CooTek (Cayman) Inc.
Annual Report 2021

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Table of ContentsUNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549FORM 20-F(Mark One)☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934OR☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2021OR☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934OR☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Date of event requiring this shell company report. . . . . . . . . . . . . . . . .For the transition period from to Commission file number: 001-38665CooTek (Cayman) Inc.(Exact Name of Registrant as Specified in Its Charter)N/A(Translation of Registrant’s Name Into English)Cayman Islands(Jurisdiction of Incorporation or Organization)9-11F, T2, No.16, Lane 399, Xinlong Road, Minhang District Shanghai, 201101People’s Republic of China(Address of Principal Executive Offices)Karl Kan Zhang, Chairman of the Board of Directors and Chief Technology Officer9-11F, T2, No.16, Lane 399, Xinlong Road, Minhang DistrictShanghai, 201101 People’s Republic of China Phone: +86 021 6485 6352 Email: ir@cootek.com(Name, Telephone, Email and/or Facsimile number and Address of Company Contact Person) Securities registered or to be registered pursuant to Section 12(b) of the Act:Title of each class Trading Symbol(s) Name of each exchange on which registeredAmerican depositary shares, each representing 50 Class Aordinary sharesCTKNew York Stock ExchangeClass A ordinary shares, par value US$0.00001 per share*New York Stock Exchange**Not for trading, but only in connection with the listing on the New York Stock Exchange of American depositary shares.Securities registered or to be registered pursuant to Section 12(g) of the Act:None(Title of Class)Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:None(Title of Class)Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:As of December 31, 2021, there were 3,638,033,656 ordinary shares issued and outstanding, par value US$0.00001 per share, being the sum of 3,391,809,191Class A ordinary shares and 246,224,465 Class B ordinary shares.Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No Table of ContentsIf this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ NoIndicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past90 days.☒ Yes ☐ NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See thedefinitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.Large accelerated filer ☐Accelerated filer ☐Non-accelerated filer ☒Emerging growth company ☒If an emerging growth company that prepare its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to usethe extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐†The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting StandardsCodification after April 5, 2012.Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control overfinancial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its auditreport. ☐Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:U.S. GAAP ☒International Financial Reporting Standards asissued by the International Accounting Standards Board ☐Other ☐If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of1934 subsequent to the distribution of securities under a plan confirmed by a court.☐ Yes ☒ No Table of ContentsiTABLE OF CONTENTSINTRODUCTION1FORWARD-LOOKING STATEMENTS3PART I4Item 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS4Item 2.OFFER STATISTICS AND EXPECTED TIMETABLE4Item 3.KEY INFORMATION4Item 4.INFORMATION ON THE COMPANY71Item 4B.UNRESOLVED STAFF COMMENTS103Item 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS103Item 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES123Item 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS133Item 8.FINANCIAL INFORMATION134Item 9.THE OFFER AND LISTING135Item 10.ADDITIONAL INFORMATION136Item 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK146Item 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES147PART II150Item 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES150Item 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OFPROCEEDS150Item 15.CONTROLS AND PROCEDURES150Item 16A.AUDIT COMMITTEE FINANCIAL EXPERT151Item 16B.CODE OF ETHICS151Item 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES152Item 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES152Item 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS152Item 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT153Item 16G.CORPORATE GOVERNANCE153Item 16H.MINE SAFETY DISCLOSURE153Item 16I.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS153PART III154Item 17.FINANCIAL STATEMENTS154Item 18.FINANCIAL STATEMENTS154Item 19.EXHIBITS155SIGNATURES157 Table of Contents1INTRODUCTIONUnless otherwise indicated or the context otherwise requires, references in this annual report on Form 20-F to:●“CooTek,” are to CooTek (Cayman) Inc., and “we,” “us,” “our company” or “our” are to CooTek (Cayman) Inc. and its subsidiaries,and in the context of describing our operations and consolidated financial information, its consolidated affiliated entities in China,including the VIEs and their subsidiaries in China;●“China” or the “PRC” are to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong,Macau and Taiwan;●“Class A ordinary shares” are to our Class A ordinary shares of par value US$0.00001 per share;●“Class B ordinary shares” are to our Class B ordinary shares of par value US$0.00001 per share;●“shares” or “ordinary shares” are to our Class A and Class B ordinary shares, par value US$0.00001 per share;●“ADSs” are to our American depositary shares, each of which represents 50 Class A ordinary shares;●“ADRs” are to the American depositary receipts that evidence our ADSs;●“average daily reading time” for a given day is calculated by dividing (i) the sum of time spent on reading books on our FengduNovel for such day by (ii) the number of Fengdu Novel users who spent time on reading books for such day; and “average dailyreading time” for a given month is calculated by dividing (i) the sum of average daily reading time for each day in such month by(ii) the number of days in such month;●“DAUs” are to the number of active users of our products during a given day. For each individual product, we treat each mobiledevice on which at least one of the following actions is taken during a given day as one active user for that day: (i) activating orlaunching such product, (ii) logging in with the user account for such product, or (iii) any other actions that result in a successfulnetwork access to our services through such product. The DAUs of multiple products during a given day is the sum of active users ofeach such product for that day;●“MAUs” are to the number of active users of our products during a given month. For each individual product, we treat each mobiledevice on which at least one of the following actions is taken during a given month as one active user for that month: (i) activating orlaunching such product, (ii) logging in with the user account for such product, or (iii) any other actions that result in a successfulnetwork access to our services through such product. The MAUs of multiple products during a given month is the sum of active usersof each such product for that month;●“our portfolio products” and “content-rich mobile applications” are to the content-rich mobile applications that we develop andprovide to our users and business partners, which excludes TouchPal Smart Input and TouchPal Phonebook, and among theseportfolio products, we refer to the mobile applications that provide our users with vertical contents at specific scenarios, such asfitness and healthcare, as “scenario-based mobile apps”;●“the VIEs” are to Shanghai Chubao (CooTek) Information Technology Co., Ltd., Molihong (Shenzhen) Internet TechnologyCo., Ltd., Shanghai Qiaohan Technology Co., Ltd. and Shanghai Qinglin Network Technology Co., Ltd.;●“RMB” and “Renminbi” are to the legal currency of China; and●“US$,” “U.S. dollars,” “$,” and “dollars” are to the legal currency of the United States. Table of Contents2All discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed therein are due torounding.Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report were madeat a rate of RMB6.3726 to US$1.00, the exchange rate on December 30, 2021 set forth in the H.10 statistical release of the Board of Governors ofthe Federal Reserve System. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted intoU.S. dollars or Renminbi, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currencyreserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. Table of Contents3FORWARD-LOOKING STATEMENTSThis annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events.Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information-D. Risk Factors,” may cause ouractual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,”“estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events that we believe may affect our financial condition,results of operations, business strategy and financial needs. These forward-looking statements include statements relating to:●our mission and strategies;●our future business development, financial conditions and results of operations;●the expected growth of the mobile internet industry and mobile advertising industry;●the expected growth of mobile advertising;●our expectations regarding demand for and market acceptance of our products and services;●competition in our industry;●relevant government policies and regulations relating to our industry or any aspect of our operations; and●potential impact of COVID-19 pandemic on our current and future business development, financial condition and results ofoperations.You should read this annual report and the documents that we refer to in this annual report and have filed as exhibits to this annual reportcompletely and with the understanding that our actual future results may be materially different from what we expect. Other sections of this annualreport discuss factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment.New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of allfactors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from thosecontained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.You should not rely upon forward-looking statements as predictions of future events. The forward-looking statements made in this annualreport relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, weundertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events orotherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. Table of Contents4PART IITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERSNot applicable.ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLENot applicable.ITEM 3.KEY INFORMATIONOur Holding Company Structure and Contractual Arrangements with the Consolidated Affiliated EntitiesCooTek (Cayman) Inc. is not a Chinese operating company but a Cayman Islands holding company with no equity ownership in itsconsolidated affiliated entities. We conduct our operations in China through (i) our PRC subsidiaries, and (ii) the consolidated affiliated entitieswith which we have maintained contractual arrangements. PRC laws and regulations restrict and impose conditions on foreign investment in theprovision of internet information services. Accordingly, we operate these businesses in China through the consolidated affiliated entities, and relyon contractual arrangements among our PRC subsidiary, the consolidated affiliated entities and their nominee shareholders to control the businessoperations of the consolidated affiliated entities. Revenues contributed by the consolidated affiliated entities accounted for 52%, 81% and 37% ofour total revenues for the years 2019, 2020 and 2021, respectively. As used in this annual report, “CooTek,” are to CooTek (Cayman) Inc., and“we,” “us,” “our company” or “our” are to CooTek (Cayman) Inc. and its subsidiaries, and in the context of describing our operations andconsolidated financial information, its consolidated affiliated entities in China, including the VIEs and their subsidiaries in China, including,without limitation, Shanghai Chubao (Cootek) Information Technology Co., Ltd., or Shanghai Chubao, Molihong (Shenzhen) Internet TechnologyCo., Ltd., or Molihong, Shanghai Qiaohan Technology Co., Ltd., or Qiaohan, and Shanghai Qinglin Network Technology Co., Ltd., or Qinglin, inChina and their subsidiaries. Holders of our ADSs hold equity interest in CooTek (Cayman) Inc., our Cayman Islands holding company, and do nothave direct or indirect equity interests in the VIEs and their subsidiaries. Table of Contents5The following diagram illustrates our corporate structure, including our significant subsidiaries and other entities that are material to ourbusiness, as of the date of this annual report:(1)Karl Kan Zhang, Susan Qiaoling Li, Michael Jialiang Wang, Jim Jian Wang and Haiyan Zhu are the beneficial owners of CooTek (Cayman) Inc., and each holds 25.0%, 21.94%,21.94%, 13.12% and 18.0% of the equity interests in Shanghai Chubao, respectively. Karl Kan Zhang and Susan Qiaoling Li are our co-founders, directors and executive officers.Michael Jialiang Wang is our consultant and one of our directors. Jim Jian Wang is one of our directors. Haiyan Zhu is one of our early investors.(2)Two of our employees holds 100% of the equity interests in Molihong, one holds 99% and the other holds 1%.(3)Each of Michael Jialiang Wang and Jim Jian Wang holds 50% of the equity interests in Qiaohan.(4)Two of our employees each hold 50% of the equity interests in Qinglin. Table of Contents6A series of contractual agreements have been entered into by and among our PRC subsidiary, the consolidated affiliated entities and theirrespective shareholders, which include exclusive business cooperation agreement, exclusive purchase option agreement, loan agreement, equityagreement, power of attorney and spouse consent letters. Terms contained in each set of contractual arrangements with the consolidated affiliatedentities and their respective shareholders are substantially similar. For more details of these contractual arrangements, see “Item 4. Information onthe Company—C. Organizational Structure.”However, the contractual arrangements may not be as effective as direct ownership in providing us with control over the consolidatedaffiliated entities and we may incur substantial costs to enforce the terms of the arrangements. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure— We rely on contractual arrangements with the consolidated affiliated entities and their respectiveshareholders for our operations in China, which may not be as effective in providing operational control as direct ownership” and “Item 3. KeyInformation—D. Risk Factors—Risks Related to Our Corporate Structure—Any failure by the VIEs or their shareholders to perform theirobligations under our contractual arrangements with them would have a material and adverse effect on our business.”There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations andrules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the consolidatedaffiliated entities and its nominee shareholders. It is uncertain whether any new PRC laws or regulations relating to variable interest entitystructures will be adopted or if adopted, what they would provide. If we or any of the consolidated affiliated entities is found to be in violation ofany existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatoryauthorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the agreements that establish the structure for operating ourbusinesses in China do not comply with PRC regulations on foreign investment in internet and other related businesses, or if these regulations ortheir interpretation change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and“Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement ofPRC laws and regulations could limit the legal protections available to you and us.”Our corporate structure is subject to risks associated with our contractual arrangements with the consolidated affiliated entities. If the PRCgovernment deems that our contractual arrangements with the consolidated affiliated entities do not comply with PRC regulatory restrictions onforeign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differentlyin the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, our PRCsubsidiaries and consolidated affiliated entities, and investors of our company face uncertainty about potential future actions by the PRCgovernment that could affect the enforceability of the contractual arrangements with the consolidated affiliated entities and, consequently,significantly affect the financial performance of the consolidated affiliated entities and our company as a whole. For a detailed description of therisks associated with our corporate structure, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related toOur Corporate Structure.”PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by,and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities toinvestors. Implementation of industry-wide regulations in this nature may cause the value of such securities to significantly decline or be of little orno value. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’ssignificant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of ourADSs.”Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws andquickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ADSs. For moredetails, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation andenforcement of PRC laws and regulations could limit the legal protections available to you and us.” Table of Contents7Permissions Required from the PRC Authorities for Our OperationsWe conduct our business primarily through our subsidiaries and consolidated affiliated entities in China. Our operations in China aregoverned by PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries and consolidated affiliated entities have notobtained all the requisite licenses and permits from the PRC government authorities that are material for the business operations of our holdingcompany, the consolidated affiliated entities in China, including, among others, the internet publication service license, publication codes, andinternet audio-visual program transmission license.. Given the uncertainties of interpretation and implementation of relevant laws and regulationsand the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals forthe functions and services of our platform in the future. For more detailed information, see “Item 3. Key Information—D. Risk Factors—RisksRelated to Our Business—Our business is subject to complex and evolving laws, regulations and governmental policies in China and othercountries and regions where we have business. Many of these laws, regulations and governmental policies are subject to change and uncertaininterpretation, and could result in claims, changes to our business practices, increased cost of operations, or declines in our growth or engagement,financial performance, or otherwise harm our business.”Furthermore, in connection with our issuance of securities to foreign investors, under current PRC laws, regulations and regulatory rules,as of the date of this annual report, we, our PRC subsidiaries and the consolidated affiliated entities, (i) are not required to obtain permissions fromthe China Securities Regulatory Commission, or the CSRC, (ii) are not required to go through cyber security review by the CyberspaceAdministration of China, or the CAC, and (iii) have not received or were denied such requisite permissions by any PRC authority.However, the PRC government has recently indicated an intent to exert more oversight and control over offerings that are conductedoverseas and/or foreign investment in China-based issuers. For more detailed information, see “Item 3. Key Information—D. Risk Factors—RisksRelated to Doing Business in China—The approval of, or filing with the CSRC or other PRC government authorities may be required inconnection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtainsuch approval or complete such filing.”The Holding Foreign Companies Accountable ActThe Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states if the SECdetermines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PublicCompany Accounting Oversight Board (United States), or the PCAOB, for three consecutive years beginning in 2021, the SEC shall prohibit ourshares or ADSs from being traded on a national securities exchange. On December 16, 2021, the PCAOB issued a report to notify the SEC of itsdetermination that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland Chinaand Hong Kong. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to inspect orinvestigate completely. The related risks and uncertainties could cause the value of our ADSs to significantly decline. For more details, see “Item 3.Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB is currently unable to inspect our auditor in relationto their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprives ourinvestors with the benefits of such inspections” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—OurADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if thePCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting ofour ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”Cash and Asset Flows through Our OrganizationCooTek (Cayman) Inc. transfers cash to its wholly-owned Hong Kong subsidiaries by making capital contributions or providing loans, andthe Hong Kong subsidiaries transfer cash to the subsidiaries in China by making capital contributions or providing loans to them. Because CooTek(Cayman) Inc. and Shanghai Chule control the VIEs through contractual arrangements, they are not able to make direct capital contribution to theVIEs and their subsidiaries. However, they may transfer cash to the VIEs by loans or by making payments to the VIEs for inter-group transactions. Table of Contents8CooTek (Cayman) Inc. provided an aggregate amount of US$5.4 million, US$16.0 million and US$37.8 million as loan or capitalinvestments to our intermediate holding companies and subsidiaries, and received an aggregate repayment of US$8.0 million, US$25.9 million andUS$19.1 million in the years ended December 31, 2019, 2020 and 2021, respectively. Under the contractual arrangements with our consolidatedVIEs, our consolidated VIEs are entitled to receive service fees from Shanghai Chule for the provisions of certain support services to ShanghaiChule. For the years ended December 31, 2019, 2020 and 2021, our consolidated VIEs received US$20.7 million, US$30.8 million and US$80.7million from the WFOE, respectively.For the years ended December 31, 2019, 2020 and 2021, no dividends or distributions were made to CooTek (Cayman) Inc. by oursubsidiaries. Under PRC laws and regulations, our PRC subsidiaries and consolidated VIEs are subject to certain restrictions with respect to payingdividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is alsosubject to examination by the banks designated by SAFE. The amounts restricted include the paid-up capital and the statutory reserve funds of ourPRC subsidiaries and the net assets of our consolidated VIEs in which we have no legal ownership, totaling to US$88 million as of December 31,2021. For risks relating to the fund flows of our operations in China, see “Item 3. Key Information—Risk Factors—Risks Related to Our CorporateStructure—We may rely on dividends paid by our PRC subsidiary to fund cash and financing requirements. Any limitation on the ability of ourPRC subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders ofthe ADSs and our ordinary shares.”In the years ended December 31, 2019, 2020 and 2021, no assets other than cash were transferred through our organization.CooTek (Cayman) Inc. has not declared or paid any cash dividends, nor does it has any present plan to pay any cash dividends on ourordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate andexpand our business. For more information, see “item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For PRC and United States federal income tax considerations of an investment in our ADSs, see “Item 10. AdditionalInformation—E. Taxation.”Financial Information Related to Our Consolidated VIEsThe following table presents the condensed consolidating schedule of financial position for CooTek (Cayman) Inc., its subsidiaries, andthe consolidated VIEs as of the dates presented.Selected Condensed Consolidated Statements of Operations DataFor the Year Ended December 31, 2021 CooTek Company Consolidated Consolidated (Cayman) Inc.SubsidiariesVIEsEliminationsTotal(in US$)Net revenues — 170,762,501 128,236,041 (26,852,721) 272,145,821Cost of revenues (304,356) (18,319,676) (14,201,856) — (32,825,888)Gross profit (304,356) 152,442,825 114,034,185 (26,852,721) 239,319,933Sales and marketing expenses (103,324) (89,099,455) (111,032,689) — (200,235,468)Research and development expenses (2,762,190) (25,621,167) (6,049,959) — (34,433,316)General and administrative expenses (4,516,554) (10,740,583) (27,514,977) 24,956,275 (17,815,839)Other operating income, net 136,129 3,160,283 1,157,050 — 4,453,462(Loss) income from operations (7,550,295) 30,141,903 (29,406,390) (1,896,446) (8,711,228)Interest expense, net (5,527,327) (54,164) (108,456) — (5,689,947)Impairment loss of investment — — (248,140) — (248,140)Foreign exchange (losses) gains, net — (249,408) 29,766 — (219,642)Fair value change of derivatives 1,108,648 — — — 1,108,648(Loss) income before income taxes (11,968,974) 29,838,331 (29,733,220) (1,896,446) (13,760,300)Income tax expense — (51,970) — — (51,970)Share of loss in equity method investment — — (65,084) — (65,084)Net (loss) income (11,968,974) 29,786,361 (29,798,304) (1,896,446) (13,877,363) Table of Contents9 For the Year Ended December 31, 2020 CooTek Company Consolidated Consolidated (Cayman) Inc.SubsidiariesVIEsEliminationsTotal(in US$)Net revenues — 85,988,649 378,890,098 (23,373,516) 441,505,231Cost of revenues (276,085) (16,992,942) (17,935,057) 11,075,622 (24,128,462)Gross profit (276,085) 68,995,707 360,955,041 (12,297,894) 417,376,769Sales and marketing expenses (212,381) (81,644,290) (336,405,083) — (418,261,754)Research and development expenses (3,034,240) (25,107,255) (1,528,120) — (29,669,615)General and administrative expenses (2,607,390) (5,873,970) (38,263,968) 31,727,829 (15,017,499)Other operating income (loss), net 112,478 490,510 (2,877,495) — (2,274,507)Loss from operations (6,017,618) (43,139,298) (18,119,625) 19,429,935 (47,846,606)Interest (expense) income, net — (98,134) 493,763 — 395,629Foreign exchange gains, net 3 89,586 1,746 — 91,335Loss before income taxes (6,017,615) (43,147,846) (17,624,116) 19,429,935 (47,359,642)Income tax expense — (7,087) — — (7,087)Net loss (6,017,615) (43,154,933) (17,624,116) 19,429,935 (47,366,729) For the Year Ended December 31, 2019CooTek Company Consolidated Consolidated (Cayman) Inc.SubsidiariesVIEsEliminationsTotal(in US$)Net revenues 51,152 86,130,885 95,996,190 (4,295,122) 177,883,105Cost of revenues (101,689) (13,677,232) (2,661,546) 1,139,613 (15,300,854)Gross profit (50,537) 72,453,653 93,334,644 (3,155,509) 162,582,251Sales and marketing expenses (196,224) (42,982,026) (113,849,706) — (157,027,956)Research and development expenses (2,806,588) (21,701,829) (2,435,609) 8,529 (26,935,497)General and administrative expenses (558,078) (14,980,421) (15,730,373) 15,012,680 (16,256,192)Other operating income, net 119,146 527,165 225,958 — 872,269Loss from operations (3,492,281) (6,683,458) (38,455,086) 11,865,700 (36,765,125)Interest (expense) income, net (2,494) 737,619 28,372 — 763,497Impairment loss of investment — — (500,032) — (500,032)Foreign exchange losses, net — (342,571) (116) — (342,687)Loss before income taxes (3,494,775) (6,288,410) (38,926,862) 11,865,700 (36,844,347)Income tax expense — (800) (914) — (1,714)Net loss (3,494,775) (6,289,210) (38,927,776) 11,865,700 (36,846,061) Table of Contents10Selected Condensed Consolidated Balance Sheets Data As of December 31, 2021CooTek Company Consolidated Consolidated (Cayman) Inc.SubsidiariesVIEsEliminationsTotal(in US$)Cash and cash equivalents 442,771 13,525,515 4,263,844 — 18,232,130Restricted cash — 59,999 139,080 — 199,079Short-term investments — 50,044 — — 50,044Accounts receivable, net — 14,571,147 6,911,955 — 21,483,102Prepaid expenses and other current assets 463,093 3,723,379 6,677,808 — 10,864,280Property and equipment, net — 2,928,695 159,514 — 3,088,209Intangible assets, net — 248,966 — — 248,966Long-term investments — — 313,691 — 313,691Advances to subsidiaries and VIEs 10,559,139 — 10,993,268 (21,552,407) —Operating lease right-of-use assets — 686,089 485,196 — 1,171,285Other non-current assets — 605,423 174,957 — 780,380Total assets 11,465,003 36,399,257 30,119,313 (21,552,407) 56,431,166Accounts payable — 14,610,176 13,149,951 — 27,760,127Short-term borrowings — 3,970,556 5,126,484 — 9,097,040Accrued salary and benefits — 4,456,606 145,698 — 4,602,304Accrued expenses and other current liabilities 478,683 3,550,617 4,033,675 — 8,062,975Convertible notes 9,175,892 — — — 9,175,892Embedded derivative liability at fair value 553,707 — — — 553,707Deferred revenue 136,129 1,347,152 459,887 — 1,943,168Operating lease liabilities, current — 508,716 300,894 — 809,610Advances from subsidiaries and VIEs 6,797,406 — 137,150,618 (143,948,024) —Operating lease liabilities, non-current — 66,060 37,097 — 103,157Other non-current liabilities 323,305 — — — 323,305Total liabilities 17,465,122 28,509,883 160,404,304 (143,948,024) 62,431,285Net current assets (9,438,547) 3,486,261 (5,223,902) — (11,176,188)Net assets (6,000,119) 7,889,374 (130,284,991) 122,395,617 (6,000,119)Total shareholders’ (deficit) equity (6,000,119) 7,889,374 (130,284,991) 122,395,617 (6,000,119)Total liabilities and shareholders’ (deficit) equity 11,465,003 36,399,257 30,119,313 (21,552,407) 56,431,166 Table of Contents11 As of December 31, 2020CooTek Company Consolidated Consolidated (Cayman) Inc.SubsidiariesVIEsEliminationsTotal(in US$)Cash and cash equivalents 128,005 17,435,779 7,105,349 — 24,669,133Restricted cash — 3,125,181 138,964 — 3,264,145Short-term investments — 50,028 — — 50,028Accounts receivable, net — 12,012,144 16,115,202 — 28,127,346Prepaid expenses and other current assets 30,596 4,129,918 7,912,712 — 12,073,226Long-term restricted cash — — 21,689,436 — 21,689,436Property and equipment, net — 5,357,320 36,422 — 5,393,742Intangible assets, net — 396,495 — — 396,495Long-term investments — — 306,518 — 306,518Advances to subsidiaries and VIEs 1,568,094 — 71,025,550 (72,593,644) —Other non-current assets — 708,076 224,235 — 932,311Total assets 1,726,695 43,214,941 124,554,388 (72,593,644) 96,902,380Accounts payable — 33,026,906 43,099,067 — 76,125,973Short-term borrowings — 10,690,105 267,917 — 10,958,022Accrued salary and benefits — 8,449,251 694,225 — 9,143,476Accrued expenses and other current liabilities 140 6,457,846 4,228,532 — 10,686,518Deferred revenue 136,129 2,574,694 620,688 — 3,331,511Advances from subsidiaries and VIEs 14,909,907 — 175,304,169 (190,214,076) —Other non-current liabilities 483,074 — — (23,639) 459,435Total liabilities 15,529,250 61,198,802 224,214,598 (190,237,715) 110,704,935Net current assets 22,332 (24,445,752) (17,638,202) — (42,061,622)Net assets (13,802,555) (17,983,861) (99,660,210) 117,644,071 (13,802,555)Total shareholders’ deficit (13,802,555) (17,983,861) (99,660,210) 117,644,071 (13,802,555)Total liabilities and shareholders’ deficit 1,726,695 43,214,941 124,554,388 (72,593,644) 96,902,380Selected Condensed Consolidated Cash Flows Data For the Year Ended December 31, 2021CooTek Company Consolidated Consolidated (Cayman) Inc.SubsidiariesVIEsEliminationsTotal(in US$)Net cash used in operating activities (4,017,545) (19,361,639) (27,664,505) — (51,043,689)Net cash used in investing activities (18,650,291) (1,302,872) (475,661) 18,650,291 (1,778,533)Net cash provided by financing activities 22,982,602 11,794,792 4,772,782 (18,650,291) 20,899,885Net increase (decrease) in cash, cash equivalents, andrestricted cash 314,766 (8,869,719) (23,367,384) — (31,922,337)Cash, cash equivalents, and restricted cash at beginning ofyear 128,005 20,560,960 28,933,749 — 49,622,714Effect of exchange rate changes on cash, cash equivalents, andrestricted cash — 1,894,273 (1,163,441) — 730,832 Table of Contents12 For the Year Ended December 31, 2020CooTek Company Consolidated Consolidated (Cayman) Inc.SubsidiariesVIEsEliminationsTotal(in US$)Net cash (used in) provided by operating activities (776,576) (17,379,599) 17,304,417 — (851,758)Net cash provided by (used in)investing activities 9,900,160 (2,299,614) (344,681) (9,900,160) (2,644,295)Net cash (used in) provided by financing activities (9,999,146) (8,238,116) (163,132) 9,900,160 (8,500,234)Net (decrease) increase in cash, cash equivalents, and restrictedcash (875,562) (27,917,329) 16,796,604 — (11,996,287)Cash, cash equivalents, and restricted cash at beginning of year 1,003,567 45,247,957 13,714,507 — 59,966,031Effect of exchange rate changes on cash, cash equivalents, andrestricted cash — 3,230,332 (1,577,362) — 1,652,970 For the Year Ended December 31, 2019CooTek Company Consolidated Consolidated (Cayman) Inc.SubsidiariesVIEsEliminationsTotal(in US$)Net cash provided by (used in) operating activities 125,769 (27,367,649) 11,577,601 — (15,664,279)Net cash provided by (used in) investing activities 2,600,000 (5,309,425) (21,502) (2,600,000) (5,330,927)Net cash (used in) provided by financing activities (12,766,875) 5,965,087 405,304 2,600,000 (3,796,484)Net (decrease) increase in cash, cash equivalents, and restrictedcash (10,041,106) (26,711,987) 11,961,403 — (24,791,690)Cash, cash equivalents, and restricted cash at beginning of year 11,044,673 72,701,166 1,114,076 — 84,859,915Effect of exchange rate changes on cash, cash equivalents, andrestricted cash — (741,222) 639,028 — (102,194)A.[Reserved]B.Capitalization and IndebtednessNot applicable.C.Reasons for the Offer and Use of ProceedsNot applicable.D.Risk FactorsSummary of Risk FactorsOur business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adverselyaffect our business, financial condition, results of operations, cash flows, and prospects. These risks are discussed more fully below and include,but are not limited to, risks related to:Risks Related to Our Business●If we fail to maintain or expand our active user base, our business, financial condition and operating results may be materially andadversely affected.●We generate substantially all of our revenues from advertising. Our failure to attract or retain advertising customers, or a reduction intheir spending with us, could seriously harm our business, operating results and growth prospects. Table of Contents13●We depend on certain third-party advertising exchanges and agencies for a large portion of our mobile advertising revenues.●We rely on our business collaborations with third parties, including major digital distribution platforms and mobile devicemanufacturers, to maintain and expand our user base. Our failure to maintain good relationships with these business partners maymaterially and adversely affect our business and operating results.●We have been and may continue to be subject to notices or complaints alleging, among other things, our infringement of copyrightsand delivery of illegal or inappropriate content through our products, which could lead to suspension or removal of such productsfrom digital distribution platforms, a decrease of our user base, and a significantly adverse impact on our financial results and ourreputation.●We are subject to a variety of laws and other obligations regarding cyber security and data protection in the PRC, and any failure tocomply with applicable laws and obligations or exposure to government interference actions could have a material and adverse effecton our business, financial condition and operating results.●Our business is subject to complex and evolving laws, regulations and governmental policies in China and other countries andregions where we have business. Many of these laws, regulations and governmental policies are subject to change and uncertaininterpretation, and could result in claims, changes to our business practices, increased cost of operations, or declines in our growth orengagement, financial performance, or otherwise harm our business.●We had incurred net loss, negative cash flows from operating activities and negative working capital in the past, and we may notachieve or sustain profitability.Risks Related to Our Corporate Structure●We are a Cayman Islands holding company with no equity ownership in the VIEs and we conduct our operations in China through(i) our PRC subsidiaries, and (ii) the consolidated affiliated entities with which we have maintained contractual arrangements.Holders of our ADSs hold equity interest in CooTek (Cayman) Inc., our Cayman Islands holding company, and do not have direct orindirect equity interests in the VIEs and their subsidiaries. If the PRC government finds that the agreements that establish thestructure for operating our business do not comply with PRC laws and regulations, or if these regulations or their interpretationschange in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holdingcompany, the VIEs and investors of our company face uncertainty about potential future actions by the PRC government that couldaffect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financialperformance of the VIEs and our company as a whole. The PRC regulatory authorities could disallow the VIEs structure, whichwould likely result in a material adverse change in our operations, and our Class A ordinary shares or our ADSs may declinesignificantly in value.●We rely on contractual arrangements with the consolidated affiliated entities and their respective shareholders for our operations inChina, which may not be as effective in providing operational control as direct ownership.●Any failure by the VIEs or their shareholders to perform their obligations under our contractual arrangements with them would havea material and adverse effect on our business.●The shareholders of the consolidated affiliated entities may have potential conflicts of interest with us, which may materially andadversely affect our business. Table of Contents14Risks Related to Doing Business in China●Recent regulatory developments in China may subject us to additional regulatory review and disclosure requirement, expose us togovernment interference, or otherwise restrict our ability to offer securities and raise capitals outside China, all of which couldmaterially and adversely affect our business and the value of our securities.●Adverse changes in China’s economic, political or social conditions or government policies could have a material and adverse effecton overall economic growth in China, which could materially and adversely affect our business.●Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of lawsand quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of ourADSs.●The approval of, or filing with the CSRC or other PRC government authorities may be required in connection with our futureoffshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain suchapproval or complete such filing.●The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and theinability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections.●Our ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or theHFCAA, in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes tothe law are enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value ofyour investment.Risks Related to Our ADSs●If we do not satisfy the NYSE requirements for continued listing, our ADS could be delisted from NYSE. We received two non-compliance notifications from NYSE related to our share price and market capitalization. With respect to the non-compliance relatedto our market capitalization, we submitted the business plan to NYSE to demonstrate our plan to cure the non-compliance, which hasbeen accepted and will be quarterly reviewed and monitored by NYSE within the 18-month of receipt of the notification letter. Withrespect to the non-compliance related to our trading price, we plan to change the ratio of our ADSs to our Class A ordinary shares(the “ADS Ratio”) from the current ADS Ratio of one ADS to fifty (50) Class A ordinary shares to a new ADS Ratio of one ADS tosix hundred and fifty (650) Class A ordinary shares. We anticipate that the change in the ADS Ratio will be effective on or aboutMay 9, 2022, subject to the effectiveness of the post-effective amendment to the ADS Registration Statement on Form F-6 on orbefore that date.●The trading price of our ADSs is likely to be volatile, which could result in substantial losses to investors. Table of Contents15Risks Related to Our BusinessIf we fail to maintain or expand our active user base, our business, financial condition and operating results may be materially and adverselyaffected.The size of our active user base with our products are critical to our success. Our portfolio products had an average of 18.5 million DAUsin December 2021, which decreased from 27.8 million DAUs in December 2020. Our financial performance has been and will continue to besignificantly affected by our ability to grow and engage our active user base. In addition, we may fail to maintain or increase our user base or ourusers’ engagement if, among other things:●we fail to innovate or develop new products and services that provide relevant content and satisfactory experience to, or are favorablyreceived by, our users;●we fail to respond to or adopt evolving technologies for product development on a timely and cost-effective basis;●we fail to successfully market and monetize our existing and new mobile applications throughout their life cycles;●we fail to develop products that are compatible with existing or new mobile devices, mobile operating systems or their respectiveupgrades;●we fail to maintain or improve our technology infrastructure and security measures designed to protect our users’ personal privacyand cyber security;●we lose users to competing products and services or due to concerns related to personal privacy and cyber security or other reasons;●we fail to successfully implement our strategies related to the continued expansion of our global user base; or●we are required by existing or new laws, regulations or government policies to implement changes to our products or services that areadverse to our business.If we are unable to maintain or increase our user base, our advertising services may become less attractive to our advertising customers,which may have a material and adverse impact on our business, financial condition and operating results.We generate substantially all of our revenues from advertising. Our failure to attract or retain advertising customers, or a reduction in theirspending with us, could seriously harm our business, operating results and growth prospects.Mobile advertising services have been contributing substantially all of our revenues, accounting for 98.4%, 99.3% and 98.2% of ourrevenues in 2019, 2020 and 2021, respectively. Therefore, any failure to continue generating substantial revenue through our mobile advertisingservices could materially harm our business.Advertisers purchase advertising services either directly from us or through third-party advertising exchanges and advertising agencies.Our advertising customers, including advertisers and advertising exchanges and agencies, typically do not have long-term contractual arrangementswith us. They may be dissatisfied with our advertising services or perceive our advertising services as ineffective. Potential new customers mayview our advertising services as unproven, and we may need to devote additional time and resources to convince them. In addition, new advertisingformats emerge from time to time and customer preferences can change. We may not be able to adapt our products and services to futureadvertising formats or changing customer preferences on a timely and cost-effective basis, and any such adaption failure could materially andadversely affect our financial conditions, results of operations and prospects. Table of Contents16We compete for advertising customers not only with other providers of digital advertising spaces, but also with other types of platformsand advertising service providers such as newspapers, magazines, billboards, television and radio stations. Some of our competitors have access toconsiderably greater financial and other resources for expanding their product offerings and present considerable challenges to gaining andmaintaining additional market share.If we fail to deliver advertising services in an effective manner, or if our advertising customers believe that placing advertisements throughour products and services does not generate a competitive return when compared to placing advertisements through our competitors’ products, theymay not continue to do business with us or they may only be willing to advertise with us at reduced prices. If our existing advertising customersreduce or discontinue their advertising spending with us, or if we fail to attract new advertising customers, our business, financial condition andresults of operations could be materially and adversely affected.We depend on certain third-party advertising exchanges and agencies for a large portion of our mobile advertising revenues.We generate a large portion of our mobile advertising revenues from a limited number of third-party advertising exchanges and advertisingagencies in 2021. Our top two advertising customers, which are advertising exchanges, accounted for approximately 53.22% of our total revenuesin 2021. Our dependence on a limited number of advertising exchange customers increases their bargaining power and the need for us to maintaingood relationships with them. The major advertising customers we work with typically offer standard terms and conditions that govern theircontractual relationships with us. In 2019, 2020 and 2021, we entered into distribution cooperation agreements with Chuan Shan Jia, a leadingadvertising exchange platform in China who is also our top advertising customer for the cooperation in placing advertisements on our mobile appsfor the respective immediately following year. If any of these advertising customers we work with ceases to do business with us for any reason oralters its standard terms and conditions to our disadvantage, or if we fail to collect any significant amount of account receivables from theseadvertising customers timely, or at all, our business, financial conditions and operating results may be materially and adversely affected.We rely on our business collaborations with third parties, including major digital distribution platforms and mobile device manufacturers, tomaintain and expand our user base. Our failure to maintain good relationships with these business partners may materially and adverselyaffect our business and operating results.We collaborate with various business partners to promote our products and enlarge our user base. We use third-party digital distributionplatforms such as Apple App Store, Tencent YingYongBao App Store and Google Play to distribute our mobile applications to users. We alsoadvertise on third-party platforms, such as Douyin and Kuaishou, to acquire users. The promotion and distribution of our mobile applications aresubject to such digital distribution platforms’ standard terms and policies for application developers, which are subject to the interpretation of, andfrequent changes by, these platforms. In addition, our applications may be suspended by or removed from such platforms as a result of allegationsor claims by third parties regardless of their merits. For instance, in July 2019, some of our global apps were disabled by Google from Google PlayStore and Google Admob, and our access to Google Play Store and Google Admob was disabled too. See “—We have been and may continue to besubject to notices or complaints alleging, among other things, our infringement of copyrights and delivery of illegal or inappropriate contentthrough our products, which could lead to suspension or removal of such products from digital distribution platforms, a decrease of our user base,and a significantly adverse impact on our financial results and our reputation.”If we are unable to maintain good relationships with our business partners or the business of our business partners declines, the reach ofour products and services may be adversely affected and our ability to maintain and expand our user base may decrease. Most of the agreementswith our business partners, including mobile device manufacturers and digital distribution platforms, do not prohibit them from working with ourcompetitors or from offering competing services. If our partner distribution platforms change their standard terms and conditions in a manner thatis detrimental to our business, or if our business partners decide not to continue working with us or choose to devote more resources to supportingour competitors or their own competing products, we may not be able to find a substitute on commercially favorable terms, or at all, and ourcompetitive advantages may be diminished.We have been and may continue to be subject to notices or complaints alleging, among other things, our infringement of copyrights anddelivery of illegal or inappropriate content through our products, which could lead to suspension or removal of such products Table of Contents17from digital distribution platforms, a decrease of our user base, and a significantly adverse impact on our financial results and our reputation.We use third-party digital distribution platforms such as Apple App Store, Tencent YingYongBao App Store and Google Play to distributeour mobile applications to users. In the ordinary course of our business, we and digital distribution platforms have received, and may from time totime in the future receive, notices or complaints from third parties alleging that certain of our products infringe copyrights, deliver illegal,fraudulent, pornographic, violent, bullying or other inappropriate content, or otherwise fail to comply with applicable policies, rules andregulations. Upon receipt of such notices or complaints, those digital distribution platforms may suspend or remove such products from suchplatforms. The processes for appealing such suspensions and removals with those platforms could be time-consuming, and we cannot guaranteethat our appeals will always prevail or that any such suspended or removed application will be made available again. Such suspensions andremovals of our products could lead to a decrease of our user base and, if they occur frequently and/or in a large scale, could significantly adverselyaffect our reputation, business operation and financial performance.For instance, in July 2019, some of our global apps were disabled by Google from the Google Play Store and Google Admob. Thesedisabled apps were discontinued but users can still use the relevant apps already downloaded. The suspensions and removals of our global appscould lead to the difficulty in growing or sustaining our user base and could significantly adversely affect our reputation, business operation andfinancial performance in a certain period. Primarily as a result of the suspension, the DAUs of our portfolio products decreased from 27.6 millionin June 2019 to 23.9 million in September 2019, and our net revenues decreased from US$37.6 million in the second quarter of 2019 to US$31.3million in the third quarter of 2019. In addition, our access and developer account to Google Play Store and Google Admob was disabled in thesame period. Consequently, we cannot use Google push notification to reach and activate our users, and the DAU/MAU ratio of our portfolioproducts decreased from 42.4% in June 2019 to 35.4% in September 2019, and further to 33.1% in December 2019. In addition, these digitaldistribution platforms and third-party platforms may also receive, from time to time, notices or complaints from third parties alleging that certain ofour products infringe copyrights, deliver illegal, fraudulent, pornographic, violent, bullying or other inappropriate content, or otherwise fail tocomply with applicable policies, rules and regulations, consequently those digital distribution platforms may suspend or remove such productsfrom their platforms and those third-party platforms may terminate their collaboration with us.We have international operations and plan to continue expanding our operations globally. We may face challenges and risks presented by ourgrowing global operations, which may have a material and adverse impact on our business and operating results.We are headquartered in China and provide our products and services to a global user base. We intend to continue the internationalexpansion of our business operations and grow our user base globally. In December 2021, the user base of our portfolio products reached anaverage of 18.5 million DAUs and our users of TouchPal Smart Input reached an average of 92.9 million DAUs. The headquarters of our majoradvertising customers are located in China and the United States and therefore substantially all of our mobile advertising revenues in 2020 and2021 were derived from China and the United States.We believe the sustainable growth of our business depends on our ability to increase the penetration of our products in both developed andemerging markets. Our continued international operations and global expansion may expose us to a number of challenges and risks, including:●challenges in developing successful products and localized adaptions, and implementing effective marketing strategies thatrespectively target mobile internet users and advertising customers from various countries and with a diverse range of preferencesand demands;●difficulties in managing and overseeing global operations and in affording increased costs associated with doing business in multipleinternational locations;●local competitions;●difficulties in integrating and managing potential foreign acquisitions or investments; Table of Contents18●compliance with applicable laws and regulations in various countries worldwide, including, but not limited to, internet contentrequirements, cyber security and data privacy requirements, intellectual property protection rules, exchange controls, and cashrepatriation restrictions;●fluctuations in currency exchange rates;●political, social or economic instability in markets or regions in which we operate; and●compliance with statutory equity requirements and management of tax consequences.Our business, financial condition and results of operations may be materially and adversely affected by these challenges and risksassociated with our global operations.Our product development and monetization strategies are highly dependent on our technology capabilities and infrastructure. If the amount ofuser data generated on our products declines, or if we fail to enhance or upgrade our technologies at a competitive pace, the effectiveness ofour business model may be harmed and our operating results may be materially and severely affected.We depend on our technological capabilities and infrastructure to analyze our users’ preferences and needs and to generate valuable userinsights. Active users of our products generate a large amount of data across our applications and in a variety of use cases on a daily basis. The datagenerated by our users lays the foundation for us to build our user profiles. By analyzing such user data with our big data analytics and otherrelevant technologies, we aim to understand our users’ interests and needs for content in order to develop products that deliver relevant contentcatering to their interests and needs. Therefore, the effectiveness of our product development and monetization strategies is dependent on ourability to obtain and process data and to refine the algorithms used in processing such data. If we fail to maintain and expand the user base of ourproducts to continually generate large amounts of user data, or if we fail to keep up with the rapid development and upgrade of big data analyticsand other relevant technologies on a timely and cost-effective basis, we may not be able to effectively grow and monetize our products, and ourbusiness and operating results may be materially and adversely affected.We may not be able to sustain our historical growth and maintain the effectiveness of our monetization.Over the past three years, we have experienced changing DAUs and MAUs of our portfolio products. At the same time, our net revenuesfluctuated from US$177.9 million in 2019 to US$441.5 million in 2020, and further to US$272.1 million in 2021. Our mobile advertising revenueincreased from US$175.0 million in 2019 to US$438.4 million in 2020, and further decreased to US$267.3 million in 2021. We may not be able tosustain a rate of growth in future periods.In addition, growing our revenue in the future depends on successfully building our portfolio products. We monetize our user baseprimarily through mobile advertising, which contributed substantially all of our revenues in 2019, 2020 and 2021. Most of the mobile advertisingrevenues were generated from our portfolio products in 2021 attributable to the rapid growth of our portfolio products, in particular our onlineliterature products and mobile games. We launched our in-house developed advertising platform, CooTek Ads, to provide high-quality and tailoredadvertising services in 2019, and the revenue derived from CooTek Ads accounted for approximately 8%, 45% and 13% of our total revenue in2019, 2020 and 2021, respectively. If we are unable to build new products which are attractive to users, our ability to effectively monetize ouradvertising services and grow our revenues may be materially impacted.We have been diversifying our monetization with our online literature products. In 2021, we started the IP operations based on originalcontent on Fengdu Novel, including licensing e-books, cooperating with audio book publishers to produce audio books of original literature onFengdu Novel, and short drama production.However, we cannot assure you that we can successfully implement the existing commercialization strategies to sustainably generategrowing revenues, or that we will be able to develop new commercialization strategies to grow our revenues. If our strategic initiatives do notenhance our ability to monetize or enable us to develop new commercialization approaches, we may not be able to maintain or increase ourrevenues or recover any associated costs. In addition, we may introduce new products and services to expand our revenue streams, includingproducts and services with which we have little or no prior development or operating experience. If these Table of Contents19new or enhanced products or services fail to engage users, content creators or business partners, we may fail to diversify our revenue streams orgenerate sufficient revenues to justify our investments and costs, and our business and operating results may suffer as a result.If we fail to correctly anticipate user preferences and develop and commercialize new products and services, we may fail to attract or retainexisting users, the lifecycles of our mobile applications may end prematurely and our operating results may be materially and adverselyaffected.Our success depends on our ability to maintain, grow and monetize our user base, which in turn depends on our ability to continuallydevelop and commercialize new mobile applications, introduce new features or functions to our existing mobile applications and provide users withhigh-quality content and an enjoyable user experience. This is particularly important since the mobile internet industry is characterized by fast andfrequent changes, including rapid technological evolution, shifting user demands, frequent introductions of new products and services, andconstantly evolving industry standards, operating systems and practices. We launched our first mobile application, TouchPal Smart Input, in 2008,and have launched over 170 portfolio products as of December 31, 2021. In December 2021, the user base of our portfolio products reached anaverage of 18.5 million DAUs, and we intend to expand the scale of our core product, Fengdu Novel, and continue developing new products andservices to enlarge our active user base. Our ability to roll out new or enhanced products and services depends on a number of factors, includingour timely and successful research and development efforts as well as correctly analyzing and predicting users’ interests and demands for contentusing our big data analytical capabilities. If we fail to correctly analyze and predict users’ interests and demands for content, fail to cater to theanticipated needs and preferences of users, or fail to provide a superior user experience, our existing and new mobile applications may suffer fromreduced user traffic or be unsuccessful in the market and our user base may decrease, which in turn may impact our ability to earn advertisingrevenue. There can be no assurance that our new products and services will generate revenues or profits and we may not be able to recoup theinvestments and expenditures involved in such development. Our quarterly results may also experience significant fluctuations as we continue toinvest in the development of new products and services.In addition, as a result of rapidly evolving user preferences, our existing mobile applications may reach the end of their lifecyclesprematurely. There can be no assurance that we will be able to correctly predict the lifecycles of our new mobile applications, our estimatesregarding the lifecycles of our existing mobile applications may turn out to be incorrect, and our business, financial condition and results ofoperations may be materially and adversely affected.We had incurred net loss, negative cash flows from operating activities and negative working capital in the past, and we may not achieve orsustain profitability.You should not rely on our revenues or gross profit from any previous period as an indication of our future revenues. Our revenues mightdecline, or the growth rate of our revenues may slow down for a number of reasons, including declined demand for our products and services,increasing competition, emergence of alternative business models, changes in regulations and government policies, changes in general economicconditions, COVID-19 as well as other risks described in this prospectus supplement.In 2019, 2020 and 2021, we had a net loss of US$36.8 million, US$47.4 million and US$13.9 million, respectively. We had negative cashflows from operations of US$15.7 million, US$0.9 million and US$51.0 million in 2019, 2020 and 2021, respectively. Although we had positiveworking capital, being the result of current assets minus current liabilities, of US$33.3 million as of December 31, 2019, we recorded negativeworking capital of US$42.1 million as of December 31, 2020, and negative working capital of US$11.2 million as of December 31, 2021. Wereceived two non-compliance notifications from NYSE, and if we do not satisfy the NYSE requirements for continued listing, our ADS could bedelisted from NYSE. Delisting from NYSE may trigger our obligation to make cash redemption of our convertible notes whose outstandingamount in aggregate was US$11.2 million as of December 31, 2021 and immediate and accelerated repayment of bank borrowing of US$1.6million outstanding as of December 31, 2021. For a detailed description of the non-compliance notifications from NYSE and the underlying risks,see “Item 3. Key Information—D. Risk Factors—Risks Related to Our ADSs—If we do not satisfy the NYSE requirements for continued listing,our ADS could be delisted from NYSE.” Our ability to continue as a going concern is dependent on our ability to successfully execute our businessplan including the implementation of a balanced growth strategy and an effective financial management which can contribute to the optimization ofthe operating cost and expense structure. Table of Contents20We cannot assure you that we will be able to generate net profit or positive cash flows from operating activities in the future. Our futurerevenue growth and profitability will depend on a variety of factors, many of which are beyond our control. These factors include marketacceptance of our products, effectiveness of our monetization strategy, our ability to control cost and expenses and to manage our growtheffectively, market competition, macroeconomic and regulatory environment. We also expect to continue to make investments in research anddevelopment, which will place significant demands on our management and our operational and financial resources. Continuous expansion mayincrease the complexity of our business, and we may encounter various difficulties. We may fail to develop and improve our operational, financialand managerial controls, enhance our financial reporting systems and procedures, recruit, train and retain skilled professional personnel, ormaintain customer satisfaction to effectively support and manage our growth. If we invest substantial time and resources to expand our operationsbut fail to manage the growth of our business and capitalize on our growth opportunities effectively, we may not be able to achieve profitability,and our business, financial condition, results of operations, liquidity and prospects would be materially and adversely affected.Our consolidated financial statements for the year ended December 31, 2021 included in this annual report beginning on page F-1 havebeen prepared based on the assumption that we will continue on a going concern basis. The auditors of our consolidated financial statements for theyear ended December 31, 2021 have included in their audit reports an explanatory paragraph relating to substantial doubt about our ability tocontinue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course ofbusiness.If we fail to control our content-related costs, lack popular literacy content that can be monetized, fail to acquire various forms of copyrights ofsuch literacy content for monetization, or fail to attract and retain signed authors or maintain the business relationships with the key authorsand third party content providers, our online literature products and their profitability will be materially and adversely affected.Popular and quality content is the core driver and foundation of our online literature products, especially Fengdu Novel. The content costshave been increasing along with our efforts to enrich content and enlarge the scale of Fengdu Novel by signing more authors and increasing anddeepening cooperation with more third party content providers. In 2020 and 2021, content costs constituted 31.8% and 42.9% of our total cost ofrevenues, respectively. We generally license the copyright of the content published on our platform on an exclusive basis with our signed authors,either at fixed prices or pursuant to revenue-sharing arrangements, under which the authors will receive royalties based on sales and other forms ofmonetization of their works. We also license the copyright of the content published on our platform generally on a non-exclusive basis with otherpublishers or content providers. As the market further develops, the expectation of copyright owners for compensation may continue to rise, assuch, they may demand higher licensing fees, and our content costs may further increase as we expand our content library.Moreover, we rely primarily on our signed authors to create original literature works. We may not be able to continue attracting andretaining signed authors by offering more competitive and favorable terms than our competitors in online literature sector or higher licensing feesthat our signed authors may request. In addition, even if our signed authors agree to create content exclusively for us for a certain period of time,we cannot control their productivity or the quality of their works produced within such term. Furthermore, any disputes or legal proceedings withour signed authors, especially the best-selling signed authors that create popular or high-quality literature works, may disrupt our businessrelationships with them. Therefore, we cannot assure you that we will retain sufficient online literature works with monetization value or control abroad range of copyrights for high quality literature works. If we fail to provide popular or quality literature on Fengdu Novel, we may fail toattract and retain active users and the monetization potential of this product could be materially and adversely affected. If we lack popular literaturecontent that can be monetized or fail to acquire a broad range of copyrights of literature works for monetization, our business and operating resultscould be materially and adversely affected. Table of Contents21We may be out of compliance with certain covenants in our credit facility agreements before maturity, which could impose operating andfinancial restrictions on us.We have entered into credit facility agreements with commercial banks in 2019, 2020 and 2021. The total outstanding balance of ourshort-term bank borrowings as of December 31, 2021 was US$9.1 million. For a detailed description, see “Item 5. Operating and Financial Reviewand Prospects—Liquidity and Capital Resources.” These agreements contain certain financial covenants over our maximum quarterly net loss,maximum monthly debt ratio, minimum net income, minimum operating cash inflow for our subsidiary, and operating data covenants whichrequire us to maintain minimum annual active user. As of December 31, 2021, we were in compliance of such covenants. If we fail to meet suchcovenants, we may be required to negotiate a waiver. We cannot assure you that we would be able to obtain such waiver in a timely manner, onacceptable terms or at all. If we were not able to obtain such waiver under the credit facility, we would be in default of such agreement, and therelevant counterparty could elect to declare the loan, together with accrued and unpaid interest and other fees, if any, immediately due and payableand proceed against any collateral securing such loan. If the loan under the credit facility agreement that we entered into was to be accelerated,even though we believe that our assets would be sufficient to repay our loans in full, our business and liquidity could nevertheless be subject toadverse effects. In addition, such waiver, even if granted, may lead to increased costs, increased interest rates, additional restrictive covenants andother available counterparty protections that would be applicable to us under these credit facilities, including the granting of additional security ourinterests in collateral, which could adversely affect our business, financial condition, results of operations and our ability to acquire additionalcapital resources.Our ability to comply with financial or other restrictive covenants under our credit facility agreements may be affected by factors beyondour control, including prevailing economic, financial and industry conditions, and our ability to issue additional equity. We had been and may againfall out of compliance with such or other covenants in the future, which could materially and adversely affect our business, financial condition andresults of operations.We may require additional financing in the future to meet our business requirements. Such capital raising may be costly, difficult or notpossible to obtain and, if obtained, could significantly dilute current stockholders’ equity interests or increase our debt service obligations.We may continue to experience a material decrease in our cash and cash equivalents balance. We may require additional cash resources tofund our working capital and expenditure needs, such as content investment, sales and marketing expenses, product development expenses andinvestment or acquisition transactions. Although we may attempt to raise funds by issuing debt or equity instruments, additional financing may notbe available to us on terms acceptable us or at all or such resources may not be received in a timely manner. If we are unable to raise additionalcapital when required or on acceptable terms, we may be required to scale back or to discontinue certain operations, scale back or discontinue thedevelopment of new business lines, reduce headcount, sell assets, file for bankruptcy, reorganize, merge with another entity or cease operations.Our advertising services may display advertisements when our products are in use, or insert promoted marketing messages into users’ feeds,which may negatively affect user experience and may lead to a decline in user engagement and, in turn, a reduction in revenues generated fromour advertising services.We primarily generate revenues by distributing advertisements to targeted audience through our products. Advertisements are displayed invarious formats when users launch or exit our products, in our theme stores or in-app stores, and in customized news feeds, among others. See“Item 4. Information on the Company—B. Business Overview—Monetization.” It is important for us to balance the frequency, prominence, sizeand content of advertisements that we display against ensuring a favorable user experience of our products. If our users find the advertisementsdisplayed irrelevant, disturbing or negatively affecting their user experience of our products, they may become less engaged or stop using ourproducts altogether. Furthermore, if advertisements contain controversial, false or misleading content, or the marketing messages we display or theproducts or services we advertise result in negative emotions or associations in our users, the user experience of our products could be diminished,our financial results could suffer and our reputation could be damaged. If we are unable to deliver advertisements in a way that is acceptable orfavorable to our users, our users may not maintain the current level of engagement, and our advertising customers may perceive our advertisingservices as ineffective in generating a competitive return for them. As a result, our revenues may decline and our business, financial conditions andoperating results may be materially and adversely affected. Table of Contents22We are subject to a variety of laws and other obligations regarding cyber security and data protection in the PRC, and any failure to complywith applicable laws and obligations or exposure to government interference actions could have a material and adverse effect on our business,financial condition and operating results.We are subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and private information,such as personal information and other data. The cyber security legal regime in China is relatively new and evolving rapidly, and theirinterpretation and enforcement involve significant uncertainties. As a result, it may be difficult to determine what actions or omissions may bedeemed to be in violations of applicable laws and regulations in certain circumstances.Under the current PRC cyber security laws, personal information and important data collected and generated by a “critical informationinfrastructure operator” in the course of its operations in the PRC must be stored in the PRC, and if a “critical information infrastructure operator”purchases internet products and services that affects or may affect national security, it should be subject to cyber security review by the CyberspaceAdministration of China, or CAC. As advised by our PRC counsel, the exact scope of “critical information infrastructure operators” under thecurrent regulatory regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement ofthese laws. The current PRC cyber security laws have established