job, Inc., a Cayman Islands company.
Added
The Administrator may delegate limited authority over the day-to-day administration of the Plan to other subcommittees or specified officers.
Added
Under the Plan, the Administrator has the authority to, among other things, determine fair market value, determine the eligibility for participants, select the service providers to whom awards may be granted, determine the type and number of shares or shares unit to be covered by each award granted under the Plan, approve forms of award agreements under the Plan, determine the terms and conditions of any award granted under the plan, including the vesting schedule, vesting conditions, the time or times when awards may be exercised, any vesting acceleration or waiver of forfeiture restrictions, cancellation or repurchase restrictions.
Added
Eligibility . Our employees, officers, directors and consultants are eligible to participate in the Plan. Plan Amendment or Termination . The Administrator may at any time amend, alter, suspend or terminate this Plan. As of the date of this annual report, we have not granted any awards under the 2024 Plan.
Added
As of the date of this annual report, none of our directors, executive officers and employees held any awards of our Company. C. Board Practices Board of Directors Our board of directors consists of five directors. A director is not required to hold any shares in our company to qualify to serve as a director.
Added
The following table sets forth the numbers of our employees categorized by function as of December 31, 2024.

Item 7. Management's Discussion & Analysis

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

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(ii) The Company provided recruitment services to Beagledata, including flexible staffing services and permanent recruitment services for the years ended December 31, 2022 and 2023. Balances with related parties: Balances with related parties consisted of the following for the periods indicated: As of December 31, 2022 2023 RMB RMB Amounts due to related parties: Beagledata (i) 2,120 2,479 Mr.
(ii) The Company provided recruitment services to Beagledata, including flexible staffing services and permanent recruitment services for the years ended December 31, 2022, 2023 and 2024. 95 Balances with related parties: Balances with related parties consisted of the following for the periods indicated: As of December 31, 2022 2023 2024 RMB Amounts due to related parties: Beagledata (i) 2,120 2,479 1,400 Mr.
Howard Lee (ii) 36 618 Total 2,156 3,097 (i) As of December 31, 2022 and 2023, amounts due to Beagledata consisted of technology services fees payable of RMB2,120 and RMB2,120, respectively, and contract liabilities of nil and RMB359, respectively. (ii) Amounts due to Mr. Howard Lee represented expensed paid on behalf of the Company. C.
Howard Lee (ii) 36 618 2,300 Total 2,156 3,097 3,700 (i) As of December 31, 2022, 2023 and 2024, amounts due to Beagledata consisted of technology services fees payable of RMB2,120, RMB2,120 and RMB1,400, respectively, and contract liabilities of nil, RMB359 and nil, respectively. (ii) Amounts due to Mr. Howard Lee represented expensed paid on behalf of the Company. C.
Compensation — Employment Agreements and Indemnification Agreements.” Other Related Party Transactions The Company had the following significant related party transactions for the years ended December 31, 2022 and 2023: For the years ended December 31, 2021 2022 2023 RMB RMB RMB Technology services received from: Beagledata (i) 320 1,480 - Recruitment services provided to: Beagledata (ii) 6,230 9,697 7,417 Outsourcing services provided to: Beagledata 1,200 - 566 (i) Beagledata provided technology services for the years ended December 31, 2022 and 2023, and the Company recorded it as research and development expenses in the consolidated statements of income and comprehensive income.
Compensation — Employment Agreements and Indemnification Agreements.” Other Related Party Transactions The Company had the following significant related party transactions for the years ended December 31, 2022, 2023 and 2024: For the years ended December 31, 2022 2023 2024 RMB RMB RMB Technology services received from: Beagledata (i) 1,480 - - Recruitment services provided to: Beagledata (ii) 9,697 7,417 3,887 Outsourcing services provided to: Beagledata - 566 - (i) Beagledata provided technology services for the year ended December 31, 2022, and the Company recorded it as research and development expenses in the consolidated statements of income and comprehensive income.

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