more stringent requirements applicable to operators of computer networks,especially to operators of networks which involve critical information infrastructure. The current PRC cyber security laws also contain anoverarching framework for regulating Internet security, protection of private and sensitive information, and safeguards for national cyberspacesecurity and provisions for the continued government regulation of the Internet and content available in the PRC. Because of their exceptionalbreadth in scope, ambiguous requirements and broadly defined terminology, there is substantial uncertainty as to the potential impact of such lawson our operations in the PRC, particularly in relation to the safeguarding of user information.On December 28, 2021, the CAC published the Measures for Cyber Security Review, effective on February 15, 2022, which provides thatcritical information infrastructure operators purchasing network products and services, and internet platform operators engaging in data processingactivities that affect or may affect national security must apply with the Cyber Security Review Office for a cyber security review. However, thescope of operators of “critical information infrastructure” under the current regulatory regime remains unclear and is subject to the decisions ofcompetent PRC regulatory authorities. The Measures for Cyber Security Review also required internet platform operators processing over onemillion users’ personal information, if seeking for listing abroad, to apply for a cyber security review with the Cyber Security Review Office. Wecannot guarantee you that we will not be subject to cyber security review for our future capital raising activities, or that new rules or regulationspromulgated in the future, if any, will not impose additional compliance requirements on us.On November 14, 2021, the CAC published a discussion draft of the Administrative Measures for Internet Data Security, or the DraftMeasures for Internet Data Security, which provides that data processors conducting the following activities shall apply for cyber security review:(i) merger, reorganization or division of Internet platform operators that have acquired a large number of data resources related to national security,economic development or public interests affects or may affect national security; (ii) listing abroad of data processors processing over one millionusers’ personal information; (iii) listing in Hong Kong which affects or may affect national security; or (iv) other data processing activities thataffect or may affect national security. There have been no clarifications from the authorities as of the date of this annual report on Form 20-F as tothe standards for determining such activities that “affects or may affect national security.” The CAC has solicited comments on this draft untilDecember 13, 2021, but there is no timetable as to when it will be enacted. As such, substantial uncertainties exist with respect to the enactmenttimetable, final content, interpretation and implementation, including the standards for determining whether a listing in Hong Kong “affects or mayaffect national security.” The Draft Measures for Internet Data Security, if enacted as proposed, may materially impact our capital raising activities.Any failure to obtain such approval or clearance from the regulatory authorities could materially constrain our liquidity and have a material adverseimpact on our business operations and financial results, especially if we need additional capital or financing. Table of Contents23We cannot assure you that we will not be subject to PRC regulatory inspection and/or review relating to cyber security, especially whenthere remains significant uncertainty as to the scope and manner of the regulatory enforcement and/or the possible government interference that wemay be exposed to. If we become subject to cyber security inspection and/or review by CAC or other PRC authorities or are required by them totake any specific actions, it could cause suspension or termination of the future offering of our securities, disrupt our operations, result in negativepublicity regarding our company, and divert our managerial and financial resources. We may also be subject to fines or other penalties, which couldmaterially and adversely affect our business, financial condition and operating results. Furthermore, as the legal and regulatory framework for theprotection of information in cyberspace in the PRC continues to evolve, we may be required to adjust our business practices or incur additionaloperating expenses, which may adversely affect our operating results and financial condition. See “Item 4. Information on the Company—B.Business Overview—Regulation—Regulations Relating to Personal Privacy and Data Protection.”Data privacy concerns relating to our products and current practices may, particularly in light of increased regulatory scrutiny of and userexpectations regarding the processing, collection, use, storage, dissemination, transfer and disposal of user data, require changes to ourbusiness practices and may result in declines in user growth or engagement, increased costs of operations and threats of lawsuits, enforcementactions and related liabilities, including financial penalties.Recently, companies’ practices regarding collection, use, retention, transfer, disclosure and security of user data have been, and continueto be, the subject of enhanced regulations and increased public scrutiny. The regulatory frameworks regarding privacy issues in many jurisdictionsare constantly evolving and can be subject to significant changes from time to time, and therefore we may not be able to comprehensively assessthe scope and extent of our compliance responsibility at a global level. Moreover, certain of our users, particularly those in the United States andEurope, may have strong expectations for the level of privacy afforded to their personal data and the content of their communications. Further, thedeveloping requirements around clear and prominent privacy notices (including in the context of obtaining informed and specific consent to thecollection and processing of personal data, if applicable) can potentially deter users from consenting to certain uses of their personal information. Ingeneral, negative publicity of us or our industry regarding actual or perceived violations of our users’ privacy-related rights may also impair users’trust in our privacy practices and make them reluctant to give their consent to share their data with us. Table of Contents24Many jurisdictions, including U.S., continue to consider the need for greater regulation or reform to the existing regulatory framework. Inthe U.S., all 50 states have now passed laws to regulate the actions that a business must take in the event of a data breach, such as promptdisclosure and notification to affected users and regulatory authorities. In addition to the data breach notification laws, some states have alsoenacted statutes and rules requiring businesses to reasonably protect certain types of personal information they hold or to otherwise comply withcertain specified cyber security requirements for personal information. Additionally, the U.S. federal and state governments will likely continue toconsider the need for greater regulation aimed at restricting certain uses of personal data for targeted advertising. California enacted the CaliforniaConsumer Privacy Act, or CCPA, which creates new individual privacy rights for consumers (as that word is broadly defined in the law) and placesincreased privacy and security obligations on entities handling personal data of consumers or households. The CCPA, which went into effect onJanuary 1, 2020, requires covered companies to provide new disclosures to California consumers, and provides such consumers new ways to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for databreaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observershave noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase ourpotential liability and adversely affect our business.In the European Union, or EU, the General Data Protection Regulation, or GDPR, which came into effect on May 25, 2018, increased ourburden of regulatory compliance and requires us to change certain of our privacy and cyber security practices in order to achieve compliance. TheGDPR applies to any company established in the EU as well as any company outside the EU that processes personal data in connection with theoffering of goods or services to individuals in the EU or the monitoring of their behavior. The GDPR implements more stringent operationalrequirements for processors and controllers of personal data, including, for example, requiring expanded disclosures about how personalinformation is to be used, limitations on retention of information, mandatory data breach notification requirements, and higher standards for datacontrollers to demonstrate that they have obtained either valid consent or have another legal basis in place to justify their data processing activities.The GDPR further provides that EU member states may make their own additional laws and regulations in relation to certain data processingactivities, which could further limit our ability to use and share personal data and could require localized changes to our operating model. Under theGDPR, fines of up to 20 million euros or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, maybe assessed for noncompliance, which significantly increases our potential financial exposure for non-compliance. However, with limitedprecedence on the interpretation and application of GDPR and limited guidance from EU regulators, the application of GDPR to the provision ofinternet services remains unsettled. The Company has adopted policies and procedures in compliance with the GDPR, however, such policies andprocedures may need to be updated when additional information concerning the best practices is made available through guidance from regulatorsor published enforcement decisions.Outside of the United States and the EU, many jurisdictions have adopted or are adopting new data privacy and data protection laws thatmay impose further onerous compliance requirements, such as data localization, which prohibits companies from storing data relating to residentindividuals in data centers outside the jurisdiction. The proliferation of such laws within jurisdictions and countries in which we operate may resultin conflicting and contradictory requirements. Table of Contents25In order for us to maintain or become compliant with applicable laws as they come into effect, it may require substantial expenditures onresources to continually evaluate our policies and processes and adapt to new requirements that are or become applicable to us. Complying withany additional or new regulatory requirements on a jurisdiction-by-jurisdiction basis would impose significant burdens and costs on our operationsor may require us to alter our business practices. While we strive to protect our users’ privacy and cyber security and to comply with material dataprotection laws and regulations applicable to us, it is possible that our practices are, and will continue to be, inconsistent with certain regulatoryrequirements. Our international business expansion could be adversely affected if these laws and regulations are interpreted or implemented in amanner that is inconsistent with our current business practices or that requires changes to these practices. In particular, the large amount of userdata generated on and collected from our products has been, and will continue to be, critical for our business model, including to enable us tounderstand our users’ interests and demands for content, improve their user experience with our products and services and deliver targetedadvertising. Therefore, if these laws and regulations materially limit our ability to collect and use our users’ data, our ability to continue our currentoperations without modification, develop new services or features of the products and expand our user base will be impaired. Any failure orperceived failure by us to comply with applicable data privacy laws and regulations, including in relation to the collection of necessary end-userconsents and providing end-users with sufficient information with respect to our use of their personal data may result in fines and penaltiesimposed by regulators, governmental enforcement actions (including enforcement orders requiring us to cease collecting or processing data in acertain way), litigation and/or adverse publicity. Proceedings against us, regulatory, civil or otherwise, could force us to spend money and devoteresources in the defense or settlement of, and remediation related to, such proceedings. Furthermore, any of the foregoing consequences coulddamage our reputation and discourage current and potential users from using our mobile applications. In addition, as users’ expectations andregulatory attitudes with respect to personal privacy and cyber security continue to evolve, future regulations on the extent to which personalinformation and user-generated data can be used by us or shared with third parties may adversely affect our ability to leverage and derive economicvalue from the data that our users generate and share with us, which may limit our ability to carry out targeted advertising and thereby result in adecline in the mobile advertising revenues upon which our revenues are dependent.If we fail to obtain or maintain the requisite licenses and approvals, or otherwise fail to comply with the rules and regulations applicable to ourbusiness operations in and outside China, or if we are required to apply for new licenses and approvals which are time-consuming or costly toobtain, our business and operating results may be materially and adversely affected.We are incorporated in the Cayman Islands and our corporate affairs are governed by our memorandum and articles of association, theCompanies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. We primarily conduct our business through oursubsidiaries and consolidated affiliated entities incorporated in mainland China, Hong Kong and the U.S. However, because our products andservices are used worldwide, one or more other jurisdictions may claim that we are required to comply with their laws based on the location of ouroffices and staff, commercial operations, equipment or our users.The internet industry, including the mobile internet industry, is highly regulated in China. The VIEs are required to obtain and maintainapplicable licenses and approvals from different regulatory authorities in order to provide their current services to our users. In addition to PRClaws and regulations, we face additional regulatory risks and costs outside of China as a portion of our active users and revenues are from marketsoutside of China. We are subject to a variety of laws and regulations in China and foreign jurisdictions that involve matters central to our business,including, but not limited to, privacy and data protection, rights of publicity, content, intellectual property, advertising, marketing, distribution,cyber security, data retention and deletion, national security, electronic contracts and other communications, competition, consumer protection,telecommunications, taxation, and economic or other trade prohibitions or sanctions. The introduction of new products, services or expansion ofour business in certain jurisdictions may subject us to additional laws and regulations. Furthermore, PRC and foreign laws and regulations areconstantly evolving and can be subject to significant change from time to time. As a result, the application, interpretation, and enforcement of theselaws and regulations are often uncertain, particularly in the new and rapidly evolving mobile internet industry in which we operate, and may beinterpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. There can be no assurancethat we will not be found in violation of any future laws and regulations or violation of any of the laws and regulations currently in effect due tochanges in the relevant authorities’ implementation or interpretation of such laws and regulations. Table of Contents26Under the current PRC regulatory scheme, a number of regulatory agencies, including, but not limited to, the State Administration ofRadio and Television (previously known as the State Administration of Press, Publication, Radio, Film and Television, or the SAPPRFT), or theSART, the Propaganda Department of the Central Committee of the Communist Party of China, the National Administration of Press andPublication, or the NAPP, the Ministry of Culture and Tourism (previously known as the Ministry of Culture, or the MOC), or the MCT, theMinistry of Industry and Information Technology, or the MIIT, the State Council Information Office, or the SCIO, and the CyberspaceAdministration of China, or the CAC, jointly regulate all major aspects of the internet industry, including mobile internet businesses. Operators inthis industry must obtain various government approvals and licenses for relevant internet or mobile business.If we fail to obtain or maintain any of the required licenses or approvals, make any necessary filings, or otherwise fail to comply with theapplicable laws and regulations, we may be subject to various penalties, such as confiscation of revenues that were generated through theunlicensed internet or mobile activities, the imposition of fines and the discontinuation or restriction of our operations. Any such penalties maydisrupt our business operations and materially and adversely affect our business, financial condition and operating results.The operations of our online literature mobile apps and game mobile apps may require us to apply for additional license and permits or toupdate our existing licenses and permits. Under regulations issued by the SAPPRFT, the publication of each online game requires approval fromthe SAPPRFT. As of the date of this annual report, we have not obtained approvals from the SAPPRFT or its successor for those domestic onlinegames operated by us. After the re-organization of SAPPRFT, we will apply with the NAPP for the approvals for publishing our games in thefuture. The NAPP at the national level had suspended the approval of game registration and issuance of publication codes for online games startingfrom March 2018. Although the NAPP later resumed game registration and issued game publication codes for the first batch of games with aneffective date of December 19, 2018, the issuance of publication is still difficult to be obtained. Any delay in game registration with NAPP orobtaining game publication codes could negatively affect the operation results of our games. Pursuant to the Notice to Adjust the Scope of OnlineCulture Operation Permit Approval and to Further Regulate the Approval Work released in May 2019, the MCT no longer assumes theresponsibility to regulate online game industry, and the provincial counterparts of MCT would no longer grant Online Culture Operation Permitcovering the business scope of using the information network to operate online games. However, the licenses granted by the MCT before thisnotice will remain valid until the expiration dates of these licenses. On July 23, 2019, the MCT announced the abolishment of the Interim Measureson Administration of Online Games, which regulated the issuance of Online Culture Operation Permits relating to online games. For moreinformation, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Online Games.” As of thedate of this annual report, the governmental authorities have not issued laws or regulations to replace the Interim Measures on Administration ofOnline Games, or to clarify the new regulatory body of online games. We cannot be sure if or when any future regulations or restrictive rules in thisregard will be promulgated and whether they would negatively impact our operations, including by increasing our compliance costs and negativelyimpacting our ability to launch and operate new games. If we are unable to obtain online culture operating license, internet publication servicelicense and publication codes, our ability to introduce, launch, operate and promote new games or games may be adversely affected, and ourfinancial condition and operating results could be adversely affected. In addition, we cannot assure you that we can obtain the NAPP’s approvals orcomplete the filings with the MCT for all games operated by us in a timely manner or at all, which could adversely and materially impact ourability to introduce new games, the timetable to launch new games and our business growth.Moreover, the provisions of online games and online literature are deemed to be internet publication activities. According to theAdministrative Measures for Internet Publication Services jointly issued by the SAPPRFT and the MIIT in 2016, we may be required to obtain aninternet publication service license for the provisions of online games and online literature. According to the Notice on Administration of MobileGame Publishing Services issued by the SAPPRFT in 2016, we may be required to obtain publishing and authorization codes for the online games.As of the date of this annual report, we have not obtained the approval for our internet publication service license and publication codes for thosedomestic online games operated by us In the event of failure to obtain these licenses and approvals, an operator may face heavy penalties, such asbeing ordered by the regulatory authority to shut down services and delete all relevant internet publications. The regulatory authority may alsoconfiscate all of such operator’s illegal income as well as major equipment and specialized tools used in illegal publishing activities. If the illegalincome exceeds RMB10,000, such operator may face a fine of five to ten times of such illegal income; and if the illegal income is less thanRMB10,000, such operator may face a fine of less than RMB50,000. Such operator may also bear civil liability if its operation has infringed onother persons’ legal rights and interests. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Internet Publication Services.” Table of Contents27Furthermore, on May 26, 2016, the National Office of Anti-Pornography and Illegal Publication issued the Notice on Management ofMobile Game Publishing Services, which provides that mobile games without approval shall not be published and operated online. In August 2018,the National Office of Anti-Pornography and Illegal Publication, the MIIT, the Ministry of Public Security, the MCT, the SART and the CACjointly issued the Notice on Strengthen the Management of Live Streaming Service, which required a real-name registration system for users to beput in place by live streaming service providers. On October 25, 2019, the NAPP issued the Notice on Preventing Minor’s Addiction to OnlineGames, which requires all online gamers to register accounts with their valid identity information and all game companies to stop providing gameservices to users who fail to do so. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Anti-fatigue System, Real-name Registration System and Parental Guardianship Project.” We plan to implement severalmeasures to comply with the current real-name registration system. However, the PRC government may further tighten the real-name registrationrequirements or require us to implement a more thorough compulsory real-name registration system for all users on our platform in the future, inwhich case we will need to upgrade our system or purchase relevant services from third-party service providers and incur additional costs inrelation thereto. If we were required to implement a more rigid real-name registration system for users on our platform, potential users may bedeterred from registering with our platform, which may in turn negatively affect the growth of our user base and business prospects.Our business is subject to complex and evolving laws, regulations and governmental policies in China and other countries and regions wherewe have business. Many of these laws, regulations and governmental policies are subject to change and uncertain interpretation, and couldresult in claims, changes to our business practices, increased cost of operations, or declines in our growth or engagement, financialperformance, or otherwise harm our business.We are subject to a variety of laws and regulations that involve matters important to or may otherwise impact our business. Theintroduction of new products and services, expansion of our activities in certain jurisdictions, or other actions that we may take may subject us toadditional laws, regulations, or other government scrutiny. In addition, foreign laws and regulations can impose different obligations or be morerestrictive than those in the PRC.These laws and regulations are continuously evolving and can be subject to significant change. New laws, regulations and governmentalpolicies may be adopted from time to time by the PRC government to address new issues that come to the authorities’ attention, which may requireus to obtain new license and permits, or take certain actions that may adversely affect the industry that we operate in and our business operations.Complying with new laws and regulations could cause us to incur substantial costs or require us to change our business practices in a mannermaterially adverse to our business.For example, the PRC government has taken steps to limit online game playing time for all minors and to otherwise control the contentand operation of online games. On August 30, 2021, National Press and Publication Administration released Notice on Further Strict Managementand Practically Preventing Minors from Indulging in Online Games, which imposed restrictions over the provision of online gaming services tominors, aiming at curbing excessive indulgence in online game and protecting minors’ mental and physical health. Although the provision of ourgames is not specifically targeting at minors, further restrictions on the operation of online games could negatively affect our business operationsand financial performance.As the industry that we operate in is still evolving in China, new laws, regulations and governmental policies may be adopted from time totime to require additional licenses and permits other than those we currently have, and to address new issues that arise from time to time. We maynot timely obtain or maintain all the required licenses or approvals or make all the necessary filings in the future.If we fail to timely address all the change in policy or to obtain and maintain approvals, licenses or permits required for our business, or tocomply with relevant laws and regulations, we could be subject to liabilities, fines, penalties and operational disruptions, or we could be required tomodify our business model, which could materially and adversely affect our growth and financial performance, including but not limited to ourprofitability, the trading price of our listed securities and our valuation. See also “—Risks Relating to Our Business—If we fail to obtain ormaintain the requisite licenses and approvals, or otherwise fail to comply with the rules and regulations applicable to our business operations in andoutside China, or if we are required to apply for new licenses and approvals which are time-consuming or costly to obtain, our business andoperating results may be materially and adversely affected.” Table of Contents28If we fail to prevent security breaches, cyber-attacks or other unauthorized access to our systems or our users’ data, we may be exposed tosignificant consequences, including legal and financial exposure and loss of users, and our reputation, business and operating results may bematerially and adversely affected.We collect, store, transmit and process a large volume of personal and other sensitive data generated by our users through their interactionswith our products. Although we have taken various security measures and adopted robust internal policies to protect our users’ personal privacyand cyber security, we may nevertheless be exposed to risks of security breaches or unauthorized access to or cyber-attacks on our systems or thedata we store. Given the size of our user base, and the types and volume of personal data on our systems, we believe that we may be a particularlyattractive target for security breaches and cyber-attacks. Our efforts to protect our data may be unsuccessful due to software “bugs,” system errorsor other technical deficiencies, mistakes or malfeasance of our employees or contractors, vulnerabilities of our vendors and service providers, orother cyber security-related vulnerabilities. Any failure to prevent or mitigate security breaches, cyber-attacks or other unauthorized access to oursystems or disclosure of our users’ data, including personal information, could result in loss or misuse of such data, interruptions to the services weprovide, diminished user experience, loss of user confidence and trust in our products, impairment of our network and technological infrastructure,and harm to our reputation and business, significant legal and financial exposure and potential lawsuits brought by private individuals or regulators.We have invested and will continue to devote resources to maintain strong security protections that shield our systems and our users’ data againstbugs, theft, misuse or security vulnerabilities or breaches. Although we have developed systems and processes that are designed to prevent anddetect security breaches and protect our users’ data, we cannot guarantee that such measures will be sufficient defenses against the evolvingtechniques used to obtain unauthorized access, disable or degrade services or sabotage systems. In addition, as our data centers and servers aredispersed around the world, we may incur significant costs in protecting them against, or remediating, security breaches and cyber-attacks.Our products and internal systems rely on software that is highly technical, and if it contains undetected errors or vulnerabilities, our businesscould be adversely affected.Our products and internal systems rely on numerous proprietary and licensed software that is highly technical and complex. In addition,our products and internal systems depend on the ability of certain software to encrypt, store, retrieve, process, and manage large amounts of data.The software on which we rely now or in the future may contain undetected errors, bugs, or vulnerabilities that may not be discovered until afterthe relevant source code is released and examined. Errors, vulnerabilities, or other design defects within the software on which we rely may resultin a negative experience for users of our products, delay product introductions or enhancements, compromise our ability to protect the data of ourusers and/or our intellectual property or lead to reductions in our ability to provide some or all of our services. In addition, any errors, bugs,vulnerabilities, or defects discovered in the software on which we rely, and any associated degradations or interruptions of service, could result indamage to our reputation, loss of users, loss of revenue, or liability for damages, any of which could materially and adversely affect our businessand operating results.The industry in which our business operates is highly competitive. If we fail to compete effectively, our business will suffer.We face intense competition in every aspect of our business, including competition for users, usage time, advertising customers,technology, and highly skilled employees. Our portfolio products compete with applications of the same or a similar kind. Our Fengdu Novelcompetes with other leading free online literature applications in the Chinese market including Fanqie Novel and Qimao Novel. Our mobile gameproducts such as Farm Hero, Idle Land King Tycoon, Hi Hamster, Puzzle No.1, Fantastic LeDou and Idiom Hero compete primarily with otheronline mobile games developed by companies such as WebEye and Laiwan. In addition, we compete with all major internet companies for userattention and advertising spend. Table of Contents29We compete with other developers of mobile applications for users, usage time and advertising customers on the basis of quality, features,availability and ease of use of products and services, and the number and quality of advertising distribution channels. We also compete with otherdevelopers for talented employees with technological expertise that is crucial for the sustained development of successful products and services.Our competitors may operate with more efficient business models and cost structures. They may prove more adaptable to new technological andother market developments than we are. Many of our competitors are larger and more established companies and may have significantly morefinancial, technological, marketing and other resources than we do and may be able to devote greater resources to the development, promotion,sales and support of their products and services. They may allow our competitors to respond to new or emerging technologies and changes inmarket requirements better than we can. Our competitors may also develop products, features, or services that are similar to ours or that achievegreater market acceptance. These products, features, and services may undertake more far-reaching and successful product development efforts ormarketing campaigns. As a result, our competitors may acquire and engage users at the expense of our user growth or engagement, which mayseriously harm our business. If we cannot effectively compete, our user engagement may decrease, which could make us less attractive to users,advertisers and seriously harm our business and have a material and adverse impact on our business, operating results and growth potential.Our mobile applications are mainly designed for Android operating systems. A decrease in the popularity of Android operating systems maymaterially and adversely affect our business and operating results.Our business is dependent on the compatibility of our products with popular mobile operating systems that we do not control, includingAndroid and iOS operating systems. Most of our mobile applications are designed to operate on the Android operating system. Any significantdecline in the overall popularity of the Android ecosystem or Android devices could materially and adversely affect the demand for, and revenuesgenerated from, our mobile applications. There can be no assurance that the Android ecosystem will grow in the future and at what growth rate.Another operating system for mobile devices may replace Android and decrease its popularity, especially considering the constantly evolvingnature of the mobile internet industry. To the extent that our mobile applications continue to mainly support Android devices, our mobile businesscould be vulnerable to any decline in popularity of the Android operating system or Android devices. In addition, any changes, bugs, or technicalissues in Android operating system may degrade our products’ functionality and limit our ability to deliver, target, or measure the effectiveness ofads, or to charge fees related to our delivery of ads, which may have an adverse impact on our business and operating results.User growth and engagement depend upon effective interoperation of our products with mobile devices, operating systems and standards thatwe do not control.Our products and services are available across a variety of mobile devices and mobile operating systems. In order to deliver high qualityproducts and services to a broad spectrum of mobile internet users, it is important for our products and services to work well with a range of mobiledevices, operating systems, networks and standards that we do not control, including Android and iOS operating systems. Any changes in suchdevices or operating systems that degrade the functionality of our products and services would affect our users’ experience with our products. If wefail to develop relationships with the key participants in the mobile internet industry and mobile advertising industry, or if we fail to maintain theeffective interoperation of our products and services with these mobile devices, operating systems, networks and standards, our user growth anduser engagement could be harmed, and our business and operating results could be adversely affected. Table of Contents30We may be held liable for information or content displayed on, distributed by, retrieved from or linked to the mobile applications integrated intoour products, which may adversely impact our brand image and materially and adversely affect our business and operating results.We may display third-party content, such as videos, pictures, books, articles and other works, on our mobile applications without theexplicit consent from such third party, and we may further explore market opportunities in the content-related business. Our users may misuse ourproducts to disseminate content that contains inappropriate, fraudulent or illegal information or that infringes the intellectual property rights of thirdparties. We have implemented control measures and procedures to detect and block inappropriate, fraudulent or illegal content uploaded to ordisseminated through our products, particularly those that violate our user agreements or applicable laws and regulations. However, suchprocedures may not be sufficient to block all such content due to the large volume of third-party content. Despite the procedures and measures wehave taken, if the content displayed on our products are found to be fraudulent, illegal or inappropriate, we may suffer a loss of users and damage toour reputation. In response to any allegations of fraudulent, illegal or inappropriate activities conducted through our mobile applications or anynegative media coverage about us, government authorities may intervene and hold us liable for non-compliance with laws and regulationsconcerning the dissemination of information on the internet and subject us to administrative penalties or other sanctions, such as requiring us torestrict or discontinue certain features and services provided by our mobile applications or to temporarily or permanently disable such mobileapplications. If any of such events occurs, our reputation and business may suffer and our operating results may be materially and adverselyaffected.We may not be able to prevent unauthorized use of our intellectual property, which could harm our business and competitive position.We regard our patents, copyrights, trademarks, trade secrets, and other intellectual property as critical to our business. Unauthorized use ofour intellectual property by third parties may adversely affect our business and reputation. We rely on a combination of intellectual property lawsand contractual arrangements to protect our proprietary rights. It is often difficult to register, maintain, and enforce intellectual property rights incountries with less developed regulatory regimes or inconsistent and unreliable enforcement mechanisms. Sometimes laws and regulations aresubject to interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. Inaddition, our contractual agreements may be breached by our counterparties, and there may not be adequate remedies available to us for any suchbreach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China andother jurisdictions in which we operate. Detecting and preventing any unauthorized use of our intellectual property is difficult and costly and thesteps we have taken may be inadequate to prevent infringement or misappropriation of our intellectual property. In the event that we resort tolitigation to enforce or protect our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial andfinancial resources. We can provide no assurance that we will prevail in such litigation. For a detailed description of such a litigation, see “Item 8.Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” In addition, our trade secrets may beleaked or otherwise become available to, or be independently discovered by, our competitors.We may be subject to intellectual property infringement lawsuits which could be expensive to defend and may result in our payment ofsubstantial damages or licensing fees, disruption to our product and service offerings, and reputational harm.The success of our business relies on the quality of our products, which in turn depends on the underlying software and related technology,such as big data analytics. The protection of such software and related technologies primarily relies on intellectual property rights including patentsand trade secrets. Meanwhile, for the purpose of our business expansion, we may from time to time display third-party content, such as videos,pictures, books, articles and other works, on our mobile applications without acquiring the explicit consent from such third party. Third parties,including our competitors, may assert claims against us for alleged infringements of their patents, copyrights, trademarks, trade secrets and internetcontent. Table of Contents31For instance, in May 2019, a third-party company in China brought a lawsuit against Shanghai Chubao and Shanghai Chule in ShanghaiIntellectual Property Court for design patent infringement. The plaintiff alleged that TouchPal Smart Input infringed its design patent of an inputmethod, and claimed for stopping the infringement and compensation of RMB1,000,000. On December 30, 2021, Shanghai Intellectual PropertyCourt ruled in favor of the plaintiff, and urged Shanghai Chubao and Shanghai Chule to stop using the relevant design patent, and to providecompensation to the plaintiff for its economic losses of RMB300,000 and other reasonable expenses of RMB50,000 for eliminating adverse effectcaused by the infringement. For more information, see “Item 8. Financial Information—A. Consolidated Statements and Other FinancialInformation—Legal Proceedings.”The lengthy application procedures of software-related patents may lead to uncertainty on our intellectual property rights to our self-developed software because it increases the likelihood that there are pending patent applications whose priority dates pre-date the development ofour own software that is identical or substantially similar to the software subject of the pending patent application. We have been subject to patentdisputes, and expect that we may increasingly be subject to patent infringement claims as our products and monetization model expand in marketshare, scope and complexity. Claims have been threatened and brought against us for alleged copyright or trademark infringements based on thenature and content of information that is generated by us or by third parties, including our users, and posted in our products. In addition, we may inthe future be subject to domestic or international actions alleging that certain content we have generated or third-party content that we have madeavailable within our products and services violates the applicable laws in China or other jurisdictions.Intellectual property claims against us, whether meritorious or not, are time consuming and costly to resolve, could divert managementattention away from our daily business, could require changes of the way we do business or develop our products, could require us to enter intocostly royalty or licensing agreements or to make substantial payments to settle claims or satisfy judgments, and could require us to ceaseconducting certain operations or offering certain products in certain areas or generally. We do not conduct comprehensive patent searches todetermine whether the technologies used in our products infringe upon patents held by others. In addition, product development is inherentlyuncertain in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which areconfidential when filed, with regard to similar technologies. While we believe that our products do not infringe in any material respect upon anyintellectual property rights of third parties, we cannot be certain that this is the case.In addition, in any potential dispute involving our patents or other intellectual property, our advertising customers and business partnerscould also become the target of litigation. We have certain contractual obligations to indemnify our advertising customers and the mobile devicemanufacturers that pre-install our products on their devices for liability that they may incur based on third-party claims of intellectual propertyinfringement for the use of our products or technology. Many of our collaboration contracts with mobile device manufacturers provide for a cap onour indemnity obligations. In addition, in the event of any such claims, our advertising customers or business partners may decide not to use ourproducts in the future, which could harm our financial condition and operating results.Finally, we may also face infringement claims from the employees, consultants, agents and outside organizations we have engaged todevelop our technology. While we have sought to protect ourselves against such claims through contractual means, there can be no assurance thatsuch contractual provisions are adequate, and any of these parties might claim full or partial ownership of the intellectual property in thetechnology that they were engaged to develop for us. Table of Contents32Pending or future litigation could have a material and adverse impact on our financial condition and operating results.We have been, and may continue to be, subject to lawsuits brought by our competitors, individuals or other entities against us. Forexample, in June 2020, a mobile device manufacturer sued us for unfair competition, alleging that one of our mobile applications had interferedwith the normal use of their devices by ways of pop-up advertisements, and claimed for stopping the act and compensation of RMB4,900,000. Thefirst-instance judgment was made in March 2021, which ordered the suspension of pop-up advertisements and awarded RMB3,000,000 to theplaintiff. After filing an appeal, we entered into a settlement agreement with the plaintiff, pursuant to which we need to provide compensation tothe plaintiff of RMB1,485,955. We may also in the future be involved in legal proceedings between us and the mobile device manufactures whohad contractual arrangements with us with respect to the pre-installation of our products on their mobile devices. In addition, we have beeninvolved in lawsuits brought by our competitors alleging the infringement of intellectual property from time to time. See “—We may be subject tointellectual property infringement lawsuits which could be expensive to defend and may result in our payment of substantial damages or licensingfees, disruption to our product and service offerings, and reputational harm.”Where we can make a reasonable estimate of the liability relating to pending litigation against us and can determine that an adverseliability resulting from such litigation is probable, we record a related contingent liability. As additional information becomes available, we assessthe potential liability and revise estimated liability as appropriate. However, due to the inherent uncertainties of litigation, the amount of ourestimated liability may be inaccurate, in which case our financial condition and results of operation may be adversely affected. In addition, theoutcomes of actions we institute may not be successful or favorable to us. Lawsuits against us may also generate negative publicity thatsignificantly harms our reputation, which in turn may adversely affect our user base and adverting customer base. In addition to the related cost,managing and defending litigation and related indemnity obligations can significantly divert our management’s attention from operating our dailybusiness. We may also need to pay damages or settle lawsuits with substantial amounts of cash, which may adversely affect our cash flow andfinancial conditions. While we do not believe that any currently pending proceedings are likely to have a material adverse effect on our business,financial condition, results of operations and cash flows, if there were adverse determinations in legal proceedings against us, we could be requiredto pay substantial monetary damages or to materially alter our business practices, which could have an adverse effect on our financial condition andresults of operations and cash flows.Some of our mobile applications contain open source software, which may pose risks to our proprietary software.We use open source software in our products and services and expect to continue to use open source software in the future. The terms ofmany open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that such licenses couldbe construed in a manner that imposes unanticipated conditions or restrictions on our ability to sell or distribute our mobile applications.Additionally, we may from time to time face threats or claims from third-parties claiming ownership of, or demanding release of, the alleged opensource software or derivative works we developed using such software, which could include our proprietary source code, or otherwise seeking toenforce the terms of the applicable open source license. These threats or claims could result in litigation and could require us to make our sourcecode freely available, purchase a costly license or cease offering the implicated mobile applications unless and until we can re-engineer them toavoid infringement. Such a re-engineering process could require significant additional research and development resources, and we may not be ableto complete it successfully. In addition to risks related to license requirements, our use of certain open source software may lead to greater risksthan use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software.Additionally, because any software source code we contribute to open source projects is publicly available, our ability to protect our intellectualproperty rights with respect to such software source code may be limited or lost entirely, and we are unable to prevent our competitors or othersfrom using such contributed software source code. Any of these risks could be difficult to eliminate or manage and, if not addressed, couldadversely affect our business, financial condition and operating results. Table of Contents33Any financial or economic crisis, or perceived threat of such a crisis may materially and adversely affect our business, financial condition andresults of operations.The global financial markets experienced significant disruptions in 2008 and the United States, European and other economies went intorecession. The recovery from the lows of 2008 and 2009 was uneven and the global financial markets are facing new challenges, including theescalation of the European sovereign debt crisis since 2011, the hostilities in the Ukraine, the end of quantitative easing by the U.S. FederalReserve, the economic slowdown in the Eurozone in 2014 and the volatility in financial markets across the world due to COVID-19. It is unclearwhether these challenges will be contained and what effects they each may have. There is considerable uncertainty over the long-term effects of theexpansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the world’s leadingeconomies, including China’s. Recently there have been signs that the rate of China’s and global economic growth is declining. Any prolongedslowdown in global economic development might lead to tighter credit markets, increased market volatility, sudden drops in business and marketconfidence and dramatic changes in business and consumer behaviors.A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect our business and financial condition.The global macroeconomic environment is facing numerous challenges. The growth rate of the Chinese economy has gradually slowed inrecent years, and the trend may continue especially in light of the challenges the global economy is facing due to the COVID-19 global pandemic.There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks andfinancial authorities of some of the world’s leading economies, including the United States and China. The conflict in Ukraine and the impositionof broad economic sanctions on Russia could raise energy prices and disrupt global markets. Unrest, terrorist threats and the potential for war in theMiddle East and elsewhere may increase market volatility across the globe. There have also been concerns about the relationship between Chinaand other countries, including the surrounding Asian countries, which may potentially have economic effects. In particular, there is significantuncertainty about the future relationship between the United States and China with respect to trade policies, treaties, government regulations andtariffs. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policiesand the expected or perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economy maymaterially and adversely affect our business, results of operations and financial condition.Changes in international trade policies and international barriers to trade or the escalation of trade tensions may have an adverse effect on ourbusiness.International trade disputes could result in tariffs and other protectionist measures that could adversely affect our business. Tariffs couldincrease our operating costs as well as the cost of the goods and products which could affect our customer’s discretionary spending level. Inaddition, any escalation in existing trade tensions or the advent of a trade war, or news and rumors of the escalation of a potential trade war, couldaffect consumer confidence and have a material adverse effect on our business, results of operations and, ultimately, the trading price of our ADSs.Political tensions between the United States and China have escalated due to, among other things, the COVID-19 outbreak, the PRCNational People’s Congress’ passage of Hong Kong national security legislation, sanctions imposed by the U.S. Department of Treasury on certainofficials of the Hong Kong Special Administrative Region and the central government of the PRC, and the executive orders issued by U.S.President in August 2020 and the new executive order issued by the U.S. President in June 2021 which sought or seek to prohibit certaintransactions with, or equity investment in, certain Chinese companies and their respective subsidiaries. In addition, on December 31, 2020, the NewYork Stock Exchange commenced proceedings to delist securities of three major telecommunications service providers in China in light of anexecutive order prohibiting any transaction in publicly traded securities of certain China-based companies by any U.S. person. We have beenclosely monitoring domestic policies in the United States designed to restrict certain Chinese companies from supplying or operating in the U.S.market. However, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to internationaltrade agreements, the imposition of tariffs on goods imported into the United States, tax policy related to international commerce, or other tradematters. If any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if theU.S. government takes retaliatory trade actions due to the recent U.S.-China trade tensions, such changes could have an adverse effect on ourbusiness, financial condition and results of operations. Table of Contents34Likewise, we are monitoring policies in the United States that are aimed at restricting U.S. persons from investing in or supplying certainChinese companies. The United States and various foreign governments have imposed controls, license requirements and restrictions on the importor export of technologies and products (or voiced the intention to do so). For instance, the United States is in the process of developing new exportcontrols with respect to “emerging and foundational” technologies, which may include certain AI and semiconductor technologies. In addition, theU.S. government may potentially impose a ban prohibiting U.S. persons from making investments in or engaging in transactions with certainChinese companies. Measures such as these could deter suppliers in the United States and/or other countries that impose export controls and otherrestrictions from providing technologies and products to, making investments in, or otherwise engaging in transactions with Chinese companies. Asa result, Chinese companies would have to identify and secure alterative supplies or sources of financing, while they may not be able to do so in atimely manner and at commercially acceptable terms, or at all. In addition, Chinese companies may have to limit and reduce their research anddevelopment and other business activities, or cease conducting transactions with parties, in the United States and other countries that impose exportcontrols or other restrictions. Like other Chinese companies, our business, financial condition and results of operations could be adversely affectedas a result.If relations between China and the United States deteriorate, our business, results of operations and financial condition could be adverselyaffected.At various times during recent years, the United States and China have had significant disagreements over monetary, economic, politicaland social issues, including currently in relation to the COVID-19 pandemic, and future relations between these two countries may deteriorate.Changes in political conditions and changes in the state of China-U.S. relations are difficult to predict and could adversely affect our business,results of operations and financial condition. In addition, because of our extensive operations in the Chinese market, any deterioration in political ortrade relations might cause a public perception in the United States or elsewhere that might cause our products to become less attractive. We cannotpredict what effect any changes in China-U.S. relations may have on our ability to access capital or effectively do business in China or the UnitedStates. Moreover, any political or trade controversies between the United States and China, whether or not directly related to our business, couldcause investors to be unwilling to hold or buy our ADSs and consequently cause the trading price of our ADSs to decline.Our business depends on a number of key employees, including our executive officers and other employees with key technical skills andknowledge. If we fail to hire, retain, or motivate our key employees, our business and operating results may be materially and adverselyaffected.We depend on the continued contributions of our executive officers and other key employees, including those with key technologicalexpertise, many of whom are difficult to replace. Any loss of the services of any of our senior management or other key employees could harm ourbusiness. Competition for qualified employees in and outside China is intense. Some of the companies with which we compete for experiencedemployees may have greater resources than we do and may be able to offer more attractive terms of employment. Our future success is dependenton our ability to attract a significant number of qualified employees and retain our existing key employees. If our key employees cease to work forus, our business may be materially and adversely affected and we may incur additional expenses to recruit, train and retain qualified personnel toreplace them.Although we have entered into confidentiality and non-compete agreements with our key employees, our key employees may join ourcompetitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantialcosts and expenses in order to enforce such agreements in China or we may be unable to enforce them at all. We commit significant time and otherresources to training our employees, which increases their value to competitors if they subsequently leave us for our competitors. Table of Contents35Our failure to effectively manage our growth or implement our business strategies may harm our business and operating results.We have experienced solid growth in the number of active users, and we plan to continue to expand our product offerings in the globalmarket. Managing our growth requires allocation of valuable management time and resources, and significant expenditures. As part of our strategy,we intend to continue making investments to expand our user base, strengthen our research and development efforts, and enhance our ability todeliver highly targeted content. To execute our business plan and growth strategy, we need to continuously improve our operational and financialsystems, procedures and controls, and hire, train, manage and maintain good relations with our employees. Continued growth could also strain ourability to maintain reliable service levels for our users, advertising customers and business partners. We have limited operational experience inmanaging the business at the current scale and we cannot assure you we will be able to maintain the current level of growth rate in the future.From time to time we may conduct strategic investments and acquisitions, which may require significant management attention, disrupt ourbusiness and adversely affect our financial conditions.We may take advantage of opportunities to invest in or acquire additional businesses, services, assets or technologies. For example, wehave invested several game studios in China and overseas during the past, including Smillage, a game studio that has created popular games such asCatwalk Beauty, Truth Runner and Love Fantasy. However, we may fail to select appropriate investment or acquisition targets, or we may not beable to negotiate optimal arrangements, including arrangements to finance any acquisitions. Acquisitions and the subsequent integration of newassets and businesses into our own could require significant management attention and could result in a diversion of resources away from ourexisting business. Investments and acquisitions could result in the use of substantial amounts of cash, increased leverage, potentially dilutiveissuances of equity securities, goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential liabilitiesof the acquired business. In addition, the invested or acquired assets or businesses may not generate the financial results we expect. Moreover, thecosts of identifying and consummating these transactions may be significant. In addition to obtaining the necessary corporate governanceapprovals, we may also need to obtain approvals and licenses from relevant government authorities for the acquisitions and investments to complywith applicable laws and regulations, which could result in increased costs and delays.We rely on our assumptions and estimates to calculate certain key operating metrics. Any real or perceived inaccuracies in our calculationsmay harm our reputation and negatively affect our business.The numbers of daily and monthly active users of our products are calculated using our internal data that has not been independentlyverified. While these numbers are based on what we believe to be reasonable calculations for the applicable periods of measurement, there areinherent challenges in accurately measuring usage and user engagement across our large user base. For example, we treat each mobile device oreach application on a mobile device as a separate user for purposes of calculating our DAUs and MAUs, and we may not be able to distinguishindividual users who use multiple applications from us or have multiple mobile devices. Accordingly, the calculations of our active users may notaccurately reflect the actual number of people using our products.We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. Our measures of usergrowth and user engagement may differ from estimates published by third parties or from similarly titled metrics used by our competitors due todifferences in methodology. If our advertising customers, business partners or investors do not perceive our user metrics to be accuraterepresentations of our user base or user engagement, or if we discover material inaccuracies in our user metrics, our reputation may be harmed andour advertising customers and business partners may be less willing to allocate their spending or resources to our products, which could negativelyaffect our business and operating results. Table of Contents36Our operating results are subject to seasonal fluctuations due to a number of factors, any of which could adversely affect our business andoperating results.We are subject to seasonality and other fluctuations in our business. Revenues from our mobile advertising services, which constitutedsubstantially all of our revenues in 2021, are affected by seasonality in advertising spending in both international and China markets. We believethat such seasonality in advertising spending affects our quarterly results, partially resulting in the significant growth in our mobile advertisingrevenues between the first and the third quarters but a decline from the third quarter to the fourth quarter. Our operating results for one or morefuture quarters or years may fluctuate or fall below the expectations of securities analysts and investors. In such event, the trading price of theADSs may fluctuate.The successful operation of our business depends upon the performance and reliability of the internet infrastructure in China and in othercountries as well as the safety of our network and infrastructure.Our growth and expansion will depend in part on the reliability of state-owned telecommunications services providers in China andsimilar providers in other countries in maintaining and expanding internet and telecommunications infrastructure, standards, protocols, andcomplementary products and services.Almost all access to the internet in China is offered through China Mobile, China Unicom and China Telecom, which are under theadministrative control and regulatory supervision of the MIIT. We rely on the internet infrastructure of China Mobile, China Unicom, and ChinaTelecom to provide bandwidth and transmit data. Although the Chinese government has announced plans to develop China’s national informationinfrastructure, this infrastructure may not be developed in time or at all, and the existing internet infrastructure in China may not be able to supportthe continued growth of internet usage. In addition, it is unlikely that we will have access to alternative networks and services on a timely basis, ifat all, in the event of any infrastructure disruption or failure.Users of our mobile applications may employ existing or new technologies to block advertisements placed by us, which may limit our ability togenerate revenues from our advertising services.Existing or new technologies that can disable the display of our advertisements may impair the growth of our mobile advertising business.Most of our revenues are derived from fees paid to us by advertising exchange customers based on the effective price per impression, which isimpacted by the number of our users’ valid clicks, conversions, impressions delivered or other measurable results. If technologies capable ofblocking advertisements on our products are adopted by a significant number of our users, we may not be able to continue delivering suchadvertisements to our users and our revenues may decrease. In addition, advertisers may choose not to advertise on or through our products in lightof the perceived use by our users of advertisement-blocking measures, which may adversely affect our business and growth prospects.If we fail to detect click-through fraud, we could lose the confidence of our advertisers and our revenues may decline as a result.Our business is exposed to the risk of click-through fraud on our mobile applications. Click-through fraud occurs when a person clicks anadvertisement displayed by us for a reason other than to view the underlying content of such advertisement. If we fail to detect significantfraudulent click-throughs or otherwise are unable to prevent significant fraudulent activity, the affected advertisers may experience a reduced returnon their investment in our mobile advertising services and may lose confidence in the integrity of our systems. As a result, we may have to issuerefunds to our advertisers and we may be unable to retain existing advertising customers and attract new advertising customers for our advertisingservices, and our mobile advertising revenues may decline. In addition, affected advertisers may commence legal action against us for claimsrelated to click-through fraud. Any such claims or similar claims, regardless of their merit, could be time-consuming and costly for us to defendagainst and could also adversely affect our brand and operating results. Table of Contents37Our business emphasizes rapid innovation and prioritizes the growth in user base and cultivation of content ecosystem of content-rich portfolioproducts. That strategy may produce results that do not align with investors’ expectation and our stock price may be negatively affected as aresult.Our growth depends on our ability to actively develop and launch new and innovative products and services. We intend to quickly adaptour products to changes in market trends and user needs, but we have no control over whether these adaptions will be well received by our users,advertising customers or business partners, and may result in unintended outcomes or consequences. We prioritize the growth in user base andcultivation of content ecosystem of content-rich portfolio products. For example, we monitor how our delivery of advertisements on our productsaffects our users’ experience with the products and we may decide to decrease the number of advertisements placed on our products to ensure ourusers’ satisfaction with our products. This could result in a loss of advertising customers and negatively impact our mobile advertising revenue. Ourdecisions may not be consistent with the short-term expectations of investors and may not produce the long-term benefits that we expect, in whichcase the maintenance and growth of our user base, our relationships with advertising customers, and our business and operating results could beadversely and materially harmed.We have granted, and may continue to grant, options, restricted shares units and other types of share-based incentive awards, which may resultin increased share-based compensation expenses.We adopted a stock incentive plan in 2012 and a share incentive plan in 2018, as amended from time to time, for the purpose of grantingshare-based compensation awards to our directors, officers, employees and advisors to incentivize their performance and align their interests withours. Expenses associated with share-based compensation have affected our net income and may reduce our net income in the future, and anyadditional securities issued pursuant to share-based incentive awards will dilute the ownership interests of our shareholders, including holders ofthe ADSs. On November 6, 2018, our board of directors approved an option modification to reduce the exercise price of certain options grantedunder our 2012 Plan to employees. Other terms of the share options granted remain unchanged. The modification resulted in incrementalcompensation costs of US$ 0.3 million, which is amortized over the remaining vesting period of the modified options, ranging from 2018 to 2021.We believe the granting of share-based incentive awards is of significant importance to our ability to attract and retain key employees, and we planto grant share-based incentive awards in the future. As a result, our share-based compensation expenses may increase, which may have an adverseeffect on our results of operations.If we fail to build, maintain and enhance our brands, or if we incur a disproportionate amount of expenses pursuing this effort, our business,operating results and prospects may be materially and adversely affected.We believe that maintaining and enhancing our brand is critical to expanding our user base and number of advertising customers. We alsobelieve that maintaining and enhancing our brand will depend largely on our ability to continue to provide useful, reliable, trustworthy, andinnovative products, which we may not be able to do successfully in the future. We will also continue to experience media, legislative, orregulatory scrutiny of our decisions regarding user privacy, content, advertising, and other issues, which may adversely affect our reputation andbrands. We also may fail to respond expeditiously to the sharing and uploading of objectionable content on our products and services orobjectionable practices by advertising customers, or may fail to otherwise address user concerns, which could erode confidence in our brands. Inaddition, maintaining and enhancing our brands may require us to make substantial investments and these investments may not be successful. Wepromote our brand and products through online advertising networks and platforms, which primarily include Douyin, Tencent, Kuaishou, Applovinand Facebook Ads, as well as social media channels, which primarily include WeChat. These branding and marketing efforts may not result inincreased user traffic in a cost-effective way. If we fail to successfully promote and maintain our brands or if we incur excessive expenses in thiseffort, our business and financial results may be adversely affected. In addition, any negative publicity in relation to our mobile applications,regardless of its veracity, could harm our brands and reputation and, in turn, our business and financial results. Table of Contents38If we fail to implement and maintain an effective system of internal control, we may be unable to accurately report our operating results, meetour reporting obligations or prevent fraud.In preparing our consolidated financial statements for the fiscal years ended December 31, 2019 and 2020, we and our independentregistered public accounting firm identified one material weakness and one significant deficiency in our internal control over financial reporting aswell as other control deficiencies as of December 31, 2019 and 2020, in accordance with the standards established by the PCAOB of the UnitedStates. As defined in the standards established by the U.S. Public Company Accounting Oversight Board, a “material weakness” is a deficiency, ora combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement ofthe annual or interim financial statements will not be prevented or detected on a timely basis, and a “significant deficiency” is a deficiency, or acombination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to meritattention by those responsible for oversight of financial reporting.The material weakness that has been identified relates to our lack of accounting policies and procedures relating to financial reporting inaccordance with U.S. GAAP and SEC financial reporting requirements. The significant deficiency that has been identified relates to ourinsufficient formal risk assessment process and monitoring activities. Following the identification of the material weakness and significantdeficiency, we have taken measures and plan to continue to take measures to remediate these control deficiencies. See “Item 15. Controls andProcedures—Internal Control Over Financial Reporting.” As of December 31, 2021, based on our management’s assessment on the performance ofthe remediation measures, we determined that the material weakness has been remediated while the significant deficiency remains as it had notbeen fully remediated. The significant deficiency, if not remediated timely, may lead to material misstatements in our consolidated financialstatements. Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control forpurposes of identifying and reporting material weaknesses and other deficiencies in our internal control over financial reporting. Had we performeda formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit ofour internal control over financial reporting, additional deficiencies may have been identified.We are a public company in the United States subject to the Sarbanes-Oxley Act of 2002. The Securities and Exchange Commission, orthe SEC, adopted rules pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 requiring every public company to include a management reporton such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness ofour internal control over financial reporting. In addition, once we cease to be an “emerging growth company” as such term is defined under theJOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financialreporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our managementconcludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its ownindependent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls aredocumented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, as we have become apublic company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems forthe foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation.During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404 of theSarbanes-Oxley Act of 2002, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if wefail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from timeto time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance withSection 404 of the Sarbanes-Oxley Act of 2002. Generally, if we fail to achieve and maintain an effective internal control environment, we couldsuffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to loseconfidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to adecline in the trading price of our ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk offraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations andcivil or criminal sanctions. Table of Contents39Non-compliance on the part of third parties with whom we conduct business could disrupt our business and adversely affect our financialconditions and operating results.We may be implicated by the non-compliant or improper activities of our users, advertising customers and business partners. For example,we may be involved in litigation related to user-generated content uploaded to our mobile applications. See also “—We may be held liable forinformation or content displayed on, distributed by, retrieved from or linked to the mobile applications integrated into our products, which mayadversely impact our brand image and materially and adversely affect our business and operating results.” Similarly, we may also be subject todisputes related to advertisements displayed on our mobile applications. Although we have adopted a comprehensive internal control and screeningprocedure over the content of advertisements, a third party may find advertisements displaying on our mobile applications improper or illegal, andmay take actions against us over such advertisements. We incurred costs of US$1.7 million to compensate victims of the alleged illegaladvertisements for our failure to supervise advertising contents displayed on our platform in compliance with relevant PRC laws and regulations.Besides, we may be subject to disputes related to certain alleged illegal act of our customers, the advertising service fees paid by the customers tous in the course of normal advertising business may be deemed to involve illegal funds and be confiscated. A local authority had frozen our bankaccounts with a total balance of US$21.7 million as of December 31, 2020 in connection with an investigation related to an alleged illegal act ofcertain customers in 2020, which were unfrozen in 2021.In addition, we may be impacted by lawsuits against our business partners, such as mobile devices manufacturers that have contractualarrangements with us. Although we have no control over the design, system, network or standard of the manufacturing of smartphones by thesebusiness partners, any lawsuits against them claiming infringement of intellectual property and any cessation of handset production resulting fromsuch lawsuits may interrupt our collaborative operations and result in the reduction of our delivery of products and services to potential users.We are a “controlled company” within the meaning of the NYSE Listed Company Manual and, as a result, we may rely on exemptions fromcertain corporate governance requirements that provide protection to shareholders of other companies.We are a “controlled company” as defined under the NYSE Listed Company Manual because Mr. Karl Kan Zhang owns more than 50%of our total voting power. For so long as we remain a controlled company under that definition, we are permitted to elect to rely, and may rely, oncertain exemptions from corporate governance rules, including an exemption from the rule that a majority of our board of directors must beindependent directors or that we have to establish a nominating committee and a compensation committee composed entirely of independentdirectors. As a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governancerequirements.We lease premises and may not be able to fully control the rental costs, quality, maintenance and our leasehold interest in these premises, norcan we guarantee that we will be able to successfully renew or find suitable premises to replace our existing premises upon expiration of theexisting leases.We lease all premises used in our operations from third parties and we require the landlords’ cooperation to effectively manage thecondition of such premises, buildings and facilities. In the event that the condition of the office premises, buildings and facilities deteriorates, or ifany or all of our landlords fail to properly maintain and renovate such premises, buildings or facilities in a timely manner or at all, the operation ofour offices could be materially and adversely affected. In addition, with respect to our leased premises, at the end of each lease term, we may needto negotiate an extension of the lease when the lease expires. If we are unable to successfully extend or renew our leases upon expiration of thecurrent term on commercially reasonable terms or at all, we may be forced to relocate our offices, or the rental costs may increase significantly.Moreover, certain lessors have not provided us with valid ownership certificates or authorizations of sublease for our leased properties.Under relevant PRC laws and regulations, if the lessors are unable to obtain certificate of title because such real estates were built illegally or failedto pass the inspection, such lease contracts may be recognized as void. In addition, if our lessors are not the owners of the properties and they havenot obtained consents from the owners or their lessors or permits from the relevant government authorities, our leases could be invalidated. If thisoccurs, we may have to renegotiate the leases with owners or parties who have the right to lease the properties, and the terms of the new leases maybe less favorable to us. Table of Contents40As of the date of this annual report, we are not aware of any material claims or actions being contemplated or initiated by governmentauthorities, property owners or any other third parties with respect to our leasehold interests in or use of such properties. However, we cannotassure you that our use of such leased properties will not be challenged. In the event that our use of properties is successfully challenged, we maybe subject to fines and forced to relocate the affected operations. In addition, we may become involved in disputes with the property owners orthird parties who otherwise have rights to or interests in our leased properties. We can provide no assurance that we will be able to find suitablereplacement sites on terms acceptable to us on a timely basis, or at all, or that we will not be subject to liabilities resulting from third parties’challenges on our use of such properties. As a result, our business operations may be interrupted, and our financial condition and results ofoperations may be adversely affected.We have limited business insurance coverage. Any interruption of our business may result in substantial costs to us and the diversion of ourresources, which could have an adverse effect on our financial condition and operating results.Insurance products available in China currently are not as extensive as those offered in more developed economies. Consistent withcustomary industry practice in China, our business insurance is limited and we do not carry business liability or disruption insurance to cover ouroperations. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance oncommercially reasonable terms make it impractical for us to obtain or maintain such insurance. Any uninsured damage to our systems or disruptionof our business operations could require us to incur substantial costs and divert our resources, which could have an adverse effect on our financialcondition and results of operations.We face risks related to natural disasters, health epidemics, including the COVID-19 pandemic, and other outbreaks, which could significantlydisrupt our business operations.In recent years, there have been outbreaks of epidemics in China and globally, including the outbreak of COVID-19. In March 2020, theWorld Health Organization declared the COVID-19 a pandemic. COVID-19 has resulted in quarantines, travel restrictions, and the temporaryclosure of businesses and facilities in China and worldwide.The worldwide outbreak of COVID-19 pandemic has resulted in significant disruptions in the global economy. To contain the spread ofCOVID-19, the Chinese government has taken certain emergency measures, including extension of the Lunar New Year holidays, implementationof travel bans and lock-downs, blockade of certain roads and closure of factories and businesses, and encouragement of remote workingarrangements and cancellation of public activities. Recently, there has been a recurrence of COVID-19 outbreaks in certain provinces of China,including Shanghai, due to the Delta and Omicron variants. As a result, the Chinese government has implemented similar emergency measures tocontain further spread of COVID-19.As it has historically, the COVID-19 pandemic may continue to, among other things, (i) reduce or curtail our customers’ advertisingexpenditures and overall demand for our services, (ii) increase the volatility of our customers’ advertising expenditure patterns from period-to-period, (iii) delay or cancel our customers’ advertising campaigns, and (iv) increase the volatility of the size and engagement of our active userbase, all of which could have a material adverse effect on our business, financial condition and results of operations. See “Item 5. Operating andFinancial Review and Prospects—Impact of COVID-19 on Our Operations and Financial Performance.”Our headquarters are located in Shanghai, and we currently lease the majority of our offices in various parts of China to support ouroperations. We have reinstated remote working arrangements for our employees in affected regions, which could however reduce the capacity andefficiency of our operations and negatively impact the normal business operations. This outbreak of communicable disease has caused, and maycause again in the future, our business partners, to implement temporary adjustment of work schemes allowing employees to work from home andadopt remote collaboration. Our other measures taken to reduce the impact of this epidemic outbreak included upgrading our telecommutingsystem, monitoring our employees’ health on a daily basis, and optimizing our technology system to support potential growth in user traffic.There remains uncertainty around the severity and duration of the COVID-19 pandemic and the measures taken, or may be taken, inresponse to the COVID-19 pandemic, which will depend on numerous factors, including, among others, the emergence of new cases of COVID-19and its variants, hospitalization and mortality rates, and the availability and distribution of safe and effective treatments and vaccines. Table of Contents41Changes in the method for determining the London Interbank Offered Rate (“LIBOR”) or China Loan Prime Rate (“LPR”) and the potentialreplacement of LIBOR or LPR may affect our cost of capital and net investment income.We entered into a credit facility agreement with a commercial bank in July 2016, as renewed in June 2020 and further renewed inJune 2021, under which agreement we can borrow up to US$10.0 million, collateralized by our accounts receivable by June 2022. The interest ratefor this credit facility is London Interbank Offered Rate (“LIBOR”) or China Loan Prime Rate (“LPR”), plus an applicable margin. In July 2021,we entered into a credit facility agreement with a commercial bank under which we can draw down up to US$1.6 million by July 2022. InDecember 2021, we entered into a loan agreement with another commercial bank which we can draw down US$1.6 million by December 31, 2021.The interest rates for these two agreements are the LPR. As of December 31, 2021, there was no unused facilities under these agreements. See also“Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources.”The LIBOR benchmark has been subject to national, international, and other regulatory guidance and proposals for reform. In July 2017,the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit rates for calculation of LIBORafter 2021. These reforms may cause LIBOR to perform differently than in the past and LIBOR may ultimately cease to exist after 2021 or beunsuitable to use as a benchmark. The consequences of any potential cessation, modification or other reform of LIBOR cannot be predicted at thistime. Any new benchmark rate will likely not replicate LIBOR exactly, which could impact new credit facilities and derivative transaction enteredinto after 2021. We may need to negotiate with the commercial bank to determine an alternative reference rate for our credit facility agreement,which may perform differently than LIBOR. Any changes to benchmark rates could have an impact on our cost of funds and our access to thecapital markets, which could impact our results of operations and cash flows. Uncertainty as to the nature of such potential changes may alsoadversely affect the trading market for our securities.The LPR refers to the one-year loan market quoted interest rate issued by the National Bank Interbank Funding Center on the 20th ofeach month starting from August 20, 2019, and the one-year loan market quoted interest rate issued by the National Bank Interbank Funding Centeron December 20, 2021 was 3.8%.Risks Related to Our Corporate StructureIf the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRCregulations on foreign investment in internet and other related businesses, or if these regulations or their interpretation change in the future,we could be subject to severe penalties or be forced to relinquish our interests in those operations.Current PRC laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies that engage in internetand other related businesses, including the provision of internet information services. Specifically, foreign ownership of an internet informationservices provider may not exceed 50%, with limited exemptions in sectors such as e-commerce. We are a company incorporated in the CaymanIslands and Shanghai Chule (CooTek) Information Technology Co., Ltd., which we refer to as Shanghai Chule or the WFOE, is our wholly ownedPRC subsidiary and therefore is considered as a foreign-invested enterprise. To comply with PRC laws and regulations, we conduct our business inChina through the consolidated affiliated entities, including Shanghai Chubao (CooTek) Information Technology Co., Ltd., or Shanghai Chubao,and several other PRC domestic entities, based on a series of contractual arrangements by and among Shanghai Chule, the consolidated affiliatedentities and their respective shareholders. As a result of these contractual arrangements, we exert control over the consolidated affiliated entitiesand consolidate or combine their operating results in our financial statements under U.S. GAAP. The consolidated affiliated entities hold thelicenses, approvals and certain key assets that are essential for our business operations. For a detailed discussion of these contractual arrangements,see “Item 4.C. Information on the Company—Organizational Structure.”In the opinion of our PRC counsel, JunHe LLP, based on its understanding of the relevant PRC laws and regulations, (i) the ownershipstructures of the VIEs in China and the PRC subsidiary that have entered into contractual arrangements with the VIEs comply with all existing PRClaws and regulations; and (ii) the contractual arrangements among our PRC subsidiary, the consolidated affiliated entities and their respectiveshareholders are valid and binding under the existing PRC laws and regulations. Table of Contents42However, we are a Cayman Islands holding company with no equity ownership in the VIEs and we conduct our operations in Chinathrough (i) our PRC subsidiaries, and (ii) the consolidated affiliated entities with which we have maintained contractual arrangements. Investors inour ADSs thus are not purchasing equity interest in our PRC operating entities but in our holding company. If the PRC government deems that ourcontractual arrangements with the VIEs do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if theseregulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties orbe forced to relinquish our interests in those operations. We may not be able to repay our outstanding indebtedness, and our shares may decline invalue or become worthless, if we are unable to assert our contractual control rights over the assets of our PRC affiliated entities, which contributedto 37.3% of our net revenues in 2021. Our holding company in the Cayman Islands, the VIEs, and investors of our company face uncertaintiesabout potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIEs and,consequently, significantly affect the financial performance of the VIEs and our company as a group.Our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of currentand future PRC laws, regulations and rules; accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion of our PRClegal counsel. It is uncertain whether any other new PRC laws or regulations relating to variable interest entity structures will be adopted or ifadopted, what they would provide. If we or any of our variable interest entity are found in violation of any PRC laws or regulations or if thecontractual arrangements among Shanghai Chule, the consolidated affiliated entities and their respective shareholders are determined as illegal orinvalid by the PRC court, arbitral tribunal or regulatory authorities, the relevant governmental authorities would have broad discretion in dealingwith such violation, including, without limitation:●revoke our business and operating licenses;●levy fines on us;●confiscate any of our income that they deem to be obtained through illegal operations;●require us to discontinue or restrict operations;●restrict our right to collect revenues;●block our mobile applications;●require us to restructure the operations in such a way as to compel us to establish a new enterprise, re-apply for the necessary licensesor relocate our businesses, staff and assets;●impose additional conditions or requirements with which we may not be able to comply; or●take other regulatory or enforcement actions against our group that could be harmful to our business.The imposition of any of these penalties may result in a material and adverse effect on our ability to conduct the business. In addition, ifthe imposition of any of these penalties causes us to lose the rights to direct the activities of the consolidated affiliated entities or the right toreceive their economic benefits, we would no longer be able to consolidate the consolidated affiliated entities. We do not believe that any penaltiesimposed or actions taken by the PRC government would result in the liquidation of our company, Shanghai Chule, or the consolidated affiliatedentities. Table of Contents43Although we believe we, our PRC subsidiaries and the VIEs comply with current PRC laws and regulations, we cannot assure you that thePRC government would agree that our contractual arrangements comply with PRC licensing, registration or other regulatory requirements, withexisting policies or with requirements or policies that may be adopted in the future. The PRC government has broad discretion in determiningrectifiable or punitive measures for non-compliance with or violations of PRC laws and regulations. If the PRC government determines that we orthe VIEs do not comply with any applicable laws, it could revoke the VIEs’ business and operating licenses, require the VIEs to discontinue orrestrict the VIEs’ operations, restrict the VIEs’ rights to collect revenues, block the VIEs’ websites, require the VIEs to restructure our operations,impose additional conditions or requirements with which the VIEs may not be able to comply, impose restrictions on the VIEs’ business operationsor on their customers, or take other regulatory or enforcement actions against the VIEs that could be harmful to their business. Any of these orsimilar occurrences could significantly disrupt our or the VIEs’ business operations or restrict the VIEs from conducting a substantial portion oftheir business operations, which could materially and adversely affect the VIEs’ business, financial condition and results of operations. If any ofthese occurrences results in our inability to direct the activities of any of the VIEs that most significantly impact its economic performance, and/orour failure to receive the economic benefits from any of the VIEs, we may not be able to consolidate these entities in our consolidated financialstatements in accordance with U.S. GAAP.We rely on contractual arrangements with the consolidated affiliated entities and their respective shareholders for our operations in China,which may not be as effective in providing operational control as direct ownership.Due to the PRC restrictions or prohibitions on foreign ownership of internet and other related businesses in China, we operate our businessin China through the consolidated affiliated entities, in which we have no ownership interest. We rely on a series of contractual arrangements withthe consolidated affiliated entities and their respective shareholders, including the powers of attorney, to control and operate their business.Our ability to control the consolidated affiliated entities depends on the powers of attorney, pursuant to which Shanghai Chule can vote onall matters requiring shareholder approval in the consolidated affiliated entities.We believe these powers of attorney are legally enforceable but may not be as effective as direct equity ownership. These contractualarrangements are intended to provide us with effective control over the consolidated affiliated entities and allow us to obtain economic benefitsfrom them. See “Item 4. Information on the Company—C. Organizational Structure” for further details.Although we have been advised by our PRC counsel, JunHe LLP, that the contractual arrangements among our PRC subsidiary, theconsolidated affiliated entities and their respective shareholders are valid and binding under existing PRC laws and regulations, these contractualarrangements may not be as effective in providing control over the consolidated affiliated entities as direct ownership. If the consolidated affiliatedentities or their shareholders fail to perform their respective obligations under the contractual arrangements, we may incur substantial costs andexpend substantial resources to enforce our rights. All of these contractual arrangements are governed by and interpreted in accordance with PRClaws, and disputes arising from these contractual arrangements will be resolved through arbitration in China. Such disputes do not include claimsarising under the United States federal securities laws and therefore these arbitration provisions do not prevent you from pursuing claims arisingunder the United States federal securities laws. However, the legal system in China, particularly as it relates to arbitration proceedings, is not asdeveloped as in other jurisdictions, such as the United States. See “—Risks Related to Doing Business in China—Uncertainties in the interpretationand enforcement of PRC laws and regulations could limit the legal protections available to you and us.” There are very few precedents and littleofficial guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC law.There remain significant uncertainties regarding the ultimate outcome of arbitration should legal action become necessary. These uncertaintiescould limit our ability to enforce these contractual arrangements. In addition, arbitration awards are final and can only be enforced in PRC courtsthrough arbitration award recognition proceedings, which could cause additional expenses and delays. In the event we are unable to enforce thesecontractual arrangements or we experience significant delays or other obstacles in the process of enforcing these contractual arrangements, we maynot be able to exert effective control over our affiliated entities and may lose control over the assets owned by the consolidated affiliated entities.As a result, we may be unable to consolidate the consolidated affiliated entities in our consolidated financial statements, our ability to conduct ourbusiness may be negatively affected, and our business operations could be severely disrupted, which could materially and adversely affect ourresults of operations and financial condition. Table of Contents44Any failure by the VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have amaterial and adverse effect on our business.If the VIEs or their shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incursubstantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law,including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, ifthe shareholders of the VIEs were to refuse to transfer their equity interest in the VIEs to us or our designee when we exercise the purchase optionpursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, we may have to take legal actions to compelthem to perform their contractual obligations.All the agreements under our contractual arrangements are governed by PRC law and provide for the resolution of disputes througharbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved inaccordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States.See “—Risks Related to Doing Business in China—Uncertainties with respect to the PRC legal system could adversely affect us.” Meanwhile,there are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should beinterpreted or enforced under PRC law, and as a result it may be difficult to predict how an arbitration panel would view such contractualarrangements. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Additionally,under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out thearbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitrationaward recognition proceedings, which would require additional expenses and delay.The consolidated affiliated entities hold certain assets that are important to our business operations, including the VAT License concerninginformation services, and the Online Culture Operating Permit. Under our contractual arrangements, the shareholders of the consolidated affiliatedentities may not voluntarily liquidate the consolidated affiliated entities or approve them to sell, transfer, mortgage or dispose of their assets or legalor beneficial interests exceeding certain threshold in the business in any manner without our prior consent. However, in the event that theshareholders breach this obligation and voluntarily liquidate the consolidated affiliated entities, or the consolidated affiliated entities declarebankruptcy, or all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of ourbusiness operations, which could materially and adversely affect our business, financial condition and results of operations. Furthermore, if theconsolidated affiliated entities undergo a voluntary or involuntary liquidation proceeding, their shareholders or unrelated third-party creditors mayclaim rights to some or all of their assets, thereby hindering our ability to operate our business, which could materially and adversely affect ourbusiness, financial condition and results of operations.Contractual arrangements we have entered into with the consolidated affiliated entities and their respective shareholders may be subject toscrutiny by the PRC tax authorities. A finding that we owe additional taxes could significantly reduce our consolidated net income and thevalue of your investment.Pursuant to applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit orchallenge by the PRC tax authorities. We may be subject to adverse tax consequences if the PRC tax authorities determine that the contractualarrangements among our PRC subsidiary, the consolidated affiliated entities and their shareholders are not on an arm’s length basis and thereforeconstitute favorable transfer pricing. As a result, the PRC tax authorities could require that the consolidated affiliated entities adjust its taxableincome upward for PRC tax purposes. Such an adjustment could adversely affect us by increasing the consolidated affiliated entities’ tax expenseswithout reducing the tax expenses of our PRC subsidiary, subjecting the consolidated affiliated entities to late payment fees and other penalties forunder-payment of taxes, and resulting in our PRC subsidiary’s loss of its preferential tax treatment. Our consolidated results of operations may beadversely affected if the consolidated affiliated entities’ tax liabilities increase or if it is subject to late payment fees or other penalties. Table of Contents45If the chops of our PRC subsidiary, the consolidated affiliated entities, are not kept safely, are stolen or are used by unauthorized persons or forunauthorized purposes, the corporate governance of these entities could be severely and adversely compromised.In China, a company chop or seal serves as the legal representation of the company towards third-parties even when unaccompanied by asignature. Each legally registered company in China is required to maintain a company chop, which must be registered with the local PublicSecurity Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes.The chops of our PRC subsidiary, the consolidated affiliated entities are generally held securely by personnel designated or approved by us inaccordance with our internal control procedures. To the extent those chops are not kept safe, are stolen or are used by unauthorized persons or forunauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities maybe bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power andauthority to do so.The shareholders of the consolidated affiliated entities may have potential conflicts of interest with us, which may materially and adverselyaffect our business.The shareholders of our major consolidated affiliated entities include Karl Kan Zhang, Susan Qiaoling Li, Michael Jialiang Wang, JimJian Wang and Haiyan Zhu. Karl Kan Zhang and Susan Qiaoling Li are our co-founders, directors and executive officers. Michael Jialiang Wang isour consultant and one of our directors. Jim Jian Wang is one of our directors. Haiyan Zhu is one of our early investors.Conflicts of interest may arise between the roles of these persons as shareholders, directors or officers of our company and as shareholdersof the consolidated affiliated entities. We rely on these individuals to abide by the laws of the Cayman Islands, which provide that our directors andofficers owe a fiduciary duty to our company to act in good faith and in the best interest of our company and not to use their positions for personalgain. The shareholders of the consolidated affiliated entities have executed powers of attorney to appoint Shanghai Chule, our PRC subsidiary, or aperson designated by Shanghai Chule to vote on their behalf and exercise voting rights as shareholders of the consolidated affiliated entities. Wecannot assure you that when conflicts arise, shareholders of the consolidated affiliated entities will act in the best interest of our company or thatconflicts will be resolved in our favor. If we cannot resolve any conflicts of interest or disputes between us and these shareholders, we would haveto rely on legal proceedings, which may be expensive, time-consuming and disruptive to our operations. There is also substantial uncertainty as tothe outcome of any such legal proceedings.We may rely on dividends paid by our PRC subsidiary to fund cash and financing requirements. Any limitation on the ability of our PRCsubsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders ofthe ADSs and our ordinary shares.We are a holding company, and we may rely on dividends to be paid by our PRC subsidiary for our cash and financing requirements,including the funds necessary to pay dividends and other cash distributions to the holders of the ADSs and our ordinary shares and service any debtwe may incur. If our PRC subsidiary incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to paydividends or make other distributions to us.Under PRC laws and regulations, our wholly owned subsidiary in the PRC, Shanghai Chule, may pay dividends only out of itsaccumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise isrequired to set aside at least 10% of its after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certainstatutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. The PRC company could distribute theremaining after-tax profits after making up losses and funding reserve funds in accordance with the provisions of the PRC Company Law.Any limitation on the ability of our wholly owned PRC subsidiary to pay dividends or make other distributions to us could materially andadversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund andconduct our business. See also “—Risks Related to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified asa PRC ‘resident enterprise,’ which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect onour results of operations and the value of your investment.” Table of Contents46Substantial uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law andhow it may impact the viability of our current corporate structure and business operations.The National People’s Congress approved the Foreign Investment Law (the “FIL”) on March 15, 2019, and the State Council approved theRegulation on Implementing the Foreign Investment Law (the “Implementation Regulations”) on December 12, 2019, effective from January 1,2020, which replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture EnterpriseLaw, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with theirimplementation rules and ancillary regulations. The Supreme People’s Court of China issued a judicial interpretation on the Foreign InvestmentLaw on December 26, 2019, effective from January 1, 2020, to ensure fair and efficient implementation of the Foreign Investment Law. Accordingto this judicial interpretation, courts in China shall not, among other things, support contracted parties to claim foreign investment contracts insectors not on the Special Administrative Measures (Negative List) for Access to Foreign Investment (2021 Revision), or 2021 Negative List, asvoid because the contracts have not been approved or registered by administrative authorities. The Foreign Investment Law grants nationaltreatment to foreign invested enterprises, except for those operating in “restricted” or “prohibited” industries in the “negative list,” where if aforeign invested enterprise proposes to conduct business in an industry subject to foreign investment “restrictions” in the “negative list,” the foreigninvested enterprise must go through a MOFCOM pre-approval process. The internet content service, internet audio-visual program services andonline culture activities that we conduct through the consolidated affiliated entities, which are our consolidated VIEs, are subject to foreigninvestment restrictions set forth in the 2021 Negative List. The Foreign Investment Law and Implementation Regulations embody an expected PRCregulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts tounify the corporate legal requirements for both foreign and domestic investments.However, uncertainties still exist in relation to their interpretation. For instance, under the Foreign Investment Law, “foreign investment”refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entities in China. Though it does notexplicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via contractualarrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, the definitioncontains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulationsor other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisionspromulgated by the State Council to provide for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertainwhether our contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment under the PRClaws and regulations. Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actionsto be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can completesuch actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatorycompliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.Risks Related to Doing Business in ChinaRecent regulatory developments in China may subject us to additional regulatory review and disclosure requirement, expose us to governmentinterference, or otherwise restrict our ability to offer securities and raise capitals outside China, all of which could materially and adverselyaffect our business and the value of our securities.As substantially all of our daily operations are conducted in China, we are subject to PRC laws relating to, among others, cyber securityand restrictions over foreign investments in value-added telecommunications services. Specifically, we may be subject to PRC laws relating to thecollection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information and other dataprovided by our users. These PRC laws apply not only to third-party transactions, but also to transfers of information among us, our PRCsubsidiary and consolidated affiliated entities, and other parties with which we have commercial relations. These PRC laws and their interpretationsand enforcement continue to develop and are subject to change, and the PRC government may adopt other rules and restrictions in the future. Table of Contents47The recent regulatory developments in China, in particular with respect to restrictions on China-based companies raising capital offshore,including through the variable interest entities structure, or the VIE structure, and the government-led cyber security reviews of certain companieswith VIE structure, may lead to additional regulatory review in China over our financing and capital raising activities in the United States. Inaddition, we may become subject to industry-wide regulations that may be adopted by the relevant PRC authorities, which may have the effect oflimiting our product and service offerings, restricting the scope of our operations in China, or causing the suspension or termination of our businessoperations in China entirely, all of which will materially and adversely affect our business, financial condition and results of operations. We mayhave to adjust, modify, or completely change our business operations in response to adverse regulatory changes or policy developments, and wecannot assure you that any remedial action adopted by us can be completed in a timely, cost-efficient, or liability-free manner or at all.On June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which took effecton September 1, 2021. The PRC Data Security Law, among other things, provides for a security review procedure for the data activities that mayaffect national security. Furthermore, on December 28, 2021, the CAC published the Measures for Cyber Security Review, effective fromFebruary 15, 2022, which provided that critical information infrastructure operators that , and internet platform operators engaging in dataprocessing activities, must be subject to the cyber security review if their activities affect or may affect national security. The measures furtherstipulate that internet platform operators holding over one million users’ personal information shall apply with the Cyber Security Review Officefor a cyber security review before any public offering at a foreign stock exchange. On August 17, 2021, the State Council promulgated theRegulations on Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to the Regulations onProtection of Critical Information Infrastructure, critical information infrastructure shall mean any important network facilities or informationsystems of the important industry or field such as public communication and information service, energy, communications, water conservation,finance, public services, e-government affairs and national defense science, which may endanger national security, people’s livelihood and publicinterest in case of damage, function loss or data leakage. In addition, relevant administration departments of each critical industry and sector, orProtection Departments, shall be responsible to formulate eligibility criteria and determine the critical information infrastructure operator in therespective industry or sector. The operators shall be informed about the final determination as to whether they are categorized as criticalinformation infrastructure operators.As of the date of this annual report on Form 20-F, no detailed rules or implementation has been issued by any Protection Departments andwe have not been informed as a critical information infrastructure operator by any governmental authorities. Furthermore, the exact scope of“critical information infrastructure operators” under the current regulatory regime remains unclear, and the PRC governmental authorities may havewide discretion in the interpretation and enforcement of these laws. Therefore, it is uncertain whether we would be deemed as a critical informationinfrastructure operator under PRC law. We cannot predict the impact of the measures, if any, at this stage, and we will closely monitor and assessany development in the rule-making process.Furthermore, the Standing Committee of the National People’s Congress passed the PRC Personal Information Protection Law, effectivefrom November 1, 2021, which required each general network operator to obtain a personal information protection certification issued byrecognized institutions in accordance with the CAC regulation before such information can be transferred out of China. PRC Personal InformationProtection Law provides special rules for processing sensitive personal information. Sensitive personal information refers to personal informationthat, once leaked or illegally used, could easily lead to the infringement of human dignity or harm to the personal or property safety of anindividual, including biometric recognition, religious belief, specific identity, medical and health, financial account, personal whereabouts andother information of an individual, as well as any personal information of a minor under the age of 14. An information processor is allowed toprocess personal information only if it has a specific purpose and processing personal information is necessary for that purpose, and it hasimplemented strict measures to protect personal information. A personal information processor shall inform the individual of the necessity ofprocessing such sensitive personal information and the impact thereof on the individual’s rights and interests. As uncertainties remain regarding theinterpretation and implementation of the PRC Personal Information Protection Law, we cannot assure you that we will comply with the PRCPersonal Information Protection Law in all respects and our current practice of collecting and processing sensitive personal information may beordered to be rectified or terminated by regulatory authorities. We may also become subject to fines and other penalties which may have materialadverse effect on our business, operations and financial condition. Table of Contents48It also remains uncertain whether the future regulatory changes would impose additional restrictions on companies like us. If we are notable to comply with the cyber security and data privacy requirements in a timely manner, or at all, we may be subject to government enforcementactions and investigations, fines, penalties, suspension of our non-compliant operations, or removal of our app from the relevant application stores,among other sanctions, which could materially and adversely affect our business and results of operations. As of the date of this annual report onForm 20-F, we have not been involved in any investigations on cyber security review made by the Cyberspace Administration of China on suchbasis, and we have not received any inquiry, notice, warning, or sanctions in such respect.Adverse changes in China’s economic, political or social conditions or government policies could have a material and adverse effect on overalleconomic growth in China, which could materially and adversely affect our business.Our principal offices are based in China. Accordingly, our operating results, financial condition and prospects are influenced by economic,political and legal developments in China. Economic reforms begun in the late 1970s have resulted in significant economic growth. However, anyeconomic reform policies or measures in China may from time to time be modified or revised. China’s economy differs from the economies ofmost 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 the PRC economy has experienced significant growth in the past 30 years, growthhas been uneven across different regions and among different economic sectors. In addition, the rate of growth has been slowing since 2012, andthe impact of COVID-19 on the Chinese and global economies in 2020 and 2021 is likely to be severe. In particular, the National Bureau ofStatistics of China reported a 8.1% growth in GDP for the full year of 2021, compared with the full year of 2020.The PRC government exercises significant control over China’s economic growth through strategically allocating resources, controllingthe payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries orcompanies. Although the Chinese economy has grown significantly in the past decade, that growth may not continue, as evidenced by the slowingof the growth of the Chinese economy in recent years. Any adverse changes in economic conditions in China, in the policies of the Chinesegovernment or in the laws and regulations in China could have a material adverse effect on the overall economic growth of China. Suchdevelopments could adversely affect our business and operating results, lead to reduction in demand for our services and adversely affect ourcompetitive position.Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.The PRC legal system is based on written statutes and court decisions have limited precedential value. The PRC legal system evolvesrapidly, and the interpretations of many laws, regulations and rules may contain inconsistencies and enforcement of these laws, regulations andrules involves uncertainties.From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC judicialand administrative authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficultto predict the outcome of a judicial or administrative proceeding than in more developed legal systems. Furthermore, the PRC legal system isbased, in part, on government policies and internal rules, some of which are not published in a timely manner, or at all, but which may haveretroactive effect. As a result, we may not always be aware of any potential violation of these policies and rules. Such unpredictability towards ourcontractual, property (including intellectual property) and procedural rights could adversely affect our business and impede our ability to continueour operations. Table of Contents49The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in ouroperations and the value of our ADSs.We conduct operations in China through (i) our PRC subsidiaries and (ii) the VIEs with which we have maintained contractualarrangements and their subsidiaries in China. Our operations in China are governed by PRC laws and regulations. The PRC government hassignificant oversight and discretion over the conduct of our business, and it may influence our operations, which could result in a material adversechange in our operation and/or the value of our ADSs. Also, the PRC government has recently indicated an intent to exert more oversight andcontrol over offerings that are conducted overseas and/or foreign investment in China-based issuers. For example, on July 6, 2021, the relevantPRC government authorities made public the Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. Theseopinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risksand incidents faced by China-based overseas-listed companies. On December 28, 2021, the CAC published the Measures for Cyber SecurityReview, effective on February 15, 2022, which required that, internet platform operators holding over one million users’ personal information shallapply with the Cyber Security Review Office for a cyber security review before any public offering at a foreign stock exchange. On November 14,2021, the CAC released a discussion draft of the Administrative Measures for Internet Data Security, or the Draft Measures for Internet DataSecurity, for public comments, which requires, among others, that a prior cyber security review should be required for listing abroad of dataprocessors which process over one million users’ personal information, and the listing of data processors in Hong Kong which affects or may affectnational security. Since the Draft Measures for Internet Data Security are in the process of being formulated and the Opinions on Strictly CrackingDown Illegal Securities Activities in Accordance with the Law remain unclear on how it will be interpreted, amended and implemented by therelevant PRC governmental authorities, it remains uncertain how PRC governmental authorities will regulate overseas listing in general andwhether we are required to obtain any specific regulatory approvals from the CSRC, CAC or any other PRC governmental authorities for ouroffshore offerings. If the CSRC, CAC or other regulatory agencies later promulgate new rules or explanations requiring that we obtain theirapprovals for our future offshore offerings, we may be unable to obtain such approvals in a timely manner, or at all, and such approvals may berescinded even if obtained. Any such circumstance could significantly limit or completely hinder our ability to continue to offer securities toinvestors and cause the value of such securities to significantly decline or be worthless. In addition, implementation of industry-wide regulationsdirectly targeting our operations could cause the value of our securities to significantly decline. Therefore, investors of our company and ourbusiness face potential uncertainty from actions taken by the PRC government affecting our business.The approval of, or filing with the CSRC or other PRC government authorities may be required in connection with our future offshoreofferings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete suchfiling.Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRCregulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions ofPRC domestic companies and controlled by PRC persons or entities to obtain the approval of the CSRC prior to the listing and trading of suchspecial purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and ouroffshore offerings may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long itwill take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay inobtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained, would subject us to sanctions imposedby the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations onour ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financialcondition, and results of operations. Table of Contents50The PRC government authorities has recently indicated an intent to exert more oversight and control over securities offerings and othercapital markets activities that are or have been conducted overseas and foreign investment in China-based companies like us. On July 6, 2021, therelevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. Theseopinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risksand incidents faced by China-based overseas-listed companies. As a follow-up, on December 24, 2021, the CSRC issued a draft of the Provisionsof the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies and a draft of AdministrationMeasures for the Filing of Overseas Securities Offering and Listing by Domestic Companies for public comments.These draft measures propose to establish a new filing-based regime to regulate overseas offerings and listings by domestic companies.Specifically, an overseas offering and listing by a PRC company, whether directly or indirectly, an initial or follow-on offering, must be completefiling procedure with and report to the CSRC. The issuer or its affiliated PRC entity, as the case may be, shall file with the CSRC for its initialpublic offering, follow-on offering and other equivalent offing activities. The examination and determination of an indirect offering and listing willbe conducted on a substance-over-form basis, and an offering and listing shall be deemed as a PRC company’s indirect overseas offering and listingif the issuer meets the following conditions: (i) any of the operating income, gross profit, total assets, or net assets of the PRC enterprise in the mostrecent fiscal year was more than 50% of the relevant line item in the issuer’s audited consolidated financial statement for that year; and (ii) seniormanagement personnel responsible for business operations and management are mostly PRC citizens or are ordinarily resident in the PRC, and theprincipal place of business is in the PRC or carried out in the PRC. It is unclear based on these draft measures whether either or both of the abovecriteria need to be satisfied. Particularly, the issuer shall submit the filing with respect to its initial public offering and listing within threebusiness days after its initial filing of the listing application, and submit the filing with respect to its follow-on offering within three business daysafter the completion of the follow-on offering. The issuer shall submit the filing with respect to its offering for acquisition of Chinese domesticassets within three business days after the date of its first announcement of the transaction. The issuer shall report the specific circumstances to theCSRC within three working days from the date of occurrence of the following major events after overseas listing: (i) change of control;(ii) initiation of investigation or imposition of punishment by overseas securities regulatory agency or relevant competent authority; and(iii) voluntary termination of listing or forced termination of listing. If the principle business activities of the issuer have changed significantly afterthe overseas listing and are no longer within the scope of the initial filing, it shall submit a special report to the CSRC and a legal opinion issued bya Chinese law firm within three working days after the date of such change to explain the situation. Failure to comply with the filing and reportingrequirements may result in fines to the relevant PRC companies, suspension of their businesses, revocation of their business licenses and operationpermits and fines on the controlling shareholder and other responsible persons. These draft measures also set forth certain regulatory red lines foroverseas offerings and listings by PRC enterprises.There are substantial uncertainties as to whether these draft measures to regulate direct or indirect overseas offering and listing would befurther amended, revised or updated their enactment timetable and final content. As the CSRC may formulate and publish guidelines for filings inthe future, these draft measures do not provide for detailed requirements of the substance and form of the filing documents. In a Q&A released onCSRC’s official website on December 24, 2021, the respondent CSRC official indicated that the proposed new filing requirement will start withnew issuers and listed companies seeking follow-on financing and other financing activities. As for the filings for other listed companies, theregulator will grant adequate transition period and apply separate arrangements. The Q&A also pointed out that, if compliant with relevant PRClaws and regulations, companies with compliant VIE structure may seek overseas listing after completion of the CSRC filings. Nevertheless, theQ&A did not specify what would qualify as a “compliant VIE structure” and what relevant PRC laws and regulations are required to be compliedwith. The draft Provisions on Strengthening the Confidentiality and Archives Administration of Overseas Securities Issuance and Listing byDomestic Enterprises does not provide for a clear scope of government work secrets or the documents and materials that, if divulged, willjeopardize national security or public interest, and the PRC government authorities may have wide discretion in the interpretation and enforcementof the applicable laws. Given the substantial uncertainties surrounding the latest CSRC filing requirements at this stage, we cannot assure you that,if ever required, we would be able to complete the filings and fully comply with the relevant new rules on a timely basis, if at all. Table of Contents51On December 27, 2021, the NDRC and the MOFCOM jointly issued the Special Administrative Measures (Negative List) for ForeignInvestment Access (2021 Version), or the 2021 Negative List, which became effective on January 1, 2022. Pursuant to the Special AdministrativeMeasures, if a PRC company engaging in the prohibited business stipulated in the 2021 Negative List seeks an overseas offering and listing, it shallobtain the approval from the competent governmental authorities. Besides, according the further explanation of the NDRC, the foreign investors ofthe direct overseas offering and listing company shall not be involved in the company’s operation and management, and theirshareholding percentages shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities investments by foreign investors.As the 2021 Negative List is relatively new, there remain substantial uncertainties as to the interpretation and implementation of these newrequirements, and it is unclear as to whether and to what extent listed companies like us will be subject to these new requirements. If we arerequired to comply with these requirements and fail to do so on a timely basis, if at all, our business operation, financial conditions and businessprospect may be adversely and materially affected.In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements onus. If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, including the DraftMeasures for Internet Data Security, are required for our future offshore offerings, it is uncertain whether we can or how long it will take us toobtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected. Any failure to obtain ordelay in obtaining such approval or completing such filing procedures for our offshore offerings, or a rescission of any such approval or filing ifobtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to seek CSRC approval or filing or othergovernment authorization for our offshore offerings. These regulatory authorities may impose fines and penalties on our operations in China, limitour ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from ouroffshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations,and prospects, as well as the trading price of our listed securities. The CSRC or other PRC regulatory authorities also may take actions requiring us,or making it advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered. Consequently, if investors engagein market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery maynot occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain theirapprovals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver ofsuch approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding suchapproval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of ourlisted securities.Content posted or displayed on our platform may be found objectionable by PRC regulatory authorities and may subject us to penalties andother severe consequences.The PRC government has adopted regulations governing internet and wireless access and the distribution of information over the internetand wireless telecommunication networks. Under these regulations, internet content providers and internet publishers are prohibited from postingor displaying over the internet or wireless networks content that, among other things, violates PRC laws and regulations, impairs the nationaldignity of China or the public interest, or is obscene, superstitious, fraudulent or defamatory. Furthermore, internet content providers are alsoprohibited from displaying content that may be deemed by relevant government authorities as “socially destabilizing” or leaking “state secrets” ofthe PRC. Failure to comply with these requirements may result in the revocation of licenses to provide internet content or other licenses, the closureof the concerned platforms and reputational harm. The operator may also be held liable for any censored information displayed on or linked to theirplatform. For a detailed discussion, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating toCyber Security.”We operate a number of portfolio products in China, including Fengdu Novel. We have implemented procedures to monitor the contentdisplayed on our products in order to comply with relevant laws and regulations. However, it may not be possible to determine in all cases the typesof content that could result in our liability as a distributor of such content and, if any of the content posted or displayed on our products is deemedby the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject topenalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adverselyaffect our business, financial condition and results of operations. Table of Contents52We may also be subject to potential liability for any unlawful actions by our users on our products. It may be difficult to determine thetype of content or actions that may result in liability to us and, if we are found to be liable, we may be prevented from operating our business inChina. Moreover, the costs of compliance with these regulations may continue to increase as a result of more content being made available by anincreasing number of users of our platform, which may adversely affect our results of operations. Although we have adopted internal procedures tomonitor content and to remove offending content once we become aware of any potential or alleged violation, we may not be able to identify all thecontent that may violate relevant laws and regulations or third-party intellectual property rights. Even if we manage to identify and removeoffensive content, we may still be held liable. For example, in August 2021, a local branch of the MCT ordered to confiscate approximatelyRMB451,801 as illegal earnings from and imposed a fine of approximately RMB458,882 on Molihong for providing online publication to thepublic without any internet publication service license and providing online pornography publication to the public on Fengdu Novel. We cannotassure you that our business and operations will be immune from government actions or sanctions in the future. To the extent that PRC regulatoryauthorities find any content displayed on our platform objectionable, they may require us to limit or eliminate the dissemination of such content onour platform in the form of take-down orders or otherwise. In addition, these laws and regulations are subject to interpretation by the relevantauthorities, and it may not be possible to determine in all cases the types of content that could result in our liability as a platform operator.Advertisements shown on our platform may subject us to penalties and other administrative actions.Under PRC advertising laws and regulations, we are obligated to monitor the advertising content shown on our platform to ensure thatsuch content is true and accurate and in full compliance with applicable laws and regulations. Advertisements shall not hinder public order, violatesocial morality or contain illegal contents, including, but not limited to, obscenity, pornography, gambling, superstition, terror and violencecontents. Otherwise, the administration of market regulation may (i) order to stop publishing of the advertisement and; (ii) confiscate theadvertising fees; (iii) impose a penalty ranging from RMB200,000 to RMB1,000,000; or (iv) in serious cases, cancel the business license andcancel the registration certificate for publishing advertisements. In addition, where a special government review is required for specific types ofadvertisements prior to internet posting, such as advertisements relating to pharmaceuticals, medical instruments, agrochemicals and veterinarypharmaceuticals, we are obligated to confirm that such review has been performed and approval has been obtained. Violation of these laws andregulations may subject us to penalties, including fines, confiscation of our advertising income, orders to cease dissemination of the advertisementsand orders to publish an announcement correcting the misleading information. In circumstances involving serious violations by us, PRCgovernmental authorities may force us to terminate our advertising operations.While we have made significant efforts to ensure that the advertisements shown on our platform are in full compliance with applicablePRC laws and regulations, we cannot assure you that all the content contained in such advertisements or offers is true and accurate as required bythe advertising laws and regulations or otherwise in full compliance with applicable PRC laws and regulations, especially given the uncertainty inthe interpretation of these PRC laws and regulations. If we are found to be in violation of applicable PRC advertising laws and regulations, we maybe subject to penalties and our reputation may be harmed, which may negatively affect our business, financial condition, and results of operationsand prospects. Although the advertisements displayed on our platform may not directly contain sensitive or illegal contents, including, but notlimited to, gambling and pyramid selling, the advertisers may use inducing words to indirectly attract advertisement viewers to participate ingambling, pyramid selling, or other illegal activities. If we receive a complaint that any superficially compliant advertisement is linked to one ormore webpages that feature non-compliant advertising content, we will remove the related advertisement. Although our agreements with theadvertising agencies provide that the advertisements provided by the advertisers shall comply with the requirements of relevant laws andregulations, we cannot control or supervise advertising contents and the linked webpages all the time. Therefore, we cannot guarantee you that allof the advertisements displayed on our platform will comply with relevant laws and regulations. Table of Contents53In April 2015, the Standing Committee of the National People’s Congress promulgated the PRC Advertising Law, effective onSeptember 1, 2015, and amended on October 26, 2018 and April 29, 2021. According to the Advertising Law, advertisements shall not have anyfalse or misleading content, or defraud or mislead consumers. Furthermore, an advertisement will be deemed as a “false advertisement” if any ofthe following situations exist: (i) the advertised product or service does not exist; (ii) there is any inconsistency that has a material impact on thedecision to purchase in what is included in the advertisement with the actual circumstances with respect to the product’s performance, function,place of production, usage, quality, specification, ingredient, price, producer, term of validity, sales condition and honors received, among others, orthe service’s content, provider, form, quality, price, sales condition, and honors received, among others, or any commitments, among others, madeon the product or service; (iii) using fabricated, forged or unverifiable scientific research results, statistical data, investigation results, excerpts,quotations or other information as supporting material; (iv) effect or results of using the good or receiving the service are fabricated; or (v) othercircumstances where consumers are defrauded or misled by any false or misleading content.The laws and regulations of advertising are relatively new and evolving and there is substantial uncertainty as to the interpretation of“false advertisement” by the State Administration for Market Regulation (formerly known as the State Administration for Industry and Commerce),or the SAMR. If any of the advertisements that we publish is deemed to be a “false advertisement” by the SAMR or its local branch, we could besubject to various penalties, such as discontinuation of publishing the relevant advertisement, imposition of fines and obligations to eliminate anyadverse effects incurred by such false advertisement, revocation of our business license and other approvals, rejection of our other advertisementexamination application, or even criminal liabilities under circumstances of serious violations. For detailed descriptions, see “Item 4. Informationon the Company—B. Business Overview—Regulation—Regulations Relating to Online Advertising Services.” We have received and maycontinue to receive administrative penalties from local branch of SAMR for illegal or inappropriate content and false advertisements placed on ourmobile apps. Any resulting penalties may disrupt our business and materially adversely affect our results of operations and financial conditions.Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable taxconsequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.Under the PRC Enterprise Income Tax Law, or the EIT Law, which became effective in January 2008 and most recently amended inDecember 2018, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise”for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. In 2009, theState Administration of Taxation, or the SAT, issued the Notice Regarding the Determination of Chinese-Controlled Overseas IncorporatedEnterprises as PRC Tax Resident Enterprise on the Basis of De Facto Management Bodies, or SAT Circular 82, which provides certain specificcriteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China.Further to SAT Circular 82, in 2011, the SAT issued the Administrative Measures for Enterprise Income Tax of Chinese-Controlled OffshoreIncorporated Resident Enterprises (Trial), or SAT Bulletin 45, amended in 2018, to provide more guidance on the implementation of SAT Circular82. SAT Bulletin 45 clarified certain issues in the areas of resident status determination, post-determination administration and competent taxauthorities’ procedures.According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will beconsidered as a PRC tax resident enterprise by virtue of having its “de facto management body” in China and will be subject to PRC enterpriseincome tax on its worldwide income only if all of the following conditions are met: (a) the senior management and core management departmentsin charge of its daily operations function have their presence mainly in the PRC; (b) its financial and human resources decisions are subject todetermination or approval by persons or bodies in the PRC; (c) its major assets, accounting books, company seals, and minutes and files of itsboard and shareholders’ meetings are located or kept in the PRC; and (d) more than half of the enterprise’s directors or senior management withvoting rights habitually reside in the PRC. SAT Bulletin 45 specifies that when provided with a copy of Chinese tax resident determinationcertificate from a resident Chinese controlled offshore incorporated enterprise, the payer should not withhold 10% income tax when paying theChinese-sourced dividends, interest, royalties, etc. to the Chinese controlled offshore incorporated enterprise. Table of Contents54Although SAT Circular 82 and SAT Bulletin 45 only apply to offshore incorporated enterprises controlled by PRC enterprises or PRCenterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the SAT’sgeneral position on how the term “de facto management body” could be applied in determining the tax resident status of offshore enterprises,regardless of whether they are controlled by PRC enterprises, individuals or foreigners.In addition, the SAT issued the Announcement of the State Administration of Taxation on Issues concerning the Determination ofResident Enterprises Based on the Standards of Actual Management Institutions in January 2014 to provide more guidance on the implementationof SAT Circular 82. This bulletin further provides that, among other things, an entity that is classified as a “resident enterprise” in accordance withthe circular shall file the application for classifying its status of residential enterprise with the local tax authorities where its main domesticinvestors are registered. From the year in which the entity is determined to be a “resident enterprise,” any dividend, profit and other equityinvestment gain shall be taxed in accordance with the enterprise income tax law and its implementing rules.Although our offshore holding entity is not controlled by PRC enterprises or a PRC enterprise group, our revenues are primarily generatedfrom business operations conducted in PRC, and we cannot rule out the possibility that the PRC tax authorities determine that we or any of ournon-PRC subsidiaries is a PRC resident enterprise for PRC enterprise income tax purposes, which could subject our company or any of our non-PRC subsidiaries to PRC tax at a rate of 25% on its world-wide income, which could materially reduce our net income. In addition, we may also besubject to PRC enterprise income tax reporting obligations.If the PRC tax authorities determine that our company is a PRC resident enterprise for PRC enterprise income tax purposes, gains realizedon the sale or other disposition of ADSs or ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20%in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRCsources. Any such tax may reduce the returns on your investment in the ADSs.There are significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payableby our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.Under the EIT Law and its implementation rules, the profits of a foreign-invested enterprise generated through operations, which aredistributed to its immediate holding company outside China, will be subject to a withholding tax rate of 10.0%. Pursuant to a special arrangementbetween Hong Kong and China, such rate may be reduced to 5.0% if a Hong Kong resident enterprise owns more than 25.0% of the equity interestin the PRC company. Our current PRC subsidiary is wholly owned by our Hong Kong subsidiary, CooTek Hong Kong Limited, or CooTek HK.Accordingly, CooTek HK may qualify for a 5.0% tax rate in respect of distributions from its PRC subsidiary. Under the Notice of the StateAdministration of Taxation on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009,the taxpayer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These conditions include: (1) the taxpayer must be thebeneficial owner of the relevant dividends, and (2) the corporate shareholder to receive dividends from the PRC subsidiary must have continuouslymet the direct ownership thresholds during the 12 consecutive months preceding the receipt of the dividends. Further, the SAT promulgated theNotice on How to Understand and Recognize the “Beneficial Owner” in Tax Treaties in 2009, most recently amended on February 3, 2018, andeffective from April 1, 2018, which sets forth several non-rebuttable presumptions to be a “beneficial owner,” and certain detailed factors indetermining the “beneficial owner” status.Entitlement to a lower tax rate on dividends according to tax treaties or arrangements between the PRC central government andgovernments of other countries or regions is subject to Administrative Measures on Entitlement of Non-residents to Treatment under Tax Treaties,or SAT Circular 60, replaced by SAT Circular 35 in 2019, which provides that non-resident enterprises are not required to obtain pre-approval fromthe relevant tax authority in order to enjoy the reduced withholding tax. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate,and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by therelevant tax authorities. As a result, we cannot assure you that we will be entitled to any preferential withholding tax rate under tax treaties fordividends received from our PRC subsidiary. Table of Contents55We face uncertainty with respect to indirect transfer of equity interests in PRC resident enterprises by their non-PRC holding companies.We face uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transferand exchange of shares in our company by non-resident investors.In February 2015, the SAT issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC ResidentEnterprises, or SAT Bulletin 7, as amended in 2017, which replaced certain clauses of the Notice of the State Administration of Taxation onStrengthening the Administration of Enterprise Income Tax on Non-resident Enterprises’ Equity Transfer Income issued by the SAT inDecember 2009. Pursuant to this bulletin, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRCresident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonablecommercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from suchindirect transfer may be subject to PRC enterprise income tax. According to SAT Bulletin 7, “PRC taxable assets” include assets attributed to anestablishment in China, immovable properties located in China, and equity investments in PRC resident enterprises, in respect of which gains fromtheir transfer by a direct holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining whetherthere is a “reasonable commercial purpose” of the transaction arrangement, features to be taken into consideration include: whether the main valueof the equity interest of the relevant offshore enterprise derives from PRC taxable assets; whether the assets of the relevant offshore enterprisemainly consist of direct or indirect investment in China or if its income mainly derives from China; whether the offshore enterprise and itssubsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function and riskexposure; the duration of existence of the business model and organizational structure; the replicability of the transaction by direct transfer of PRCtaxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements. In respect of an indirect offshoretransfer of assets of a PRC establishment, the resulting gain is to be included with the enterprise income tax filing of the PRC establishment orplace of business being transferred, and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlyingtransfer relates to the immovable properties located in China or to equity investments in a PRC resident enterprise, which is not related to a PRCestablishment or place of business of a non-resident enterprise, a PRC enterprise income tax of 10% would apply, subject to available preferentialtax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has thewithholding obligation. Where the payor fails to withhold any or sufficient tax, the transferor is required to declare and pay such tax to the taxauthority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. SAT Bulletin 7 doesnot apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction througha public stock exchange.There is uncertainty as to the application of SAT Bulletin 7. We face uncertainties as to the reporting and other implications of certain pastand future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries orinvestments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject towithholding obligations if our company is transferee in such transactions under SAT Bulletin 7. In 2014, we repurchased certain number ofordinary shares in CooTek (Cayman) Inc. from an existing shareholder for the consideration of US$9.3 million. The existing shareholder undertookto make the necessary tax filings in relation to this repurchase by herself and to indemnify us against any losses arising from the failure to makesuch tax filings. However, we cannot assure you that, if the existing shareholder fails to make necessary tax filings, the tax authority would notrequire us to make such tax filings and even subject us to fines. As of the date of this annual report, we have neither received any notice of warningnor been subject to any penalties or other disciplinary action from the relevant government authorities regarding such tax filing. For transfer ofshares in our company by investors that are non-PRC resident enterprises, our PRC subsidiary may be requested to assist in the filing under SATBulletin 7. As a result, we may be required to expend valuable resources to comply with SAT Bulletin 7 or to request the relevant transferors fromwhom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars. Table of Contents56China’s M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreigninvestors, which could make it more difficult for us to pursue growth through acquisitions in China.The Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, and other recentlyadopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger andacquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that MOFCOM be notified inadvance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry isconcerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to achange in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-Monopoly Lawpromulgated by the Standing Committee of the National People’s Congress in August 2007 and effective in August 2008 requires that transactionswhich are deemed concentrations and involve parties with specified turnover thresholds (i.e., during the previous fiscal year, (i) the total globalturnover of all operators participating in the transaction exceeds RMB10 billion and at least two of these operators each had a turnover of morethan RMB400 million within China, or (ii) the total turnover within China of all the operators participating in the concentration exceeded RMB2billion, and at least two of these operators each had a turnover of more than RMB400 million within China) must be cleared by MOFCOM beforethey can be completed. In addition, in February 2011, the General Office of the State Council promulgated a Notice on Establishing the SecurityReview System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the Circular 6, which officially established asecurity review system for mergers and acquisitions of domestic enterprises by foreign investors. Further, in August 2011, MOFCOM promulgatedthe Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors, or theMOFCOM Security Review Regulations, to implement the Circular 6. Under Circular 6, a security review is required for mergers and acquisitionsby foreign investors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire the “defacto control” of domestic enterprises with “national security” concerns. Under the MOFCOM Security Review Regulations, MOFCOM will focuson the substance and actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review. IfMOFCOM decides that a specific merger or acquisition is subject to security review, it will submit it to the Inter-Ministerial Panel, an authorityestablished under the Circular 6 led by the National Development and Reform Commission, or NDRC, and MOFCOM under the leadership of theState Council, to carry out security review. The regulations prohibit foreign investors from bypassing the security review by structuring transactionsthrough trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provisionor official interpretation stating that the merging or acquisition of a company engaged in the internet information services, online games, onlineaudio-visual program services and related businesses requires security review, and there is no requirement that acquisitions completed prior to thepromulgation of the Security Review Circular are subject to MOFCOM review. In addition, on December 19, 2020, the NDRC and the MOFCOMpromulgated the Measures for Security Review of Foreign Investment, or the Foreign Investment Security Review Measures, which took effect onJanuary 18, 2021. Under the Foreign Investment Security Review Measures, investment in certain key areas which results in acquiring the actualcontrol of the assets is required to obtain approval from designated governmental authorities in advance.In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes,including obtaining approval from the MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It isunclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns.However, MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject tothe security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual control arrangements withtarget entities, may be closely scrutinized or prohibited. Table of Contents57PRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase their registeredcapital or distribute profits to us or otherwise expose us to liability and penalties under PRC law.In July 2014, the SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing andRoundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaced the Relevant Issues Concerning Foreign ExchangeControl on Domestic Residents’ Corporate Financing and Roundtrip Investment through Offshore Special Purpose Vehicles, or Circular 75.Circular 37 requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of anoffshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFEregistrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change ofsuch PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, ormergers or divisions. According to the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of DirectInvestment released on February 13, 2015, by the SAFE, as amended in 2019, local banks will examine and handle foreign exchange registrationfor overseas direct investment, including the initial foreign exchange registration and amendment registration, under SAFE Circular 37 fromJune 1, 2015.If our shareholders who are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC subsidiarymay be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may berestricted in our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration describedabove could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.Karl Kan Zhang, Susan Qiaoling Li, Michael Jialing Wang, Jim Jian Wang and Haiyan Zhu, who directly or indirectly hold shares inCooTek (Cayman) Inc. and who are PRC residents, have completed the SAFE registration in connection with our financings and have committed toupdate their registration filings with SAFE under SAFE Circular 75 or Circular 37 when any changes should be registered under SAFE Circular 75or Circular 37. However, we may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that arerequired to make such registrations, and we cannot compel our beneficial owners to comply with SAFE registration requirements. As a result, wecannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities have complied with, and will in the futuremake or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners tocomply with SAFE regulations, or failure by us to amend the foreign exchange registrations of our PRC subsidiary, could subject us to fines orlegal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiary’s ability to make distributions or pay dividends oraffect our ownership structure, which could adversely affect our business and prospects. Table of Contents58Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans maysubject the PRC plan participants or us to fines and other legal or administrative sanctions.Pursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly listed companies due totheir position as director, senior management or employees of the PRC subsidiaries of the overseas companies may submit applications to SAFE orits local branches for the foreign exchange registration with respect to offshore special purpose companies. Our directors, executive officers andother employees who are PRC residents and who have been granted options may follow SAFE Circular 37 to apply for the foreign exchangeregistration before our company becomes an overseas listed company. In February 2012, SAFE promulgated the Notices on Issues Concerning theForeign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly Listed Companies, or theStock Option Rules. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive planin an overseas publicly listed company are required to register with SAFE or its local branches and complete certain other procedures. Participantsof a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publiclylisted company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respectto the stock incentive plan on behalf of its participants. Such participants must also retain an overseas entrusted institution to handle matters inconnection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRCagent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan,the PRC agent or the overseas entrusted institution or other material changes. We and our PRC employees who have been granted stock options aresubject to these regulations. We have completed such SAFE registrations for our PRC stock option holder employees in March 2019. However, wecannot assure you that we will be able to complete the relevant registration for new employees who participate in such stock incentive plan in thefuture in a timely manner or at all. Failure of our PRC stock option holders to complete their SAFE registrations may subject these PRC residentsto fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary, limit our PRC subsidiary’s abilityto distribute dividends to us, or otherwise materially adversely affect our business.PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currencyconversion may restrict or prevent us from using the proceeds of our public offerings to make loans to our PRC subsidiary and consolidatedaffiliated entities, or to make additional capital contributions to our PRC subsidiary.We are an offshore holding company conducting our operations in China through our PRC subsidiary and consolidated affiliated entities.We may make loans to our PRC subsidiary and consolidated affiliated entities, or we may make additional capital contributions to our PRCsubsidiary, or we may establish new PRC subsidiary and make capital contributions to these new PRC subsidiaries, or we may acquire offshoreentities with business operations in China in an offshore transaction.Most of these ways are subject to PRC regulations and approvals. For example, loans by us to our wholly owned PRC subsidiary tofinance its activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE. If we decide to finance our whollyowned PRC subsidiary by means of capital contributions, these capital contributions are subject to the requirement of making necessary filings withthe MOFCOM and registration with other governmental authorities in China. Due to the restrictions imposed on loans in foreign currenciesextended to any PRC domestic companies, we are not likely to make such loans to the consolidated affiliated entities, which are PRC domesticcompany. Further, we are not likely to finance the activities of the consolidated affiliated entities by means of capital contributions due toregulatory restrictions relating to foreign investment in PRC domestic enterprises engaged in internet information services, online games, onlineaudio-visual program services and related businesses. Table of Contents59The SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of ForeignExchange Settlement of Capital of Foreign-invested Enterprises, or SAFE Circular 19, effective in June 2015. According to SAFE Circular 19, theflow and use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated suchthat RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of banks loansthat have been transferred to a third party. Although SAFE Circular 19 allows RMB capital converted from foreign currency-denominatedregistered capital of a foreign-invested enterprise to be used for equity investments within the PRC, it also reiterates the principle that RMBconverted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyondits business scope. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the ForeignExchange Settlement Management Policy of Capital Account, or SAFE Circular 16, effective in June 2016, which reiterates some of the rules setforth in SAFE Circular 19, but changes the prohibition against using RMB capital converted from foreign currency-denominated registered capitalof a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises.SAFE Circular 19 and SAFE Circular 16 may significantly limit our ability to transfer any foreign currency we hold, including the net proceedsfrom our public offerings, to our PRC subsidiary, which may adversely affect our liquidity and our ability to fund and expand our business in thePRC. On October 23, 2019, SAFE issued Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, or the Circular 28. Circular 28 allows non-investment foreign-invested enterprises to use their capital funds to makeequity investments in China; provided that such investments do not violate the Negative List and the target investment projects are genuine and incompliance with PRC laws. Since Circular 28 was issued only recently, its interpretation and implementation in practice are still subject tosubstantial uncertainties.In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holdingcompanies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary governmentapprovals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiary or with respect to future capital contributions by us toour PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we received from our initialpublic offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect ourliquidity and our ability to fund and expand our business.Fluctuation in the value of the RMB may have a material adverse effect on the value of your investment.The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. TheRenminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and othercurrencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. Wecannot assure you that Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predicthow market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future.A certain percentage of our costs, expenses and revenues are denominated in RMB. Any significant depreciation of the RMB maymaterially adversely affect the value of, and any dividends payable on, our ADSs in U.S. dollars. To the extent that we need to convert U.S. dollarswe received from our initial public offering into RMB for our operations, appreciation of the RMB against the U.S. dollar would have an adverseeffect on the RMB amount we would receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purposeof paying dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the RMB would have anadverse effect on the U.S. dollar amount available to us.Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered intoany hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedgingtransactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge ourexposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability toconvert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment. Table of Contents60The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in ouroperations and the value of our ADS.We conduct our operations in China through (i) our PRC subsidiaries, and (ii) the consolidated affiliated entities with which we havemaintained contractual arrangements. Our operations in China are governed by PRC laws and regulations. The PRC government has significantoversight and discretion over the conduct of our business, and it may influence our operations, which could result in a material adverse change inour operation and the value of our ADSs. Also, the PRC government has recently indicated an intent to exert more oversight and control overofferings that are conducted overseas and foreign investment in China-based issuers. Any such action could significantly limit or completely hinderour ability to offer or continue to offer securities to investors. In addition, implementation of industry-wide regulations directly targeting ouroperations could cause the value of our securities to significantly decline. Therefore, investors of our company and our business face potentialuncertainty from actions taken by the PRC government affecting our business.The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability ofthe PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections.Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as anauditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board(United States), or the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess itscompliance with the applicable professional standards. Since our auditor is located in China, a jurisdiction where the PCAOB has been unable toconduct inspections without the approval of the Chinese authorities, our auditor is not currently inspected by the PCAOB. As a result, we andinvestors in our ADSs are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors inChina makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or qualitycontrol procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause investors and potentialinvestors in our ADSs to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.Our ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. Thedelisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.The Holding Foreign Companies Accountable Act, or the HFCAA, was signed into law on December 18, 2020. The HFCAA states if theSEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection for thePCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securitiesexchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC ofits determination that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainlandChina and Hong Kong. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to inspect orinvestigate completely.Whether the PCAOB will be able to conduct inspections of our auditor before the issuance of our financial statements on Form 20-F forthe year ending December 31, 2023 which is due by April 30, 2024, or at all, is subject to substantial uncertainty and depends on a number offactors out of our, and our auditor’s, control. If our shares and ADSs are prohibited from trading in the United States, there is no certainty that wewill be able to list on a non-U.S. exchange or that a market for our shares will develop outside of the United States. Such a prohibition wouldsubstantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting wouldhave a negative impact on the price of our ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptableto us, or at all, which would have a material adverse impact on our business, financial condition, and prospects. Table of Contents61On June 22, 2021, the U.S. Senate passed a bill which would reduce the number of consecutive non-inspection years required fortriggering the prohibitions under the HFCAA from three years to two. On February 4, 2022, the U.S. House of Representatives passed a bill whichcontained, among other things, an identical provision. If this provision is enacted into law and the number of consecutive non-inspection yearsrequired for triggering the prohibitions under the HFCAA is reduced from three years to two, then our shares and ADSs could be prohibited fromtrading in the United States as early as 2023.It may be difficult for overseas regulators to conduct investigation or collect evidence within China.Shareholder claims or regulatory investigation that are common in the United States generally are difficult to pursue as a matter of law orpracticality in China. For example, in China, there are significant legal and other obstacles to providing information needed for regulatoryinvestigations or litigations initiated by regulators outside China. Although the authorities in China may establish a regulatory cooperationmechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, suchcooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperationmechanism and involves uncertainty. The PRC government authorities have strengthened the supervision of cross-border information provisionrecently. For example, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseassecurities regulator is allowed to directly conduct investigation, evidence collection and other activities within the PRC territory. Furthermore,pursuant to the draft of Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing byDomestic Companies (Draft for Comments) issued by the CSRC on April 2, 2022, if any overseas securities regulators and competent overseasauthorities requests to investigate, including to collect evidence for investigation purpose, or inspects a PRC domestic company that has been listedor offered securities in an overseas market or securities companies and securities service providers that undertake securities business for such PRCdomestic companies, such investigation and inspection shall be conducted under a cross-border regulatory cooperation mechanism, and the CSRCand competent authorities will provide necessary assistance pursuant to bilateral and multilateral cooperation mechanisms. For more information,see “Item 4. Information on the Company—B. Business Overview—Regulation— Regulations Relating to M&A and Overseas Listing.” Whiledetailed interpretation of or implementation rules under Article 177 have yet to be promulgated and the draft of Provisions on StrengtheningConfidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) have notbeen formally adopted, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities withinChina may further increase the difficulties you face in protecting your interests. See also “Item 3. Key Information—D. Risk Factors—RisksRelated to Our ADSs—You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may belimited, because we are incorporated under Cayman Islands law.”The custodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities, ormisappropriate or misuse these assets.Under the PRC law, legal documents for corporate transactions, including agreements and contracts are executed using the chop or seal ofthe signing entity or with the signature of a legal representative whose designation is registered and filed with relevant PRC market regulationadministrative authorities.In order to secure the use of our chops and seals, we have established internal control procedures and rules for using these chops and seals.In any event that the chops and seals are intended to be used, the responsible personnel will submit a formal application, which will be verified andapproved by authorized employees in accordance with our internal control procedures and rules. In addition, in order to maintain the physicalsecurity of our chops, we generally have them stored in secured locations accessible only to authorized employees. Although we monitor suchauthorized employees, the procedures may not be sufficient to prevent all instances of abuse or negligence. There is a risk that our employees couldabuse their authority, for example, by entering into a contract not approved by us or seeking to gain control of one of our subsidiaries or ouraffiliated entities or their subsidiaries. If any employee obtains, misuses or misappropriates our chops and seals or other controlling non-tangibleassets for whatever reason, we could experience disruption to our normal business operations. We may have to take corporate or legal action, whichcould involve significant time and resources to resolve and divert management from our operations, and we may not be able to recover our loss dueto such misuse or misappropriation if the third party relies on the apparent authority of such employees and acts in good faith. Table of Contents62Risks Related to Our ADSsIf we do not satisfy the NYSE requirements for continued listing, our ADS could be delisted from NYSE.The listing of our ADSs on the New York Stock Exchange is contingent on our compliance with the NYSE’s conditions for continuedlisting.Pursuant to NYSE Rule 802.01B, a company will be considered to be below compliance if its average global market capitalization over aconsecutive 30 trading-day period is less than US$50 million and, at the same time stockholders’ equity is less than US$50 million. We received aletter from the NYSE dated January 5, 2022 and further e-mail communication on the same date, notifying CooTek that (i) it was below compliancestandards due to its total market capitalization and stockholders’ equity, (ii) the due date for CooTek to submit a business plan that demonstratescompliance was April 5, 2022, and (iii) the applicable cure period for CooTek to regain compliance would expire on July 5, 2023. On March 16,2022, we submitted the requisite business plan to the NYSE. On April 14, 2022, NYSE notified us that the business plan was accepted. The NYSEwill continue to review our regularly scheduled financial reporting cycle during an 18-month period from January 5, 2022 in order to examine ourcompliance with the goals and initiatives outlined in the business plan. Failure to maintain these goals will result in our company being subject toNYSE trading suspension at the point the initiative or goal is not met.Pursuant to NYSE Rule 802.01C, a company will be considered to be below compliance standards if the average closing price of asecurity as reported on the consolidated tape is less than US$1.00 over a consecutive 30 trading-day period. Once notified, the company must bringits share price and average share price back above US$1.00 by six months following receipt of the notification. The company can regaincompliance at any time during the six-month cure period if on the last trading day of any calendar month during the cure period the company has aclosing share price of at least US$1.00 and an average closing share price of at least US$1.00 over the 30 trading-day period ending on the lasttrading day of that month. In the event that at the expiration of the six-month cure period, both a US$1.00 closing share price on the last trading dayof the cure period and a US$1.00 average closing share price over the 30 trading-day period ending on the last trading day of the cure period arenot attained, the NYSE will commence suspension and delisting procedures. In addition, we understand that the NYSE has a policy to suspendtrading immediately and commence delisting procedures if the market price of securities falls to US$0.16 or less. We received a letter from theNYSE dated December 6, 2021 notifying CooTek that it was below compliance standards due to the trading price of CooTek’s ADS. With respectto the non-compliance related to our trading price, we plan to change our ADS Ratio from the current ADS Ratio of one ADS to fifty (50) Class Aordinary shares to a new ADS Ratio of one ADS to six hundred and fifty (650) Class A ordinary shares. We anticipate that the change in the ADSRatio will be effective on or about May 9, 2022, subject to the effectiveness of the post-effective amendment to the ADS Registration Statement onForm F-6 on or before that date.Failure to implement or achieve the financial and operational goals outlined in our business plan or any of the minimum listing standard,including having an average global market capitalization over a 30-day period of over US$15 million, will result in us being subject to NYSEtrading suspension at the point the initiative, goal, or standard is not met. Upon such an occurrence, we may be delisting by the NYSE. We mayalso be subject to immediate suspension and delisting if the NYSE determines that we have filed or have announced an intent to file for relief underany provisions of any bankruptcy laws. In the event our ADSs are no longer listed for trading on the NYSE, we will have decreased exposure inforeign markets and experience further difficulties in raising capital which could materially affect our operations and financial results, and theliquidity and value of an investment in our ADSs will be materially and adversely affected.The trading price of our ADSs is likely to be volatile, which could result in substantial losses to investors.During the fiscal year ended December 31, 2021, the trading price of our ADSs has ranged from US$0.48 to US$6.81 per ADS. Thetrading price of our ADSs is likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broadmarket and industry factors, including the performance and fluctuation of the market prices of other mobile internet companies based in China thathave listed their securities in the United States. In addition to market and industry factors, the price and trading volume for our ADSs may behighly volatile for factors specific to our own operations, including the following:●variations in our revenues, earnings, cash flow and data related to our operating metrics;●announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; Table of Contents63●announcements of new product and service offerings, solutions and expansions by us or our competitors;●changes in financial estimates by securities analysts;●financial projections that may be provided by us and changes to these projections;●detrimental adverse publicity about us, our products and 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.Any of these factors may result in large and sudden changes in the volume and price at which our ADSs will trade.In the past, shareholders of public companies have often brought securities class action suits against those companies following periods ofinstability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’sattention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm ouroperating results. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in thefuture. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverseeffect on our financial condition and results of operations.Techniques employed by short sellers may drive down the market price of our ADSs.Short selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intentionof buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securitiesbetween the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase thanit received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for thepublication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generateprofits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.Public companies listed in the United States that have a substantial majority of their operations in China have been the subject of shortselling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reportingresulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, inmany cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegationsand, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.We may be the subject of unfavorable allegations made by short sellers in the future. Any such allegations may be followed by periods ofinstability in the market price of our common shares and ADSs and negative publicity. If and when we become the subject of any unfavorableallegations, whether such allegations are proven to be true or untrue, we could have to expend a significant amount of resources to investigate suchallegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner inwhich we can proceed against the relevant short seller by principles of freedom of speech, applicable federal or state law or issues of commercialconfidentiality. Such a situation could be costly and time-consuming and could distract our management from growing our business. Even if suchallegations are ultimately proven to be groundless, allegations against us could severely impact our business operations and shareholders’ equity,and the value of any investment in our ADSs could be greatly reduced or rendered worthless. Table of Contents64Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage othersfrom pursuing any change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.We have created a dual-class share structure such that our ordinary shares shall consist of Class A ordinary shares and Class B ordinaryshares. In respect of matters requiring the votes of shareholders, holders of Class A ordinary shares are entitled to one vote per share, while holdersof Class B ordinary shares are entitled to twenty-five (25) votes per share on all matters subject to vote at general meetings of our company basedon our dual-class share structure. Each Class B ordinary share is convertible into one Class A ordinary share at any time at the option of the holderthereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer,assignment or disposition of any Class B ordinary shares by a holder thereof to any person or entity other than holders of Class B ordinary shares ortheir affiliates, or upon a change of ultimate beneficial ownership of any Class B ordinary shares to any person who is not an affiliate of the holderthereof, such Class B ordinary shares shall be automatically and immediately converted into the equivalent number of Class A ordinary shares.As of March 31, 2022, our chairman of the board of directors and chief technology officer, Karl Kan Zhang, beneficially owned all of ourissued Class B ordinary shares. These Class B ordinary shares constituted approximately 5.4% of our total issued and outstanding share capital and58.6% of the aggregate voting power of our total issued and outstanding share capital as of March 31, 2022, due to the disparate voting powersassociated with our dual-class share structure. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” As a result ofthe dual-class share structure and the concentration of ownership, holders of Class B ordinary shares have considerable influence over matters suchas decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significantcorporate actions. Such holders may take actions that are not in the best interest of us or our other shareholders. This concentration of ownershipmay discourage, delay or prevent a change in control of our company, which could have the effect of depriving our other shareholders of theopportunity to receive a premium for their shares as part of a sale of our company and may reduce the price of our ADSs. This concentrated controlwill limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change ofcontrol transactions that holders of Class A ordinary shares and ADSs may view as beneficial.The dual-class structure of our ordinary shares may adversely affect the trading market for our ADSs.S&P Dow Jones and FTSE Russell have recently announced changes to their eligibility criteria for inclusion of shares of public companieson certain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold nomore than 5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced theiropposition to the use of multiple class structures. As a result, the dual-class structure of our ordinary shares may prevent the inclusion of our ADSsrepresenting Class A ordinary shares in such indices and may cause shareholder advisory firms to publish negative commentary about our corporategovernance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less activetrading market for our ADSs. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capitalstructure could also adversely affect the value of our ADSs.If securities or industry analysts do not publish research about our business, or if they adversely change their recommendations regarding ourADSs, the market price for our ADSs and trading volume could decline.The trading market for our ADSs will be influenced by research or reports that industry or securities analysts publish about our business.If one or more analysts who cover us downgrade our ADSs, the market price for our ADSs would likely decline. If one or more of these analystscease 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 marketprice or trading volume for our ADSs to decline. Table of Contents65Substantial future sale or the perception of a potential sale of substantial amounts of our ADSs could adversely affect our ADRs’ market price.Sales of substantial amounts of our ADSs in the public market, or the perception that these sales could occur, could adversely affect themarket price of our ADSs and could materially impair our ability to raise capital through equity offerings in the future. We cannot predict whateffect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for futuresale will have on the market price of our ADSs.Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our ADSs for return on yourinvestment.We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of ourbusiness. 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 ourADSs as a source for a future dividend income.Pursuant to our seventh amended and restated memorandum and articles of association, our board of directors has complete discretion asto whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary resolutiondeclare a dividend, but no dividend may exceed the amount recommended by our board of directors. Under Cayman Islands law, a Cayman Islandscompany may pay a dividend either out of profits or share premium account; provided that in no circumstances may a dividend be paid if thiswould result in the company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decidesto declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results ofoperations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, ourfinancial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investmentin our ADSs will likely depend entirely upon any future price appreciation of our ADSs. There is no guarantee that our ADSs will appreciate invalue or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in our ADSs and you mayeven lose your entire investment in our ADSs.You may be subject to PRC income tax on dividends from us or on any gain realized on the transfer of our ADSs.Under the EIT Law and its implementation rules, subject to any applicable tax treaty or similar arrangement between the PRC and yourjurisdiction of residence that provides for a different income tax arrangement, PRC withholding tax at the rate of 10% is normally applicable todividends from PRC sources payable to investors that are non-PRC resident enterprises, which do not have an establishment or place of business inthe PRC, or which have such establishment or place of business if the relevant income is not effectively connected with the establishment or placeof business. Any gain realized on the transfer of ADSs or ordinary shares by such non-PRC resident enterprise investors is also subject to 10%PRC income tax if such gain is regarded as income derived from sources within the PRC, unless a tax treaty or similar arrangement providesotherwise. Under the PRC Individual Income Tax Law and its implementation rules, dividends from sources within the PRC paid to foreignindividual investors who are not PRC residents are generally subject to a PRC withholding tax at a rate of 20% and gains from PRC sourcesrealized by such investors on the transfer of ADSs or ordinary shares are generally subject to 20% PRC income tax, in each case, subject to anyreduction or exemption set forth in applicable tax treaties and similar arrangements and PRC laws. Although substantially all of our dailyoperations are in China, it is unclear whether dividends we pay with respect to our ADSs, or the gain realized from the transfer of our ADSs, wouldbe treated as income derived from sources within the PRC and as a result be subject to PRC income tax if we were considered a PRC residententerprise, as described above. If PRC income tax were imposed on gains realized through the transfer of our ADSs or on dividends paid to ournon-PRC resident investors, the value of your investment in our ADSs may be materially and adversely affected. Furthermore, our ADS holderswhose jurisdictions of residence have tax treaties or similar arrangements with China may not qualify for benefits under such tax treaties orarrangements. Table of Contents66There can be no assurance that we will not be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for anytaxable year, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs or ordinary shares.A non-U.S. corporation will be considered a passive foreign investment company, or “PFIC,” for any taxable year if either (i) at least 75%of its gross income for such year consists of certain types of “passive” income; or (ii) at least 50% of the value of its assets (generally determinedon the basis of a quarterly average) during such year is attributable to assets that produce passive income or are held for the production of passiveincome (the “asset test”). Although the law in this regard is not entirely clear, we treat the VIEs as being owned by us for United States federalincome tax purposes because we control their management decisions and are entitled to substantially all of the economic benefits associated withthem. As a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were determined, however,that we are not the owner of the VIEs for United States federal income tax purposes, we would likely be treated as a PFIC for the currenttaxable year and any subsequent taxable year.Assuming that we are the owner of the VIEs for United States federal income tax purposes, we do not believe that we were a PFIC for ourtaxable year ended December 31, 2021 and we do not presently expect to be a PFIC for the current taxable year or the foreseeable future. However,no assurance can be given in this regard because the determination of whether we are or will become a PFIC is a fact-intensive inquiry made on anannual basis that depends, in part, upon the composition of our income and assets and the value of our assets.Fluctuations in the market price of our ADSs may cause us to become a PFIC for the current or future taxable years because the value ofour assets for the purpose of the asset test, including the value of our goodwill and unbooked intangibles, may be determined by reference to themarket price of our ADSs from time to time (which may be volatile). In particular, recent decline in the market price of our ADSs increased ourrisk of becoming a PFIC. The market price of our ADSs may continue to fluctuate considerably and, consequently, we cannot assure you of ourPFIC status for any taxable year. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets.Under circumstances where our revenue from activities that produce passive income significantly increases relative to our revenue from activitiesthat produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming aPFIC may substantially increase.If we were to be or become a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10. Additional Information-Taxation-United States Federal Income Tax Considerations”) holds our ADSs or ordinary shares, certain adverse U.S. federal income taxconsequences could apply to such U.S. Holder. See “Item 10. Additional Information—Taxation—United States Federal Income TaxConsiderations-Passive Foreign Investment Company Rules.”Our memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holdersof our Class A ordinary shares and ADSs.Our seventh memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company orcause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to selltheir shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tenderoffer or similar transaction. Our dual-class voting structure gives disproportionate voting power to holders of the Class B ordinary shares. Inaddition, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and tofix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations orrestrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may begreater than the rights associated with our Class A ordinary shares, in the form of ADS or otherwise. Preferred shares could be issued quickly withterms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directorsdecides to issue preferred shares, the price of our ADSs may fall and the voting and other rights of the holders of our Class A ordinary shares andADSs may be materially and adversely affected. Table of Contents67You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we areincorporated under Cayman Islands law.We are an exempted company limited by shares incorporated under the laws of the Cayman Islands. Our corporate affairs are governed byour memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands.The rights of shareholders to take action against the directors, actions by minority shareholders, and the fiduciary duties owed to us by our directorsunder Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands isderived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions ofwhose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciaryduties owed to us by our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent insome jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. SomeU.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition,Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporaterecords (save for our memorandum and articles of association, our register of mortgages and charges and special resolutions of our shareholders) orto obtain copies of lists of shareholders of these companies. Our directors have discretion under our memorandum and articles of association todetermine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to makethem available to our shareholders. This may make it more difficult for our shareholders to obtain the information needed to establish any factsnecessary for them to motion or to solicit proxies from other shareholders in connection with a proxy contest.As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken bymanagement, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated inthe United States.ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorableoutcomes to the plaintiff (s) in any such action.The deposit agreement governing the ADSs representing our ordinary shares provides that, subject to the depositary’s right to require aclaim to be submitted to arbitration, the federal or state courts in the City of New York have exclusive jurisdiction to hear and determine claimsarising under the deposit agreement and in that regard, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of anyclaim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claimunder the U.S. federal securities laws.If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceablebased on the facts and circumstances of that case in accordance with the applicable U.S. state and federal law. To our knowledge, the enforceabilityof a contractual pre-dispute jury trial waiver in connection with claims arising under the U.S. federal securities laws has not been finallyadjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generallyenforceable, including under the laws of the State of New York, which govern the deposit agreement. In determining whether to enforce acontractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waivedthe right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legalcounsel regarding the jury waiver provision before entering into the deposit agreement.If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arisingunder the deposit agreement or the ADSs, including claims under U.S. federal securities laws, you or such other holder or beneficial owner may notbe entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or thedepositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of theapplicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jurywould have had, including results that could be less favorable to the plaintiff(s) in any such action. Table of Contents68Nevertheless, if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms ofthe deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder orbeneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and therules and regulations promulgated thereunder.Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.Under the deposit agreement, any action or proceeding against or involving the depositary, arising out of or based upon the depositagreement or the transactions contemplated thereby or by virtue of owning the ADSs may only be instituted in a state or federal court in New York,New York, and you, as a holder of our ADSs, will have irrevocably waived any objection which you may have to the laying of venue of any suchproceeding, and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or proceeding.The depositary may, in its sole discretion, require that any dispute or difference arising from the relationship created by the depositagreement be referred to and finally settled by an arbitration conducted under the terms described in the deposit agreement, although the arbitrationprovisions do not preclude you from pursuing claims under the Securities Act or the Exchange Act in state or federal courts.Certain judgments obtained against us by our shareholders may not be enforceable.We are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. Substantially allof our daily operations are conducted in China. In addition, substantially all of our current directors and officers are nationals and residents ofcountries other than the United States, and substantially all of the assets of these persons are located outside the United States. As a result, it may bedifficult 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 yourrights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the lawsof the Cayman Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reportingrequirements.As a company with less than US$1.07 billion in revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant tothe JOBS Act. Therefore, we may take advantage of certain exemptions from requirements applicable to other public companies that are notemerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 forso long as we remain an emerging growth company until the fifth anniversary from the date of our initial listing. As a result, if we elect not tocomply with such auditor attestation requirements, our investors may not have access to certain information they may deem important. In addition,pursuant to the JOBS Act, we have elected to take advantage of the extended transition period for complying with new or revised accountingstandards until those standards would otherwise apply to private companies. As a result, our operating results and financial statements may not becomparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards. If wecease to be an emerging growth company, we will no longer be able to take advantage of these exemptions or the extended transition period forcomplying with new or revised accounting standards.We cannot predict if investors will find our ADSs less attractive or our company less comparable to certain other public companiesbecause we will rely on these exemptions and election. If some investors find our ADSs less attractive as a result, there may be a less active tradingmarket for our ADSs and our ADS price may be more volatile. Table of Contents69We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”We are a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company.The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and the New York Stock Exchange, impose variousrequirements on the corporate governance practices of public companies. As a company with less than US$1.07 billion in revenues for our lastfiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage ofspecified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions includeexemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of theemerging growth company’s internal control over financial reporting. The JOBS Act also permits an emerging growth company to delay adoptingnew or revised accounting standards until such time as those standards apply to private companies. We have elected to take advantage of suchextended transition period for complying with new or revised accounting standards as required when they are adopted for public companies.We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities moretime-consuming and costly. After we are no longer an “emerging growth company,” we expect to incur significant expenses and devote substantialmanagement effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules andregulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors andadopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company may make itmore difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limitsand coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we may incur additional costs associated withour public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or asexecutive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict orestimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation tocorporate governance matters that differ significantly from the NYSE corporate governance listing standards; these practices may afford lessprotection to shareholders than they would enjoy if we complied fully with the NYSE corporate governance listing standards.As a Cayman Islands exempted company listed on the New York Stock Exchange, we are subject to the NYSE corporate governancelisting standards. However, NYSE rules permit a foreign private issuer like us to follow the corporate governance practices of its home country.Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the NYSE corporategovernance listing standards. We have chosen, and may from time to time choose, to follow home country exemptions with respect to certaincorporate matters. For example, beginning on September 2, 2019, we have been following home country practice in lieu of the requirements ofNYSE Listed Company Manual Section 303A.01 to have a majority of independent directors and Section 303A.07 to have an audit committee withat least three members. As a result, our shareholders may be afforded less protection than they would otherwise enjoy under the NYSE governancelisting standards applicable to U.S. domestic issuers.We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisionsapplicable to United States domestic public companies.Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules andregulations 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 theSEC;●the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registeredunder the Exchange Act; Table of Contents70●the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liabilityfor 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.We are required to file an annual report within four months of the end of each fiscal year. In addition, we voluntarily publish our results ona quarterly basis through press releases, distributed pursuant to the rules and regulations of the New York Stock Exchange. Press releases relating tofinancial results and material events are furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to theSEC are less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not beafforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer.The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to voteyour Class A ordinary shares.Holders of ADSs do not have the same rights as our registered shareholders. As a holder of our ADSs, you do not have any direct right toattend general meetings of our shareholders or to cast any votes at such meetings. You will only be able to exercise the voting rights which arecarried by the underlying Class A ordinary shares represented by your ADSs indirectly by giving voting instructions to the depositary in accordancewith the provisions of the deposit agreement. Under the deposit agreement, you may vote by giving voting instructions to the depositary. Uponreceipt of your voting instructions, the depositary will try, as far as is practicable, to vote the underlying Class A ordinary shares represented byyour ADSs in accordance with your instructions. If we ask for your instructions, then upon receipt of your voting instructions, the depositary willtry to vote the underlying Class A ordinary shares in accordance with these instructions. If we do not instruct the depositary to ask for yourinstructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so. You are not able to directlyexercise your right to vote with respect to the underlying Class A ordinary shares represented by your ADSs unless you withdraw such shares, andbecome the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened, you may notreceive sufficient advance notice of the meeting to withdraw the underlying Class A ordinary shares represented by your ADSs and become theregistered holder of such shares to allow you to attend the general meeting and to vote directly with respect to any specific matter or resolution tobe considered and voted upon at the general meeting. In addition, under our seventh amended and restated articles of association, for the purposesof determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of membersand/or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may preventyou from withdrawing the underlying Class A ordinary shares represented by your ADSs and becoming the registered holder of such shares prior tothe record date, so that you would not be able to attend the general meeting or to vote directly. If we ask for your instructions, the depositary willnotify you of the upcoming vote and will arrange to deliver our voting materials to you. We cannot assure you that you will receive the votingmaterials in time to ensure that you can instruct the depositary to vote the underlying Class A ordinary shares represented by your ADSs. Inaddition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your votinginstructions. This means that you may not be able to exercise your right to direct how the underlying Class A ordinary shares represented by yourADSs are voted and you may have no legal remedy if the underlying Class A ordinary shares represented by your ADSs are not voted as yourequested.You may experience dilution of your holdings due to inability to participate in rights offerings.We may, from time to time, distribute rights to our shareholders, including rights to acquire securities. Under the deposit agreement, thedepositary will not distribute rights to holders of ADSs unless the distribution and sale of rights and the securities to which these rights relate areeither exempt from registration under the Securities Act with respect to all holders of ADSs, or are registered under the provisions of the SecuritiesAct. The depositary may, but is not required to, attempt to sell these undistributed rights to third parties, and may allow the rights to lapse. We maybe unable to establish an exemption from registration under the Securities Act, and we are under no obligation to file a registration statement withrespect to these rights or underlying securities or to endeavor to have a registration statement declared effective. Accordingly, holders of ADSs maybe unable to participate in our rights offerings and may experience dilution of their holdings as a result. Table of Contents71You may be subject to limitations on transfer of your ADSs.Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to timewhen it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number ofreasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exactnumber of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and publicholidays. The depositary may refuse to deliver, transfer or register transfers of our ADSs generally when our share register or the books of thedepositary are closed, or at any time if we or the depositary thinks it is advisable to do so because of any requirement of law or of any governmentor governmental body, or under any provision of the deposit agreement, or for any other reason.ITEM 4.INFORMATION ON THE COMPANYA.History and Development of the CompanyWe commenced our mobile internet business and launched our first mobile application, TouchPal Smart Input, in 2008. We initiallyconducted our business through Shanghai Hanxiang (CooTek) Information Technology Co., Ltd., or Shanghai Hanxiang, a PRC domestic company.In March 2012, we incorporated CooTek (Cayman) Inc., or CooTek Cayman, as our offshore holding company in order to facilitateforeign investment in our company. We established CooTek Hong Kong Limited, or CooTek HK, as our intermediate holding company, which inturn established a wholly owned PRC subsidiary, Shanghai Chule (CooTek) Information Technology Co., Ltd., or Shanghai Chule or WFOE, inJune 2012. Subsequently, we, through our WFOE, entered into a series of contractual arrangements with Shanghai Hanxiang and its shareholderswhereby we were established as the primary beneficiary of Shanghai Hanxiang. We have recognized the net assets of Shanghai Hanxiang athistorical cost with no change in basis in the consolidated financial statements upon the completion of this reorganization.In March 2012, we formed a PRC domestic company, Shanghai Chubao (CooTek) Information Technology Co., Ltd., or ShanghaiChubao, to operate part of our Chinese business.In September 2014, we incorporated TouchPal HK Co., Limited to operate our overseas business.In July 2015, we incorporated TouchPal. Inc., a U.S. company, to operate a research and development center in Silicon Valley and acquiretalents from the U.S.In 2017, we formed two PRC domestic companies, Molihong (Shenzhen) Internet Technology Co., Ltd., or Molihong, and YingsunInformation Technology (Ningbo) Co., Ltd., or Yingsun, to operate certain of our portfolio products.In 2019, we formed Shanghai Qiaohan Technology Co., Ltd., or Qiaohan, to operate certain of our portfolio products.In October 2020, we formed Shanghai Qinglin Network Technology Co., Ltd., or Qinglin, to operate the online games.On December 15, 2020, we filed a Form F-3 with the SEC to offer and sell Class A ordinary shares, including Class A ordinary sharesrepresented by ADSs, preferred shares, debt securities and/or warrants of an aggregate offering price of up to US$100,000,000.On January 19, 2021, we offered US$10,000,000 aggregate principal amount of convertible note with an annual interest rate of 5%directly to YA II PN, Ltd, a Cayman Islands exempt limited partnership, due January 19, 2022 (the “January 2021 Note”). As of the date of thisannual report, the January 2021 Note has been converted to 3,933,317 ADSs with the average conversion price of US$2.54 per ADS. Table of Contents72On January 25, 2021, we entered into a Standby Equity Distribution Agreement, with YA II PN, Ltd., for the offer and sale of up toUS$20,000,000 of the ADSs, and we will be able to sell up to US$20,000,000 of our ADSs at our request any time during the following 36 months.As of the date of this annual report, we have not sold any ADS to YA II PN, Ltd according to this agreement.On March 19, 2021, we entered into a securities purchase agreement and a convertible note with YA II PN, Ltd., pursuant to which YA IIPN, Ltd. will purchase a convertible promissory note in the principal amount of US$20,000,000 with an annual interest rate of 5%, which may beconvertible into our Class A ordinary shares in exchange for our ADSs, due March 19, 2022 (the “March 2021 Note”). Beginning on June 1, 2021and continuing on the first day of each calendar month thereafter through January 2022, the principal amount plus an 8% redemption premium andplus accrued and unpaid interest will be subject to monthly redemption in the event that the daily VWAP on each of the five consecutivetrading days immediately prior to the redemption date does not exceed a price equal to 108% of the fixed conversion price. In September 2021, weentered into a letter agreement with YA II PN, Ltd. to amend the schedule of redemptions, which was subsequently replaced by the one signed onOctober 29, 2021. On October 29, 2021, we entered into a letter agreement with YA II PN, Ltd. to amend and restate the March 2021 Note so as to,among others, extend the maturity date to August 31, 2022 (the “Rescheduled March 2021 Note”) and reduced the floor price from US$0.75 perADS to US$0.50 per ADS. On January 10 and February 28, 2022, we entered into two letter agreements, pursuant to which the floor price wasreduced to US$0.30 per ADS and US$0.20 per ADS, respectively. As of the date of this annual report, the Rescheduled March 2021 Note has beenconverted to 27,837,764 ADSs with the weighted average conversion price of US$0.44 per ADS.On August 16, 2021, we entered into a securities purchase agreement with Mercer Street Global Opportunity Fund LLC, pursuant towhich we agreed to issue and sell, and Mercer Street Global Opportunity Fund LLC agreed to subscribe for and purchase, US$1.5 million worth ofour Class A ordinary shares represented by the ADSs at a price of US$1.5151 per ADS in a registered direct offering.Due to restrictions imposed by PRC laws and regulations on foreign ownership of companies that engaged in mobile internet and mobileadvertising businesses, our WFOE also entered into a series of contractual arrangements with Shanghai Chubao, Molihong, Qiaohan and Qinglin,and their respective shareholders. We collectively refer to these domestic entities and Shanghai Hanxiang as the VIEs in this annual report. Thebusiness of Shanghai Hanxiang was migrated into other entities in our group, and Shanghai Hanxiang has gradually ceased its business operationssince 2012. As of the date of this annual report, Shanghai Hanxiang does not have any substantive business operations. For more details and risksrelated to our variable interest entity structure, please see “Item 3. Risk Factors—D. Risks Related to Our Corporate Structure.” As a result of ourdirect ownership in our WFOE and the variable interest entity contractual arrangements, we are regarded as the primary beneficiary of the VIEs.We treat them as the consolidated affiliated entities under U.S. GAAP, and have consolidated the financial results of these entities in ourconsolidated financial statements in accordance with U.S. GAAP.Our principal executive offices are located at 9-11F, No.16, Lane 399, Xinlong Road, Minhang District, Shanghai, 201101, People’sRepublic of China. Our telephone number at this address is +86 21 6485-6352. Our registered office in the Cayman Islands is located at the officesof Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands. Our agent for service ofprocess in the United States is Puglisi & Associates, located at 850 Library Avenue, Suite 204 Newark, Delaware 19711.SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that fileelectronically with the SEC on www.sec.gov. You can also find information on our website https://ir.cootek.com/.B.Business OverviewWe are a fast-growing mobile internet company with a global vision. Our mission is to empower everyone to enjoy relevant contentseamlessly. We have developed and brought to market content-rich mobile applications, focusing on three categories: online literature, mobilegames and scenario-based content apps. Sophisticated big data analytics and data-driven user insights are the backbone of our business, enabling usto release appealing products that capture mobile internet users’ ever-evolving content needs and attract targeted users. Our portfolio products ofmobile applications serve a global user base comprised of an average of 18.5 million DAUs in December 2021, compared to an average of 27.8million DAUs in December 2020. Table of Contents73Building upon user insights initially accumulated through TouchPal Smart Input, an intelligent input method for mobile devices, we haveformulated a systematic approach to growing a global product portfolio, through which we deliver relevant content, develop content-rich mobileapplications and increase our user base. We employ proprietary big data analytical technologies both to process data we gathered through ourmobile applications and a large amount of content that we source and organize from the internet. These technologies enable us to obtain in-depthuser insights and identify market opportunities.We have launched over 50 content-rich portfolio products in 2021. Our content-rich mobile applications focus on three categories: onlineliterature, mobile games and scenario-based content apps. Our portfolio products reached 85.8 million MAUs and 27.8 million DAUs on average inDecember 2020 and 62.6 million MAUs and 18.5 million DAUs on average in December 2021.We have been rapidly expanding the scale of the product portfolio by leveraging the competitive user base and spending time achieved byour core product in the online literature business: Fengdu Novel. The DAUs of Fengdu Novel reached nearly 4.2 million in December 2021 withapproximately 179 minutes of user average daily reading time. With the rapid growth of our online literature products, we have further developedother synergized business segments like mobile games.In addition, we have started to build a customized content production model for our online literature business that establishes the datafeedback and matrices between our signed authors and readers, so that the content ecosystem is adaptive to our users’ ever-evolving contentpreferences.As our user base and business operations continue to grow in the recent years using our systematic approach, we have demonstrated ourmonetization capability in mobile advertising. We leverage our in-depth user insights to deliver targeted, precise and engaging advertisements thatare relevant to users across our various mobile applications. Reinvesting part of our revenues generated by mobile advertising, we can furtherimprove our user-centric and data-driven technology, which enables us to release more appealing products to capture mobile internet users’ ever-evolving content needs and help us rapidly acquire new users with our ever-improving user profile analysis. For information on our financialperformance, see “Item 5.A. Operating Results.”In the first quarter of 2019, we launched CooTek Ads, an in-house developed advertising platform supported by our proprietary big datacapabilities serving advertising customers directly or through advertising agencies. This system allows advertisers to create and manageadvertisement campaigns and budget, and to place advertisements in our portfolio applications directly.Our ProductsContent-rich Mobile ApplicationsFollowing our user-centric and data-driven approach, we have developed and brought to market the following global mobile applicationsfocusing on three categories: online literature, mobile games and scenario-based mobile apps.Online literatureFor our online literature business, we have launched Fengdu Novel in the Chinese market in 2019 and Readict in the overseas market in2020.Fengdu Novel is a mobile application that provides users with free online novels. Unlike the other paid user-only model in the onlineliterature industry that charges users a fee for most content offered, users of Fengdu Novel can enjoy literature works under a free-to-read model.Users have free access to a large literature library. We classify the genre, length, popularity, serial or completed literature works by addingkeywords to the content, and users can search for content based on these key words. Fengdu Novel is currently available on both Android and iOSoperating systems.We also launched Fengdu Literature Platform to develop our original content ecosystem at the end of 2019. Fengdu Literature Platformhas accumulated approximately 5,000 signed authors and 6,600 original contract books as of December 31, 2021, as compared to approximately2,500 signed authors and 3,100 original contract books as of December 31, 2020. Table of Contents74Fengdu Literature Platform is deemed as diverse in category, covering 14 major categories of male and female preferred content includinggenres of romance, fantasy, science fiction, history and others. More than 50% of content focus on gender specialized stories in urban context andancient romance.In addition, we are actively diversifying our IP business based on the original books from Fengdu Literature Platform. We developedFengdu Audiobook, a feature incorporated in Fengdu Novel app to meet the evolving needs of readers. Audible books available on the platformincreased from 2,233 as of December 31, 2020 to 8,383 as of December 31, 2021.We also created short video series based on Fengdu Literature Platform content and IP resources. The first short video drama series namedthe Proud Wanwan Su, produced from content on Fengdu Literature Platform, is based on a piece of literature with a substantial and excitingstoryline. The video series is divided into 20 episodes with a running time of 2 or 3 minutes for each. The short drama has been redistributed onmajor short video sites such as Douyin, Kuaishou, Bilibili and Xigua Video, among others, and can be watched by searching FengDu Theater.We introduced online community feature for book lovers on Fengdu Novel, which allows readers to make book reviews, chapter reviewsand posts. We incentivize users to make comments by rewarding witty and popular review writers with virtual gold coins and VIP membership.The comment that has received most likes will be placed on the top of the section. By allowing users to directly share and express their comments,we believe this feature help improve the retention rate of users and users’ reding time, which will in turn attract more writers to join our communityto interact with their fans.Mobile gamesWe launched our first self-developed mobile game in the third quarter of 2019, and thereafter introduced a series of self-developed casualgames, including dress-up games such as Catwalk Beauty, which reached No.1 in U.S. and other 57 countries and regions on App Store and GooglePlay game section, and Truth Runner, which topped the U.S. iOS game charts, match-3 games such as Love Fantasy, which ranked No. 2 on the USiOS Games, simulation games such as Farm Hero and Idle Land King Tycoon, puzzle games such as Hi Hamster, and educational games such asPuzzle No. 1 and Idiom Hero.In addition, we started our game publishing business in the overseas market. We have signed a cooperation agreement with more than 24third party studios for publishing the products in the overseas market. We developed our game publishing SaaS platform, which is based on ourunique data-driven content production model. Our content providers will produce their content on this platform. We provide comprehensive datamatrix to help them evaluate their ideas, upgrade content in their games, and optimize monetization and user acquisition.TouchPal Smart InputTouchPal Smart Input is an innovative input method for mobile devices. TouchPal Smart Input had an average of 92.9 million DAUsDecember 2021.TouchPal Smart Input supports multilingual next-word prediction as well as mistyping correction and auto spelling correction on mobiledevices. These features help users enter a string of text on a mobile device swiftly and accurately.We employ our big data analytics technologies to process and analyze our massive number of users’ interactions with TouchPal SmartInput in different languages to improve our language model, enrich our language databases, and strengthen our support for each language. Inaddition, the proprietary deep learning engine behind TouchPal Smart Input is fueled and enriched by users’ interaction with the application. Itenables the application to achieve semantic understanding, adapt to each user, and provide an increasingly improved and customized userexperience over time.TouchPal Smart Input boasts an advanced multilingual language model that supports more than 110 different languages. TouchPal SmartInput can be installed across major mobile operating systems, including Android and iOS operating systems. Table of Contents75Product DistributionWe distribute our products and acquire users primarily through user downloads from digital distribution platforms and social media.We acquire new users through downloads of our products from digital distribution platforms such as Apple App Store, TencentYingYongBao App Store and Google Play. Some of these users acquired through downloads are drawn to our applications through word-of-mouthor general interest in one of our global products, thus growing our user base organically. A majority of our users are drawn to our products throughour paid marketing campaigns on third-party platforms, such as Facebook, Douyin and Kuaishou. In the second half of 2019, we increased theportion of users acquired from third-party platforms in China in order to broaden the range of user acquisition channels and to reduce our relianceon overseas distribution platforms.MarketingWe market our brand, products and services globally to mobile internet users primarily through online social media sites includingDouyin, Kuaishou, Facebook, Instagram and Twitter, and through search engines such as Google. We also market our brand, products and servicesto our global business partners through trade show exhibitions.MonetizationWe generate substantially all of our revenues through mobile advertising. Our value proposition to advertisers is driven by our large,engaged and sticky user base, insightful understanding of user interests and demands, and precision targeting of content to the preferred audience ina variety of usage scenarios. We provide performance-based advertising solutions that are compelling to our advertisers.The number of our available advertising spaces is a function of the size of our user base and the number of our product offerings. Wepossess the technical capability to efficiently managing our advertising spaces. Our advertising spaces within our products can accommodate avariety of ad formats. At the same time, our priority is to achieve a balance between user experience and utilization of advertising spaces.Launched in 2019, CooTek Ads is our in-house advertising network platform that provides our clients with high-quality and tailoredadvertising services. This system allows advertisers to create and manage advertisement campaigns and budget, and to place advertisements in ourportfolio applications directly.Our advertisers are from a broad range of industries, including healthcare, e-commerce, online games, merchant services and businessservices. Most of our advertisers are represented by third-party advertising exchanges and agencies. Our top two advertising customers, which areadvertising exchanges, in aggregate accounted for approximately 53.22% of our total revenues in 2021. We have entered into standard forms ofagreements with our major advertising customers. In 2019, 2020 and 2021, we entered into distribution cooperation agreements with Chuan ShanJia, a leading advertising exchange platform in China who is also our top advertising customer for the cooperation in placing advertisements on ourmobile apps for the respective immediately following year. Our business depends on our relationships with these large advertising exchanges andagencies. For more details, see “Item 3. Key Information—D. Risk Factors—We depend on certain third-party advertising exchanges and agenciesfor a large portion of our mobile advertising revenues.”We are exploring methods to diversify our monetization. We operated IP content commercialization based on content on our onlineliterature products, such as Fengdu Novel. In 2021, we initiated a novel-to-drama launching mechanism to enhance the influence and profitabilityof IP works. We use social media and other channels to promote these drama products. As a part of our IP incubation efforts, Fengdu Novel hasformed business relationships with third party content suppliers in content creation and adaptation.Technology and Research and DevelopmentTechnology is the key to our success. Our research and development efforts focus on big data analytical capabilities. Table of Contents76AI-based analytics tool for content productionWe have developed an AI and data-driven system to enable the authors on our online literature platform to produce more suitable contentfor our users and continuously adapt to changing demand based on data feedback. The platform that we are building is not just a place for authorsto publish books, but also a platform to really enable them to improve their authorship based on a proper data matrix, so that even an averageauthor may also produce valuable content.Natural language processing, semantic understanding in multiple languagesAs of the date of this annual report, our natural language processing and semantic understanding technology supports more than 110languages. We employ machine learning, corpus linguistics and other technologies to process and understand user-generated data, internet contentand user interactions with our products, and predict user intentions, identify relevant content from the internet and build our rich library of userinsights.Web content analysis and information extractionWe have built a proprietary distributed system which regularly and timely crawls and indexes an enormous amount of content in multiplelanguages from the internet. With our advanced multilingual natural language processing technology and semantic understanding technologies, wecan process over one billion webpages every month and systematically organize content from these webpages.Data integration, mining and analyticsWe have deployed a scalable, distributed data system to manage and mine our massive and diverse data. We have developed an advanceddata warehouse and real-time data analysis platform to support our build-up of user insights. We have also developed a business intelligence systemwhich facilitates our product planning, data analytics, user growth and acquisition, monetization, and other crucial business activities.Big data powered advertising systemWe have developed a distributed, real-time advertising system to optimize our advertising performance. Relying on our big data analyticsand in-depth user insights, this advertising system enables our advertising customers to reach our large and diverse active user base and to achieveprecision targeting of the preferred audience and to distribute ads to targeted audience.Technology infrastructureWe have built a reliable and smart network infrastructure with sufficient redundant topologies to ensure high availability and a low risk ofdowntime. We have also built a scalable hybrid cloud infrastructure to minimize cost and sustain performance in periods of high network traffic.We dedicate ourselves to building our technology infrastructure to support our business in a cost-effective manner. As of December 31,2021, we had 3 data centers (IDC), 1,976 physical servers, 250 virtual servers and 5 public cloud sites in 4 countries.Research and development teamWe are committed to technological innovation since our inception. Approximately 60% of our employees are software engineers andproduct designers tasked with research and development to achieve innovation and advancement.Intellectual PropertyWe rely on a combination of patent, copyright, trademark and trade secret laws, as well as non-competition and confidentiality agreementsand contractual clauses, to establish and protect our intellectual property rights. Table of Contents77As of December 31, 2021, we held 63 patents in China and 39 patents in countries and regions outside of China, covering inventions anddesigns; we have 16 patent applications currently pending in China; we have submitted 33 international patent applications through the proceduresunder the Patent Cooperation Treaty, or PCT; and we intend to apply for more patents to protect our core technologies and intellectual properties.As of December 31, 2021, we have registered 267 trademarks with the Trademark Office of the State Administration for Industry and Commerce inChina, including our company’s name “CooTek,” CooTek logos, trademarks relating to our products such as TouchPal Smart Input and TouchPalPhonebook; and we are in the process of applying for the registration of 7 other trademarks in China; we have registered 27 trademarks, and are inthe process of applying for registration of 1 other trademarks, in countries and regions outside of China. As of December 31, 2021, we are theregistered owner of 199 software copyrights in China, each of which we have registered with the State Copyright Bureau of China. As ofDecember 31, 2021, we own the rights to more than 50 domain names that we use in connection with the operation of our business, including ourCooTek and TouchPal websites cootek.com, chubao.cn and touchpal.com.In addition to the foregoing protections, we generally control access to and use of our proprietary and other confidential informationthrough the use of internal and external controls. For example, for external controls, we enter into confidentiality agreements or agree toconfidentiality clauses with our advertising customers and mobile device manufacturers and, for internal controls, we adopt and maintain relevantpolicies governing the operation and maintenance of our IT systems and the management of user-generated data.User Privacy and Cyber securityWe place paramount importance on, and dedicate significant amount of resources to, the protection of the personal privacy of each of ourusers and the security of their data.Transparency. Our end user license agreement and privacy policy describe our data use practices and how privacy works on our mobileapplications. We provide our users with adequate and timely notices as to what data are being collected, and we undertake to manage and use thedata collected in accordance with applicable laws and make reasonable efforts to prevent unauthorized use, loss or leak of such user data. Our usersmay opt out of personal data collection or choose to have personal data erased from our servers.Protection. We have adopted comprehensive policies, procedures and guidelines to regulate our employees’ actions in relation to user datain order to protect user privacy and cyber security. We also have adopted a strict access control mechanism to ensure implementation of leastprivilege and need-to-know principles and to protect user privacy while meeting business requirements. For instance, we strictly limit the numberand clearance level of personnel who may access user data or those servers that store user data. In addition, we employ a variety of technicalsolutions to prevent and detect risks and vulnerabilities in user privacy and cyber security, such as encryption, firewall, vulnerability scanning andlog audit. For instance, we have built an internal compliance team which has privacy professionals who participate in new product and featuredevelopment and are dedicated to the ongoing review and monitoring of cyber security practices and security professionals who monitor internaland external security threats and risks. We store and transmit all user data in encrypted format on separate servers depending on each individualuser’s location. We do not share any input data from our users or any user insight data with third parties or allow third parties to access user datastored on our servers, and we also utilize firewalls to protect against potential cyber-attacks or unauthorized access. We periodically audit oursystems and procedures to detect information security risks and privacy risks. Table of Contents78Compliance. Various laws and regulations, such as the GDPR in the European Union, California Consumer Privacy Act in the UnitedStates and the Cyber Security Law of the PRC, govern the collection, use, retention, sharing, and security of the personal data we receive from andabout our users. Privacy groups and government bodies have increasingly scrutinized the ways in which companies link personal identities and dataassociated with particular users with data collected through the internet, and we expect such scrutiny to continue to increase. We devote substantialamount of resources to the compliance with, and the prevention of any violation of, the laws and regulations relating to user privacy and cybersecurity. For additional information on our efforts to comply with applicable laws and regulations relating to user privacy and cyber security, see“Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—If we fail to prevent security breaches, cyber-attacks or otherunauthorized access to our systems or our users’ data, we may be exposed to significant consequences, including legal and financial exposure,reputational harm and loss of users, and our reputation, business and operating results may be materially and adversely affected.” and “Item 3. KeyInformation—D. Risk Factors—Risks Related to Our Business—Data privacy concerns relating to our products and current practices may,particularly in light of increased regulatory scrutiny of and user expectations regarding the processing, collection, use, storage, dissemination,transfer and disposal of user data, could require changes to our business practices and may result in declines in user growth or engagement,increased costs of operations and threats of lawsuits, enforcement actions and related liabilities, including financial penalties.”CompetitionWe face intense competition for users, usage time and advertising customers. Our portfolio products compete with applications of thesame or a similar kind. In addition, we compete with all major internet companies for user attention and advertising spending. Fengdu Novelcompetes with other leading free online literature applications in the Chinese market including Fanqie Novel and Qimao Novel. Our mobile gameproducts such as Farm Hero, Idle Land King Tycoon, Hi Hamster, Puzzle No.1 and Idiom Hero compete primarily with other mobile gamesdeveloped by companies such as WebEye and Laiwan. TouchPal Smart Input competes primarily with default mobile device input methods,including Apple input for iOS devices, Gboard and Samsung mobile keyboard. Our TouchPal Smart Input also competes with other alternativeinput method products for mobile devices that offer similar language prediction capabilities and other smart features, such as Microsoft/SwiftKey.InsuranceWe do not maintain insurance policies covering damages to our network infrastructures or information technology systems. We also do notmaintain business interruption insurance or general third-party liability insurance, nor do we maintain product liability insurance or key-maninsurance. We consider our insurance coverage to be in line with that of other companies in the same industry of similar size in China.Legal ProceedingsWe may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business.For more information, see “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”RegulationWe are an international company that is incorporated as a Cayman Islands exempted company under the laws of Cayman Islands. Ourprincipal offices are located in China while we have built a large user base in more than 240 countries and regions around the world. As a result ofthis organizational structure and the scope of our operations, we are subject to a variety of laws in different countries, including those related topersonal privacy, data protection, content restrictions, telecommunications, intellectual property, consumer protection, advertising and marketing,labor, foreign exchange, competition and taxation. These laws and regulations are constantly evolving and may be interpreted, implemented oramended in a manner that could harm our business. It also is likely that if our business grows and evolves and our products and services are usedmore globally, we will become subject to laws and regulations in additional jurisdictions. This section sets forth the summary of material laws andregulations relevant to our business operations. Table of Contents79Regulations Relating to Personal Privacy and Data ProtectionIn the area of personal privacy and data protection, we are subject to the laws in various jurisdictions where our products are available foruse, and such laws and regulations can impose stringent requirements. Such requirements also vary from jurisdiction to jurisdiction. Manyjurisdictions, including China and the U.S., continue to consider the need for greater regulation or reform to the existing regulatory framework.In the U.S., there is no single comprehensive national law governing the collection and use of user data or personal information. Instead,the U.S. has both federal and state laws in parallel and regulations that sometimes overlap and even contradict one another. In addition, there aremany guidelines developed by government authorities and industry groups that, although lacking the force of law, are considered “best practices”and are relied upon for setting standards. All states in the U.S. have now passed laws to regulate the actions that a business must take in the event ofa data breach, such as prompt disclosure and notification to affected users and regulatory authorities. In addition, some states have enacted statutesand rules requiring businesses to reasonably protect certain types of personal information they hold or to otherwise comply with certain specifiedcyber security requirements for personal information. At the federal level, the Federal Trade Commission Act, or the FTC Act, is a federalconsumer protection law that prohibits unfair or deceptive practices and has been applied to offline and online privacy and cyber security policies.The Federal Trade Commission, or the FTC, empowered by the FTC Act, oversees consumer privacy compliance of most companies doingbusiness in the U.S. and provides various guidelines regarding privacy and security practices for different industries. The FTC has brought manyenforcement actions against companies for failing to comply with their own privacy policies and for the unauthorized disclosure of personal data.The U.S. federal and state legislatures will likely continue to consider the need for greater regulation aimed at restricting certain targetedadvertising practices.In the EU, the GDPR, which came into effect on May 25, 2018, increased our burden of regulatory compliance and requires us to changecertain of our privacy and cyber security practices in order to achieve compliance. The GDPR applies to any company established in the EU as wellas any company outside the EU that processes personal data in connection with the offering of goods or services to individuals in the EU or themonitoring of their behavior. The GDPR implements more stringent operational requirements for processors and controllers of personal data,including, for example, requiring expanded disclosures about how personal information is to be used, limitations on retention of information,mandatory data breach notification requirements, and higher standards for data controllers to demonstrate that they have obtained either validconsent or have another legal basis in place to justify their data processing activities. The GDPR further provides that EU member states may maketheir own additional laws and regulations in relation to certain data processing activities, which could further limit our ability to use and sharepersonal data and could require localized changes to our operating model. Under the GDPR, fines of up to 20 million euros or up to 4% of the totalworldwide annual turnover of the preceding financial year, whichever is higher, may be assessed for non-compliance, which significantly increasesour potential financial exposure for non-compliance. However, in the absence of precedence and guidance from EU regulators, the application ofGDPR to the provision of internet services remains unsettled. Moreover, the implementation of the GDPR may require substantial amendments toour procedures and policies, and these changes could impact our business by increasing its operational and compliance costs. The Company hasadopted policies and procedures in compliance with the GDPR, however, such policies and procedures may need to be updated when additionalinformation concerning the best practices is made available through guidance from regulators or published enforcement decisions. Table of Contents80In recent years, PRC government authorities have enacted legislation on internet use to protect personal information from anyunauthorized disclosure. The Network Information Protection Decision provides that electronic information that identifies a citizen or involvesprivacy of any citizen is protected by law and must not be unlawfully collected or provided to others. ICP operators collecting or using personalelectronic information of citizens must specify the purposes, manners and scopes of information collection and uses, obtain consent of the relevantcitizens, and keep the collected personal information confidential. ICP operators are prohibited from disclosing, tampering with, damaging, sellingor illegally providing others with, collected personal information. ICP operators are required to take technical and other measures to prevent thecollected personal information from any unauthorized disclosure, damage or loss. The Administrative Measures on Internet Information Servicesprohibit an ICP operator from insulting or slandering a third party or infringing upon the lawful rights and interests of a third party. According tothe Provisions on Protection of Personal Information of Telecommunication and Internet Users, which was promulgated by MIIT and becameeffective in September 2013, telecommunication business operators and ICP operators are responsible for the security of the personal informationof users they collect or use in the course of their provision of services. Without obtaining the consent from the users, telecommunication businessoperators and ICP operators may not collect or use the users’ personal information. The personal information collected or used in the course ofprovision of services by the telecommunication business operators or ICP operators must be kept in strict confidence, and may not be divulged,tampered with or damaged, and may not be sold or illegally provided to others. The ICP operators are required to take certain measures to preventany divulgence of, damage to, tampering with or loss of users’ personal information. In accordance with the Cyber Security Law, network operatorsare required to collect and use personal information in compliance with the principles of legitimacy, properness and necessity, and strictly withinthe scope of authorization by the subject of personal information unless otherwise prescribed by laws or regulations. In the event of anyunauthorized disclosure, damage or loss of collected personal information, network operators must take immediate remedial measures, notify theaffected users and report the incidents to the relevant authorities in a timely manner. If any user knows that a network operator illegally collects anduses his or her personal information in violation of laws, regulations or any agreement with the user, or the collected and stored personalinformation is inaccurate or wrong, the user has the right to request the network operator to delete or correct the relevant collected personalinformation.The relevant telecommunications authorities are further authorized to order ICP operators to rectify unauthorized disclosure. ICP operatorsare subject to legal liability, including warnings, fines, confiscation of illegal gains, revocation of licenses or filings, closing of the relevantwebsites, administrative punishment, criminal liabilities, or civil liabilities, if they violate relevant provisions on internet privacy. Pursuant to theNinth Amendment to the Criminal Law issued by the Standing Committee of the National People’s Congress in August 2015 and becomingeffective in November 2015, the standards of crime of infringing citizens’ personal information were amended accordingly and the criminalculpability of unlawful collection, transaction, and provision of personal information has been reinforced. In addition, any ICP provider that fails tofulfill the obligations related to internet information security administration as required by applicable laws and refuses to rectify upon orders, willbe subject to criminal liability for (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’sinformation; (iii) any serious loss of evidence of criminal activities; or (iv) other severe situations, and any individual or entity that (x) sells orprovides personal information to others unlawfully, or (y) steals or illegally obtains any personal information, will be subject to criminal liability insevere situations. In addition, the Interpretations of the Supreme People’s Court and the Supreme People’s Procuratorate of the PRC on SeveralIssues Concerning the Application of Law in Handling Criminal Cases of Infringing Personal Information, effective in June 2017, have clarifiedcertain standards for the conviction and sentencing in relation to personal information infringement. The PRC government has the power andauthority to order ICP operators to turn over personal information if an internet user posts any prohibited content or engages in illegal activities onthe internet. The Civil Code further provides in a stand-alone chapter of right of personality and reiterate that the personal information of a naturalperson shall be protected by the law. Any organization or individual shall legitimately obtain such personal information of others in due course on aneed-to-know basis and ensure the safety and privacy of such information, and refrain from excessively handling or using such information. Table of Contents81With respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting SpecialSupervision against the Illegal Collection and Use of Personal Information by Apps, which was issued on January 23, 2019, app operators shouldcollect and use personal information in compliance with the Cyber Security Law and should be responsible for the security of personal informationobtained from users and take effective measures to strengthen the personal information protection. Furthermore, app operators should not forcetheir users to make authorization by means of bundling, suspending installation or in other default forms and should not collect personalinformation in violation of laws, regulations or breach of user agreements. Such regulatory requirements were emphasized by the Notice on theSpecial Rectification of Apps Infringing upon User’s Personal Rights and Interests, which was issued by MIIT on October 31, 2019. OnNovember 28, 2019, the CAC, the MIIT, the Ministry of Public Security and the SAMR jointly issued the Methods of Identifying Illegal Acts ofApps to Collect and Use Personal Information. This regulation further illustrates certain commonly-seen illegal practices of apps operators in termsof personal information protection, including “failure to publicize rules for collecting and using personal information”, “failure to expressly statethe purpose, manner and scope of collecting and using personal information”, “collection and use of personal information without consent of usersof such App”, “collecting personal information irrelevant to the services provided by such app in violation of the principle of necessity”, “provisionof personal information to others without users’ consent”, “failure to provide the function of deleting or correcting personal information as requiredby laws” and “failure to publish information such as methods for complaints and reporting”. Among others, any of the following acts of an appoperator will constitute “collection and use of personal information without consent of users”: (i) collecting an user’s personal information oractivating the permission for collecting any user’s personal information without obtaining such user’s consent; (ii) collecting personal informationor activating the permission for collecting the personal information of any user who explicitly refuses such collection, or repeatedly seeking foruser’s consent such that the user’s normal use of such app is disturbed; (iii) any user’s personal information which has been actually collected bythe app operator or the permission for collecting any user’s personal information activated by the app operator is beyond the scope of personalinformation which such user authorizes such app operator to collect; (iv) seeking for any user’s consent in a non-explicit manner; (v) modifyingany user’s settings for activating the permission for collecting any personal information without such user’s consent; (vi) using users’ personalinformation and any algorithms to directionally push any information, without providing the option of non-directed pushing such information;(vii) misleading users to permit collecting their personal information or activating the permission for collecting such users’ personal information byimproper methods such as fraud and deception; (viii) failing to provide users with the means and methods to withdraw their permission ofcollecting personal information; and (ix) collecting and using personal information in violation of the rules for collecting and using personalinformation promulgated by such app operator.On August 22, 2019, the CAC promulgated the Children Information Protection Provisions, which took effect on October 1, 2019,requiring that before collecting, using, transferring or disclosing the personal information of a child, the Internet service operator should inform thechild’s guardians in a noticeable and clear manner and obtain their consents. Meanwhile, internet service operators should take measures likeencryption when storing children’s personal information.On March 12, 2021, the CAC and three other authorities jointly issued the Rules on the Scope of Necessary Personal Information forCommon Types of Mobile Internet Applications. The Rules specifies the scope of necessary personal information to be collected each for a varietyof common mobile internet applications, such as maps and navigation apps, online ride-hailing apps, instant messaging apps, online communityapps. Operators of such apps shall not refuse to provide basic services to users on the ground of users’ refusal to provide their personal non-essential information.On April 26, 2021, the MIIT issued the Interim Administrative Provisions on Personal Information Protection in Internet MobileApplications (Draft for Comment). The draft of the Interim Administrative Provisions on Personal Information Protection in Internet MobileApplications sets forth two principles of collection and utilization of personal information, namely “explicit consent” and “minimum necessity.” Table of Contents82Regulations Relating to Cyber SecurityThe PRC Congress promulgated the PRC Cyber-security Law, or Cyber-security Law, effective in June 2017. Under the Cyber-securityLaw, “network operators” are broadly defined as network owners, network administrator, and network service providers are subject to varioussecurity protection-related obligations. As a network service provider, our obligations include:●complying with security protection obligations in accordance with tiered requirements with respect to maintenance of the security ofinternet systems, which include designing internal security management rules and developing manuals, appointing personnel incharge of internet security, adopting measures to prevent computer viruses and activities that threaten internet security, adoptingmeasures to monitor and record status of network operations, holding Internet security training events, retaining user logs for at leastsix months, and adopting measures such as data classification, key data backup, and encryption for the purpose of securing networksfrom interference, vandalism, or unauthorized visits, and preventing network data from leakage, theft, or tampering; and●verifying users’ identities before signing agreements or providing services such as network access, domain name registration,landline telephone or mobile phone access, information publishing, or real-time communication services; and formulating internetsecurity emergency response plans, timely handling security risks, initiating emergency response plans, taking appropriate remedialmeasures, and reporting to governmental authorities;Under the PRC Cyber-security Law, network service providers must inform users about and report to the relevant governmentalauthorities any known security defects or bugs, and must provide constant security maintenance services for their products and services. Networkproducts and service providers may not contain or provide any malware. Network service providers who do not comply with the PRC Cyber-security Law may be subject to fines, suspension of their businesses, shutdown of their websites, and revocation of their business licenses.The Provisions on Technological Measures for Internet Security Protection, promulgated by the Ministry of Public Security and becameeffective in March 2006, require all ICP operators to keep records of certain information about its users (including user registration information,log-in and log-out time, IP address, content and time of posts by users) for at least 60 days and submit the above information as required by lawsand regulations. The Decision on Strengthening Network Information Protection, or the Network Information Protection Decision, which waspromulgated by the PRC National People’s Congress in December 2012, states that ICP operators must request identity information from userswhen ICP operators provide information publication services to the users. If ICP operators come across prohibited information, they mustimmediately cease the transmission of such information, delete the information, keep relevant records, and report to relevant governmentauthorities.In addition, the State Secrecy Bureau has issued provisions authorizing the blocking of access to any website it deems to be leaking statesecrets or failing to comply with the relevant legislation regarding the protection of state secrets during online information distribution.Specifically, internet companies in the PRC with bulletin boards, chat rooms or similar services must apply for specific approval prior to operatingsuch services.On August 20, 2021, the Standing Committee of the National Peoples’ Congress promulgated the Personal Information Protection Law,which integrates the scattered rules with respect to personal information rights and privacy protection. Table of Contents83For the further purposes of regulating data processing activities, safeguarding cyber security, promoting data development and utilization,protecting the lawful rights and interests of individuals and organizations, and maintaining national sovereignty, security, and developmentinterests, on June 10, 2021, Standing Committee of the PRC National People’s Congress published the Data Security Law of the People’s Republicof China, which took effect on September 1, 2021. The Data Security Law requires data processing, which includes the collection, storage, use,processing, transmission, provision, publication of data, to be conducted in a legitimate and proper manner. The Data Security Law provides forcyber security and privacy obligations on entities and individuals carrying out data activities. The Data Security Law also introduces a dataclassification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm itmay cause to national security, public interests, or legitimate rights and interests of individuals or organizations if such data are tampered with,destroyed, leaked, illegally acquired or illegally used. The appropriate level of protection measures is required to be taken for each respectivecategory of data. For example, a processor of important data is required to designate the personnel and the management body responsible for cybersecurity, carry out risk assessments of its data processing activities and file the risk assessment reports with the competent authorities. State coredata, i.e. data having a bearing on national security, the lifelines of national economy, people’s key livelihood and major public interests, shall besubject to stricter management system. Moreover, the Data Security Law provides a national security review procedure for those data activitieswhich affect or may affect national security and imposes export restrictions on certain data and information. In addition, the Data Security Law alsoprovides that any organization or individual within the territory of the PRC shall not provide any foreign judicial body and law enforcement bodywith any data without the approval of the competent PRC governmental authorities. We may be required to make further adjustments to ourbusiness practices to comply with this law, as well as any adjustments that may be required by the Personal Information Protection Law.On July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities, which,among others, provides for improving relevant laws and regulations on cyber security, cross-border data transmission, and confidential informationmanagement. It provided that efforts will be made to revise the regulations on strengthening the confidentiality and file management relating to theoffering and listing of securities overseas, to implement the responsibility on information security of overseas listed companies, and to strengthenthe standardized management of cross-border information provision mechanisms and procedures.On December 28, 2021, the Cyberspace Administration of China issued the Measures for Cyber Security Review. The scope of reviewunder the Measures for Cyber Security Review extends to critical information infrastructure operators that intend to purchase internet products andservices and internet platform operators engaging in data processing activities, which affect or may affect national security. According to theMeasures for Cyber Security Review, internet platform operators who possess personal information of over a million users shall apply to the CyberSecurity Review Office for cyber security reviews before listing in a foreign country. If the relevant authorities consider that certain networkproducts and services, data processing activities and listings in foreign countries affect or may affect national security, the authorities may initiate acyber security review even if the operators do not have an obligation to report for a cyber security review under such circumstances. The Measuresfor Cyber Security Review also elaborated the factors to be considered when assessing the national security risks of the relevant activities,including among others, risks of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegallyused or exited the country and risks of critical information infrastructure, core data, important data or a large amount of personal information databeing affected, controlled and maliciously used by foreign governments after a foreign listing. Table of Contents84On November 14, 2021, the CAC released a discussion draft of the Administrative Measures for Internet Data Security, or the DraftMeasures for Internet Data Security, and will accept public comments until December 13, 2021. The Draft Measures for Internet Data Securityprovide that data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. Inaccordance with the Draft Measures for Internet Data Security, data processors shall apply for a cyber security review for the following activities:(i) merger, reorganization or division of Internet platform operators that have acquired a large number of data resources related to national security,economic development or public interests to the extent that affects or may affect national security; (ii) listing abroad of data processors whichprocess over one million users’ personal information; (iii) listing in Hong Kong which affects or may affect national security; or (iv) other dataprocessing activities that affect or may affect national security. Besides, data processors that are listed overseas shall carry out an annual cybersecurity assessment. The Draft Measures for Internet Data Security remain unclear on whether the relevant requirements will be applicable tocompanies that have been listed in the United States. We cannot predict the impact of the Draft Measures for Internet Data Security, if any, at thisstage, and we will closely monitor and assess any development in the rule-making process. If the enacted versions of the Draft Measures forInternet Data Security mandate clearance of cyber security review and other specific actions to be completed by China-based companies listed on aU.S. stock exchange, we face uncertainties as to whether such clearance can be timely obtained, or at all. If a final version of the Draft Measuresfor Internet Data Security is adopted, we may be subject to review when conducting data processing activities and annual cyber security assessmentand may face challenges in addressing its requirements and make necessary changes to our internal policies and practices in data processing. Basedon the foregoing, our PRC legal counsel does not expect that, as of the date of this annual report, the current applicable PRC laws on cyber securitywould have a material adverse impact on our business.On July 30, 2021, the State Council issued the Regulations on Protection of Critical Information Infrastructure, or the Regulations.Pursuant to the Regulations, critical information infrastructure shall mean the important network facilities or information systems of key industriesor fields such as public communication and information service, energy, transportation, water conservation, finance, public services, e-governmentaffairs and national defense science, and important network facilities or information systems which may endanger national security, people’slivelihood and public interest once there occur damage, malfunctioning or data leakage to them. The Regulations provide that no individual ororganization may carry out any illegal activity of intruding into, interfering with, or sabotaging any critical information infrastructures, or endangerthe security of any critical information infrastructures. The Regulations also require that critical information infrastructure operators shall establisha cyber security protection system and accountability system, and that the main responsible person of a critical information infrastructure operatorshall take full responsibility for the security protection of the critical information infrastructures operated by it. In addition, relevant administrationdepartments of each important industry and sector shall be responsible for formulating the rule of critical information infrastructure determinationapplicable to their respective industry or sector, and determine the critical information infrastructure operators in their industry or sector.On July 12, 2021, the MIIT and two other authorities jointly issued the Provisions on the Administration of Security Vulnerabilities ofNetwork Products, or the Provisions. The Provisions state that, no organization or individual may abuse the security vulnerabilities of networkproducts to engage in activities that endanger network security, or to illegally collect, sell, or publish the information on such securityvulnerabilities. Anyone who is aware of the aforesaid offences shall not provide technical support, advertising, payment settlement and otherassistance to the relevant offenders. According to the Provisions, network product providers, network operators, and platforms collecting networkproduct security vulnerabilities shall establish and improve channels for receiving network product security vulnerability information and keepsuch channels available, and retain network product security vulnerability information reception logs for at least six months. The Provisions alsobans provision of undisclosed vulnerabilities to overseas organizations or individuals other than to the product providers.On August 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal InformationProtection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect onNovember 1, 2021. The Personal Information Protection Law requires, among others, that (i) the processing of personal information should have aclear and reasonable purpose which should be directly related to the processing purpose and should be conducted in a method that has the minimumimpact on personal rights and interests, and (ii) the collection of personal information should be limited to the minimum scope as necessary toachieve the processing purpose and avoid the excessive collection of personal information. Personal information processors shall adopt necessarymeasures to safeguard the security of the personal information they handle. The offending entities could be ordered to correct, or to suspend orterminate the provision of services, and face confiscation of illegal income, fines or other penalties. Table of Contents85On October 29, 2021, the CAC issued the Measures for Security Assessment of Cross-border Data Transfer (Draft for Comment).According to these measures, in addition to the self-risk assessment requirement for provision of any data outside China, a data processor shallapply to the competent cyberspace department for cyber security assessment and clearance of outbound data transfer in any of the following events:(i) outbound transfer of personal information and important data collected and generated by an operator of critical information infrastructure;(ii) outbound transfer of important data; (iii) outbound transfer of personal data by a data processor which has processed more than one millionusers’ personal data; (iv) outbound transfer of more than one hundred thousand users’ personal information or more than ten thousand users’sensitive personal information cumulatively; (v) such other circumstances where ex-ante security assessment and evaluation of cross-border datatransfer is required by the CAC.On November 14, 2021, the CAC published a discussion draft of the Administrative Measures for Internet Data Security, or the DraftMeasures for Internet Data Security, which provides that data processors conducting the following activities shall apply for cybersecurity review:(i) merger, reorganization or separation of Internet platform operators that have acquired a large number of data resources related to nationalsecurity, economic development or public interests affects or may affect national security; (ii) listing abroad of data processors processing over onemillion users’ personal information; (iii) listing in Hong Kong which affects or may affect national security; (iv) other data processing activitiesthat affect or may affect national security. The Draft Measures for Internet Data Security also provided that operators of large Internet platformsthat set up headquarters, operation centers or R&D centers overseas shall report to the national cyberspace administration and competentauthorities. In addition, the Draft Measures for Internet Data Security requires data processors processing over one million users’ personalinformation to comply with the regulations on important data processors, including, among others, appointing a person in charge of data securityand establishing a data security management organization, filing with the competent authority within fifteen working days after identifying itsimportant data, formulating data security training plans and organizing data security education and training for all staff every year, and that theeducation and training time of data security related technical and management personnel shall not be less than 20 hours per year. The DraftMeasures for Internet Data Security also stated that data processors processing important data or going public overseas shall conduct an annual datasecurity assessment by themselves or entrust a data security service institution to do so, and submit the data security assessment report of theprevious year to the local branch of CAC before January 31 of each year. Further, the Draft Measures for Internet Data Security required internetplatform operators to establish platform rules, privacy policies and algorithm strategies related to data, and solicit public comments on their officialwebsites and personal information protection related sections for no less than 30 working days when they formulate platform rules or privacypolicies or makes any amendments that may have a significant impacts on users’ rights and interests. Further, platform rules and privacy policiesformulated by operators of large Internet platforms with more than 100 million daily active users, or amendments to such rules or policies byoperators of large Internet platforms with more than 100 million daily active users that may have significant impacts on users’ rights and interestsshall be evaluated by a third-party organization designated by the CAC and reported to local branch of the CAC for approval. The CAC solicitedcomments on this draft, but there is no timetable as to when it will be enacted.On October 21, 2019, the Supreme People’s Court and the Supreme People’s Procuratorate of the PRC jointly issued the Interpretations onCertain Issues Regarding the Applicable of Law in the Handling of Criminal Case Involving Illegal Use of Information Networks and AssistingCommitting Internet Crimes, which came into effect on November 1, 2019, and further clarifies the meaning of Internet service provider and thesevere situations of the relevant crimes.Regulations Relating to Foreign InvestmentNegative List and Encouraged Industry Guidelines Related to Foreign Investment. Investment activities in China by foreign investorsare principally governed by the Special Administrative Measures (Negative List) for Access to Foreign Investment (2021 Revision), or 2021Negative List, which was promulgated by the Ministry of Commerce of the PRC, or MOFCOM, and the National Development and ReformCommission, or NDRC, as amended from time to time, and the Catalogue of Encouraged Industries for Foreign Investment (2021 Revision), orEncouraged Industry Catalogue, issued by MOFCOM and NDRC.If foreign investment falls into industries specified in the 2021 Negative List, special administrative measures shall apply, such asthe percentage of foreign invested equity interests and background and quality of senior management. According to the 2021 Negative List, theproportion of foreign investments in entities engaged in value- added telecommunications business shall not exceed 50%, except for e-commerce,domestic multi-party communication, store-and-forward service, and call centers service. The online transmission of audio-visual programsbusiness, online publishing services and online cultural business (except for music) remain as prohibited industries for foreign investment. Table of Contents86Foreign Investment in Telecommunication Business. Regulations for Administration of Foreign-Invested TelecommunicationsEnterprises, or the FITE Regulations, promulgated by the PRC State Council, or State Council, in 2001 and most recently amended inFebruary 2016 set forth detailed requirements with respect to, among others, capitalization, investor qualifications and application procedures inconnection with the establishment of a foreign-invested telecommunications enterprise. The 2019 Negative List prohibits a foreign investor fromholding more than 50% of the total equity interest in value-added telecommunications service business, except for e-commerce, domestic multi-party communication, store-and-forward service, and call centers service in China. The MIIT issued an Announcement on Issues concerning theProvision of Telecommunication Services in Mainland China by Service Providers from Hong Kong and Macau, allowing investors from HongKong and Macau to hold more than 50% of the equity in FITEs engaging in certain specified categories of value-added telecommunicationsservices.In 2006, the Ministry of Information Industry, or the MII, the predecessor of the MIIT, issued the Circular on Strengthening theAdministration of Foreign Investment in and Operation of Value-added Telecommunications Business, pursuant to which, a PRC company thatholds a license for providing internet information services, or an ICP license, is prohibited from leasing, transferring or selling the license to foreigninvestors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors to conduct value-added telecommunications businesses illegally in China. Furthermore, the trademarks and domain names that are used in the provision of internetcontent services must be owned by the ICP operator or its shareholders. In addition, an ICP operator shall have appropriate facilities for itsapproved business operations and to maintain such facilities in the regions covered by its license.In view of these restrictions on foreign direct investment in the value-added telecommunications sector, we established domestic VIEs toengage in value-added telecommunications services.Foreign Investment in Online Games. In September 2009, the General Administration of Press and Publication, or the GAPP (thepredecessor of the SART), together with the National Copyright Administration and the National Office of Combating Pornography and IllegalPublications, jointly issued a Notice on Further Strengthening on the Administration of Pre-examination and Approval of Online Games and theExamination and Approval of Imported Online Games, or the GAPP Online Game Notice. The GAPP Online Game Notice states that foreigninvestors are not permitted to invest in online game operating businesses in China via wholly foreign-owned entities, Chinese-foreign equity jointventures or cooperative joint ventures or to exercise control over or participate in the operation of domestic online game businesses through indirectmeans, such as other joint venture companies or contractual or technical arrangements. In view of these restrictions on foreign direct investment inthe online games sector, we established domestic VIEs to engage in the provision of online games mobile apps.Due to a lack of interpretative materials from the relevant PRC governmental authorities, there are uncertainties regarding whether PRCgovernmental authorities would consider our corporate structure and contractual arrangements to constitute foreign ownership of atelecommunications business or an online games business. In order to comply with PRC regulatory requirements, we operate a portion of ourbusiness through the VIEs, with which we have contractual relationships but in which we do not have an actual ownership interest. If our currentownership structure is found to be in violation of current or future PRC laws, rules or regulations regarding the legality of foreign investment in thePRC internet sector, we could be subject to severe penalties.Regulations Relating to Telecommunications ServicesIn 2000, the State Council promulgated the Telecommunications Regulations, or the Telecom Regulations, most recently amended inFebruary 2016, which set out the general framework for regulating telecommunication services by PRC companies. The Telecom Regulationsdiffer “basic telecommunications services” from “value-added telecommunications services.” The Catalogue of Telecommunications Business,most recently updated in June 2019, categorizes information services, internet data centers and internet access as value-added telecommunicationsservices. Table of Contents87In 2000, the State Council issued the Measures for the Administration of Internet Information Services, or the ICP Measures, mostrecently amended in January 2011. The ICP Measures define “internet information services” as the services of providing internet information toonline users, which is further divided into “commercial internet information services” and “non-commercial internet information services.” Acommercial internet information services operator must obtain a value-added telecommunications services license, or ICP license for internetinformation services, from the MIIT or its local branch at the provincial or municipal level in accordance with the Telecom Regulations beforeproviding any commercial internet information services in China. Our business includes providing VoIP services and other value-addedtelecommunications services such as internet information service.The ICP Measures further stipulate that entities providing online information services regarding news, publishing, education, medicine,health, pharmaceuticals and medical equipment must procure the consent of the national authorities responsible for such areas prior to applying foran operating license from the MIIT or its local branch at the provincial or municipal level. Moreover, ICP operators must display their operatinglicense numbers in conspicuous locations on their home pages. ICP operators are required to police their internet platforms and remove certainprohibited content. Many of these requirements mirror internet content restrictions that have been announced previously by PRC ministries, such asthe MIIT, and the Ministry of Culture and Tourism of the PRC, formerly the Ministry of Culture, or the MCT.The Measures on the Administration of Telecommunications Business Operating Permit, promulgated by MIIT in 2009 and most recentlyamended in July 2017, sets forth detailed activities that an enterprise are permitted to conduct under their licenses. A commercialtelecommunication service operator must first obtain an ICP license from the MIIT, or its provincial level authorities if providing mere inter-provincial services. A licensed telecommunication services operator must conduct its business, whether basic or value-added, in accordance withthe specifications in its Telecommunications Services Operating License.The CAC, issued the Provisions on the Administration of Mobile Internet Applications Information Services, or the APP Provisions, inJune 2016. Under the APP Provisions, mobile application providers are prohibited from engaging in any activity that may endanger nationalsecurity, disturb the social order, or infringe the legal rights of third parties, and may not produce, copy, issue or disseminate through mobileapplications any content prohibited by laws and regulations. The APP Provisions also require ICP operators, such as us, to procure relevantapproval to provide services through such applications.We currently hold eight Value-added Telecommunications Services Operating Licenses.Regulations Relating to Internet Publication ServicesThe State Administration of Radio and Television, or SART, formerly known as the SAPPRFT, as integrated from the StateAdministration of Radio, Film and Television, and the GAPP, in March 2018 as a result of institutional reform, is the government agencyresponsible for regulating publication activities in China. In June 2002, the MIIT and the GAPP jointly promulgated the Interim AdministrativeMeasures on Internet Publication, which require internet publishers to obtain a license from the GAPP to conduct internet publication activities.In February 2016, the SAPPRFT and the MITT jointly issued the Administrative Measures for Internet Publication Services, which tookeffect in March 2016 and replaced the Interim Administrative Measures on Internet Publication. The Administrative Measures for InternetPublication Services further strengthened and expanded the supervision and management on the internet publication services. Pursuant to theAdministrative Measures for Internet Publication Services, entities engaging in the internet publication service are required to obtain an internetpublication service license from SART. Internet Publication Services refer to the activities of providing internet publications to the public throughinformation networks, and the internet publications refer to the digitalized works with the publishing features such as editing, producing andprocessing, including e-books and online games. In the event of failure to obtain relevant licenses and approvals, an operator may face heavypenalties, such as being ordered by the regulatory authority to shut down services and delete all relevant internet publications. The regulatoryauthority may also confiscate all of such operator’s illegal income as well as major equipment and specialized tools used in illegal publishingactivities. If the illegal income exceeds RMB10,000, such operator may face a fine of five to ten times of such illegal income; and if the illegalincome is less than RMB10,000, such operator may face a fine of less than RMB50,000. Such operator may also bear civil liability if its operationhas infringed on other persons’ legal rights and interests. Table of Contents88In May 2016, the SAPPRFT issued a Notice on Administration of Mobile Game Publishing Services, or the Mobile Game Notice,effective in July 2016, which provides that the content of mobile games is subject to its review, and that mobile game publishers and operators mustapply for publishing and authorization codes for the games. Under the Mobile Game Notice, significant upgrades and expansion packs for mobilegames that have previously been approved for publishing could be regarded as new works, and the operators will be required to obtain approval forsuch upgrades and expansion packs before they are released. In the event of any failure to meet these license and approval requirements, anoperator may face heavy penalties, such as being ordered to stop operation, or having its business license revoked. As of the date of this annualreport, we have not obtained the approval for our internet publication service license and publication codes for those domestic online gamesoperated by us. We are applying for publication codes for certain future online games.Regulations Relating to Online News ServicesIn May 2017, the CAC promulgated the Administrative Regulations for Internet News Information Services, or the News Regulations,pursuant to which internet news information services include the services of collecting, editing, and releasing internet news information, repostingsuch news information, and providing a platform to spread such news information. Subsequently, the CAC promulgated the Detailed ImplementingRules of Administration of Internet News Information Services Approval. Both of these rules require the general Websites of non-newsorganizations to apply to the State Council Information Office, or SCIO, for approval after obtaining the consent of the SCIO at the provincial levelbefore they commence to provide news dissemination services. As of the date of this annual report on Form 20-F, we have not obtained theapproval for our online news services.Regulations Relating to Internet Audio-Visual Program ServicesThe State Administration of Radio and Television, or SART, and MIIT jointly issued the Administrative Provisions for the Internet Audio-Video Program Service, or the Audio-visual Program Provisions, in 2007 and amended in August 2015. The Audio-visual Program Provisionsdefine “internet audio-visual programs services” as the production, edition and integration of audio-video programs, the supply of audio-videoprograms to the public via the internet, and providing uploading and audio-video programs transmission services to a third party. Entities engagingin internet audio-visual programs services must obtain internet audio-visual program transmission licenses, which will only be issued to state-owned or state-controlled entities unless the license applicants have obtained internet audio-visual program transmission licenses prior to thepromulgation of the Audio-visual Program Provisions in accordance with the then-in-effect laws and regulations. According to the Categories ofthe Internet Audio-Video Program Services promulgated by SART in March 2017, “aggregation of internet audio-visual programs,” meaning“editing and arranging the internet audio-visual programs on the same website and providing searching and watching services to public users,” fallsinto the definition of the aforementioned “internet audio-visual programs services.” As of the date of this annual report, we have not obtained theinternet audio-visual program transmission license for our business.Regulations Relating to Online Cultural ProductsIn 2011 and as amended in 2017, the MCT issued the Provisional Regulations for the Administration of Online Culture, or the OnlineCulture Regulations, which applies to entities engaging in activities related to “online cultural products,” including the cultural products that areproduced specially for internet use, such as online music and entertainment, online games, online plays, online performances, online art works andWeb animations, and those cultural products that, through technical means, produce or reproduce music, entertainment, games, plays and other artworks for internet dissemination. Further, commercial entities are required to apply to the relevant local branch of the MCT for an Online CultureOperating Permit if they engage in any of the following types of activities:●the production, duplication, importation, release or broadcasting of online cultural products;●the dissemination of online cultural products on the internet or transmission thereof via internet or mobile phone networks to users’terminals such as computers, fixed-line or mobile phones, television sets, gaming consoles and internet surfing service sites such asinternet cafés for the purpose of browsing, using or downloading such products; or●the exhibition or holding of contests related to online cultural products. Table of Contents89The MCT issued a Notice on Strengthening the Administration of Online Performance, or the Online Performance Notice, in July 2016,and the Measures of Administration of Online Performance Operating Activities, or Online Performance Measures, effective in January 2017. TheOnline Performance Notice and the Online Performance Measures both stipulate that online performance service providers must obtain OnlineCulture Operating Permits and that online performances must not contain any content that is horrific, cruel, violent, vulgar or humiliating in nature,mocking persons with disabilities, including photographs or video clips that infringing on third parties’ privacy or other rights, featuring animalabuse, or presenting characters or other features of online games that have not been registered and approved for publication by applicable PRCgovernmental authorities. A violator of these regulations may face an order of correction from competent authorities, or be subject to confiscationof illegal proceeds or a fine. If the violation is severe, competent authorities may order the violator to cease its operation for rectification, revokethe violator’s Online Culture Operating Permit, or impose applicable criminal liability.We currently hold eight Online Culture Operating Permits.Regulations Related to Online GamesRegulatory Authorities and Restriction on Foreign InvestmentIn 2008, the General Office of the State Council issued a circular, pursuant to which, the GAPP is responsible for the examination andapproval of online games prior to the online publication, while the MOC is responsible for regulating the online game market. In 2009, the GAPP,the National Copyright Administration and the National Office of Combating Pornography and Illegal Publications jointly published the NoticeRegarding the Consistent Implementation of the “Stipulations on ‘Three Provisions’ of the State Council and the Relevant Interpretations of theState Commission Office for Public Sector Reform and the Further Strengthening of the Administration of Pre-examination and Approval ofInternet Games and the Examination and Approval of Imported Internet Games,” which expressly requires that all online games need to bescreened by the GAPP through the pre-approvals before they can be operated online, and any updated online game versions or any change to theonline games shall be subject to further pre-approvals before they can be operated online.Pursuant to the Notice to Adjust the Scope of Online Culture Operation Permit Approval and to Further Regulate the Approval Workreleased by MCT in May 2019, the MCT no longer assumes the responsibility to regulate online game industry, and the provincial counterparts ofMCT would no longer grant Online Culture Operation Permits covering the business scope of using the information network to operate onlinegames. The licenses granted by the MCT before this notice will remain valid until the expiration dates of these licenses, but those whose businessscopes include only the operation of online games cannot be renewed after the expiration dates. On July 23, 2019, the MCT announced theabolishment of the Interim Measures on Administration of Online Games, which regulated the issuance of Online Culture Operation Permitsrelating to online games.Both the internet publication services (including the online game publishing) and online culture operation (including the online gameoperation) fall within the prohibited categories in the Negative List. The Notice Regarding the Consistent Implementation of the “Regulation onThree Provisions” of the State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the FurtherStrengthening of the Administration of Pre-examination and Approval of Online Games and the Examination and Approval of Imported OnlineGames, or the GAPP Notice, promulgated by the GAPP, together with the National Copyright Administration and the Office of the NationalWorking Group for Crackdown on Pornographic and Illegal Publications in 2009, provides that, among other things, foreign investors are notpermitted to invest or engage in online game operations in China through their wholly owned subsidiaries, equity joint ventures or cooperative jointventures, and foreign investors are not permitted to gain control over or participate in domestic online game operations indirectly through jointventures, contractual agreements or technical support. Serious violation of the GAPP Notice will result in suspension or revocation of relevantlicenses and registrations. Table of Contents90Online Game Examination and PublishingPursuant to the Administrative Measures for Internet Publication Services jointly promulgated by the SAPPRFT and the MIIT inFebruary 2016, online publications such as games provided to the public through information networks must be approved by the SAPPRFT and theservice operator must obtain an internet publication service license. An online publishing service provider shall first file an application with thecompetent provincial-level counterpart of the SAPPRFT in the place where it is located and the application, if approved, shall be submitted to theSAPPRFT for approval. For the publishing of online games authorized by foreign copyright owners, the online publishing service provider shallobtain legal authorization for the copyright and complete the approval formalities.In May 2016, the SAPPRFT issued the Mobile Game Notice, which provides that the content of mobile games is subject to its review, andthat mobile game publishers and operators must apply for publishing and authorization codes for the games. Under the Mobile Game Notice,significant upgrades and expansion packs for mobile games that have previously been approved for publishing could be regarded as new works,and the operators will be required to obtain approval for such upgrades and expansion packs before they are released. In the event of any failure tomeet these license and approval requirements, an operator may face heavy penalties, such as being ordered to stop operation, or having its businesslicense revoked.The Central Committee of the Communist Party of China issued the Plan for Deepening the Institutional Reform of the Party and Stateand the National People’s Congress adopted the Institutional Reform Plan of the State Council in March 2018 (collectively, the “InstitutionalReform Plans”). According to the Institutional Reform Plans, the SAPPRFT was reformed and now known as the SART and the NAPP.Concurrently with the implementation of this reformation, the assessment and pre-approval on domestic and foreign developed online games hadbeen suspended during April to December 2018 and had resumed since December 2018. After this re-organization, companies need to apply withthe NAPP for the approvals publishing the online games. As of the date of this annual report, we have not obtained the approval for our internetpublication service license and publication codes for those domestic online games operated by us. We are applying for publication codes for certainfuture online games.Online Game OperationIn June 2010, the MOC promulgated the Interim Measures on Administration of Online Games, or the Online Game Interim Measures,amended on December 15, 2017, which governed the research, development and operation of online games and the issuance and trading services ofvirtual currency. All operators of online games, issuers of virtual currency and providers of virtual currency trading services are required to obtainOnline Culture Operation Permits. An Online Culture Operation Permit is valid for three years.In May 2019, MCT released the Notice on Adjusting the Scope of Examination and Approval regarding the to Further Regulate theApproval Work, pursuant to which the provincial counterparts of MCT would no longer grant Online Culture Operation Permit covering thebusiness scope of using the information network to operate online games.On July 23, 2019, the MCT announced the abolishment of the Online Game Interim Measures. After the abolishment, the game operatorsare no longer required to apply to MCT for examination of imported online games or go through filing procedures for domestic online games.Regulations Related to Anti-fatigue System, Real-name Registration System and Parental Guardianship ProjectIn 2007, the GAPP and several other government agencies issued a circular requiring the implementation of an anti-fatigue system and areal-name registration system by all PRC online game operators to curb addictive online game playing by minors. Under the anti-fatigue system,three hours or less of continuous playing by minors, defined as game players under 18 years of age, is considered to be “healthy,” three to fivehours to be “fatiguing,” and five hours or more to be “unhealthy.” Game operators are required to reduce the value of in-game benefits to a minorplayer by half if the minor has reached the “fatiguing” level, and to zero once reaching the “unhealthy” level. Table of Contents91To identify whether a game player is a minor and thus subject to the anti-fatigue system, a real-name registration system must be adoptedto require online game players to register their real identity information before playing online games. The online game operators are also requiredto submit the identity information of game players to the public security authority for verification. In 2011, the GAPP, together with several othergovernment agencies, jointly issued the Notice on Initializing the Verification of Real-name Registration for the Anti-Fatigue System on OnlineGames, or the Real-name Registration Notice, to strengthen the implementation of the anti-fatigue and real-name registration system. The mainpurpose of the Real-name Registration Notice is to curb addictive online game playing by minors and protect their physical and mental health. Thisnotice indicates that the National Citizen Identity Information Center of the Ministry of Public Security will verify identity information of gameplayers submitted by online game operators. The Real-name Registration Notice also imposes stringent penalties on online game operators that donot implement the required anti-fatigue and real-name registration systems properly and effectively, including terminating their online gameoperations.In 2011, the MOC, together with several other government agencies, jointly issued a Circular on Printing and Distributing ImplementationScheme regarding Parental Guardianship Project for Minors Playing Online Games to strengthen the administration of online games and protect thelegitimate rights and interests of minors. This circular indicates that online game operators must have person in charge, set up specific servicewebpages and publicize specific hotlines to provide parents with necessary assistance to prevent or restrict minors’ improper game playingbehavior. Online game operators must also submit a report regarding its performance under the Parental Guardianship Project to the provinciallevel counterpart of the MOC each quarter.In August 2016, the CAC issued the Regulations for the Administration of Mobile Internet Applications Information Services, pursuant towhich the mobile applications information service providers shall satisfy relevant qualifications required by laws and regulations, strictly carry outthe information security management responsibilities and fulfill their obligations in various aspects relating to the real-name system, protection ofusers’ information and the examination and management of information content. The app store service providers shall file with the local cyberspaceadministration authorities within 30 days after its app store services being launched, and such app store service providers are responsible foroverseeing app information service providers operated in their stores.In August 2018, the National Health Commission, the MOE, together with several other government agencies, jointly issued theImplementation on Comprehensive Prevention and Control of Juveniles’ Myopia, which sets forth the plans to control the number of new onlinegames and to restrict the amount of time when juveniles play games and use electronic devices.On October 25, 2019, the NAPP issued the Notice on Preventing Minor’s Addiction to Online Games, which requires all online gamers toregister accounts with their valid identity information and all game companies to stop providing game services to users who fail to do so.Furthermore, minors are prohibited from playing games exceeding a certain period of time per day or charging their accounts exceeding a certainamount.On October 17, 2020, the SCNPC issued the Law of the PRC on the Protection of Minors (2020 Revision), which took effect on June 1,2021. The Law of the PRC on the Protection of Minors (2020 Revision) added a new section entitled “Internet Protections,” which stipulates aseries of provisions to further protect minors’ interests on the internet, including, among others, (i) online product and service providers areprohibited from providing minors with products and services that would induce minors to indulge; (ii) online service providers for services, such asonline games, live streaming, audio-visual, and social networking, are required to establish special management systems of user duration, accessauthority and consumption for minors; (iii) online games service providers must request minors to register and log into online games with theirvalid identity information; (iv) online games service providers shall categorize games according to relevant rules and standards, notify users aboutthe appropriate ages for the players of the games, and take technical measures to keep minors from accessing inappropriate online games functions,and (v) online games service providers may not provide online games services to minors from 10:00 P.M. to 8:00 A.M. the next day.In addition, pursuant to the Notice of on Further Strengthening Regulation to Effectively Prevent Online Gaming Additions amongMinors, which became effective on September 1, 2021, the NPPA limit online gaming time for minors to an hour per day from 8 p.m. to 9 p.m. onFriday, Saturday, Sunday and legal holidays in the PRC starting from September 1, 2021 and all online games are required to be connected to theonline game anti-fatigue compliance system and a real-name registration system of the NPPA. Table of Contents92Regulations Relating to Online Advertising ServicesThe PRC Congress amended the Advertising Law effective in April 2021. The amended Advertising Law stipulates the potential legalliability of providers of advertising services, and includes provisions intended to strengthen identification of false advertising and the power ofregulatory authorities. In July 2016, the SAIC issued the Interim Measures of the Administration of Online Advertising, or the SAIC InterimMeasures. The Advertising Law and the SAIC Interim Measures both provide that advertisements posted or published through the internet shall notaffect users’ normal usage of network, and advertisements published in the form of pop-up windows on the internet must display an outstanding“close” sign with a button to close the pop-up windows. The SAIC Interim Measures provide that all online advertisements must be marked as“Advertisement” so that viewers can easily identify them as such. The Advertising Law and SAIC Interim Measures will require us to conductmore stringent examination and monitoring of our advertisers and the content of their advertisements.Advertisements shall not hinder public order, violate social morality or contain illegal contents, including, but not limited to, obscenity,pornography, gambling, superstition, terror and violence contents. Otherwise, the administration of market regulation may (i) order to stoppublishing of the advertisement and; (ii) confiscate the advertising fees; (iii) impose a penalty ranging from RMB200,000 to RMB1,000,000; or(iv) in serious cases, cancel the business license and cancel the registration certificate for publishing advertisements.According to the Advertising Law, advertisements shall not have any false or misleading content, or defraud or mislead consumers.Furthermore, an advertisement will be deemed as a “false advertisement” if any of the following situations exist: (i) the advertised product orservice does not exist; (ii) there is any inconsistency that has a material impact on the decision to purchase in what is included in the advertisementwith the actual circumstances with respect to the product’s performance, function, place of production, usage, quality, specification, ingredient,price, producer, term of validity, sales condition and honors received, among others, or the service’s content, provider, form, quality, price, salescondition, and honors received, among others, or any commitments, among others, made on the product or service; (iii) using fabricated, forged orunverifiable scientific research results, statistical data, investigation results, excerpts, quotations or other information as supporting material;(iv) effect or results of using the good or receiving the service are fabricated; or (v) other circumstances where consumers are defrauded or misledby any false or misleading content.Where there is a false advertisement, the administration of market regulation may (i) request the discontinuation of publishing the targetadvertisement and the elimination of any adverse effects caused by such false advertisement; (ii) impose fines calculated based on advertisementexpenses, if the advertising expense is incalculable or evidently low, the fines should be RMB200,000 to RMB1,000,000, and if the advertiser haspublished false advertisements more than three times in the past two years or in other serious cases, the fines should be five to ten times of theadvertising expense and where the advertising expense is incalculable or evidently low, the fines should be between RMB1,000,000 toRMB2,000,000; and (iii) cancel the advertiser’s business license. The advertisement examination authority may revoke advertisements approvalsand reject advertisement examination requests from such advertisers for one year.The relevant advertisers, advertisement operators and advertisement publishers may also face criminal liabilities. According to theCriminal Law, where an advertiser, advertisement operator or advertisement publisher uses false advertising for its products or services and whenthe circumstances are serious, the offender may face imprisonment of not more than two years, criminal detention and fines. According to theProvisions of the Supreme People’s Procuratorate and the Ministry of Public Security on Criteria for Docketing and Prosecution of Criminal Casesunder the Jurisdiction of Public Security Authorities (II), where an advertiser, advertisement operator or advertisement publisher uses falseadvertising for its products or services, the offender may be prosecuted if, among other serious violation circumstances, (i) the amount of illegalgains exceeds RMB100,000, (ii) causing direct economic loss of over RMB50,000 to a single consumer, or accumulatively direct loss of overRMB200,000 to several consumers, or (iii) the offender has received administrative punishment more than two times within two years forconducting false advertising.Regulations on Unfair CompetitionOn April 23, 2019, the Standing Committee of the National People’s Congress promulgated the amended Anti-Unfair Competition Law ofthe People’s Republic of China, or the Anti-Unfair Competition Law, which became effective on April 23, 2019. Table of Contents93Pursuant to the Anti-Unfair Competition Law, a business operator shall not conduct any false or misleading commercial publicity inrespect of the performance, functions, quality, sales, user reviews, and honors received of its commodities, in order to defraud or misleadconsumers. A business operator publishing any false advertisements in violation of this provision shall be punished in accordance with the PRCAdvertising Law.The Anti-Unfair Competition Law also stipulated that a business operator engaging in production or distribution activities online shallabide by the provisions of the Anti-Unfair Competition Law. No business operator may, by technical means to affect users’ options, among others,commit the acts of interfering with or sabotaging the normal operation of online products or services legally provided by another business operator.In addition, according to the Anti-Unfair Competition Law, a business operator is prohibited from any of the following unfair activities:(i) committing act of confusion to mislead a person into believing that a commodity is one of another person or has a particular connection withanother person; (ii) seeking transaction opportunities or competitive edges by bribing relevant entities or individuals with property or by any othermeans; (iii) infringing on trade secrets; (iv) premium campaign violating the provision of the Anti-Unfair Competition Law; and (v) fabricating ordisseminating false or misleading information to damage the goodwill or product reputation of a competitor.Regulations Relating to Intellectual Property ProtectionChina has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents and trademarks.CopyrightUnder the PRC Copyright Law promulgated by the National People’s Congress in 1990 and most recently amended in 2020, copyrightprotection extends to internet activities, products disseminated over the internet and software products. In addition, there is a voluntary registrationsystem administered by the China Copyright Protection Center, and requires registration of any pledge of a copyright. Its implementing regulation,Computer Software Copyright Registration Procedures, was promulgated in 2011 and most recently amended in January 2013, specifies detailedprocedures and requirements regarding the registration of software copyrights.To address the problem of copyright infringement related to content posted or transmitted over the internet, the PRC National CopyrightsAdministration, or the NCA and the MIIT jointly promulgated the Measures for Administrative Protection of Copyright Related to Internet in 2005.Upon receipt of an infringement notice from a legitimate copyright holder, an ICP operator must take remedial actions immediately by removing ordisabling access to the infringing content. If an ICP operator knowingly transmits infringing content or fails to take remedial actions after receipt ofa notice of infringement harming public interest, the ICP operator could be subject to administrative penalties, including an order to ceaseinfringing activities, confiscation by the authorities of all income derived from the infringement activities, or payment of fines.The Provisions of the Supreme People’s Court on Certain Issues Related to the Application of Law in the Trial of Civil Cases InvolvingDisputes on Infringement of the Information Network Dissemination Rights provides that disseminating works, performances or audio-videoproducts by internet users or internet service providers via the internet without the consents of the copyright owners shall be deemed to haveinfringed the right of dissemination of the copyright owner. Under the Regulations on the Protection of the Right to Network Dissemination ofInformation, promulgated by the State Council in 2006 and amended in 2013, an owner of the network dissemination rights with respect to writtenworks or audio or video recordings who believes that information storage, search or link services provided by an internet service provider infringehis or her rights may require that the internet service provider delete, or disconnect the links to, such works or recordings. As of December 31,2020, we have registered 149 software copyrights in China. Table of Contents94Patent LawUnder the Patent Law promulgated by PRC Congress in 1984 and most recently amended in 2020, and its implementation regulationsissued in 2010, the State Intellectual Property Office is responsible for administering patents in the PRC. The Chinese patent system adopts a “firstto file” principle, which means that where more than one person files a patent application for the same invention, a patent will be granted to theperson who filed the application first. To be patentable, invention or utility models must meet all three conditions: novelty, inventiveness andpractical applicability. A patent is valid for 20 years in the case of an invention and 10 years in the case of utility models and designs. A third-partyuser must obtain consent or proper license from the patent owner to use the patent. Otherwise, third-party use constitutes an infringement of patentrights. As of December 31, 2020, we had 59 patents in China.Trademark LawUnder the Trademark Law promulgated by PRC Congress in 1982 and most recently amended in 2019, and its implementation regulationsissued in 2002 and amended in April 2014, the Trademark Office of the Administration for Industry and Commerce is responsible for theregistration and administration of trademarks. The Administration for Industry and Commerce under the State Council has established a TrademarkReview and Adjudication Board for resolving trademark disputes. As with patents, China has adopted a “first-to-file” principle for trademarkregistration. If two or more applicants apply for registration of identical or similar trademarks for the same or similar commodities, the applicationthat was filed first will receive preliminary approval and will be publicly announced. For applications filed on the same day, the trademark that wasfirst used will receive preliminary approval and will be publicly announced. Registered trademarks are valid for ten years from the date theregistration is approved. A registrant may apply to renew a registration within twelve months before the expiration date of the registration. If theregistrant fails to apply in a timely manner, a grace period of six additional months may be granted. If the registrant fails to apply before the graceperiod expires, the registered trademark shall be deregistered. Renewed registrations are valid for ten years. As of December 31, 2021, we had 267trademarks in China.Domain NameDomain names are protected in the PRC under the Administrative Measures on the Internet Domain Names promulgated by the MIIT,which became effective on November 1, 2017. The MIIT is the primary regulatory authority responsible for the administration of the PRC internetdomain names. The registration of domain names in China has adopted a “first-to-file” principle. A domain name applicant will become the domainname holder upon the completion of its application procedure.As of December 31, 2021, we had registered more than 50 domain names, including “cootek.com,” “chubao.cn” and “touchpal.com.”Internet InfringementUnder the PRC Civil Code promulgated by PRC Congress and became effective on January 1, 2021, an internet user or an internet serviceprovider that infringes upon the civil rights or interests of others through using the internet assumes tort liability. If an internet user infringes uponthe civil rights or interests of another through internet, the victim has the right to notify and request the facilitating internet service provider to takenecessary measures including deletion, blocking or disconnection of any relevant internet link. If, the internet service provider fails to takenecessary measures upon notification in a timely manner to stop the infringement, such internet service provider shall be jointly and severally liablefor any additional harm caused by its failure to act. According to the PRC Civil Code, civil rights and interests include the personal rights andrights of property, such as the right to life, right to health, right to name, right to reputation, right to honor, right of portraiture, right of privacy, rightof marital autonomy, right of guardianship, right to ownership, right to usufruct, right to security interests, copyright, patent right, exclusive right touse trademarks, right to discovery, right to equity interests and right of heritage, among others. Table of Contents95Regulations Relating to User ProtectionThe Measures on the Complaint Settlement of the Telecommunication Services Users, issued by MIIT in May 2016, requirestelecommunication services providers to respond to their users within fifteen days upon the receipt of any complaint delivered by such users, thefailure of which will give the complaining users the right to file a complaint against the service providers with the provincial branch offices of theMIIT.Regulations Relating to M&A and Overseas ListingIn 2006, six PRC regulatory agencies, including the MOFCOM, the State Assets Supervision and Administration Commission, the StateAdministration of Taxation, or the SAT, the SAIC, the China Securities Regulatory Commission, or the CSRC, and the State Administration ofForeign Exchange, or the SAFE, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or theM&A Rules, amended in 2009. The M&A Rules require an offshore special purpose vehicle, formed for purposes of the overseas listing of equityinterests in PRC companies through acquisitions of PRC domestic companies and controlled directly or indirectly by PRC companies orindividuals, to obtain the approval of the CSRC prior to any listing or trading of such special purpose vehicle’s securities on any overseas stockexchange. In 2006, the CSRC published on its official Website procedures for obtaining its approval of overseas listings by special purposevehicles, which requires the filing of a number of documents with the CSRC. The application of this PRC regulation remains unclear, with noconsensus currently existing among leading PRC law firms regarding the scope of the applicability of the CSRC approval requirements.The M&A Rules also establish procedures and requirements that could make some acquisitions of Chinese companies by foreign investorsmore time-consuming and complex, including requirements in some instances that the MOFCOM be notified in advance of any change-of-controltransaction in which a foreign investor takes control of a Chinese domestic enterprise.In February 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergersand Acquisitions of Domestic Enterprises by Foreign Investors, or the Circular 6, which established a security review system for mergers andacquisitions of domestic enterprises by foreign investors. Under Circular 6, a security review is required for mergers and acquisitions by foreigninvestors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire “de facto control”of domestic enterprises with “national security” concerns. In August 2011, the MOFCOM promulgated the Rules on Implementation of SecurityReview System, or the MOFCOM Security Review Rules, to replace the Interim Provisions of the Ministry of Commerce on Matters Relating tothe Implementation of the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors promulgated by theMOFCOM in March 2011. The MOFCOM Security Review Rules, which came into effect on September 1, 2011, provide that the MOFCOM willlook into the substance and actual impact of a transaction and prohibit foreign investors from bypassing the security review requirement bystructuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshoretransactions. In addition, on December 19, 2020, the NDRC and the MOFCOM promulgated the Measures for Security Review of ForeignInvestment, or the Foreign Investment Security Review Measures, which took effect on January 18, 2021. Under the Foreign Investment SecurityReview Measures, investment in certain key areas which results in acquiring the actual control of the assets is required to obtain approval fromdesignated governmental authorities in advance.Based on our understanding of the current PRC laws and regulations, as of the date of this annual report, we believe that we will not berequired to submit an application to the CSRC for the approval of the listing and trading of the ADSs on the NYSE. However, there remains someuncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering, and its opinions summarized aboveare subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules.On July 6, 2021, the relevant PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities inAccordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervisionon overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatorysystems to deal with the risks and incidents faced by China-based overseas-listed companies. Table of Contents96On December 27, 2021, the NDRC and the MOC jointly issued the Special Administrative Measures (Negative List) for ForeignInvestment Access (2021 Version), or the 2021 Negative List, which became effective on January 1, 2022. Pursuant to such Special AdministrativeMeasures, if a PRC domestic company engaging in the prohibited business stipulated in the 2021 Negative List seeks an overseas offering andlisting, it shall obtain the approval from the competent governmental authorities. Besides, according the further explanation of the NDRC, theforeign investors of the direct overseas offering and listing company shall not be involved in the company’s operation and management, and theirshareholding percentage shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities investments by foreign investors.On December 24, 2021, the CSRC issued a draft of the Provisions of the State Council on the Administration of Overseas SecuritiesOffering and Listing by Domestic Companies, or the Draft Provisions, and a draft of Administration Measures for the Filing of Overseas SecuritiesOffering and Listing by Domestic Companies, or the Draft Administration Measures, for public comments. According to the Draft Provisions andthe Draft Administration Measures, the overseas offering and listing by a PRC domestic company, whether directly or indirectly, an initial orfollow-on offering, shall be required to complete filing procedure with and report to the CSRC. Specifically, the determination of an indirectoffering and listing will be conducted on a “substance over form” basis, and an offering and listing shall be considered as an indirect overseasoffering and listing by a PRC domestic company if the issuer meets the following conditions: (i) the operating income, gross profit, total assets, ornet assets of the domestic enterprise in the most recent fiscal year was more than 50% of the relevant line item in the issuer’s audited consolidatedfinancial statement for that year; and (ii) senior management personnel responsible for business operations and management are mostly PRCcitizens or are ordinarily resident in the PRC, and the main place of business is in the PRC or carried out in the PRC. It is unclear whether either orboth of the above criteria need to be satisfied. The main purpose of these regulations is to establish a new filing-based regime to regulate overseasofferings and listings by PRC domestic companies. According to the Draft Administration Measures, an overseas offering and listing is prohibitedunder any of the following circumstances: (i) if the intended securities offering and listing is specifically prohibited by national laws andregulations and relevant provisions; (ii) if the intended securities offering and listing may constitute a threat to or endangers national security asreviewed and determined by competent authorities under the State Council in accordance with law; (iii) if there are material ownership disputesover the equity, major assets, and core technology, etc. of the issuer; (iv) if, in the past three years, the domestic enterprise or its controllingshareholders or actual controllers have committed corruption, bribery, embezzlement, misappropriation of property, or other criminal offensesdisruptive to the order of the socialist market economy, or are currently under judicial investigation for suspicion of criminal offenses, or are underinvestigation for suspicion of major violations; (v) if, in past three years, directors, supervisors, or senior executives have been subject toadministrative punishments for severe violations, or are currently under judicial investigation for suspicion of criminal offenses, or are underinvestigation for suspicion of major violations; (vi) other circumstances as prescribed by the State Council.According to the Draft Administration Measures, the issuer or its affiliated domestic company, as the case may be, shall file with theCSRC (i) with respect to its initial public offering and listing within three business days, after its initial filing of the listing application to theregulator in the place of the intended listing, (ii) with respect to its follow-on offering within three business days after completion of the follow-onoffering, (iii) with respect to its follow-on offering for purpose of acquiring specific assets, within three business days after the first publicannouncement of the transaction, and (iv) with respect to listing by means of reverse takeover, share swap, acquisition and similar transactions,within three business days after its initial filing of the listing application or the first public announcement of the transaction, as case may be. TheCSRC also requires the PRC domestic companies to submit regulatory opinions, assessment opinions or approvals issued by relevant authorities asfiling materials. The Draft Provisions and the Draft Administration Measures also require subsequent report to the CSRC on material events, suchas material change in principal business and change of control. Non-compliance with the Draft Administration Measures or an overseas listingcompleted in breach of Draft Administration Measures may result in a warning on the relevant domestic companies or a fine of RMB1 million toRMB10 million on them. If the circumstances are serious, they may be ordered to suspend their business or suspend their business pendingrectification, or their permits or businesses license may be revoked. Furthermore, the controlling shareholder, actual controllers, directors,supervisors, and other legally appointed persons of the domestic enterprises may be warned, or fined between RMB500,000 to RMB5,000,000either individually or collectively. However, these regulations are unclear on whether companies that have been already listed overseas need tocomplete the CSRC filing. Table of Contents97On April 2, 2022, the CSRC issued the draft of Provisions on Strengthening Confidentiality and Archives Administration of OverseasSecurities Offering and Listing by Domestic Companies (Draft for Comments) for public comments. A PRC domestic company that plans to, eitherdirectly or through its overseas listed entity, publicly disclose or provide to relevant entities or individuals including securities companies, securitiesservice providers, and overseas regulators, documents and materials that contain state secrets or government work secrets, shall first obtainapproval from competent authorities according to law, and file with the secrecy administrative department at the same level. Archives, includingworking papers, that have been produced in the Chinese mainland by securities companies and securities service providers for overseas securitiesoffering and listing by PRC domestic companies shall be retained in the Chinese mainland, and, without prior approval by competent authorities,must not be brought, mailed or otherwise transferred to outside the Chinese mainland, or transmitted to any institutions or individuals outside theChinese mainland through any methods including via the use of information technologies. Overseas securities regulators and competent overseasauthorities may request to investigate, including to collect evidence for investigation purpose, or inspect a PRC domestic company that has beenlisted or offered securities in an overseas market or securities companies and securities service providers that undertake securities business for suchPRC domestic companies. Such investigation and inspection shall be conducted under a cross-border regulatory cooperation mechanism, and theCSRC and competent authorities of the Chinese government will provide necessary assistance pursuant to bilateral and multilateral cooperationmechanisms. Before cooperating with the investigation and inspection by, or providing documents and materials to overseas securities regulators orother competent overseas authorities, such PRC domestic companies, securities companies and securities service providers shall report to theCSRC or other competent authorities. As of the date of this document, this draft has not been formally adopted and the final version and effectivedate of such measures are subject to change with substantial uncertainty.Regulations Relating to Foreign Currency Exchange and Dividend DistributionThe principal regulations governing foreign currency exchange in China are the Foreign Exchange Administration Regulations, or theForeign Exchange Regulations, which were promulgated by the State Council in 1996 and most recently amended in 2008. Under the ForeignExchange Regulations, the RMB is freely convertible for current account items, including the distribution of dividends, interest payments, tradeand service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investmentsand investments in securities outside of the PRC, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made.Dividends paid by a PRC subsidiary to its overseas shareholder are deemed income of the shareholder and are taxable in the PRC. Pursuant to theAdministration Rules of the Settlement, Sale and Payment of Foreign Exchange promulgated by the PBOC in 1996, foreign-invested enterprises inthe PRC may purchase or remit foreign currency, subject to a cap approved by the SAFE, for settlement of current account transactions without theapproval of the SAFE. Foreign currency transactions under the capital account are still subject to limitations and require approvals from, orregistration with, the SAFE and other relevant PRC governmental authorities.In July 2014, the SAFE promulgated the Circular on Issues Concerning Foreign Exchange Administration over the Overseas Investmentand Financing and Roundtrip Investment by Domestic Residents Via Special Purpose Vehicles, or SAFE Circular 37, which replaced RelevantIssues Concerning Foreign Exchange Control on Domestic Residents’ Corporate Financing and Roundtrip Investment through Offshore SpecialPurpose Vehicles, or SAFE Circular 75. SAFE Circular 37 requires PRC residents, including PRC institutions and individuals, to register with thelocal SAFE office in connection with their direct establishment or indirect control of an offshore entity, referred to in SAFE Circular 37 as a“special purpose vehicle” for the purpose of holding domestic or offshore assets or interests. PRC residents must also file amendments to theirregistrations in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributedby PRC individuals, share transfer or exchange, merger, division or other material event. Under these regulations, PRC residents’ failure to complywith such regulations may result in restrictions being imposed on the foreign exchange activities of the relevant PRC entity, including the paymentof dividends and other distributions to its offshore parent, as well as restrictions on capital inflows from the offshore entity to the PRC entity,including restrictions on the ability to contribute additional capital to the PRC entity. Further, failure to comply with the various SAFE registrationrequirements could result in liability under PRC laws for evasion of foreign exchange regulations. Table of Contents98Under SAFE Circular 37, if a non-listed special purpose vehicle uses its own equity to grant equity incentives to any directors,supervisors, senior management or any other employees directly employed by a domestic enterprise which is directly or indirectly controlled bysuch special purpose vehicle, or with which such an employee has established an employment relationship, related PRC residents and individualsmay, prior to exercising their rights, apply to the SAFE for foreign exchange registration formalities for such special purpose vehicle. However, inpractice, different local SAFE offices may have different views and procedures on the interpretation and implementation of the SAFE regulations,and since SAFE Circular 37 was the first regulation to regulate the foreign exchange registration of a non-listed special purpose vehicle’s equityincentives granted to PRC residents, there remains uncertainty with respect to its implementation.In February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign ExchangeConcerning Direct Investment, or SAFE Notice 13, as amended in December 2019. SAFE Notice 13 amended SAFE Circular 37 by requiring PRCresidents or entities to register the incorporation or control of an offshore entity for purposes of offshore investment or offshore financing withqualified banks rather than SAFE or its local branches.Under the Administration Measures on Individual Foreign Exchange Control issued by PBOC in 2006, and related ImplementationRules issued by the SAFE in 2007 as amended in 2016, all foreign exchange transactions involving an employee share incentive plan, share optionplan, or similar plan participated in by onshore individuals shall obtain approval from the SAFE or its local office.The principal regulations governing distribution of dividends of foreign holding companies include the Foreign Investment Lawpromulgated in 2019, Implementation Regulations for the Foreign Investment Law promulgated in 2019, and the Company Law as recentlyamended in 2018. Under these regulations, wholly foreign-owned enterprises in China may pay dividends only out of their accumulated profits, ifany, as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise in China isrequired to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until its cumulative totalreserve funds reaches 50% of its registered capital. At the discretion of the board of directors of the wholly foreign-owned enterprise, it mayallocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfareand bonus funds, however, may not be distributed as cash dividends.Furthermore, under the Enterprise Income Tax Law, which became effective in January, 2008 and latest amended in December 2018, themaximum tax rate for the withholding tax imposed on dividend payments from PRC foreign invested companies to their overseas investors that arenot regarded as “resident” for tax purposes is 20%. The rate was reduced to 10% under the Implementing Regulations for the PRC EnterpriseIncome Tax Law issued by the State Council. However, a lower withholding tax rate of 5% might be applied if there is a tax treaty between Chinaand the jurisdiction of the foreign holding companies, such as is the case with Hong Kong, and certain requirements specified by PRC taxauthorities are satisfied.Regulations Relating to Employee Share Option PlansPursuant to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock IncentivePlan of Overseas Listed Company, or SAFE Circular 7, issued by the SAFE in February 2012, employees, directors, supervisors, and other seniormanagement participating in any share incentive plan of an overseas publicly listed company who are PRC citizens or non-PRC citizens residing inChina for a continuous period of not less than one year, subject to a few exceptions, are required to register with SAFE through a domesticqualified agent, which may be a PRC subsidiary of such overseas listed company, and complete certain other procedures.In addition, the SAT has issued certain circulars concerning employee share options and restricted shares. Under these circulars,employees working in the PRC who exercise share options or are granted restricted shares will be subject to PRC individual income tax. The PRCsubsidiaries of an overseas listed company are obligated to file documents related to employee share options and restricted shares with relevant taxauthorities and to withhold individual income taxes of employees who exercise their share option or purchase restricted shares. If the employeesfail to pay or the PRC subsidiaries fail to withhold income tax in accordance with relevant laws and regulations, the PRC subsidiaries may facesanctions imposed by the tax authorities or other PRC governmental authorities. Table of Contents99Regulations Relating to Employment and Social InsuranceThe PRC Labor Contract Law promulgated by PRC Congress in 2007 and amended in December 2012, and its implementationrules issued by the State Council in 2008, require employers to provide written contracts to their employees, restrict the use of temporary workersand aim to give employees long-term job security. Violations of the PRC Labor Law and the PRC Labor Contract Law may result in fines and otheradministrative sanctions, and serious violations may result in criminal liabilities.Pursuant to the PRC Labor Contract Law, employment contracts lawfully concluded prior to the implementation of the PRC LaborContract Law and continuing as of the date of its implementation shall continue to be performed. Where an employment relationship wasestablished prior to the implementation of the PRC Labor Contract Law but no written employment contract was concluded, a contract must beconcluded within one month after its implementation.The PRC governmental authorities have passed a variety of laws and regulations regarding social insurance and housing funds from timeto time, including, among others, the PRC Social Insurance Law, the Regulation of Insurance for Labor Injury, the Regulations of Insurance forUnemployment, and Interim Measures for Enterprise Employees’ Maternity Insurance. Pursuant to these laws and regulations, PRC companiesmust make contributions at specified levels for their employees to the relevant local social insurance and housing fund authorities. Failure tocomply with such laws and regulations may result in various fines and legal sanctions and supplemental contributions to the local social insuranceand housing fund regulatory authorities. Table of Contents100C.Organizational StructureThe following diagram illustrates our corporate structure, including our significant subsidiaries and other entities that are material to ourbusiness, as of the date of this annual report:(1)Karl Kan Zhang, Susan Qiaoling Li, Michael Jialiang Wang, Jim Jian Wang and Haiyan Zhu are the beneficial owners of CooTek (Cayman) Inc., and each holds 25.0%, 21.94%,21.94%, 13.12% and 18.0% of the equity interests in Shanghai Chubao, respectively. Karl Kan Zhang and Susan Qiaoling Li are our co-founders, directors and executive officers.Michael Jialiang Wang is our consultant and one of our directors. Jim Jian Wang is one of our directors. Haiyan Zhu is one of our early investors.(2)Two of our employees holds 100% of the equity interests in Molihong, one holds 99% and the other holds 1%.(3)Each of Michael Jialiang Wang and Jim Jian Wang holds 50% of the equity interests in Qiaohan.(4)Two of our employees each hold 50% of the equity interests in Qinglin. Table of Contents101The following is a summary of our contractual arrangements with respect to Shanghai Chubao and other principal VIEs.Agreements that provide us effective control over Shanghai ChubaoLoan Agreement. On August 6, 2012, the WFOE and each shareholder of Shanghai Chubao entered into loan agreement. Pursuant to suchagreements, the WFOE will provide loan to the shareholders of Shanghai Chubao solely for the purpose of capital contribution. The shareholders ofShanghai Chubao should pledge their equity interests in Shanghai Chubao and enter into an equity pledge agreement to secure such loan and otherobligations. The shareholders can only repay the loans by the sale of all their equity interest in Shanghai Chubao to WFOE or its designated person.Each loan agreement will remain effective for 10 years, and will be automatically renewed by three years upon the option of the WFOE.Equity Pledge Agreement. On August 6, 2012, the WFOE and Shanghai Chubao and each of its shareholders entered into an equitypledge agreement, which was subsequently amended and restated on October 30, 2012. Pursuant to the amended and restated equity pledgeagreement, each shareholder of Shanghai Chubao shall pledges 100% equity interests in Shanghai Chubao to the WFOE to guarantee their andShanghai Chubao’s performance of their obligations under the contractual arrangements including the exclusive business cooperation agreement,exclusive purchase option agreement and the power of attorney. In the event of a breach by Shanghai Chubao or its shareholders of theircontractual obligations under these agreements, the WFOE, as pledgee, will have the right to dispose of the pledged equity interests in ShanghaiChubao. The shareholders of Shanghai Chubao also undertakes that, during the term of the equity pledge agreements, they will not dispose of thepledged equity interests or create or allow any encumbrance on the pledged equity interests. During the term of the equity pledge agreements, ourWFOE has the right to receive all of the dividends and profits distributed on the pledged equity interests. We have completed the registration of theequity pledges with the relevant office of the administration for industry and commerce in accordance with the PRC Property Rights Law.Power of Attorney. On October 30, 2012, each shareholder of Shanghai Chubao granted irrevocable and exclusive power of attorney tothe WFOE as his/her attorney-in-fact to exercise all shareholder rights, including, but not limited to, attend shareholders meeting of ShanghaiChubao, voting on their behalf on all matters of Shanghai Chubao, disposing of all or part of the shareholder’s equity interest in Shanghai Chubao,and electing, appointing or removing legal representative, directors, supervisors and executive officers of Shanghai Chubao. Each power ofattorney will remain in force for so long as the shareholder remains a shareholder of Shanghai Chubao. Each shareholder has waived all the rightswhich have been authorized to our WFOE under each power of attorney.Spouse Consent Letters. Pursuant to the spouse consent letters dated October 30, 2012, each spouse of the shareholders of ShanghaiChubao, if any, confirmed that his/her spouse can perform the obligations under the contractual arrangements and has sole discretion to amend andterminate the contractual arrangements. Each spouse agreed that the equity interest in Shanghai Chubao held by and registered in the name ofhis/her spouse will be disposed of pursuant to the amended and restated equity pledge agreement, the amended and restated exclusive optionagreement and the power of attorney. In addition, in the event that each spouse obtains any equity interest in Shanghai Chubao held by his/herspouse for any reason, he/she agreed to be bound by the contractual arrangements. Table of Contents102Agreement that allows us to receive economic benefits from Shanghai ChubaoExclusive Business Cooperation Agreement. On August 6, 2012, our WFOE and Shanghai Chubao entered into an exclusive businesscooperation agreement. Under such agreement, our WFOE has the exclusive right to provide Shanghai Chubao with operational support andtechnology and consulting services. The WFOE owns the exclusive intellectual property rights created as a result of the performance of thisagreement. Shanghai Chubao agrees to pay our WFOE a monthly service fee, at an amount equal to 100% of Shanghai Chubao’s monthly netincome or an amount otherwise agreed by the WFOE. This agreement will remain effective unless terminated unilaterally by the WFOE orotherwise as required by applicable PRC laws and regulations.Agreement that provides us with the option to purchase the equity interest in Shanghai ChubaoExclusive Purchase Option Agreement. On August 6, 2012, the WFOE and each shareholder of Shanghai Chubao entered into anexclusive purchase option agreement, which was subsequently amended and restated on October 30, 2012. Pursuant to the amended and restatedexclusive purchase option agreement, each shareholder of Shanghai Chubao irrevocably grants our WFOE an exclusive option to purchase, or haveits designated person to purchase, at its discretion, to the extent permitted under PRC law, all or part of the shareholder’s equity interests inShanghai Chubao. In addition, the purchase price should be the amount of registered capital, which may be subject to fair value adjustments ifrequired by the PRC laws. Without the prior written consent of the WFOE, the shareholders of Shanghai Chubao may not amend its articles ofassociation, increase or decrease the registered capital, dispose of its assets or business, create any encumbrance on its assets or business, incur anydebts or guarantee liabilities, enter into any material contracts, merger with or acquire any other persons or make any investments, provide anyloans for any third parties or distribute dividends to the shareholders. Each shareholder of Shanghai Chubao agrees that, without the prior writtenconsent of the WFOE, he/she will not dispose of his/her equity interests in Shanghai Chubao or create or allow any encumbrance on the equityinterests. Each exclusive purchase option agreement will remain effective unless the agreement is required to be terminated by applicable PRC lawsand regulations.The WFOE, the other three VIEs and their respective shareholders have entered into contractual arrangements which contain agreementsand terms substantially similar to our contractual arrangements with Shanghai Chubao and its shareholders described above, except that the WFOEdid not extended any loans to the shareholders of Shanghai Hanxiang and the option to purchase the equity interest of Shanghai Hanxiang can beexercised at a nominal price pursuant to its exclusive purchase option agreement. The registration of the equity pledges over the equity interests ofthe other VIEs have been completed with the relevant office of the administration for industry and commerce in accordance with the PRC PropertyRights Law.In the opinion of JunHe LLP, our PRC legal counsel:●the ownership structure of the WFOE and the VIEs is not in violation of PRC laws or regulations currently in effect; and●the contractual arrangements among the WFOE, the VIEs and their respective shareholders governed by PRC law are valid andbinding, and do not result in any violation of PRC laws or regulations currently in effect.However, we have been further advised by our PRC legal counsel that there are substantial uncertainties regarding the interpretation andapplication of current and future PRC laws, regulations and rules, and there can be no assurance that the PRC regulatory authorities will ultimatelytake a view that is consistent with the opinion stated above. Accordingly, the PRC regulatory authorities may in the future take a view that iscontrary to or otherwise different from the above opinion of our PRC legal counsel. If the PRC government finds that the agreements that establishthe structure for operating our mobile internet business do not comply with PRC government restrictions on foreign investment in our businesses,we could be subject to severe penalties including being prohibited from continuing operations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the agreements that establish the structure for operating ourbusinesses in China do not comply with PRC regulations on foreign investment in internet and other related businesses, or if these regulations ortheir interpretation change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations,” and“Item 3. Key Information—D. Risk Factors-Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement ofPRC laws and regulations could limit the legal protections available to you and us.” Table of Contents103D.Property and EquipmentOur headquarters are located in Shanghai, China, where we currently lease and occupy approximately 5,000 square meters of office space.As of December 31, 2021, we also lease offices in Beijing, Guangzhou, Shenzhen and other cities, with an aggregate area of approximately 1,130square meters of office space. We also have research and development personnel at our office in Silicon Valley, the United States, with an area ofapproximately 460 square meters.Below is a summary of the term of each of our current leases and we plan to renew most of them when they expire:Leased properties Term Area (square meters)Shanghai 1, 2 and 3 years 5,243Beijing 1 and 2 years 479Guangzhou 1.5 years 448Shenzhen 1 year 195Silicon Valley 2 years and 1 month 459Taiwan 1 year and 5 months 8 WorkstationsTotal 6,824ITEM 4B.UNRESOLVED STAFF COMMENTSNone.ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTSYou should read the following discussion and analysis of our financial condition and results of operations in conjunction with ourconsolidated financial statements and the related notes included elsewhere in this annual report on Form 20-F. This discussion may containforward-looking statements based upon current expectations that involve risks and uncertainties. Our actual results may differ materially fromthose anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D.Risk Factors” or in other parts of this annual report on Form 20-F.A.Operating ResultsOverviewWe operate a global portfolio of mobile applications with a large and diverse user base. Our mobile applications include a portfolio ofcontent-rich mobile applications, TouchPal Smart Input and TouchPal Phone book. We leverage our ability to derive sophisticated user insights todeliver targeted advertisements that are relevant to users across our various mobile applications.We generate revenues primarily from mobile advertising. In July 2019, some of our global apps were disabled by Google from the GooglePlay Store and Google Admob, and we were able to bounce back during the second half of 2019, through our diversified content-rich mobileapplications and additional distribution channels. In 2020, we continue to develop our content-rich product portfolio, and to build a global pan-entertainment content ecosystem which focus on online literature, scenario-based content apps and mobile games. In 2021, we implemented abalanced development approach between growth and profitability by continuous restructuring of portfolio products. Our net revenues grew rapidlyby 148% from US$177.9 million in 2019 to US$441.5 million in 2020, but decreased by 38% to US$272.1 million in 2021, due to the restructuringof portfolio products in the Chinese mobile games and scenario-based apps categories. We recorded gross profit of US$162.6 million, US$417.4million and US$239.3 million in 2019, 2020 and 2021, reflecting an improvement of gross profit margin from 91.4% in 2019 to 94.5% in 2020, butdecreased to 87.9% in 2021. Of our total advertising revenue, our portfolio products contributed approximately 85% in 2019, 99% in 2020 and99% in 2021, respectively. We recorded net loss of US$36.8 million, US$47.4 million and US$13.9 million in 2019, 2020 and 2021. Table of Contents104Key Factors Affecting Our Results of OperationsWhile our business is influenced by general factors affecting our industry, our results of operations are more directly affected by companyspecific factors, including the following major factors:Our ability to increase our user baseOur business depends on our ability to grow our global user base. As our revenues are primarily derived from our advertising services, thenumber of users and the frequency with which they use our products and services directly affect the number of advertisements we are able to showand the value of those advertisements. Since our inception, we have experienced rapid growth of the user base of our portfolio products. However,the user base of our portfolio products in December 2021 recorded an average of 18.5 million DAUs, with a decrease of 33% from 27.8 million inDecember 2020.The following table sets forth the average DAUs, MAUs, and DAU/MAU ratios of our global products for each of the months indicated:For the Months Ended Mar 31,Jun 30,Sep 30,Dec 31,Mar 31,Jun 30,Sep 30,Dec 31, 2020 2020 2020 2020 2021 2021 2021 2021 (in millions, except for the percentages) Portfolio products (including online literature) DAUs 25.2 23.9 27.7 27.8 20.3 23.5 18.7 18.5MAUs 89.2 83.5 94.8 85.8 58.6 70.0 57.2 62.6DAU/MAU ratio(1) 28.3% 28.6% 29.2% 32.4% 34.6% 33.6% 32.7% 29.6%Online literature DAUs 7.3 8.1 10.0 10.2 7.5 6.7 5.0 4.2MAUs 29.1 28.4 29.5 29.5 20.1 18.1 13.5 12.3DAU/MAU ratio(1) 25.1% 27.8% 28.5% 33.9% 37.3% 37.0% 37.0% 34.1%(1)DAU/MAU ratio refers to, for any period, the ratio calculated by dividing (i) the average DAUs of certain product(s) in the given month, by (ii) the MAU of such product (s) inthe given month. The average DAUs and MAUs used in calculating the DAU/MAU ratio are rounded to the nearest hundred thousand.The MAUs of our portfolio products decreased from 85.8 million in December 2020 to 62.6 million in December 2021. Despite Google’sdecision in July 2019 to disable some of our global apps from the Google Play Store and Google Admob, we managed to find alternative digitaldistribution platforms and user acquisition channels to keep growing our user base. For example, we used Tencent YingYongBao App Store todistribute our mobile applications and we increased the portion of user acquisition through advertising on third-party platforms in China, such asDouyin and Kuaishou. In 2021, we implemented a balanced development approach between growth and profitability by continuous transition of thestrategy in relation to the acquisition of new users and the retention of existing users, our DAUs and MAUs of our portfolio products bothdecreased from December 2020 to December 2021.In 2021, the DAUs of our portfolio products increased from 20.3 million in March 2021 to 23.5 million in June, and decreased to 18.7million in September and slightly decreased to 18.5 million in December 2021. Table of Contents105We regained our user growth momentum due to a range of factors, including our improved relevance of the content we deliver with ourtechnology, continuous innovation of and improvements in user experience with our products and services and effective user acquisition throughonline distribution platforms and third-party platforms, all of which are guided and driven by our in-depth user insights. The decrease in our userbase in the second half year of 2021 is mainly due to optimizing the resource allocation in accordance with the balanced development strategy.Although we expect our user base to grow, our actual results may be materially different from our expectations due to certain factors inherent in ourbusiness and industry. See “Item 3. Key Information—D. Risk Factors-Risks Related to Our Business—If we fail to maintain or expand our userbase, our business, financial condition and operating results may be materially and adversely affected.” and “Item 3. Key Information—D. RiskFactors—Risks Related to Our Business—We have significant international operations and plan to continue expanding our operations globally. Wemay face challenges and business risks presented by our global operations, which may have a material and adverse impact on our business andoperating results.”As a long-term strategy, we plan to continuously offer innovative and diversified products and services to meet the interests and demandsof our targeted mobile internet users and to further improve our users’ experience with our products to achieve a sustained high level of usersatisfaction, which we believe is the most cost-effective way to attract, engage and retain our users.Effectiveness of monetization.We monetize our user base primarily through mobile advertising. Our advertising revenue increased by 150.5% from US$175.0 million in2019 to US$438.4 million in 2020, and decrease by 39.0% to US$267.3 million in 2021. It is estimated that, of the total advertising revenue, ourportfolio products contributed approximately 85% in 2019, 99% in 2020 and 99% in 2021. In addition, online literature, scenario-based contentapps and mobile games contributed approximately 39.1%, 7.7% and 52.3% of our total advertising revenue in 2021, respectively.The effectiveness of our monetization and our results of operations are affected by a number of factors, including the number of ouravailable advertising spaces, our ability to attract and retain advertising customers, and our ability to deliver targeted advertisements to our users.Our available advertising spacesOur available advertising spaces represent the number, size and prominence of advertisements we can display, which in turn affect ourrevenues and results of operations. As we have continued to launch new content-rich products, and grow our user base, the number of our availableadvertising spaces increased rapidly in recent years. We plan to continue to invest in the development of innovative products catering to users’interests in and demands for relevant content in order to create more advertising spaces. Table of Contents106Our ability to attract and retain advertising customersWe source our advertisers primarily through our network of advertising exchanges and agencies, and to a lesser extent, direct contractualarrangements with individual advertisers. Our revenues and results of operations depend largely on our ability to engage, directly or indirectly,more advertisers with our advertising services. We generate advertising revenue primarily from performance-based advertisements and we alsooffer brand advertising arrangements. In July 2019, some of our global apps were disabled by Google from the Google Play Store and GoogleAdmob, and our access to Google Play Store and Google Admob was disabled too. Our business and financial results was adversely affected as aresult in the second and third quarter of 2019. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—We have been andmay continue to be subject to notices or complaints alleging, among other things, our infringement of copyrights and delivery of illegal orinappropriate content through our products, which could lead to suspension or removal of such products from digital distribution platforms, adecrease of our user base, and a significantly adverse impact on our financial results and our reputation.” We launched our in-house developedadvertising platform, CooTek Ads, afterwards to reduce our dependency on third-party advertising exchanges and to provide high-quality andtailored advertising services. The revenue derived from CooTek Ads have accounted for approximately 14% of our total revenue in 2021. In 2021,our top two advertising customers, which are advertising exchanges, contributed 53.22% of our total revenues. Our business may be materially andadversely affected if our cooperation with these two advertising customers is impaired or terminated. See “Item 3. Key Information—D. RiskFactors—Risks Related to Our Business—We depend on certain third-party advertising exchanges and agencies for a large portion of our mobileadvertising revenues.” We plan to further strengthen our network of advertising exchanges and agencies to serve a larger number of advertisers. Wealso plan to further expand and diversify our advertiser base and to maximize the value of our services to the advertisers by improving our targetingcapability, increasing our user base, developing CooTek Ads while maintaining quality business relationship with third-party advertisingexchanges.Our ability to deliver targeted advertisementsLeveraging our in-depth user insights, we help advertisers reach their desired audiences and our advertising exchange customers chargethem advertising fees based primarily on valid clicks, conversions or other measurable actions of the audience. Our ability to deliveradvertisements that are relevant to our users across our various mobile applications is critical to maintaining high click-through rates or conversionrates, which in turn directly impacts the value of our advertising services. We strive to deepen our understanding of our users’ content interests anddemands in order to improve our targeted delivery of advertising services, which will ultimately increase the effectiveness of the monetization ofour use base and advertising spaces.Effective investment in technology and talentTo maintain our advanced technological capabilities and in order to be able to keep up with any future technological developments, wehave continued to make significant investments in enhancing our technology infrastructure and in acquiring and retaining talent with technologicalexpertise. Our investment in technology and talent has effectively met our needs for technology upgrades and increases in product developmentcapacity along with the rapid growth of our business. As of December 31, 2021, we had 385 full-time employees, of which 228 were softwareengineers and product designers. Our research and development expenses increased by 10.2% from US$26.9 million in 2019 to US$29.7 million in2020, and further increased by 16.1% to US$34.4 million in 2021. In the foreseeable future, we expect to continuously increase our investment inour research and development team and our big data analytics and precise targeted advertising capabilities. Table of Contents107Ability to manage costs and expensesOur results of operations depend on our ability to manage our costs and expenses. We spend primarily on content costs, server andbandwidth costs, telecommunication service charges and expenses related to voice over internet protocol, or VoIP, services, and staff costs. Weexpect the absolute amount of our content costs, bandwidth and server costs and our staff costs to steadily increase as we continue to grow ourbusiness. In order to expand our user base, we also incur sales and marketing expenses to acquire new users through online marketing andpromotion activities. We expect to continue spending on user acquisition channels to further enlarge our user base in the foreseeable future. Weexpect to stabilize and improve our economic efficiency of user acquisition cost for our existing products as a result of the economies of scale andour accumulated knowledge and experience related to user growth. The user acquisition costs for our new products may currently be higher thanour existing products, and we plan to keep improving our economic efficiency of user acquisition cost for our new products as well. In addition, weexpect our costs and operating expenses to decrease as a percentage of our total net revenues, as our business further increases in scale and ouroperating efficiency improves.Impact of COVID-19 on Our Operations and Financial PerformanceA substantial majority of our revenues and workforce are concentrated in China. To contain the spread of COVID-19, the Chinesegovernment has taken certain emergency measures, including extension of the Lunar New Year holidays, implementation of travel bans and lock-downs, blockade of certain roads and closure of factories and businesses, and encouragement of remote working arrangements and cancellation ofpublic activities. Recently, there has been a recurrence of COVID-19 outbreaks in certain provinces of China, including Shanghai, due to the Deltaand Omicron variants. As a result, the Chinese government has implemented similar emergency measures to contain further spread of COVID-19.In 2022, the COVID-19 pandemic may, among other things, (i) reduce or curtail our customers’ advertising expenditures and overalldemand for our services, (ii) increase the volatility of our customers’ advertising expenditure patterns from period-to-period, (iii) delay or cancelour customers’ advertising campaigns, and (iv) increase the volatility of the size and engagement of our active user base, all of which could have amaterial adverse effect on our business, financial condition and results of operations.Throughout the COVID-19 pandemic, we have prioritized the health and safety of our employees by (i) adopting remote workingarrangements for our employees in affected regions, (ii) upgrading our telecommuting system, (iii) monitoring our employees’ health, and(iv) optimizing our technology system to support potential growth in user traffic. However, the remote working arrangement could reduce thecapacity and efficiency of our operations and negatively impact the normal business operations.We continue to monitor the evolving situation and guidance from government and public health authorities and may take additionalactions based on their recommendations. There remains uncertainty around the severity and duration of the COVID-19 pandemic and the measurestaken, or may be taken, in response to the COVID-19 pandemic, which will depend on numerous factors, including, among others, the emergenceof new cases of COVID-19 and its variants, hospitalization and mortality rates, and the availability and distribution of safe and effective treatmentsand vaccines. Accordingly, we cannot reasonably estimate the full impact of the COVID-19 pandemic on our business, financial condition andresults of operations at this time, which may be material. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business andIndustry—We face risks related to natural disasters, health epidemics, including the COVID-19 pandemic, and other outbreaks, which couldsignificantly disrupt our business operations.”As of December 31, 2021, we had US$18.4 million in cash, cash equivalents, and restricted cash. Our cash and cash equivalents primarilyconsist of cash on hand, demand deposits and short-term floating rate financial instruments which can be freely withdrawn or used and haveoriginal maturities of three months or less when purchased. We believe this level of liquidity is sufficient to navigate an extended period ofuncertainty. Table of Contents108Key Components of Results of OperationsNet Revenues. The following table sets forth the components of our net revenues, both in absolute amount and as a percentage of our totalnet revenues, for the periods presented:For the Years Ended December 31, 2019 2020 2021 US$ % US$ % US$ % Net Revenues: Advertising revenue 175,040,033 98.4 438,384,470 99.3 267,266,716 98.2Other revenue 2,843,072 1.6 3,120,761 0.7 4,879,105 1.8Total net revenues 177,883,105 100.0 441,505,231 100.0 272,145,821 100.0Advertising RevenueWe generate advertising revenue primarily from delivering advertisements through our products. Based on our in-depth user insights, wetarget users who are likely to have interests and demands for the advertised products and services. We generally enter into arrangements withadvertising exchanges and agencies that purchase advertising services and spaces from us on behalf of the end advertisers, and we also enter intoadvertising arrangements with individual advertisers directly. Our advertising revenue is primarily generated from performance-basedadvertisements, and we also offer brand advertising arrangements. For performance-based advertisements, we are paid by our advertising exchangecustomers based on the effective price per impression, which is impacted by the number of valid clicks, conversions or other measurable actions ofour users in relation to the advertisements.Revenue from our advertising services accounted for 98.4%, 99.3% and 98.2% of our total net revenues in 2019, 2020 and 2021,respectively. We estimate that, of our total advertising revenue, our portfolio products contributed approximately 85% in 2019, 99% in 2020 and99% in 2021. In addition, online literature, scenario-based content apps and mobile games contributed approximately 39.1%, 7.7% and 52.3% ofour total advertising revenue in 2021, respectively. From time to time, we provide sales rebates to certain advertising agencies to incentivize theirreferral of more brand advertising arrangements to us. Our advertising revenue is presented net of sales rebates to these advertising agencies.We expect our advertising revenue to increase in the foreseeable future as we continue to expand our global user base, improve theeffectiveness of our targeted advertising services, and attract more advertising customers.Other RevenueWe generate other revenue from (i) VIP user subscription fee; (ii) licensing of our TouchPal Smart Input to certain device manufacturersfor pre-installation; and (iii) licensing of online literature works. Revenue from both services in aggregate increased by US$0.7 million from 2018to 2019. We ceased to generate revenue from the sales of virtual items in a live social video community on TouchPal Phonebook in 2019. As aresult, our other revenue stayed stable at US$2.8 million in 2019. Revenue from both services in aggregate increased by US$1.8 million fromUS$3.1 million in 2020 to US$4.9 million in 2021.Cost of revenuesThe following table sets forth our cost of revenues and gross profit, both in absolute amount and as a percentage of our total net revenues,for the periods presented.For the Years Ended December 31,201920202021 US$ % US$ % US$ % Cost of revenues 15,300,854 8.6 24,128,462 5.5 32,825,888 12.1Gross profit 162,582,251 91.4 417,376,769 94.5 239,319,933 87.9 Table of Contents109Our cost of revenues consists primarily of content costs, bandwidth costs, VoIP related expenses and staff costs. Content costs are the feeswe pay to our signed authors and third-party content providers for the publishing and licensing of relevant online literature works. Bandwidth costsare the fees we pay to telecommunications carriers and other service providers for telecommunications and other content delivery-related services.VoIP related expenses are the fees we pay to telecommunications carriers and other service providers for the VoIP services we offer through ourVoIP products such as TouchPal Phonebook. Staff costs consist of salaries and benefits for our employees involved in the operation andmaintenance of our network and mobile applications. Our other costs of revenues include hardware, server and internet equipment depreciationexpenses and internet data center service fees. In the foreseeable future, we expect our total cost of revenues to increase in absolute amount as wecontinue to expand our user base and business operations globally and we expect our cost of revenue as a percentage of net revenue to slightlydecrease and then to remain stable.Operating ExpensesThe following table sets forth the components of our operating expenses, both in absolute amount and as a percentage of our total netrevenues, for the periods presented.For the Years Ended December 31, 2019 2020 2021 US$ % US$ % US$ %Operating expenses: Sales and marketing expenses 157,027,956 88.3 418,261,754 94.7 200,235,468 73.6Research and development expenses 26,935,497 15.1 29,669,615 6.7 34,433,316 12.7General and administrative expenses 16,256,192 9.1 15,017,499 3.4 17,815,839 6.5Other operating (income) loss, net (872,269) (0.5) 2,274,507 0.5 (4,453,462) (1.6)Total operating expenses 199,347,376 112.1 465,223,375 105.4 248,031,161 91.1Sales and Marketing ExpensesOur sales and marketing expenses consist primarily of advertising and promotion expenses, expenses incurred for the user incentiveprograms, salaries and benefits of sales and marketing personnel and fees paid to mobile device manufacturers to pre-install our smart inputproducts. Our user acquisition costs represent expenses for acquiring new users of our products, including expenses on targeted campaigns toacquire users. We expect our sales and marketing expenses to stabilize and optimize in the foreseeable future as we continue to acquire new usersand enlarge our user base but also to improve the efficiency of our user retention and management.Research and Development ExpensesResearch and development expenses consist primarily of salaries and benefits, including share-based compensation, for our technologyand product development personnel, and depreciation and other expenses associated with the use of facilities for research and developmentpurposes. We expect our research and development expenses to increase in the foreseeable future as we expand our team of technology and productdevelopment professionals and continue to invest in our technology infrastructure to enhance our big data analytics.General and Administrative ExpensesOur general and administrative expenses consist primarily of salaries and benefits, including share-based compensation, for our employeesinvolved in general corporate operations, facility rental, as well as professional service fees related to various corporate activities. We expect ourgeneral and administrative expenses to increase in absolute amount in the foreseeable future as we continue to grow our business and incurincreased costs in accounting, compliance, reporting and other costs associated with operating as a public company.Other Operating (Income) Loss, netOther operating income primarily consisted of government subsidies and other operating loss primarily consisted of provision and reversalof contingent losses for an investigation of certain alleged illegal acts of our customers, intellectual property infringement lawsuit andcompensation payments to victims of alleged misconducts of certain third-party advertisers perpetrated on our platform. Table of Contents110Results of OperationsThe following table sets forth a summary of our consolidated results of operations for the periods presented, both in absolute amount andas a percentage of our total net revenues for the periods presented. This information should be read together with our consolidated financialstatements and related notes included elsewhere in this annual report. The results of operations in any period are not necessarily indicative of ourfuture trends.For the Years Ended December 31, 2019 2020 2021 US$ % US$ % US$ %Net revenues: Advertising revenue 175,040,033 98.4 438,384,470 99.3 267,266,716 98.2Other revenue 2,843,072 1.6 3,120,761 0.7 4,879,105 1.8Total net revenues 177,883,105 100.0 441,505,231 100.0 272,145,821 100.0Cost of revenues(1) (15,300,854) (8.6) (24,128,462) (5.5) (32,825,888) (12.1)Gross profit 162,582,251 91.4 417,376,769 94.5 239,319,933 87.9Operating expenses: Sales and marketing expenses(1) (157,027,956) (88.3) (418,261,754) (94.7) (200,235,468) (73.6)Research and development expenses(1) (26,935,497) (15.1) (29,669,615) (6.7) (34,433,316) (12.7)General and administrative expenses(1) (16,256,192) (9.1) (15,017,499) (3.4) (17,815,839) (6.5)Other operating income (loss), net 872,269 0.5 (2,274,507) (0.5) 4,453,462 1.6Total operating expenses (199,347,376) (112.1) (465,223,375) (105.4) (248,031,161) (91.1)Loss from operations (36,765,125) (20.7) (47,846,606) (10.8) (8,711,228) (3.2)Interest income (expenses), net 763,497 0.4 395,629 0.1 (5,689,947) (2.1)Impairment loss of investment (500,032) (0.3)— — (248,140) (0.1)Foreign exchange (losses) gains, net (342,687) (0.2) 91,335 0.0 (219,642) (0.1)Fair value change of derivatives — —— — 1,108,648 0.4Loss before income taxes (36,844,347) (20.7) (47,359,642) (10.7) (13,760,309) (5.1)Income tax expenses (1,714) (0.0) (7,087) (0.0) (51,970) (0.0)Share of loss in equity method investment — —— — (65,084) (0.0)Net loss (36,846,061) (20.7) (47,366,729) (10.7) (13,877,363) (5.1)(1)Share-based compensation was allocated in cost of revenues and operating expenses as follows:For the Years Ended December 31, 2019 2020 2021 US$ US$ US$Cost of revenues 91,597 276,085 142,404Sales and marketing expenses 196,224 212,381 103,324Research and development expenses 2,806,587 3,034,240 1,716,316General and administrative expenses 568,077 1,814,335 1,754,275Total 3,662,485 5,337,041 3,716,319Year Ended December 31, 2021 Compared to Year Ended December 31, 2020Net RevenuesOur net revenues decreased by 38.4% from US$441.5 million in 2020 to US$272.1 million in 2021, primarily due to a decrease in ourmobile advertising revenue.Advertising revenue. Our advertising revenue decreased by 39.0% from US$438.4 million in 2020 to US$267.3 million in 2021. Thedecrease of advertising revenue was primarily due to the restructuring of portfolio products in the Chinese mobile games and scenario-basedcontent apps categories. Table of Contents111Other Revenue. We generate other revenue from (i) VIP user subscription fee; (ii) licensing of our TouchPal Smart Input to certain devicemanufacturers for pre-installation; and (iii) licensing of online literature works. Our other revenue increased by US$1.8 million from 2020 to 2021,primarily due to the increase in revenue from licensing of our Fengdu Novel.Cost of revenuesOur cost of revenues increased by 36.1% from US$24.1 million in 2020 to US$32.8 million in 2021. This increase was primarily due tothe increase in content costs paid to our signed authors and third-party content providers for the publishing and licensing of relevant onlineliterature works, third-party outsourcing fee, salary and payroll expenses associated with cost staff, partially offset by a decrease in operational andmaintenance-related expenses, and share-based compensation expenses.Gross profitAs a result of the foregoing, we recorded gross profit of US$239.3 million in 2021, as compared to gross profit of US$417.4 million in2020. Our gross margin decreased from 94.5% in 2020 to 87.9% in 2021, primarily due to the decrease in our revenues.Operating expensesOur total operating expenses decreased by 46.7% from US$465.2 million in 2020 to US$248.0 million in 2021, primarily due to thedecrease of sales and marketing expenses, partially offset by an increase in our research and development expenses along with the development ofour content-rich portfolio products, as well as an increase in our general and administrative expenses.Sales and marketing expenses. Our sales and marketing expenses decreased by 52.1% from US$418.3 million in 2020 to US$200.2million in 2021. The decrease was primarily due to the continuous transition of the strategy in relation to the acquisition of new users and theretention of existing users which resulted in the reduction of the user acquisition costs.Research and development expenses. Our research and development expenses increased by 15.8% from US$29.7 million in 2020 toUS$34.4 million in 2021. The increase was primarily due to an increase in salary and payroll expenses associated with technology R&D staff andthird-party outsourcing fee, and was partially offset by a decrease in share-based compensation expenses.General and administrative expenses. Our general and administrative expenses increased by 18.7% from US$15.0 million in 2020 toUS$17.8 million in 2021. The increase was primarily due to an increase in salary and payroll expenses associated with G&A staff, professionalservice fee, third-party outsourcing fee and listing expenses, and was partially offset by a decrease in bad debt provision.Other operating income (loss), net. We recorded other operating income of US$4.5 million in 2021, compared to other operating loss ofUS$2.3 million in 2020. Other operating income (loss), net in 2021 primarily consisted of government subsidies received by us.Loss from operationsAs a result of the foregoing, we recorded loss from operations of US$8.7 million in 2021, compared to loss from operations of US$47.8million in 2020.Interest income (expenses), netWe had interest income of US$0.4 million and interest expenses of US$5.7 million in 2020 and 2021, respectively. The increase in ourinterest expense was mainly due to the increase in interest expense on convertible note.Foreign exchange (losses) gains, netWe incurred foreign exchange gain of US$0.1 million and foreign exchange losses of US$0.2 million in 2020 and 2021, respectively,primarily due to the costs incurred on foreign exchange conversion, and appreciation of RMB against U.S. dollar in 2021 as we have positive netliabilities in RMB. Table of Contents112Income tax expenseWe recorded income tax expenses of US$7,087 and US$51,970 in 2020 and 2021, respectively.Net lossAs a result of the foregoing, we recorded a net loss of US$13.9 million in 2021, compared to a net loss of US$47.4 million in 2020.Year Ended December 31, 2020 Compared to Year Ended December 31, 2019Net RevenuesOur net revenues increased by 148% from US$177.9 million in 2019 to US$441.5 million in 2020, primarily due to a substantial increasein our advertising revenue.Advertising revenue. Our advertising revenue increased by 150% from US$175.0 million in 2019 to US$438.4 million in 2020. Theincrease of advertising revenue was driven primarily by the increase of content-rich portfolio products and in the number of impressions we sold onour advertising spaces in 2019 to 2020. Our portfolio products contributed approximately 99% of the revenue in 2020, a significant increase from85% in 2019. The increase in the number of impressions we sold on our advertising spaces was primarily driven by the increase in the averageDAUs of our portfolio products from 24.7 million in December 2019 to 27.8 million in December 2020, as we have made continuous effort inlaunching new content-rich mobile applications and expanding our user base in 2020.Other Revenue. We generate other revenue from (i) VIP user subscription; and (ii) licensing of our TouchPal Smart Input to certain mobiledevice manufacturers for pre-installation. Revenue from both services in aggregate increased by US$0.3 million from 2019 to 2020.Cost of revenuesOur cost of revenues increased by 58% from US$15.3 million in 2019 to US$24.1 million in 2020. This increase was primarily due to theincrease in our content costs, IT infrastructure, bandwidth and server costs and maintenance costs of US$10.3 million, partially offset by a decreaseof US$1.7 million in our VoIP related expenses. The steady increase in our IT infrastructure, bandwidth and server costs and maintenance costs isattributable to our continuous effort to grow our business.Gross profitAs a result of the foregoing, we recorded gross profit of US$417.4 million in 2020, as compared to gross profit of US$162.6 million in2019. Our gross margin increased from 91.4% in 2019 to 94.5% in 2020, primarily due to the rapid growth of our revenues and also due to ourimproved operational efficiency driven by the improvements in our ability to deliver targeted advertisements.Operating expensesOur total operating expenses increased by 133% from US$199.3 million in 2019 to US$465.2 million in 2020, primarily due to theincrease of sales and marketing expenses, research and development expenses and along with the expansion of our global user base and businessoperations, partially offset by a slightly decrease of general and administrative expenses.Sales and marketing expenses. Our sales and marketing expenses increased by 166% from US$157.0 million in 2019 to US$418.3 millionin 2020. The increase was primarily due to the increase in our user acquisition costs in connection with our continuous efforts to grow the user baseof our content-rich portfolio products. Table of Contents113Research and development expenses. Our research and development expenses increased by 10% from US$26.9 million in 2019 toUS$29.7 million in 2020. The increase was primarily due to an increase in salaries and benefits (including share-based compensation) for ourtechnology and product development personnel of US$2.0 million mainly as a result of an increase in the number of our technology and productdevelopment personnel from 350 as of December 31, 2019, to 452 as of December 31, 2020. The increase in research and development expensesreflected our increased efforts in improving our big data analytics and expanding our product offerings.General and administrative expenses. Our general and administrative expenses decreased by 8% from US$16.3 million in 2019 toUS$15.0 million in 2020. The decrease was primarily due to accrued bad debt provision of US$0.4 million in 2020, a decrease of US$3.7 millionfrom US$4.1 million in 2019, and was partially offset by an increase in professional expenses and an increase in costs associated with G&A staffand share-based compensation expenses.Other operating income (loss), net. We recorded other operating loss of US$2.3 million in 2020, compared to other operating income ofUS$0.9 million in 2019. Other operating income (loss), net primarily in 2020 consisted of government subsidies, contingent losses for an ongoinginvestigation of certain alleged illegal acts of our customers, intellectual property infringement lawsuit and compensation payments to victims ofalleged misconducts of certain third-party advertisers perpetrated on our platform while there are no contingent losses for investigation andcompensation payments in 2019.Income (loss) from operationsAs a result of the foregoing, we recorded loss from operations of US$47.8 million in 2020, compared to income from operations ofUS$36.8 million in 2019.Interest income, netWe had interest income of US$0.8 million and US$0.4 million in 2019 and 2020, respectively. Interest income represents interest earnedon our cash, cash equivalents, restricted cash and short-term investments, net of the interest expenses primarily related to our bank borrowings.Foreign exchange (losses) gains, netWe incurred foreign exchange losses of US$0.3 million and foreign exchange gain of US$0.1 million in 2019 and 2020, respectively,primarily due to the costs incurred on foreign exchange conversion, partially offset by appreciation of RMB against U.S. dollar in 2020 as we havepositive net assets in RMB.Income tax expenseWe recorded income tax expenses of US$1,714 in 2019 and US$7,087 in 2020.Net (loss) incomeAs a result of the foregoing, we recorded a net loss of US$47.4 million in 2020, compared to a net income of US$36.8 million in 2019. Table of Contents114TaxationCayman IslandsWe are an exempted company incorporated in the Cayman Islands. The Cayman Islands currently levies no taxes on individuals orcorporations based upon profits, income, gains or appreciation and there is no taxation in the nature of estate duty or inheritance tax. There are noother taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may be applicable oninstruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to any doubletax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions inthe Cayman Islands. In addition, the Cayman Islands does not impose withholding tax on dividend payments.United StatesCompanies registered in the United States are subject to U.S. federal corporate income tax at a rate of 21% and state income tax inCalifornia.Hong KongCompanies registered in Hong Kong are subject to Hong Kong profits tax on the taxable income as reported in their respective statutoryfinancial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate is 8.25% or 16.5% in Hong Kongcommencing on or after April 1, 2018. The profits tax rate is 8.25% for the first HK$2 million of profits, and the profits above that amount will besubject to the tax rate of 16.5%. Under the Hong Kong tax law, our subsidiaries are exempted from income tax on its foreign-derived income andthere are no withholding taxes in Hong Kong on remittance of dividends.PRCEnterprise Income TaxGenerally, our PRC subsidiary, VIEs and their subsidiaries, which are considered PRC resident enterprises under PRC tax law, are subjectto enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of 25%. A “highand new technology enterprise,” or an HNTE, is entitled to a favorable statutory tax rate of 15% and this qualification is reassessed by relevantgovernment authorities every three years. Our PRC subsidiary, Shanghai Chule obtained High and New Technology Enterprise status from 2017 to2019 and renewed the status from 2020 to 2022. It enjoyed a preferential tax rate of 15% in 2019 and 2020 to the extent it has taxable income underthe PRC Enterprise Income Tax Law. If our holding company in the Cayman Islands or any of our subsidiaries outside the PRC is considered as aPRC resident enterprise for tax purposes, then our global income will be subject to PRC enterprise income tax at the rate of 25%. See “Item 3. KeyInformation—D. Risk Factors—Risks Related to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified as aPRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on ourresults of operations and the value of your investment.”Value-Added TaxWe are subject to VAT at a rate of 6% on the services we provide to advertising customers in the PRC, less any deductible VAT we havealready paid or borne. We are also subject to surcharges on VAT payments in accordance with PRC law. Table of Contents115Withholding Tax on DividendsDividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to awithholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between the PRC and theHong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes onIncome and Capital and receives approval from the relevant tax authority. If our Hong Kong subsidiary satisfies the requirements under the taxarrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject towithholding tax at a reduced tax rate of 5%. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Thereare significant uncertainties under the EIT Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRCsubsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.”B.Liquidity and Capital ResourcesCash Flows and Working CapitalThe following table sets forth a summary of our cash flows for the periods presented:For the Years EndedDecember 31 2019 2020 2021 US$ US$ US$Summary Consolidated Cash Flow Data: Net cash used in operating activities (15,664,279) (851,758) (51,043,689)Net cash used in investing activities (5,330,927) (2,644,295) (1,778,533)Net cash (used in) provided by financing activities (3,796,484) (8,500,234) 20,899,885Net decrease in cash, cash equivalents, and restricted cash (24,791,690) (11,996,287) (31,922,337)Cash, cash equivalents, and restricted cash at beginning of year 84,859,915 59,966,031 49,622,714Effect of exchange rate changes on cash, cash equivalents, and restricted cash (102,194) 1,652,970 730,832Cash, cash equivalents, and restricted cash at end of year 59,966,031 49,622,714 18,431,209Historically, we have financed our operations primarily through the proceeds we received from private issuances of preferred shares, loansfrom commercial banks, public offering of equity and debt securities and other financing activities. In January and March 2021, we issued twoconvertible notes with aggregate principal of US$30.0 million. As of December 31, 2020 and 2021, we had US$49.6 million and US$18.4 millionin cash, cash equivalents and restricted cash, respectively. Our cash and cash equivalents consist of cash on hand, demand deposits and floating ratefinancial instruments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased.Our restricted cash represents amounts held in our bank account as guarantee deposit for payments processing services and loan facility providedby the bank. Table of Contents116On January 19, 2021, we issued the January 2021 Note to YA II PN, Ltd, a Cayman Islands exempt limited partnership. The January 2021Note has a conversion price of the lower of (1) US$4.20 per ADS, or (2) 88% of the lowest daily VWAP, being the dollar volume-weighted averageprice for ADSs on the New York Stock Exchange, during the ten consecutive trading days immediately preceding the conversion date or other dateof determination, but not lower than the floor price as prescribed in the January 2021 Note (the “Conversion Price of January 2021 Note”). TheConversion Price of January 2021 Note is subject to adjustment in the case of a subdivision, combination or re-classification. The principal and theinterest payable under the January 2021 Note will mature on January 19, 2022, unless earlier converted or redeemed by us. At any time beforeJanuary 19, 2022, YA II PN, Ltd may convert the January 2021 Note at their option into our Class A ordinary shares represented by ADSs at theConversion Price of January 2021 Note. Pursuant to the January 2021 Note, YA II PN, Ltd shall not sell such number of ADSs in anycalendar month that would result in gross proceeds received by it in excess of the greater of (1) 30% of the dollar trading volume during suchcalendar month or (2) US$1,700,000, which shall not apply with respect to any sales of the ADSs at prices greater than or equal to US$4.20 perADS. YA II PN, Ltd has also agreed under the securities purchase agreement that it shall not directly or indirectly, engage in any short salesinvolving our securities during the period commencing on the date thereof and ending when no convertible note remains outstanding. As of the dateof this annual report, the January 2021 Note has been converted to 3,933,317 ADSs with the average conversion price of US$2.54 per ADS.On January 25, 2021, we entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN, Ltd. for the offer and saleof up to US$20,000,000 of the ADSs. We will be able to sell up to US$20,000,000 of our ADSs at our request any time during the 36 monthsfollowing the date of the SEDA. The ADSs would be purchased pursuant to the SEDA at 90% of the Market Price, being the lowest daily VWAP(as defined below) of the ADSs during the five consecutive trading days commencing on the trading day following the date we submit an advancenotice to Investor. The purchase would be subject to certain limitations, including that Investor could not purchase any ADSs that would result in itand its affiliates owning more than 4.99% of our then outstanding share capital. The YA II PN, Ltd. has agreed that, during the term of the SEDA,neither YA II PN, Ltd. nor its affiliates will engage in any short sales or hedging transactions with respect to our Class A ordinary shares or ADSs.“VWAP” means, for any trading day, the daily volume weighted average price of the ADSs for such date on the New York Stock Exchange asreported by Bloomberg L.P. during regular trading hours. Table of Contents117On March 19, 2021, we issued the March 2021 Note to YA II PN, Ltd. On October 29, 2021, we entered into a letter agreement with YA IIPN, Ltd. to amend and restate the March 2021 Note so as to, among others, extend the maturity date to August 31, 2022 (the “RescheduledMarch 2021 Note”). The Rescheduled March 2021 Note has a fixed conversion price of US$3.00 per ADS (the “Fixed Conversion Price”). TheFixed Conversion Price is not subject to adjustment except in the case of a subdivision, combination or re-classification. The principal and theinterest payable under the Rescheduled March 2021 Note will mature on August 31, 2022, unless earlier converted or redeemed by us. At any timebefore August 31, 2022, YA II PN, Ltd. may convert the Rescheduled March 2021 Note at their option into our Class A ordinary shares representedby ADSs at the Fixed Conversion Price. Beginning on June 1, 2021 and continuing on the first day of each calendar month thereafter throughAugust 1, 2022, the principal amount of the Rescheduled March 2021 Note plus an 8% redemption premium (“Payment Premium”) and plusaccrued and unpaid interest will be subject to monthly redemption (“Monthly Redemption”). Under Monthly Redemption, we shall redeem anapplicable redemption amount in accordance with the redemption schedule provided in the Rescheduled March 2021 Note, which is subject to prorata adjustment to reflect the conversion or redemption otherwise effected pursuant to the Rescheduled March 2021 Note contemporaneous with orprior to the scheduled redemption date, in cash, ADSs through conversion of the Rescheduled March 2021 Note (at any time after the applicableredemption date), or a combination of both at our option. With respect to each Monthly Redemption all or partially in ADSs, the conversion priceshall be the lower of (1) the Fixed Conversion Price, or (2) 100% of the lowest daily VWAP (the dollar volume-weighted average price for ADSson the New York Stock Exchange) during the ten consecutive trading days immediately preceding the date of conversion (the “Variable ConversionPrice”). In addition, the holder of Rescheduled March 2021 Note may, at its option, convert an additional amount per month equal to US$1,000,000of principal, plus accrued and unpaid interests thereon, plus the applicable Payment Premium, at a conversion price based on the VariableConversion Price if the Variable Conversion Price for such conversions are US$2.00 or greater. In the event that the daily VWAP on each of thefive consecutive trading days immediately prior to the scheduled redemption date exceeds a price equal to 108% of the Fixed Conversion Price,then no cash redemption shall be due on such scheduled redemption date. We also have the right, but not the obligation, to redeem (“OptionalRedemption”) a portion or all amounts outstanding under the Rescheduled March 2021 Note prior to August 31, 2022 at a cash redemption priceequal to the outstanding principal balance to be redeemed, plus a 15% redemption premium and plus accrued and unpaid interest, if any; providedthat the trading price of the ADSs is less than Fixed Conversion Price, and we provide the holder of the Rescheduled March 2021 Note at least tenbusiness days’ prior written notice of its desire to exercise an Optional Redemption. The holder shall have ten business days to elect to convert allor any part of the Rescheduled March 2021 Note after receiving a redemption notice, in which case the redemption amount shall be reduced by theamount so converted. Pursuant to the Rescheduled March 2021 Note, YA II PN, Ltd. shall not sell such number of ADSs in any calendar monththat would result in gross proceeds received by it in excess of the greater of (1) 30% of the dollar trading volume during such calendar month or(2) US$3,290,000, which shall not apply with respect to any sales of the ADSs at prices greater than or equal to US$3.00 per ADS. YA II PN, Ltd.has also agreed under the securities purchase agreement that it shall not directly or indirectly, engage in any short sales involving our securitiesduring the period commencing on the date thereof and ending when no convertible note remains outstanding.We incurred a net loss of US$36.8 million and negative cash flows from operations of US$15.7 million in 2019. We incurred a net loss ofUS$47.4 million and negative cash flows from operations of US$0.9 million in 2020. We incurred a net loss of US$13.9 million and negative cashflows from operations of US$51.0 million in 2021. We accumulated a deficit of US$214.8 million as of December 31, 2021. We had positiveworking capital, which equals the result of current assets minus current liabilities, of US$33.3 million and negative working capital of US$42.1million and US$11.2 million as of December 31, 2019, 2020 and 2021, respectively.The liquidity of our company is dependent on our ability to enhance our operating cash flow, obtain capital financing from investors andborrowings from commercial banks to fund our general operations including marketing activities. Our ability to continue as a going concern isdependent on our ability to successfully execute our business plans including the implementation of a balanced growth strategy and an effectivefinancial management which can contribute to the optimization of the operating cost and expense structure. To implement the plans, we willcontinue to improve the stickiness of our existing users by offering higher quality and diversified contents and user incentive program. In order tooptimize cost structure and improve operating efficiency, we will continue to implement various measures to control our costs and expenses, byreducing various discretionary expenditures, including spending on user acquisition, labor costs and other operating expenses. We will furtherstrengthen the monetization capability by diversifying our revenue structure and improving the return on investment of our key products. Withrespect to the non-compliance notification from NYSE related to our trading price, we plan to change our ADS Ratio which is anticipated to beeffective on or about May 9, 2022, subject to the effectiveness of the post-effective amendment to the ADS Registration Statement on Form F-6 onor before that date, to cure this deficiency. In addition, we will continue to seek external financing to improve our liquidity position to fundcontinuing operations, though there is no assurance that we will be successful in obtaining sufficient funding on terms acceptable to us. While therecan be no assurance that we will be able to refinance our short-term bank borrowings as they become due, historically, we had renewed our shortterm credit facility upon the maturity of the loans and believe we will continue to be able to do so. Table of Contents118We believe that, with the implementation of the above plans, we are of the view that we have addressed contrary indicators of our abilityto continue as a going concern. We believe that, with the foregoing potential sources of cash flow and potential cost control measures, we havesufficient financial resources for continuous operations and will be able to meet its payment obligations from operations for the next twelve monthsfrom the issuance of the consolidated financial statements.We may, however, need additional capital in the future. If we determine that our cash requirements exceed the amount of cash and cashequivalents we have on hand at the time, we may seek to issue equity or debt securities or obtain credit facilities. The issuance and sale ofadditional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed obligationsand could result in operating covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or onterms acceptable to us, if at all.The total outstanding balance of our short-term bank borrowings as of December 31, 2021 was US$9.1 million. We have entered into thefollowing short-term loan transactions:●We entered into a credit facility agreement with a commercial bank initially in July 2016, which was renewed in October 2019 andfurther renewed in June 2020 and matured in June 2021, under which we could borrow up to US$11.0 million collateralized by ouraccounts receivable. In June 2021, we renewed the bank credit facility under which we can borrow up to US$10.0 million, withmaturity date in June 2022 and collateralized by our accounts receivable. In 2021, we have aggregately drawn down from the creditfacility of US$74.7 million and repaid US$79.8 million with the weighted average interest rate of 5.15%.●In July 2021, we entered into a one-year credit facility agreement with a commercial bank under which we can draw down up toUS$1.6 million by July 2022. In December 2021, we entered into a one-year loan agreement with another commercial bank whichwe can draw down US$1.6 million by December 31, 2021. The interest rates for these two agreements are the LPR. In 2021, we havedrawn down US$1.6 million from each of the two agreements, and we have not made repayment as of the date of this annual report.●In March 2021, we entered into two short-term interest-free loan agreements with a local Hi-tech industrial park, under which wereceived a total amount of US$5.4 million and fully repaid the amount by the end of August 2021.While there can be no assurance that we will be able to refinance our short-term bank borrowings as they become due, historically, wehave renewed or rolled over most of our short-term bank loans upon the maturity of such loans and believe we will continue to be able to do so.Meanwhile, we will seek additional credit facility with more financing banks. Additionally, we continue to monitor the daily expenditure regardingmatters such as launching new products or upgrading existing products for experimental features, investing in research and development and ITinfrastructure, spending in user acquisition and marketing expenses and determine the future business development plan when the necessaryfinancial resources are available.We believe that our current cash, cash equivalents and restricted cash, the available credit under our existing credit facilities, and ouranticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures in theordinary course of business for the next 12 months. We may, however, need additional capital for business expansion in the future.As of December 31, 2021, 74.1% of our cash, cash equivalents and restricted cash were held in China, and 23.9% were held by the VIEsand denominated in Renminbi. Most of the remaining cash and cash equivalents we held as of December 31, 2021, were held in Hong Kong andUnited States, and mainly denominated in Hong Kong dollars and U.S. dollars. Although we consolidate the results of the VIEs, we only haveaccess to the assets or earnings of the VIEs through our contractual arrangements with the VIEs and their shareholders. See “Item 4. Information onthe Company—C. Organizational Structure.” For restrictions and limitations on liquidity and capital resources as a result of our corporate structure,see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.” Table of Contents119To utilize the proceeds we received from our public offerings, 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. However,most of these uses are subject to PRC regulations. Foreign direct investment and loans must be approved by and/or registered with SAFE and itslocal branches. The total amount of loans we can make to our PRC subsidiary cannot exceed statutory limits and must be registered with the localcounterpart of SAFE. The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amountof total investment as approved by the Ministry of Commerce or its local counterpart and the amount of registered capital of such foreign-investedcompany. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—PRC regulation of loans to, and directinvestment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from usingthe proceeds of our initial public offering to make loans to our PRC subsidiary and consolidated affiliated entities, or to make additional capitalcontributions to our PRC subsidiary.”A portion of our future revenues are likely to continue to be in the form of Renminbi. Under existing PRC foreign exchange regulations,Renminbi may be converted into foreign exchange for current account items, including profit distributions, interest payments and trade-andservice-related foreign exchange transactions without prior SAFE approval by following certain routine procedural requirements. However, currentPRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any, determined in accordance withChinese accounting standards and regulations. Our PRC subsidiary is required to set aside at least 10% of its after-tax profits after making upprevious years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registeredcapital. These reserves are not distributable as cash dividends. See “Item 3. Key Information—D. Risk Factors-Risks Related to Our CorporateStructure—We may rely on dividends paid by our PRC subsidiary to fund cash and financing requirements. Any limitation on the ability of ourPRC subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders ofthe ADSs and our ordinary shares.”Operating ActivitiesNet cash used in operating activities in 2021 was US$51.0 million, as compared to net loss of US$13.9 million in the same period. Thedifference was primarily due to (i) a decrease of US$48.4 million in accounts payable driven primarily by the payments of our user acquisitioncosts, (ii) a decrease of US$2.4 million in deferred revenue and (iii) a decrease of US$4.8 million in accrued expenses and other current liabilities,partially offset by an increase of US$7.0 million in accounts receivables and US$1.3 million in prepaid expenses and other current assets. Theprincipal non-cash items affecting the difference between our net income and our net cash used in operating activities in 2021 primarily consistedof (i) US$5.6 million in amortization of issuance cost and debt discounts related to convertible notes, (ii) US$3.8 million in depreciation expenses,and (iii) US$3.7 million in share-based compensation expenses, and partially offset by US$1.1 million in Change in fair value of derivatives.Net cash used in operating activities in 2020 was US$0.9 million, as compared to net loss of US$47.4 million in the same period. Thedifference was primarily due to (i) an increase of US$33.7 million in accounts payable driven primarily by the increase of our user acquisitioncosts, (ii) an increase of US$1.3 million in deferred revenue and (iii) an increase of US$3.6 million in accrued expenses and other current liabilities,partially offset by an increase of US$4.1 million in prepaid expenses and other current assets. The principal non-cash items affecting the differencebetween our net income and our net cash used in operating activities in 2020 primarily consisted of (i) US$5.3 million in share-based compensationexpenses, and (ii) US$3.8 million in depreciation expenses.Net cash used in operating activities in 2019 was US$15.7 million, as compared to net loss of US$36.8 million in the same period. Thedifference was primarily due to (i) an increase of US$13.0 million in accounts payable driven primarily by the increase of our user acquisitioncosts, (ii) an increase of US$3.4 million in deferred revenue, and (iii) an increase of US$3.2 million in accrued expenses and other currentliabilities, partially offset by an increase of US$7.9 million in accounts receivables and increase of US$2.9 million in prepaid expenses and othercurrent assets. The principal non-cash items affecting the difference between our net income and our net cash used in operating activities in 2019primarily consisted of (i) US$4.1 million in provision for allowance of doubtful accounts, (ii) US$3.7 million in share-based compensationexpenses, and (iii) US$3.0 million in depreciation expenses. The increase in our accounts receivable was primarily due to the significant increase inour advertising revenue in 2019. Contractually our advertising customers are typically required to make payments in the month followingthe month in which the advertisements were delivered. In practice, we typically allow a payment term of 30 to 90 days. Table of Contents120Investing ActivitiesNet cash used in investing activities in 2021 was US$1.8 million, primarily due to (i) purchase of property, plant and equipment of US$1.5million and (ii) purchase of long-term investment of US$0.3 million.Net cash used in investing activities in 2020 was US$2.6 million, primarily due to (i) purchase of property, plant and equipment of US$2.9million and (ii) purchase of short-term investment of US$13 million, offset by the mature and sale of short-term investment of US$13.5 million.Net cash used in investing activities in 2019 was US$5.3 million, primarily due to (i) purchase of property, plant and equipment of US$4.8million and (ii) purchase of short-term investment of US$0.6 million.Financing ActivitiesNet cash provided by financing activities in 2021 was US$20.9 million, primarily due to (i) proceeds from bank borrowings of US$77.8million, (ii) proceeds from issuance of convertible notes, net of debt discounts and issuance cost of US$27.2 million, (iii) proceeds from issuance ofa registered direct offering of US$1.4 million, and (iv) proceeds from issuance of ordinary shares upon exercise of options of US$0.1 million,partially offset by (i) repayment of bank borrowing of US$79.8 million, (ii) repayment of convertible notes of US$4.2 million, (iii) payment ofshare repurchase of US$1.3 million, and (iii) payment of issuance costs for the issuance of ordinary shares upon exercise of options of US$0.2million.Net cash used in financing activities in 2020 was US$8.5 million, primarily due to (i) payment of share repurchase of US$9.5 million,(ii) repayment of bank borrowing of US$31 million, and (iii) payment of issuance costs for the issuance of ordinary shares upon exercise of optionsof US$0.8 million, partially offset by (i) proceeds from bank borrowings of US$32.5 million, and (ii) proceeds from issuance of ordinary sharesupon exercise of options of US$0.3 million.Net cash used in financing activities in 2019 was US$3.8 million, primarily due to (i) payment of share repurchase of US$12.3 million,(ii) repayment of bank borrowing of US$5.1 million, and (iii) payment of issuance costs for the initial public offering of US$0.8 million, partiallyoffset by (i) proceeds from bank borrowings of US$14.1 million, and (ii) proceeds from issuance of ordinary shares upon exercise of options ofUS$0.3 million.Material Cash RequirementsOur material cash requirements as of December 31, 2021 and any subsequent interim period primarily include our capital expenditures,operating lease obligations and short-term debt obligations under our Rescheduled March 2021 Note.We made capital expenditures of US$4.8 million, US$2.9 million and US$1.5 million in 2019, 2020 and 2021, respectively. In theseperiods, our capital expenditures were mainly used for purchases of property and equipment, including servers and other IT equipment. We plan tocontinue to make capital expenditures to meet the needs that result from the expected growth of our business.Our operating lease obligations consist of the commitments under the lease agreements for our office premises. We lease our officefacilities under non-cancelable operating leases with various expiration dates. Our leasing expense was US$1.7 million, US$1.5 million andUS$1.7 million for the years ended December 31, 2019, 2020 and 2021, respectively. The majority of our operating lease commitments are relatedto our office lease agreements in China.The January 2021 Note represents future maximum commitment relating to the principal amount and interests in connection with theissuance of US$10 million in aggregate principal amount of convertible notes bearing an annual interest rate of 5%, which has matured onJanuary 19, 2022.The Rescheduled March 2021 Note represents future maximum commitment relating to the principal amount and interests in connectionwith the issuance of US$20 million in aggregate principal amount of convertible notes bearing an annual interest rate of 5%, which will mature onAugust 31, 2022. Table of Contents121We received two non-compliance notifications from NYSE, and if we do not satisfy the NYSE requirements for continued listing, ourADS could be delisted from NYSE. Delisting from NYSE may trigger our obligation to make cash redemption of our convertible notes whoseoutstanding amount in aggregate was US$11.2 million as of December 31, 2021 and immediate and accelerated repayment of bank borrowing ofUS$1.6 million outstanding as of December 31, 2021. For a detailed description of the non-compliance notifications from NYSE and theunderlying risks, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our ADSs—If we do not satisfy the NYSE requirements forcontinued listing, our ADS could be delisted from NYSE” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Wehad incurred net loss, negative cash flows from operating activities and negative working capital in the past, and we may not achieve or sustainprofitability.”We intend to fund our existing and future material cash requirements with our existing cash balance and future cash from our operationsand financings. We will continue to make cash commitments, including capital expenditures, to support the growth of our business.We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We donot have retained or contingent interests in assets transferred. We have not entered into contractual arrangements that support the credit, liquidity ormarket risk for transferred assets. We do not have obligations that arise or could arise from variable interests held in an unconsolidated entity, orobligations related to derivative instruments that are both indexed to and classified in our own equity, or not reflected in the statement of financialposition.Other than as discussed above, we did not have any significant capital and other commitments, long-term obligations or guarantees as ofDecember 31, 2021.Holding Company StructureCooTek (Cayman) Inc. is a holding company with no material operations of its own. We conduct our operations primarily through ourPRC subsidiary, our Hong Kong subsidiaries and the VIEs in China. As a result, CooTek (Cayman) Inc.’s ability to pay dividends depend ondividends paid by our PRC and Hong Kong subsidiaries. If our existing subsidiaries or any newly formed ones incur debt on their own behalf in thefuture, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiary inChina is permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards andregulations. Under PRC law, each of our subsidiary and the VIEs in China is required to set aside at least 10% of its after-tax profits each year, ifany, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital. In addition, our wholly foreign-ownedsubsidiary in China may allocate a portion of its after-tax profits based on PRC accounting standards to enterprise expansion funds and staff bonusand welfare funds at its discretion, and the VIEs may allocate a portion of their after-tax profits based on PRC accounting standards to adiscretionary surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends.Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our PRCsubsidiary has not paid dividends and will not be able to pay dividends until it generates accumulated profits and meets the requirements forstatutory reserve funds.C.Research and Development, Patents and Licenses, Etc.See “Item 4. Information On the Company—B. Business Overview—Intellectual Property.”D.Trend InformationOther than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or eventssince January 1, 2021, to December 31, 2021, that are reasonably likely to have a material adverse effect on our net revenues, income, profitability,liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results orfinancial conditions. Table of Contents122E.Critical Accounting EstimatesWe prepare our consolidated financial statements in accordance with U.S. GAAP, which requires our management to make estimates thataffect the reported amounts of assets, liabilities and disclosures of contingent assets and liabilities at the balance sheet dates, as well as the reportedamounts of revenues and expenses during the reporting periods. To the extent that there are material differences between these estimates and actualresults, our financial condition or results of operations would be affected. We base our estimates on our own historical experience and otherassumptions that we believe are reasonable after taking account of our circumstances and expectations for the future based on availableinformation. We evaluate these estimates on an ongoing basis.We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that werehighly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period toperiod or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financialcondition or results of operations. There are other items within our financial statements that require estimation but are not deemed critical, asdefined above. Changes in estimates used in these and other items could have a material impact on our financial statements. For a detaileddiscussion of our significant accounting policies and related judgments, see “Notes to Consolidated Financial Statements–Note 2 Summary ofSignificant Accounting Policies” of our audited consolidated financial statements included in this annual report. We believe the following criticalaccounting estimates are used in the preparation of our financial statements.Revenue Recognition - Sales incentivesWe provide sales incentives to customers in the form of sales rebates which entitle them to receive reductions in the price. We account forthese incentives granted to customers as variable consideration and records it as reduction of revenue. Estimated rebates are determined based onagreed rates, customer spending and amount deposited by the customers. We regularly review the information related to these estimates and adjustthe amount accordingly.Share-based CompensationOur share-based payment transactions with our employees are measured based on the grant date fair value of the equity instrument weissued and recognized as compensation expense over the requisite service period based on the straight-line method, with a corresponding impactreflected in additional paid-in capital.Our share-based compensation expenses are measured at the fair value of the awards as calculated under the binomial option-pricingmodel. Changes in the assumptions used in the binomial model could significantly affect the fair value of stock options and hence the amount ofcompensation expenses we recognize in our consolidated financial statements. Using this model, fair value is calculated based on assumptions withrespect to (i) expected volatility of our ADS price, (ii) contractual term stated in the agreement (iii) expected dividend yield on our ADS, and(iv) risk-free interest rates, which are based on quoted U.S. Treasury rates for securities with maturities approximating the options’ expected lives.Expected volatility is estimated based on annualized standard deviation of daily stock price return of comparable companies for the period beforevaluation date and with similar span as the expected expiration term. The expected dividend yield is zero as we have never paid dividends and donot currently anticipate paying any in the foreseeable future.Income TaxCurrent income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense itemswhich are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. We follow theasset and liability method of accounting for income taxes.In accordance with the provisions of ASC 740, we recognize in the financial statements the benefit of a tax position if the tax position is“more likely than not” to prevail based on the facts and technical merits of the position. Tax positions that meet the “more likely than not”recognition threshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized uponsettlement. We estimate liability for unrecognized tax benefits which are periodically assessed and may be affected by changing interpretations oflaws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute of limitations. The ultimateoutcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, in some cases, appeal orlitigation process. Table of Contents123Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statementscarrying amounts and tax bases of assets and liabilities by applying enacted statutory tax rates that will be in effect in the period in which thetemporary differences are expected to reverse. We consider positive and negative evidence when determining whether some portion or all of thedeferred tax assets will not be realized. This assessment considers, among other matters, the nature, frequency and severity of current andcumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, historical results of operations, and tax planningstrategies. We record a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more likely than not thatsome portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rate is recognized in ourconsolidated financial statements in the period of change. The ultimate realization of deferred tax assets is dependent upon the generation of futuretaxable income during the periods in which those temporary differences become deductible.Recent Accounting PronouncementsA list of recently issued accounting pronouncements that are relevant to us is included in “Summary of Significant Accounting Policies-(z) Recent accounting pronouncements” of our audited consolidated financial statements included elsewhere in this annual report.ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEESA.Directors and Senior ManagementThe following table sets forth information regarding our directors and executive officers as of the date of this annual report.Directors and Executive Officers Age Position/TitleKarl Kan Zhang 41Chairman of the Board of Directors and Chief Technology OfficerSusan Qiaoling Li 43Director, Chief Executive Officer, and PresidentMichael Jia Liang Wang 42DirectorJim Jian Wang 42DirectorDuane Ziping Kuang 58DirectorGlen Qian Sun 48DirectorHaibing Wu 49Independent DirectorJue Yao 48Independent DirectorRobert Yi Cui 39Chief Financial OfficerMr. Karl Kan Zhang co-founded our company in 2008 and has served as Chairman of the Board of Directors since March 2012 and ChiefTechnology Officer since April 2020. Mr. Zhang also served as the Chief Architect from August 2008 to April 2020. Prior to founding ourcompany, Mr. Zhang served as a research and development manager at Microsoft Advanced Technology Center from 2004 to 2008. Prior to that,Mr. Zhang served as a software engineer at Intel China Software Lab from 2002 to 2004. Mr. Zhang received his bachelor’s degree in mechanicaland electronic engineering from Shanghai University in 2002.Ms. Susan Qiaoling Li co-founded our company in 2008, and has served as our President since April 17, 2018, our director sinceOctober 2012, and our Chief Executive Officer since November 2021. Ms. Li first served as our Chief Marketing Officer in 2008, and was thenappointed as our Head of Global Business Division in September 2015. Prior to founding our company, Ms. Li served as a program manager inMicrosoft China Co., Ltd.’s Shanghai Branch from 2005 to 2008, where she gained extensive experience in developing software and managing keyaccounts. Prior to that, Ms. Li served as a software quality engineer at Intel (China) Co., Ltd from 2003 to 2005. Ms. Li received her bachelor’sdegree in automation from Tsinghua University in 2000 and her master’s degree in computer engineering from North Carolina State University in2003.Mr. Michael Jia Liang Wang co-founded our company in 2008 and has served as a director since March 2012. Prior to founding ourcompany, Mr. Wang served as a product manager at Microsoft R&D Group in China from 2005 to 2008. Mr. Wang served as our Chief ExecutiveOfficer since August 2008 to November 2021. Mr. Wang received his bachelor’s and master’s degrees in electronic engineering from Shanghai JiaoTong University in 2002 and 2005, respectively. Table of Contents124Mr. Jim Jian Wang co-founded our company in 2008 and has served as our director since July 2014. Mr. Wang has served as our ChiefTechnology Officer from August 2008 to April 2020. Prior to founding our company, Mr. Wang served as a development team leader at NTT Datain Tokyo, Japan from 2007 to 2008, where he developed a web crawler program. Prior to that, Mr. Wang served as a project manager in ShanghaiJT-Omron Software Co., Ltd from 2002 to 2007. Mr. Wang received his bachelor’s degree in mechatronic engineering and automation fromShanghai University in 2002.Mr. Duane Ziping Kuang has served as our director since August 2012. Mr. Kuang founded Qiming Venture Partners in 2006, a privateequity firm affiliated to one of our major shareholders, and has been serving as its managing partner since then. Mr. Kuang also serves on theboards of companies invested by Qiming Venture Partners. Mr. Kuang has over 20 years of operational and investment experience with technologycompanies. Prior to founding Qiming Venture Partners, Mr. Kuang was a director of Intel Capital China since 1999. Prior to that, Mr. Kuang servedas a general manager in Cisco Systems since 1994. Mr. Kuang received his master’s degree in computer science from Stanford University and hisMBA from the University of California Berkeley.Mr. Glen Qian Sun has served as our director since July 2014. Mr. Sun is a partner of Sequoia Capital China, a private equity firmaffiliated to one of our major shareholders. Mr. Sun has also served on the board of 500.com Limited (NYSE: WBAI) as an independent directorsince 2013. Prior to joining Sequoia Capital China in 2006, Mr. Sun served as an associate at General Atlantic LLC, a private equity firm, from2003 to 2005, focusing on technology and internet related investment in China. Mr. Sun also worked as a management consultant at Monitor Groupfrom 1997 to 1999. Mr. Sun received his bachelor’s degree in applied mathematics from Harvard College in 1997, and his MBA from HarvardBusiness School and J.D. from Harvard Law School in 2003.Mr. Haibing Wu has served as an independent director since September 2018. Mr. Wu has also served as an independent director ofTongcheng Travel Holdings Limited (HKEX: 00780) since November 2018. Mr. Wu has over 20 years of experience in finance. Mr. Wu has beenserving as the investment partner of Sequoia Capital since June 2019. Prior to that, Mr. Wu served as a partner of Vision Knight Capital, a leadingprivate equity firm from April 2018 to June 2019 and the chief financial officer at Plateno Hotels Group (formerly known as 7 Days GroupHoldings Limited) from October 2007 to March 2018. Mr. Wu worked at PricewaterhouseCoopers in the United States from May 2000 toFebruary 2006 and later worked as a senior manager in the assurance department of PricewaterhouseCoopers Zhong Tian CPAs Limited Companyfrom February 2006 to October 2007. Mr. Wu received his bachelor’s degree in engineering economics from Shanghai Jiao Tong University in1994, and master’s degree in business administration from Michigan State University in 2000.Ms. Jue Yao has served as our independent director since September 2018. Ms. Yao has also served on the board of China RenaissanceHoldings Limited (HKEx: 1911) as an independent non-executive director and chairman of the audit committee since September 2018. Ms. Yao hasextensive experience in accounting and corporate finance. Ms. Yao served as the chief financial officer of Qihoo 360 Technology Co., Ltd., orQihoo 360, a company formerly listed on the New York Stock Exchange (NYSE: QIHU) and currently listed on the Shanghai Stock Exchange(SSE: 601360), from 2014 to April 2018. Since 2006, Ms. Yao has held various positions at Qihoo 360, including its financial director and vicepresident of finance from 2008 to 2012 and its co-chief financial officer from 2012 to 2014. From 1999 to 2006, Ms. Yao held various positions,including financial director, at Sohu.com Inc. From 1996 to 1999, Ms. Yao was a senior auditor at KPMG. Ms. Yao received her bachelor’s degreein international accounting from the University of International Business and Economics in 1996. Ms. Yao is a member of the Chinese Institute ofCertified Public Accountants.Mr. Robert Yi Cui has served as our Chief Financial Officer since August 24, 2020. Mr. Cui has tendered his resignation from the positionas our Chief Financial Officer, effective on April 30, 2022. He will continue to serve as our consultant. Mr. Jacky Junkai Lin, our financialcontroller since March 2020 and our interim Chief Financial Officer from April 30 to August 24, 2020, will assume the role of the interim ChiefFinancial Officer, effective on the same date and until a new Chief Financial Officer is appointed. Prior to joining CooTek, Mr. Cui worked in theHong Kong office of Investment Banking Asia Pacific of BNP Paribas from 2014 to 2020 with his last position held as a director. Before that,Mr. Cui worked in the Hong Kong office of the Investment Banking Division of Bank of China International, in the Hong Kong office of theInvestment Banking Division of Daiwa Capital Markets and in the Paris office of HSBC Global Investment Banking from 2007 to 2014. Mr. Cuireceived his bachelor’s degree of arts in French studies from Shanghai International Studies University in 2004 and master’s degree of science inmanagement (Diplôme Grande École) from HEC Paris in 2007. Mr. Cui speaks fluent English, French and Mandarin. Table of Contents125Employment Agreements and Indemnification AgreementsWe have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officersis employed for a specified time period. We may terminate employment for cause, at any time, without advance notice or remuneration, for certainacts of the executive officer, such as conviction or plea of guilty to a felony or any crime involving moral turpitude, negligent or dishonest acts toour detriment, or misconduct or a failure to perform agreed duties. We may also terminate an executive officer’s employment without cause uponthree-month advance written notice. In such case of termination by us, we will provide severance payments to the executive officer as expresslyrequired by applicable law of the jurisdiction where the executive officer is based. The executive officer may resign at any time with a three-monthadvance written notice.Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strictconfidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicablelaw, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or theconfidential or proprietary information of any third-party received by us and for which we have confidential obligations. The executive officershave also agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice duringthe executive officer’s employment with us and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents,copyrights and other legal rights for these inventions, designs and trade secrets.In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his orher employment and typically for one year following the last date of employment. Specifically, each executive officer has agreed not to(i) approach our suppliers, clients, customers or contacts or other persons or entities introduced to the executive officer in his or her capacity as arepresentative of us for the purpose of doing business with such persons or entities that will harm our business relationships with these persons orentities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise,any of our competitors, without our express consent; or (iii) seek directly or indirectly, to solicit the services of any of our employees who isemployed by us on or after the date of the executive officer’s termination, or in the year preceding such termination, without our express consent.We have also entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agreeto indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims madeby reason of their being a director or officer of our company.B.CompensationFor the fiscal year ended December 31, 2021, we paid an aggregate of approximately US$1.5 million in cash to our executive officers,and we paid US$0.4 million in cash to our non-executive directors. We have not set aside or accrued any amount to provide pension, retirement orother similar benefits to our executive officers and directors. Our PRC subsidiary and VIEs are required by law to make contributions equal tocertain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutorybenefits and a housing provident fund.Share Incentive Plans 2012 Stock Incentive PlanIn November 2012, we adopted the 2012 Stock Incentive Plan, as amended from time to time, or the 2012 Plan, to attract and retain thebest available personnel, provide additional incentives to employees, directors and advisors and promote the success of our business. Themaximum aggregate number of our ordinary shares which may be issued pursuant to all awards under the 2012 Plan is 226,153,637 ordinaryshares. As of March 31, 2022, awards to purchase 212,336,377 ordinary shares have been granted and outstanding, excluding awards that wereforfeited or cancelled after the relevant grant dates.On November 6, 2018, our Board of Directors approved to reduce the exercise price of certain options granted under our 2012 Plan toemployees.The following paragraphs describe the principal terms of the 2012 Plan. Table of Contents126Types of Awards. The 2012 Plan permits the awards of options, restricted shares, restricted share units, or RSUs, or any other form ofawards granted to a participant pursuant to the 2012 Plan.Plan Administration. Our board of directors or a committee of one or more members of the board of directors will administer the 2012Plan. The plan administrator will determine the participants to receive awards, the type and number of awards to be granted to each participant, andthe terms and conditions of each award grant.Award Agreement. Awards granted under the 2012 Plan are evidenced by an award agreement that sets forth terms, conditions andlimitations for each award, which may include the term of the award, the provisions applicable in the event of the participant’s employment orservice terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.Eligibility. We may grant awards to our senior managers, advisors or employees.Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.Exercise of Awards. The plan administrator determines the exercise price for each award, which is stated in the award agreement. Thevested portion of awards will expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, themaximum exercisable term is ten years from the date of a grant.Transfer Restrictions. Awards may not be transferred in any manner by the participant other than by will or the laws of descent anddistribution, except as otherwise authorized by the plan administrator during the lifetime of the participant.Termination and amendment of the 2012 Plan. Unless terminated earlier, the 2012 Plan has a term of ten years. Our board of directors hasthe authority to amend or terminate the 2012 Plan. However, no such action may adversely affect in any material way any awards previouslygranted unless agreed by the participant.2018 Share Incentive PlanIn August 2018, our shareholders and board of directors adopted the 2018 Share Incentive Plan, or the 2018 Plan, to attract and retain thebest available personnel, provide additional incentives to employees, directors and consultants and promote the success of our business. Themaximum aggregate number of shares which may be issued under the 2018 Plan shall initially be 63,916,634 Class A ordinary shares, plus anannual increase on the first day of each of the first five (5) complete fiscal years after the completion of our initial public offering in 2018 andduring the term of this plan commencing with the fiscal year beginning January 1, 2019, by an amount equal to 2.0% of the total number of sharesissued and outstanding on the last day of the immediately preceding fiscal year (excluding issued shares reserved for future option exercise andrestricted share unit vesting). As of March 31, 2022, awards to purchase 197,849,123 ordinary shares have been granted and outstanding, excludingawards that were forfeited or cancelled after the relevant grant dates.The following paragraphs summarize the terms of the 2018 Plan.Types of Awards. The 2018 Plan permits the awards of options, restricted shares, restricted share units, or other types of awards granted toa participant pursuant to the terms of the 2018 Plan.Plan Administration. The board of directors or a committee of one or more members of the board of directors will administer the 2018Plan. The plan administrator will determine the participants to receive awards, the type and number of awards to be granted to each participant, andthe terms and conditions of each award grant.Award Agreement. Awards granted under the 2018 Plan are evidenced by an award agreement that sets forth the terms and conditions foreach grant, which may include the term of the award, the provisions applicable in the event the grantee’s employment or service terminates, and ourauthority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.Eligibility. We may grant awards to our employees, directors and consultants of our company. However, we may grant options that areintended to qualify as incentive share options only to our employees and employees of our parent companies and subsidiaries. Table of Contents127Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is set forth in the relevant award agreement.Exercise of Options. The plan administrator determines the exercise price for each option, which is stated in the award agreement. Theplan administrator shall determine the time or times at which an option may be exercised in whole or in part, but the maximum term of any optionis ten years.Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than in accordance with the exceptions providedin the 2018 Plan, such as transfers by will or the laws of descent and distribution.Termination and Amendment of the 2018 Plan. Unless terminated earlier, the 2018 Plan has a term of ten years. Our board of directors hasthe authority to amend or terminate the plan. However, no such action may adversely affect in any material way any awards previously grantedunless agreed by the recipient.The following table summarizes, as of March 31, 2022, the awards granted under our Plan to several of our directors and executiveofficers and to other individuals as a group, excluding awards that were forfeited or cancelled after the relevant grant dates.Ordinary SharesUnderlyingOutstandingExerciseOptions orPriceDate ofName RSUs (US$/Share) Date of Grant ExpirationKarl Kan Zhang * 0.0002January 6, 2020January 5, 2030 Susan Qiaoling Li * 0.0002January 6, 2020January 5, 2030 Haibing Wu *(1) —November 6, 2018November 5, 2028*(1) —September 30, 2019September 29, 2029 *(1) —September 04, 2020September 03, 2030 Jue Yao *(1) —November 6, 2018November 5, 2028*(1) —September 30, 2019September 29, 2029 *(1) —September 04, 2020September 03, 2030 Robert Yi Cui * 0.0002September 04, 2020September 03, 2030Other individuals as a group 370,646,134(2) from 0.0002 to 0.1800 *The options and restricted shares units in aggregate held by each of these officers represent less than 1% of our total outstanding shares.(1)Restricted share units.(2)Including options and restricted shares units. With respect to the options the exercise price is with the range from 0.0002 to 0.1800. Table of Contents128C.Board PracticesOur board of directors consists of eight directors. A director is not required to hold any shares in our company by way of qualification. Adirector who is in any way, whether directly or indirectly, interested in a contract or proposed contract with our company is required to declare thenature of his interest at a meeting of our directors. A director may vote in respect of any contract, proposed contract, or arrangementnotwithstanding that he may be interested therein, and if he does so his vote shall be counted and he may be counted in the quorum at any meetingof our directors at which any such contract or proposed contract or arrangement is considered. The directors may exercise all the powers of thecompany to borrow money, mortgage its undertaking, property and uncalled capital, and issue debentures or other securities whenever money isborrowed or as security for any obligation of the company or of any third party.Committees of the Board of DirectorsWe have established three committees under the board of directors: an audit committee, a compensation committee and a nominating andcorporate governance committee. We have adopted a charter for each of the three committees. Each committee’s members and functions aredescribed below.Audit Committee. Our audit committee consists of Mr. Haibing Wu and Ms. Jue Yao. Mr. Haibing Wu is the chairman of our auditcommittee. We have determined that each of Mr. Haibing Wu and Ms. Jue Yao satisfies the “independence” requirements of Section 303A of theCorporate Governance Rules of the New York Stock Exchange and meet the independence standards under Rule 10A-3 under the SecuritiesExchange Act of 1934, as amended. We have determined that each of Mr. Haibing Wu and Ms. Jue Yao qualifies as an “audit committee financialexpert.” The audit committee oversees our accounting and financial reporting processes and the audits of the financial statements of our company.The audit committee is responsible for, among other things:●appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by theindependent auditors;●reviewing with the independent auditors any audit problems or difficulties and management’s response;●discussing the annual audited financial statements with management and the independent auditors;●reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken tomonitor and control major financial risk exposures;●reviewing and approving all proposed related party transactions;●meeting separately and periodically with management and the independent auditors; and●monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of ourprocedures to ensure proper compliance.Compensation Committee. Our compensation committee consists of Ms. Jue Yao, Mr. Haibing Wu and Mr. Karl Kan Zhang. Ms. Jue Yaois the chairwoman of our compensation committee. We have determined that each of Ms. Jue Yao and Mr. Haibing Wu satisfies the “independence”requirements of Section 303A of the Corporate Governance Rules of the New York Stock Exchange. The compensation committee assists theboard in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers.Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensationcommittee is responsible for, among other things:●reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and otherexecutive officers; Table of Contents129●reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors;●reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and●selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to thatperson’s independence from management.Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Mr. Karl KanZhang, Mr. Haibing Wu and Ms. Jue Yao. Mr. Karl Kan Zhang is the chairman of our nominating and corporate governance committee. We havedetermined that each of Mr. Haibing Wu and Ms. Jue Yao satisfies the “independence” requirements of Section 303A of the Corporate GovernanceRules of the New York Stock Exchange. The nominating and corporate governance committee assists the board of directors in selecting individualsqualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governancecommittee is responsible for, among other things:●selecting and recommending to the board nominees for election by the shareholders or appointment by the board;●reviewing annually with the board the current composition of the board with regards to characteristics such as independence,knowledge, skills, experience and diversity;●making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of theboard; and●advising the board periodically with regards to significant developments in the law and practice of corporate governance as well asour compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporategovernance and on any remedial action to be taken.Duties of DirectorsUnder Cayman Islands law, our directors owe fiduciary duties to us, including a duty of loyalty, a duty to act honestly, in good faith andwith a view to our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also have a duty to exercisethe skills they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. It waspreviously considered that a director need not exhibit in the performance of his duties a greater degree of skill than what may reasonably beexpected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standardwith regard to the required skill and care, and these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us,our directors must ensure compliance with our memorandum and articles of association and the class rights vested thereunder in the holders of theshares. The Company has the right to seek damages if a duty owed by our directors is breached. In certain limited exceptional circumstances, ashareholder may have rights to damages if a duty owed by the directors is breached.Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functionsand powers of our board of directors include, among others:●convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings;●declaring dividends and distributions;●appointing officers and determining the term of office of the officers;●exercising the borrowing powers of our company and mortgaging the property of our company; and●approving the transfer of shares in our company, including the registration of such shares in our share register. Table of Contents130Terms of Directors and OfficersOur officers are appointed by and serve at the discretion of the board of directors. Our directors are not subject to a term of office and holdoffice until such time as they are removed from office by ordinary resolution of the shareholders. A director will be removed from officeautomatically if, among other things, the director (i) becomes bankrupt or makes any arrangement or composition with his creditors; (ii) dies, or isfound by our company to be or becomes of unsound mind; (iii) resigns his office by notice in writing to the company, (iv) without special leave ofabsence from our board, is absent from three consecutive board meetings and our board of directors resolve that his office be vacated; or (v) isremoved from office pursuant to any other provision of our memorandum and articles of association.D.EmployeesWe had 553, 759 and 385 employees as of December 31, 2019, 2020 and 2021, respectively. The following table sets forth the breakdownof our employees by function as of December 31, 2021:Function: Number of EmployeesResearch and development 228Sales and marketing 27Operations 61General and administrative 69Total 385As required by laws and regulations in China, we contribute to various statutory employee benefit plans that are organized by municipaland provincial governments, including pension, medical insurance, unemployment insurance, work-related injury insurance and maternityinsurance plans as well as the housing provident fund. We are required under Chinese law to make contributions to employee benefit plans atspecified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the localgovernment from time to time.We enter into labor contracts and standard confidentiality and intellectual property agreements with our key employees. The laborcontracts with our key personnel typically include a standard non-compete covenant that prohibits the employee from competing with us, directlyor indirectly, during his or her employment and for one year after the termination of his or her employment.E.Share OwnershipThe following table sets forth information with respect to the beneficial ownership of our ordinary shares as of March 31, 2022, by:●each of our directors and executive officers; and●each person known to us to own beneficially 5% of our total outstanding shares.The calculations in the table below are based on 4,348,814,491 Class A ordinary shares (excluding treasury stocks and shares issued andreserved for future issuance upon the exercising or vesting of awards granted under our share incentive plans) and 246,224,465 Class B ordinaryshares outstanding as of March 31, 2022. Table of Contents131Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of sharesbeneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within60 days after March 31, 2022, including through the exercise of any option, warrant or other right or the conversion of any other security. Theseshares, however, are not included in the computation of the percentage ownership of any other person. Ordinary Shares Beneficially Owned% of Class A Class B Total % of Aggregate Ordinary Ordinary Ordinary Beneficial Voting Shares Shares Shares Ownership Power***Directors and Executive Officers** Karl Kan Zhang(1) 5,000,000 246,224,465 251,224,465 5.5 58.6Susan Qiaoling Li(2) 218,124,465 — 218,124,465 4.7 2.1Michael Jialiang Wang(3) 167,037,115 — 167,037,115 3.6 1.6Jim Jian Wang(4) 111,868,349 — 111,868,349 2.4 1.0Duane Ziping Kuang — — — — —Glen Qian Sun — — — — —Haibing Wu * — * * *Jue Yao * — * * *Robert Yi Cui * — * * *All Directors and Executive Officers as a Group 498,150,898 246,224,465 744,375,363 16.2 63.3Principal Shareholders: Sequoia Capital China GF Holdco III-A, Ltd.(5) 534,404,772 — 534,404,772 11.6 5.1Qiming Funds(6) 540,786,459 — 540,786,459 11.8 5.1SIG China Investments Master Fund III, LLLP(7) 413,875,937 — 413,875,937 9.0 3.9Kan's Global CoolStuff Investment Inc.(1)(8) — 246,224,465 246,224,465 5.4 58.6LQL Global Innovation Investment Inc.(2)(9) 215,624,465 — 215,624,465 4.7 2.1Jialiang's Global Creativity Investment Inc.(3)(10) 167,037,115 — 167,037,115 3.6 1.6Jian's Global CoolStuff Investment Inc.(4)(11) 111,868,349 — 111,868,349 2.4 1.0*Less than 1% of our total outstanding shares.**Except as otherwise indicated below, the business address of our directors and executive officers is 9-11F, No.16, Lane 399, Xinlong Road,Minhang District, Shanghai, 201101, China. The business address of Duane Ziping Kuang is Room 5542, Four Seasons Place, 8 FinanceStreet, Central, Hong Kong. The business address of Glen Qian Sun is Room 3006, Plaza 66 Tower 2, No.1366 Nanjing West Road, Shanghai,China.***For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially ownedby such person or group by the voting power of all of our Class A and Class B ordinary shares as a single class. Each holder of Class Aordinary shares is entitled to one vote per share and each holder of our Class B ordinary shares is entitled to twenty-five votes per share on allmatters submitted to them for a vote. Our Class A ordinary shares and Class B ordinary shares vote together as a single class on all matterssubmitted to a vote of our shareholders, except as may otherwise be required by law. Our Class B ordinary shares are convertible at any timeby the holder thereof into Class A ordinary shares on a one-for-one basis. Table of Contents132(1)Represents (i) 246,224,465 Class B ordinary shares held by Kan’s Global CoolStuff Investment Inc., a British Virgin Islands company, and (ii) 5,000,000 Class A ordinary sharesissuable upon the exercise of options exercisable within 60 days after the date of this annual report held by Karl Kan Zhang. Kan’s Global CoolStuff Investment Inc. is whollyowned by Kan’s Universe Investment Limited, a British Virgin Islands company, which is ultimately owned by Karl’s Global CoolStuff Investment Trust, a trust established underthe laws of Guernsey and managed by Cantrust (Far East) Limited as the trustee. Karl Kan Zhang is the settlor of this trust, and Mr. Zhang and his family members are the trust’sbeneficiaries. Under the terms of this trust, Mr. Zhang has the power to direct the trustee with respect to the retention or disposal of, and the exercise of any voting and other rightsattached to, the shares of the Issuer held by Kan’s Global CoolStuff Investment Inc. Mr. Zhang is the sole director of Kan’s Global CoolStuff Investment Inc. The registered officeof Kan’s Global CoolStuff Investment Inc. is at Drake Chambers P.O. Box 3321, Road Town, Tortola, British Virgin Islands.(2)Represents (i) 215,624,465 Class A ordinary shares held by LQL Global Innovation Investment Inc., a British Virgin Islands company, and (ii) 2,500,000 Class A ordinary sharesissuable upon the exercise of options exercisable within 60 days after the date of this annual report held by Susan Qiaoling Li. LQL Global Innovation Investment Inc. is whollyowned by LQL International Limited, a British Virgin Islands company, which is ultimately owned by LQL International Trust, a trust established under the laws of Guernsey andmanaged by Cantrust (Far East) Limited as the trustee. Susan Qiaoling Li is the settlor of this trust, and Ms. Li and her family members are the trust’s beneficiaries. Under theterms of this trust, Ms. Li has the power to direct the trustee with respect to the retention or disposal of, and the exercise of any voting and other rights attached to, the shares ofthe Issuer held by LQL Global Innovation Investment Inc. Ms. Li is the sole director of LQL Global Innovation Investment Inc. The registered office of LQL Global InnovationInvestment Inc. is at Drake Chambers P.O. Box 3321, Road Town, Tortola, British Virgin Islands.(3)Represents (i) 165,874,465 Class A ordinary shares and (ii) 1,162,650 Class A ordinary shares in the form of ADSs held by Jialiang’s Global Creativity Investment Inc., a BritishVirgin Islands company. Jialiang’s Global Creativity Investment Inc. is wholly owned by MWRT Global Limited, a British Virgin Islands company, which is ultimately owned byIvy Trust, a trust established under the laws of Guernsey and managed by Cantrust (Far East) Limited as the trustee. Michael Jialiang Wang is the settlor of this trust, andMr. Wang and his family members are the trust’s beneficiaries. Under the terms of this trust, Mr. Wang has the power to direct the trustee with respect to the retention or disposalof, and the exercise of any voting and other rights attached to, the shares of the Issuer held by Jialiang’s Global Creativity Investment Inc. Mr. Wang is the sole director ofJialiang’s Global Creativity Investment Inc. The registered office of Jialiang’s Global Creativity Investment Inc. is at Drake Chambers P.O. Box 3321, Road Town, Tortola, BritishVirgin Islands.(4)Represents (i) 105,368,349 Class A ordinary shares and (ii) 6,500,000 Class A ordinary shares in the form of ADSs directly held by Jian’s Global CoolStuff Investment Inc., aBritish Virgin Island company. Jian’s Global CoolStuff Investment Inc. is ultimately owned by Thoughtwise Trust, a trust established with the laws of Guernsey and managed byCantrust (Far East) Limited as the trustee. Jim Jian Wang is the settlor of this trust, and Mr. Wang and his family members are the trust’s beneficiaries. Under the terms of thistrust, Mr. Wang has the power to direct the trustee with respect to the retention or disposal of, and the exercise of any voting and other rights attached to the shares held by Jian’sGlobal CoolStuff Investment Inc in our company. Mr. Wang is the sole director of Jian’s Global CoolStuff Investment Inc. The registered office of Jian’s Global CoolStuffInvestment Inc. is at Drake Chambers P.O. Box 3321, Road Town, Tortola, British Virgin Islands.(5)Represents (i) 534,404,772 Class A ordinary shares and (ii) 20,800,000 Class A ordinary shares in the form of ADSs held by Sequoia Capital China GF Holdco III-A, Ltd., anexempted company with limited liability incorporated in the Cayman Islands. Information regarding beneficial ownership is reported as of December 31, 2018, based on theinformation contained in the Schedule 13G filed by Sequoia Capital China GF Holdco III-A, Ltd. with SEC on February 14, 2019. The sole shareholder of Sequoia Capital ChinaGF Holdco III-A, Ltd. is Sequoia Capital China Growth Fund III, L.P. The general partner of Sequoia Capital China Growth Fund III, L.P. is SC China Growth IIIManagement, L.P., whose general partner is SC China Holding Limited. SC China Holding Limited is wholly owned by SNP China Enterprises Limited, which in turn is whollyowned by Mr. Neil Nanpeng Shen. The registered office of Sequoia Capital China GF Holdco III-A, Ltd. is at Cricket Square, Hutchins Drive P.O. Box 2681, Grand Cayman,KY1-1111, Cayman Islands.(6)Represents (i) 490,679,348 Class A ordinary shares held by Qiming Venture Partners II, L.P., a Cayman Islands exempted limited partnership; (ii) 42,966,564 Class A ordinaryshares held by Qiming Venture Partners II-C, L.P, a Cayman Islands exempted limited partnership; and (iii) 7,140,547 Class A ordinary shares by Qiming Managing DirectorsFund II, L.P., a Cayman Islands exempted limited partnership. Information regarding beneficial ownership is reported as of December 31, 2020, based on the informationcontained in the Schedule 13G/A filed by Qiming Corporate GP II, Ltd. with SEC on February 10, 2021. Qiming Venture Partners II, L.P., Qiming Venture Partners II-C, L.P., andQiming Managing Directors Fund II, L.P. are collectively referred to as Qiming Funds. The general partner of both Qiming Venture Partners II, L.P. and Qiming Venture PartnersII-C, L.P. is Qiming GP II, L.P., a Cayman Islands exempted limited partnership. The general partner of both Qiming Managing Directors Fund II, L.P. and Qiming GP II, L.P. isQiming Corporate GP II, Ltd., a Cayman Islands exempted limited company. Duane Ziping Kuang, Gary Edward Rieschel and Robert Brian Headley each owns approximately33.33% of Qiming Corporate GP II, Ltd. The registered office of Qiming Funds is at P.O. Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.(7)Represents 413,875,937 Class A ordinary shares, including 9,707,450 Class A ordinary shares represented by ownership of 194,149 ADRs held by SIG China Investments MasterFund III, LLLP, a Delaware limited liability limited partnership. SIG Asia Investment, LLLP, a Delaware limited liability limited partnership, is the investment manager for SIGChina Investments Master Fund III, LLLP pursuant to an investment management agreement, and as such, has discretionary authority to vote and dispose of the Class A ordinaryshares. Heights Capital Management, Inc., a Delaware Corporation, is the investment manager for SIG Asia Investment, LLLP pursuant to an investment management agreement,and as such, has the discretionary to dispose and vote the Class A ordinary shares. Mr. Authur Dantchik, in his capacity as president of SIG Asia Investment, LLLP, and vicepresident of Heights Capital Management, Inc. may also be deemed to have investment discretion over the shares held by SIG China Investments Master Fund III, LLLP.Mr. Dantchik disclaims any such investment discretion or beneficiary ownership with respect to these shares. The registered office of SIG China Investments Master Fund III,LLLP is at One Commence Center, 1201 N. Orange Street, Suite 715, Wilmington, DE, USA. Table of Contents133(8)Represents 246,224,465 Class B ordinary shares held by Kan’s Global CoolStuff Investment Inc., a British Virgin Islands company. Kan’s Global CoolStuff Investment Inc. iswholly owned by Kan’s Universe Investment Limited, a British Virgin Islands company, which is ultimately owned by Karl’s Global CoolStuff Investment Trust, a trustestablished under the laws of Guernsey and managed by Cantrust (Far East) Limited as the trustee. Karl Kan Zhang is the settlor of this trust, and Mr. Zhang and his familymembers are the trust’s beneficiaries. Under the terms of this trust, Mr. Zhang has the power to direct the trustee with respect to the retention or disposal of, and the exercise ofany voting and other rights attached to, the shares of the Issuer held by Kan’s Global CoolStuff Investment Inc. Mr. Zhang is the sole director of Kan’s Global CoolStuffInvestment Inc. The registered office of Kan’s Global CoolStuff Investment Inc. is at Drake Chambers P.O. Box 3321, Road Town, Tortola, British Virgin Islands.(9)Represents 215,624,465 Class A ordinary shares held by LQL Global Innovation Investment Inc., a British Virgin Islands company. LQL Global Innovation Investment Inc. iswholly owned by LQL International Limited, a British Virgin Islands company, which is ultimately owned by LQL International Trust, a trust established under the laws ofGuernsey and managed by Cantrust (Far East) Limited as the trustee. Susan Qiaoling Li is the settlor of this trust, and Ms. Li and her family members are the trust’s beneficiaries.Under the terms of this trust, Ms. Li has the power to direct the trustee with respect to the retention or disposal of, and the exercise of any voting and other rights attached to, theshares of the Issuer held by LQL Global Innovation Investment Inc. Ms. Li is the sole director of LQL Global Innovation Investment Inc. The registered office of LQL GlobalInnovation Investment Inc. is at Drake Chambers P.O. Box 3321, Road Town, Tortola, British Virgin Islands.(10)Represents (i) 165,874,465 Class A ordinary shares and (ii) 1,162,650 Class A ordinary shares in the form of ADSs held by Jialiang’s Global Creativity Investment Inc., a BritishVirgin Islands company. Jialiang’s Global Creativity Investment Inc. is wholly owned by MWRT Global Limited, a British Virgin Islands company, which is ultimately owned byIvy Trust, a trust established under the laws of Guernsey and managed by Cantrust (Far East) Limited as the trustee. Michael Jialiang Wang is the settlor of this trust, andMr. Wang and his family members are the trust’s beneficiaries. Under the terms of this trust, Mr. Wang has the power to direct the trustee with respect to the retention or disposalof, and the exercise of any voting and other rights attached to, the shares of the Issuer held by Jialiang’s Global Creativity Investment Inc. Mr. Wang is the sole director ofJialiang’s Global Creativity Investment Inc. The registered office of Jialiang’s Global Creativity Investment Inc. is at Drake Chambers P.O. Box 3321, Road Town, Tortola, BritishVirgin Islands.(11)Represents (i) 105,368,349 Class A ordinary shares and (ii) 6,500,000 Class A ordinary shares in the form of ADSs directly held by Jian’s Global CoolStuff Investment Inc., aBritish Virgin Island company. Jian’s Global CoolStuff Investment Inc. is ultimately owned by Thoughtwise Trust, a trust established with the laws of Guernsey and managed byCantrust (Far East) Limited as the trustee. Jim Jian Wang is the settlor of this trust, and Mr. Wang and his family members are the trust’s beneficiaries. Under the terms of thistrust, Mr. Wang has the power to direct the trustee with respect to the retention or disposal of, and the exercise of any voting and other rights attached to the shares held by Jian’sGlobal CoolStuff Investment Inc in our company. Mr. Wang is the sole director of Jian’s Global CoolStuff Investment Inc. The registered office of Jian’s Global CoolStuffInvestment Inc. is at Drake Chambers P.O. Box 3321, Road Town, Tortola, British Virgin Islands.To our knowledge, as of March 31, 2022, a total of 2,789,198,547 of our ordinary shares (including treasury stocks and shares issued andreserved for future issuance upon the exercising or vesting of awards granted under our share incentive plans) were held by three record holders inthe United States. One of these holders is Deutsche Bank Trust Company Americas, the depositary of our ADS program, which held 2,375,322,600Class A ordinary shares (including treasury stocks and shares issued and reserved for future issuance upon the exercising or vesting of awardsgranted under our share incentive plans). The number of beneficial owners of our ADSs in the United States is likely to be much larger than thenumber of record holders of our ordinary shares in the United States.ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONSA.Major ShareholdersPlease refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”B.Related Party TransactionsContractual Arrangements with the VIEs and their ShareholdersSee “Item 4. Information on the Company—C. Organizational Structure.”Shareholders AgreementWe entered into our shareholders agreement on January 10, 2017, with our shareholders, which consist of holders of ordinary shares andpreferred shares. Table of Contents134The shareholders agreement provides for certain preferential rights, including right of first refusal, co-sale rights, preemptive rights andprovisions governing the board of directors and other corporate governance matters. Those preferential rights governing the board of directors hasbeen automatically terminated upon the completion of our initial public offering.Employment Agreements and Indemnification AgreementsSee “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Employment Agreements andIndemnification Agreements.”Share Incentive PlansSee “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—2012 Stock Incentive Plan.” and“Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—2018 Share Incentive Plan.”C.Interests of Experts and CounselNot applicable.ITEM 8.FINANCIAL INFORMATIONA.Consolidated Statements and Other Financial InformationWe have appended consolidated financial statements filed as part of this annual report.Legal ProceedingsWe are from time to time subject to various legal or administrative claims, proceedings and penalties arising in the ordinary course ofbusiness. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial cost and diversion ofour management’s time and attention.In June 2020, a mobile device manufacturer and a third-party company sued us for unfair competition, alleging that one of our mobileapplications has interfered with the normal use of their devices by ways of pop-up advertisements, and claimed for stopping the act andcompensation of RMB4,900,000. The first-instance judgment was made in March 2021, which ordered the suspension of pop-up advertisementsand awarded RMB3,000,000 to the plaintiff. After filing an appeal, we entered into a settlement agreement with the plaintiff, according to whichwe need to provide compensation to the plaintiff of RMB1,485,955.In September 2020, Shanghai Dengyong Information Technology Co., Ltd. brought a lawsuit to a third-party company claiming itfalsifying the official website of our products and infringing trademark rights. We claimed for RMB1,000,000 and People’s Court of ShanghaiXuhui District made a judicial decision on November 26, 2021 that the third-party company shall provide compensation to Shanghai DengyongInformation Technology Co., Ltd. for its economic losses of RMB 100,000 and reasonable expenses of RMB12,000 for eliminating adverse effectcaused by the infringement. As of the date of this annual report, the third-party company has appealed, but the appeal process has not been started.In August 2021, a local branch of the MCT ordered to confiscate approximately RMB451,801 as illegal earnings from and imposed a fineof approximately RMB458,882 on Molihong for providing online publication to the public without any internet publication service license andproviding online pornography publication to the public on Fengdu Novel.For risks and uncertainties relating to the pending cases against us, please see “Item 3. Key Information—D. Risk Factors—Risks Relatedto Our Business—We may be subject to intellectual property infringement lawsuits which could be expensive to defend and may result in ourpayment of substantial damages or licensing fees, disruption to our product and service offerings, and reputational harm.”Other than the above, we are currently not a party to any material legal or administrative proceedings. Table of Contents135Dividend PolicyOur board of directors has complete discretion on whether to distribute dividends, subject to certain requirements of Cayman Islands law.In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board ofdirectors. Under Cayman Islands law, a Cayman Islands company may pay a dividend either out of profits or share premium account; provided thatin no circumstances may a dividend be paid if this would result in the company being unable to pay its debts as they fall due in the ordinary courseof business. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations andearnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors maydeem relevant.We do not have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retainmost, if not all, of our available funds and any future earnings to operate and expand our business.We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cashrequirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to paydividends to us. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign CurrencyExchange and Dividend Distribution.”If we pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the Class A ordinary sharesunderlying our ADSs to the depositary, as the registered holder of such Class A ordinary shares, and the depositary then will pay such amounts toour ADS holders in proportion to Class A ordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the depositagreement, including the fees and expenses payable thereunder. Cash dividends on our Class A ordinary shares, if any, will be paid in U.S. dollars.B.Significant ChangesWe have not experienced any significant changes since the date of our audited consolidated financial statements included in this annualreport.ITEM 9.THE OFFER AND LISTINGA.Offering and Listing DetailsOur ADSs, each representing 50 of our Class A ordinary share of ours, have been listed on the New York Stock Exchange sinceSeptember 28, 2018. Our ADSs trade under the symbol “CTK.”B.Plan of DistributionNot applicable.C.MarketsOur ADSs, each representing 50 Class A ordinary share of ours, have been listed on the New York Stock Exchange since September 28,2018, under the symbol “CTK.”D.Selling ShareholdersNot applicable.E.DilutionNot applicable. Table of Contents136F.Expenses of the IssueNot applicable.ITEM 10.ADDITIONAL INFORMATIONA.Share CapitalNot applicable.B.Memorandum and Articles of AssociationThe following are summaries of material provisions of our seventh amended and restated memorandum and articles of association, as wellas the Companies Act (As Revised), or the “Companies Act,” insofar as they relate to the material terms of our ordinary shares.Objects of Our Company. Under our seventh amended and restated memorandum and articles of association, the objects of our companyare unrestricted and we have the full power and authority to carry out any object not prohibited by the laws of the Cayman Islands.Ordinary Shares. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of our Class Aordinary shares and Class B ordinary shares will have the same rights except for voting and conversion rights. Our ordinary shares are issued inregistered form. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their shares.Conversion. Each Class B ordinary share is convertible into one Class A ordinary share at any time at the option of the holder thereof.Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment ordisposition of any Class B ordinary shares by a holder thereof to any person other than holders of Class B ordinary shares or their affiliates or upona change of ultimate beneficial ownership of any Class B ordinary shares to any person who is not an affiliate of the holder thereof, such Class Bordinary shares shall be automatically and immediately converted into the same number of Class A ordinary shares.Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Our amendedand restated articles of association provide our directors may, before recommending or declaring any dividend, set aside out of the funds legallyavailable for distribution such sums as they think proper as a reserve or reserves which shall, in the absolute discretion of our directors, beapplicable for meeting contingencies or for equalizing dividends or for any other purpose to which those funds may be properly applied. Under thelaws of the Cayman Islands, our company may pay a dividend out of either profit or share premium account; provided that in no circumstances maya dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.Voting Rights. In respect of all matters subject to a shareholders’ vote, each holder of Class A ordinary shares is entitled to one vote pershare and each holder of Class B ordinary shares is, on a poll, entitled to twenty-five votes per share on all matters subject to vote at our generalmeetings. Our Class A ordinary shares and Class B ordinary shares vote together as a single class on all matters submitted to a vote of ourshareholders, except as may otherwise be required by law. Voting at any shareholders’ meeting is by show of hands unless a poll is demanded. Apoll may be demanded by the chairman of such meeting or any shareholder present in person or by proxy. Table of Contents137A quorum required for a meeting of shareholders consists of one or more shareholders present or representing by proxy and holding shareswhich represent, in aggregate, not less than one-third of all votes attaching to the issued and outstanding voting shares entitled to vote at generalmeetings. Shareholders may be present in person or by proxy or, if the shareholder is a corporation or other non-natural person, by its dulyauthorized representative. Shareholders’ meetings may be convened by our board of directors on its own initiative or upon a request to the directorsby shareholders holding, at the date of deposit of the requisition, shares which represent, in aggregate, no less than one-third of all votes attachingto all our issued and outstanding shares, in which case the directors are obliged to call such meeting and to put the resolutions so requisitioned to avote at such meeting; however, our amended and restated memorandum and articles of association do not provide our shareholders with any rightto put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders. Advance notice of at leastten (10) calendar days is required for the convening of our annual general shareholders’ meeting and any other general shareholders’ meeting.An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votesattaching to the ordinary shares cast by those shareholders entitled to vote who are present in person or by proxy at a general meeting, while aspecial resolution requires the affirmative vote of no less than two-thirds of the votes attaching to the ordinary shares cast by those shareholdersentitled to vote who are present in person or by proxy at a general meeting. Both ordinary resolutions and special resolutions may also be passed bya unanimous written resolution signed by all the shareholders of our company, as permitted by the Companies Act and our amended and restatedmemorandum and articles of association. A special resolution will be required for important matters such as a change of our name or makingchanges to our amended and restated memorandum and articles of association. Holders of the ordinary shares may, among other things, consolidateor subdivide their shares by ordinary resolution.General Meetings of Shareholders. As a Cayman Islands exempted company, we are not obliged by the Companies Act to callshareholders’ annual general meetings. Our memorandum and articles of association provide that we may (but are not obliged to) in each year holda general meeting as our annual general meeting in which case we shall specify the meeting as such in the notices calling it, and the annual generalmeeting shall be held at such time and place as may be determined by our directors.Shareholders’ general meetings may be convened by a majority of our board of directors. Advance notice of at least ten calendar days isrequired for the convening of our annual general shareholders’ meeting (if any) and any other general meeting of our shareholders. A quorumrequired for any general meeting of shareholders consists of one or more shareholders present in person or by proxy, representing not less than one-third of all votes attaching to all of our shares in issue and entitled to vote.The Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholderswith any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Ourmemorandum and articles of association provide that upon the requisition of shareholders representing in aggregate not less than one-third of allvotes attaching to all outstanding shares of our company that as at the date of the deposit carry the right to vote at general meetings, our board willconvene an extraordinary general meeting and put the resolutions so requisitioned to a vote at such meeting. However, our memorandum andarticles of association do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary generalmeetings not called by such shareholders.Election, Removal and Remuneration of Directors. Unless otherwise determined by our company in general meeting, our memorandumand articles of association provide that our board will consist of not less than three directors. There are no provisions relating to retirement ofdirectors upon reaching any age limit.The directors have the power to appoint any person as a director either to fill a vacancy on the board or as an addition to the existingboard. Our shareholders may also appoint any person to be a director by way of ordinary resolution. A director shall not be required to hold anyShares in the company by way of qualification.Subject to restrictions contained in our amended and restated memorandum and articles of association, a director may be removed with orwithout cause by ordinary resolution.In addition, the office of any director shall be vacated if the director (i) becomes bankrupt or makes any arrangement or composition withhis creditors, (ii) dies or is found to be or becomes of unsound mind, (iii) resigns his office by notice in writing to our company, (iv) without specialleave of absence from our board is absent from three consecutive board meetings and our board resolves that his office be vacated, or (v) isremoved from office pursuant to our amended and restated memorandum and articles of association. Table of Contents138The remuneration of the directors may be determined by the directors or by ordinary resolution of shareholders.Transfer of Ordinary Shares. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her ordinaryshares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or onwhich we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:●the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such otherevidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;●the instrument of transfer is in respect of only one class of ordinary shares;●the instrument of transfer is properly stamped, if required;●in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceedfour; and●a fee of such maximum sum as the New York Stock Exchange may determine to be payable or such lesser sum as our directors mayfrom time to time require is paid to us in respect thereof.If our directors refuse to register a transfer they shall, within three calendar months after the date on which the instrument of transfer waslodged, send to each of the transferor and the transferee notice of such refusal.The registration of transfers may, after compliance with any notice required of the New York Stock Exchange, be suspended and theregister closed at such times and for such periods as our board of directors may from time to time determine; provided, however, that theregistration of transfers shall not be suspended nor the register closed for more than 30 calendar days in any calendar year as our board maydetermine from time to time.Liquidation. On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more thansufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholdersin proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares inrespect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distributionare insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders in proportion to thepar value of the shares held by them.Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any amountsunpaid on their shares in a notice served to such shareholders at least 14 calendar days prior to the specified time of payment. The shares that havebeen called upon and remain unpaid are subject to forfeiture.Redemption, Repurchase and Surrender of Shares. We may issue shares on terms that such shares are subject to redemption, at our optionor at the option of the holders of these shares, on such terms and in such manner as may be determined by our board of directors. Our companymay also repurchase any of our shares on such terms and in such manner as have been approved by our board of directors or by an ordinaryresolution of our shareholders. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company’s profits orout of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premiumaccount and capital redemption reserve) if our company can, immediately following such payment, pay its debts as they fall due in the ordinarycourse of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if suchredemption or repurchase would result in there being no shares outstanding or (c) if the company has commenced liquidation. In addition, ourcompany may accept the surrender of any fully paid share for no consideration. Table of Contents139Variations of Rights of Shares. If at any time, our share capital is divided into different classes of shares, the rights attached to any suchclass (unless otherwise provided by the terms of issue of the shares of that class), may be materially adversely varied with the consent in writing ofthe holders of two-thirds of the issued shares of that class or with the sanction of a resolution passed at a separate meeting of the holders of theshares of that class by the holders of two-thirds of the issued shares of that class. The rights conferred upon the holders of the shares of any classissued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be materially and adverselyvaried by the creation or issue of further shares ranking pari passu with such existing class of shares or subsequent to them or the redemption orpurchase of any shares of any class by our company. The rights of the holders of shares shall not be deemed to be materially adversely varied bythe creation or issue of shares with preferred or other rights, including, without limitation, the creation of shares with enhanced or weighted votingrights.Issuance of Additional Shares. Our amended and restated memorandum of association authorizes our board of directors to issue additionalordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.Our amended and restated memorandum of association also authorizes our board of directors to establish from time to time one or moreseries of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series, including but notlimited to:●the designation of the series;●the number of shares of the series and the subscription price thereof if different from the par value thereof;●the dividend rights, dividend rates, conversion rights, voting rights; and●the rights and terms of redemption and liquidation preferences.Our board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued. Issuance ofthese shares may dilute the voting power of holders of ordinary shares.Inspection of Books and Records. Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtaincopies of our list of shareholders or our corporate records (save for our memorandum and articles of association, register of mortgages and chargesand special resolutions of our shareholders). However, we will provide our shareholders with annual audited financial statements.Anti-Takeover Provisions. Some provisions of our memorandum and articles of association may discourage, delay or prevent a change ofcontrol of our company or management that shareholders may consider favorable, including provisions that:●authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences,privileges and restrictions of such preference shares without any further vote or action by our shareholders; and●limit the ability of shareholders to requisition and convene general meetings of shareholders.However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our memorandum andarticles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.Exempted Company. We are incorporated as an exempted company with limited liability under the Companies Act. The Companies Actdistinguishes between ordinary resident companies and exempted companies. Any company that is incorporated in the Cayman Islands butconducts business mainly outside of the Cayman Islands may apply to be incorporated as an exempted company. The requirements for an exemptedcompany are essentially the same as for an ordinary company except that an exempted company:●does not have to file an annual return of its shareholders with the Registrar of Companies; Table of Contents140●is not required to open its register of members for inspection;●does not have to hold an annual general meeting;●may issue negotiable or bearer shares or shares with no par value;●may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the firstinstance);●may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;●may register as a limited duration company; and●may register as a segregated portfolio company.“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of thecompany (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improperpurpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).C.Material ContractsWe have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4.Information on the Company,” “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions,” in this “Item 10.Additional Information—C. Material Contracts” or elsewhere in this annual report on Form 20-F.D.Exchange ControlsSee “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Currency Exchangeand Dividend Distribution.”E.TaxationThe following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in our ADSs orordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject tochange. This summary does not deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares, such as the taxconsequences under U.S. state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, the People’s Republic ofChina and the United States.Cayman Islands TaxationAccording to Maples and Calder (Hong Kong) LLP, our Cayman Islands counsel, the Cayman Islands currently levies no taxes onindividuals or corporations based upon profits, income, gains or appreciation and there is no taxation in the nature of inheritance tax or estate duty.There are no other taxes likely to be material to us levied by the government of the Cayman Islands except for stamp duties which may beapplicable on instruments executed in, or after execution brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party toany double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currencyrestrictions in the Cayman Islands.Payments of dividends and capital in respect of the shares will not be subject to taxation in the Cayman Islands and no withholding taxwill be required on the payment of dividends or capital to any holder of our ADSs or ordinary shares, nor will gains derived from the disposal ofour ADSs or ordinary shares be subject to Cayman Islands income or corporation tax. Table of Contents141People’s Republic of China TaxationUnder the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de factomanagement body” within the PRC is considered a resident enterprise. The implementation rules define the term “de facto management body” asthe body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of anenterprise. In April 2009, the State Administration of Taxation issued a circular, known as Circular 82, which provides certain specific criteria fordetermining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Althoughthis circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individualsor foreigners, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de factomanagement body” text should be applied in determining the tax resident status of all offshore enterprises. According to Circular 82, an offshoreincorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “defacto management body” in China only if all of the following conditions are met: (i) the primary location of the day-to-day operationalmanagement is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval byorganizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board andshareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually residein the PRC.We believe that CooTek (Cayman) Inc. is not a PRC resident enterprise for PRC tax purposes. CooTek (Cayman) Inc. is not controlled bya PRC enterprise or PRC enterprise group and we do not believe that CooTek (Cayman) Inc. meets all of the conditions above. CooTek(Cayman) Inc. is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, andits key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained,outside the PRC. In addition, we are not aware of any offshore holding companies with a similar corporate structure as ours ever having beendeemed a PRC “resident enterprise” by the PRC tax authorities. However, the tax resident status of an enterprise is subject to determination by thePRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”If the PRC tax authorities determine that CooTek (Cayman) Inc. is a PRC resident enterprise for enterprise income tax purposes, we maybe required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders ofour ADSs. In addition, non-resident enterprise shareholders (including our ADS holders) may be subject to a 10% PRC tax on gains realized on thesale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. It is unclear whether our non-PRCindividual shareholders (including our ADS holders) would be subject to any PRC tax on dividends or gains obtained by such non-PRC individualshareholders in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it wouldgenerally apply at a rate of 20% unless a reduced rate is available under an applicable tax treaty. However, it is also unclear whether non-PRCshareholders of CooTek (Cayman) Inc. would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC inthe event that CooTek (Cayman) Inc. is treated as a PRC resident enterprise. Table of Contents142United States Federal Income Tax ConsiderationsThe following discussion is a summary of United States federal income tax considerations generally applicable to the ownership anddisposition of our ADSs or ordinary shares by a U.S. Holder (as defined below) that holds our ADSs as “capital assets” (generally, property heldfor investment) under the United States Internal Revenue Code of 1986, as amended, or the Code. This discussion is based upon existing UnitedStates federal tax law, which is subject to differing interpretations or change, possibly with retroactive effect. There can be no assurance that theInternal Revenue Service (the “IRS”) or a court will not take a contrary position. This discussion does not discuss all aspects of United Statesfederal income taxation that may be important to particular investors in light of their individual investment circumstances, including investorssubject to special tax rules (including for example, financial institutions, insurance companies, regulated investment companies, real estateinvestment trusts, broker-dealers, traders in securities that elect mark-to-market treatment, tax-exempt organizations (including privatefoundations), holders who are not U.S. Holders, holders who own (directly, indirectly or constructively) 10% or more of our stock (by vote orvalue), holders who acquire their ADSs or ordinary shares pursuant to any employee share option or otherwise as compensation, investors that willhold their ADSs or ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction for United Statesfederal income tax purposes, investors required to accelerate the recognition of any item of gross income with respect to our ADSs or ordinaryshares as a result of such income being recognized on an applicable financial statement, or investors that have a functional currency other than theUnited States dollar, all of whom may be subject to tax rules that differ significantly from those discussed below). This discussion, moreover, doesnot address the U.S. federal estate and gift tax or alternative minimum tax consequences of the acquisition or ownership of our ADSs or ordinaryshares or the Medicare tax. Each U.S. Holder is urged to consult its tax advisor regarding the application of United States federal taxation to itsparticular circumstances, and the state, local, non-United States and other tax considerations of the ownership and disposition of our ADSs orordinary shares.GeneralFor purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ADSs or ordinary shares that is, for United States federalincome tax purposes, (i) an individual who is a citizen or resident of the United States, (ii) a corporation (or other entity treated as a corporation forUnited States federal income tax purposes) created in, or organized under the law of, the United States or any state thereof or the District ofColumbia, (iii) an estate the income of which is includible in gross income for United States federal income tax purposes regardless of its source, or(iv) a trust (A) the administration of which is subject to the primary supervision of a United States court and which has one or more United Statespersons who have the authority to control all substantial decisions of the trust or (B) that has otherwise validly elected to be treated as a UnitedStates person under the Code.If a partnership (or other entity treated as a partnership for United States federal income tax purposes) is a beneficial owner of our ADSsor ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of thepartnership. Partnerships holding our ADSs or ordinary shares and their partners are urged to consult their tax advisors regarding an investment inour ADSs or ordinary shares.For United States federal income tax purposes, a U.S. Holder of ADSs will generally be treated as the beneficial owner of the underlyingshares represented by the ADSs. Accordingly, deposits or withdrawals of ordinary shares for ADSs will generally not be subject to United Statesfederal income tax. The remainder of this discussion assumes that a U.S. Holder of our ADSs will be treated in this manner.Passive Foreign Investment Company ConsiderationsA non-United States corporation, such as our company, will be classified as a PFIC for United States federal income tax purposes, if, inthe case of any particular taxable year, either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or(ii) 50% or more of the value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets thatproduce or are held for the production of passive income. For this purpose, cash and assets readily convertible into cash are categorized as a passiveasset and the company’s goodwill and other unbooked intangibles are taken into account. Passive income generally includes, among other things,dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assetsand earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of thestock. Table of Contents143Although the law in this regard is not entirely clear, we treat the VIEs as being owned by us for United States federal income tax purposes,because we control their management decisions and we are entitled to substantially all of the economic benefits associated with these entities, and,as a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were determined, however, that wedo not own the stock of the VIEs for United States federal income tax purposes, we may be treated as a PFIC for the current taxable year and anysubsequent taxable year.Assuming that we are the owner of the VIEs for United States federal income tax purposes, we do not believe we were a PFIC for thetaxable year ended December 31, 2020 and we do not presently expect to be a PFIC for the current taxable year or in the foreseeable future.However, no assurance can be given in this regard because the determination of whether we will be or become a PFIC is a fact-intensive inquirymade on an annual basis and will depend, in part, upon the composition of our income and assets and the value of our assets. Fluctuations in themarket price of our ADSs may cause us to be or become a PFIC for the current or future taxable years because the value of our assets for thepurpose of the asset test, including the value of our goodwill and unbooked intangibles, may be determined by reference to the market value of ourADSs from time to time (which may be volatile). In particular, recent decline in the market price of our ADSs increased our risk of becoming aPFIC. The market price of our ADSs may continue to fluctuate considerably and, consequently, we cannot assure you of our PFIC status for anytaxable year. Furthermore, the composition of our income and our assets may also be affected by how, and how quickly, we use our liquid assets.Under circumstances where our revenue from activities that produce passive income significantly increases relative to our revenue from activitiesthat produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming aPFIC may substantially increase.If we are classified as a PFIC for any year during which a U.S. Holder holds our ADSs or ordinary shares, we generally will continue to betreated as a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or ordinary shares.The discussion below under “Dividends” and “Sale or Other Disposition of ADSs or Ordinary Shares” is written on the basis that we arenot and will not be or become classified as a PFIC for United States federal income tax purposes. The United States federal income tax rules thatapply if we are treated as a PFIC are generally discussed below under “Passive Foreign Investment Company Rules.”DividendsSubject to the discussion below under “Passive Foreign Investment Company Rules,” any cash distributions (including the amount of anyPRC tax withheld) paid on our ADSs or ordinary shares out of our current or accumulated earnings and profits, as determined under United Statesfederal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually orconstructively received by the U.S. Holder, in the case of ordinary shares, or by the depositary, in the case of ADSs. Because we do not intend todetermine our earnings and profits on the basis of United States federal income tax principles, any distribution we pay will generally be treated as a“dividend” for United States federal income tax purposes. A non-corporate U.S. Holder will be subject to tax on dividend income from a “qualifiedforeign corporation” at a lower applicable capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided thatcertain holding period requirements are met. A non-United States corporation (other than a corporation that is classified as a PFIC for thetaxable year in which the dividend is paid or the preceding taxable year) will generally be considered to be a qualified foreign corporation (i) if it iseligible for the benefits of a comprehensive tax treaty with the United States which the Secretary of Treasury of the United States determines issatisfactory for purposes of this provision and which includes an exchange of information program, or (ii) with respect to any dividend it pays onstock (or ADSs in respect of such stock) which is readily tradable on an established securities market in the United States. Our ADSs (but not ourordinary shares) are listed on the New York Stock Exchange and is considered readily tradable on an established securities market in the UnitedStates. Since we do not expect that our ordinary shares will be listed on an established securities market, it is unclear whether dividends that we payon our ordinary shares that are not represented by ADSs will meet the conditions required for the reduced tax rate. However, in December 2021 wereceived communications from the New York Stock Exchange notifying us that we were not in compliance with certain New York Stock Exchangecontinued listing standards, and if we fail to satisfy such requirements and fail to regain compliance on a timely basis, our ADSs could be delistedfrom the New York Stock Exchange. See "Item 3. Key Information—D. Risk Factors—Risks Related to Our ADSs—If we do not satisfy the NYSErequirements for continued listing, our ADS could be delisted from NYSE." If our ADSs are delisted from the New York Stock Exchange and arenot otherwise readily tradable on an established securities market in the United States, dividends received on our ADSs would generally not beeligible to be taxed as dividend income from a qualified foreign corporation. Table of Contents144In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law, a U.S. Holder may be subjectto PRC withholding taxes on dividends paid on our ADSs or ordinary shares. We may, however, be eligible for the benefits of the United States-PRC income tax treaty (which the Secretary of Treasury of the United States has determined is satisfactory for the purpose of being a “qualifiedforeign corporation”). If we are eligible for such benefits, dividends we pay on our ordinary shares, regardless of whether such shares arerepresented by the ADSs, would be eligible for the reduced rates of taxation described in the preceding paragraph. Dividends received on our ADSsor ordinary shares will not be eligible for the dividends received deduction allowed to corporations.Dividends will generally be treated as income from foreign sources for United States foreign tax credit purposes and will generallyconstitute passive category income. Depending on the U.S. Holder’s individual facts and circumstances, a U.S. Holder may be eligible, subject to anumber of complex limitations, to claim a foreign tax credit not in excess of any applicable treaty rate in respect of any foreign withholding taxesimposed on dividends received on our ADSs or ordinary shares. A U.S. Holder who does not elect to claim a foreign tax credit for foreign taxwithheld may instead, subject to applicable limitations, claim a deduction, for United States federal income tax purposes, in respect of suchwithholding, but only for a year in which such holder elects to do so for all creditable foreign income taxes. The rules governing the foreign taxcredit are complex and their outcome depends in large part on the U.S. Holder’s individual facts and circumstances. Accordingly, U.S. Holders areurged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.Sale or Other Disposition of ADSs or Ordinary SharesSubject to the discussion below under “Passive Foreign Investment Company Rules,” a U.S. Holder will generally recognize gain or lossupon the sale or other disposition of ADSs or ordinary shares in an amount equal to the difference between the amount realized upon thedisposition and the holder’s adjusted tax basis in such ADSs or ordinary shares. Any gain or loss will be capital gain or loss if the ADSs or ordinaryshares have been held for more than one year and will generally be United States source gain or loss for United States foreign tax credit purposes.Long-term capital gains of non-corporate taxpayers are currently eligible for reduced rates of taxation. In the event that gain from the disposition ofthe ADSs or ordinary shares is subject to tax in the PRC, such gain may be treated as PRC source gain under the United States-PRC income taxtreaty. Pursuant to recently issued United States Treasury Regulations, however, if a U.S. Holder is not eligible for the benefits of the Treaty or doesnot elect to apply the Treaty, then such holder may not be able to claim a foreign tax credit arising from any PRC tax imposed on the disposition ofADSs or ordinary shares. The rules regarding foreign tax credits and deduction of foreign taxes are complex. U.S. Holders should consult their taxadvisors regarding the availability of a foreign tax credit or deduction in light of their particular circumstances, including their eligibility forbenefits under the Treaty and the potential impact of the recently issued United States Treasury Regulations.Passive Foreign Investment Company RulesIf we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ADSs or ordinary shares, and unless the U.S.Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules that have a penalizingeffect, regardless of whether we remain a PFIC, on (i) any excess distribution that we make to the U.S. Holder (which generally means anydistribution paid during a taxable year to a U.S. Holder that is greater than 125 percent of the average annual distributions paid in the threepreceding taxable years or, if shorter, the U.S. Holder’s holding period for the ADSs or ordinary shares), and (ii) any gain realized on the sale orother disposition, including a pledge, of ADSs or ordinary shares. Under the PFIC rules:●the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or ordinary shares;●the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the firsttaxable year in which we are classified as a PFIC (each, a “pre-PFIC year”), will be taxable as ordinary income;●the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect forindividuals or corporations, as appropriate, for that year; and●increased by an additional tax equal to the interest on the resulting tax deemed deferred with respect to each such taxable year. Table of Contents145If we are a PFIC for any taxable year during which a U.S. Holder holds our ADSs or ordinary shares and any of our subsidiaries or VIEs isalso a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes ofthe application of these rules. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to any of oursubsidiaries or VIEs.As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” in a PFIC may make a mark-to-market election with respectto such stock; provided that such stock is regularly traded on a qualified exchange or other market, as defined in the applicable United StatesTreasury Regulations. For those purposes, our ADSs, but not our ordinary shares, are listed on the New York Stock Exchange, which is a qualifiedexchange. We anticipate that our ADSs should qualify as being regularly traded, but no assurances may be given in this regard. Our ADSs are listedon the New York Stock Exchange, which is an established securities market in the United States. Consequently, if ADSs continue to be listed onthe New York Stock Exchange and are being regularly traded, we expect that the mark-to-market election would be available to a U.S. Holder thatholds our ADS were we to be or become a PFIC. Our ADSs are expected to qualify as being regularly traded, but no assurances may be given inthis regard. If a U.S. Holder makes this election with respect to our ADSs, the holder will generally (i) include as ordinary income for eachtaxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis ofsuch ADSs and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs heldat the end of the taxable year, but such deduction will only be allowed to the extent of the amount previously included in income as a result of themark-to-market election. The U.S. Holder’s adjusted tax basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of a corporation classified as a PFIC and such corporation ceases tobe classified as a PFIC, the holder will not be required to take into account the gain or loss described above during any period that such corporationis not classified as a PFIC. However, in December 2021 we received communications from the New York Stock Exchange notifying us that wewere not in compliance with certain New York Stock Exchange continued listing standards, and if we fail to satisfy such requirements and fail toregain compliance on a timely basis, our ADSs could be delisted from the New York Stock Exchange. See "Item 3. Key Information—D. RiskFactors-- Risks Related to Our ADSs-- If we do not satisfy the NYSE requirements for continued listing, our ADS could be delisted from NYSE."If our ADSs are delisted from the New York Stock Exchange and are not otherwise listed on a qualified exchange or other market, as describedabove, our ADSs would not be treated as "marketable stock" for these purposes and a U.S. Holder would not be eligible to make a mark-to-marketelection with respect to our ADSs. If a U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or otherdisposition of our ADSs in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but such losswill only be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election.Because a mark-to-market election cannot technically be made for any lower-tier PFICs that we may own, a U.S. Holder may continue tobe subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest ina PFIC for United States federal income tax purposes.We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, wouldresult in tax treatment different from the general tax treatment for PFICs described above.If a U.S. Holder owns our ADSs or ordinary shares during any taxable year that we are a PFIC, the holder must generally file an annualIRS Form 8621 or such other form as is required by the United States Treasury Department. Each U.S. Holder is advised to consult its tax advisorregarding the United States federal income tax considerations of owning and disposing of ADSs or ordinary shares if we are or become a PFIC,including the availability and possibility of making a mark-to-market election.F.Dividends and Paying AgentsNot applicable.G.Statement by ExpertsNot applicable. Table of Contents146H.Documents on DisplayWe are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we arerequired to file reports and other information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four monthsafter the close of each fiscal year. Copies of reports and other information, when so filed, may be inspected without charge and may be obtained atprescribed rates at the public reference facilities maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. The publicmay obtain information regarding the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains aweb site at www.sec.gov that contains reports, proxy and information statements, and other information regarding registrants that make electronicfilings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing thefurnishing and content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reportingand short-swing profit recovery provisions contained in Section 16 of the Exchange Act.We will furnish Deutsche Bank Trust Company Americas., the depositary of our ADSs, with our annual reports, which will include areview of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’meetings and other reports and communications that are made generally available to our shareholders. The depositary will make such notices,reports and communications available to holders of ADSs and, upon our request, will mail to all record holders of ADSs the information containedin any notice of a shareholders’ meeting received by the depositary from us.I.Subsidiary InformationNot applicable.ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInflationTo date, inflation in China has not materially impacted 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 December 2019, 2020 and 2021 were increases of 2.9%, 2.5% and 0.9%,respectively. Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected byhigher rates of inflation in China in the future.Market RisksForeign Exchange RiskA majority of our expenses and a certain percentage of our revenues are denominated in RMB. We have not used any derivative financialinstruments to hedge exposure to such risk.The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. TheRenminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. It is difficult to predict how market forces or PRC or U.S.government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future.To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of Renminbi against the U.S. dollarwould have an adverse effect on Renminbi amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollarsfor the purpose of making payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollaragainst Renminbi would have a negative effect on the U.S. dollar amounts available to us. Table of Contents147As of December 31, 2021, we had RMB-denominated cash and cash equivalents of RMB87.8 million, HKD-denominated cash and cashequivalents of HKD6.3 million, and U.S. dollar-denominated cash and cash equivalents of US$3.9 million. Assuming we had converted the U.S.dollar-denominated cash and cash equivalents of US$3.9 million into RMB at the exchange rate of $1.00 for RMB6.3723 as of December 31, 2021,a 5% appreciation or depreciation of RMB against the U.S. dollar as of December 31, 2021, would result in a decrease or an increase of RMB1.2million in our cash and cash equivalents, respectively. Assuming we had converted the HKD-denominated cash, cash equivalents and restrictedcash of HKD6.3 million into RMB at the exchange rate of HKD1.00 for RMB0.8170 as of December 31, 2021, a 5% appreciation or depreciationof RMB against HKD as of December 31, 2021, would result in a decrease or an increase of RMB0.3 million in our cash and cash equivalents,respectively.In recent years, the exchange rate between RMB and U.S. dollar has experienced volatility. It is difficult to predict how market forces andgovernment policies may impact the exchange rate between RMB and the U.S. dollar in the future. To date, we have not entered into any hedgingtransactions in an effort to reduce our exposure to foreign currency exchange risk, but we may, in the future, enter into derivatives or other financialinstruments in an attempt to hedge our foreign currency exchange risk. The effectiveness of these hedges may be limited and we may not be able tosuccessfully reduce our exposure.Interest Rate RiskOur exposure to interest rate risk primarily relates to the interest expenses incurred on bank borrowings and income generated by excesscash, which is mostly held in interest-bearing bank deposits. Interest-earning instruments carry a degree of interest rate risk. We have not beenexposed to material risks due to changes in interest rates, and we have not used any derivative financial instruments to manage our interest riskexposure. However, our future interest income may fall short of expectations due to changes in market interest rates.ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIESA.Debt SecuritiesNot applicable.B.Warrants and RightsNot applicable.C.Other SecuritiesNot applicable.D.American Depositary SharesFees and Expenses Our ADS Holders May Have to PayDeutsche Bank Trust Company Americas. is our depositary. The principal executive office of the depositary is located at 60 Wall Street,New York, NY 10005, USA. Table of Contents148An ADS holder will be required to pay the following service fees to the depositary bank and certain taxes and governmental charges (inaddition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented by any of yourADSs):Service Fees⚫ To any person to which ADSs are issued or to any person to which adistribution is made in respect of ADS distributions pursuant to stockdividends or other free distributions of stock, bonus distributions, stocksplits or other distributions (except where converted to cash)Up to US$0.05 per ADS issued⚫ Cancellation of ADSs, including the case of termination of the depositagreementUp to US$0.05 per ADS cancelled⚫ Distribution of cash dividendsUp to US$0.05 per ADS held⚫ Distribution of cash entitlements (other than cash dividends) and/orcash proceeds from the sale of rights, securities and other entitlementsUp to US$0.05 per ADS held⚫ Distribution of ADSs pursuant to exercise of rights.Up to US$0.05 per ADS held⚫ Distribution of securities other than ADSs or rights to purchaseadditional ADSsUp to US$0.05 per ADS held⚫ Depositary servicesUp to US$0.05 per ADS held on the applicable recorddate(s) established by the depositary bankAn ADS holder will also be responsible to pay certain fees and expenses incurred by the depositary bank and certain taxes andgovernmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securitiesrepresented by any of your ADSs) such as:●Fees for the transfer and registration of Class A ordinary shares charged by the registrar and transfer agent for the Class A ordinaryshares in Cayman Islands (i.e., upon deposit and withdrawal of Class A ordinary shares).●Expenses incurred for converting foreign currency into U.S. dollars.●Expenses for cable, telex and fax transmissions and for delivery of securities.●Taxes and duties upon the transfer of securities, including any applicable stamp duties, any stock transfer charges or withholdingtaxes (i.e., when Class A ordinary shares are deposited or withdrawn from deposit).●Fees and expenses incurred in connection with the delivery or servicing of Class A ordinary shares on deposit.●Fees and expenses incurred in connection with complying with exchange control regulations and other regulatory requirementsapplicable to Class A ordinary shares, deposited securities, ADSs and ADRs.●Any applicable fees and penalties thereon.The depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (onbehalf of their clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering theADSs to the depositary bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection withdistributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary bank to the holders of record ofADSs as of the applicable ADS record date. Table of Contents149The depositary fees payable for cash distributions are generally deducted from the cash being distributed or by selling a portion ofdistributable property to pay the fees. In the case of distributions other than cash (i.e., share dividends, rights), the depositary bank charges theapplicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whethercertificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable record date ADS holders. In the case ofADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its fees through the systems provided by DTC(whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. Thebrokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to thedepositary banks.In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requestedservice until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.Fees and Other Payments Made by the Depositary to UsThe depositary may make payments to us or reimburse us for certain costs and expenses, by making available a portion of the ADS feescollected in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank agree from time to time. Forthe year ended December 31, 2021, we did not receive reimbursement from the depositary. Table of Contents150PART IIITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIESNone.ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDSNone.ITEM 15.CONTROLS AND PROCEDURESDisclosure Controls and ProceduresUnder the supervision and with the participation of our management, including our chairman of the board of directors, chief executiveofficer and our chief financial officer, we carried out an evaluation of the effectiveness of our disclosure controls and procedures, which is definedin Rules 13a-15(e) of the Exchange Act, as of December 31, 2021. Based upon that evaluation, our management, with the participation of ourchairman of the board of directors, chief executive officer and chief financial officer, has concluded that, as of the end of the period covered by thisannual report, our disclosure controls and procedures were effective in ensuring that the information required to be disclosed by us in this annualreport is recorded, processed, summarized and reported to them for assessment, and required disclosure is made within the time period specified inthe rules and forms of the SEC.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the exchange Act), under the supervision and with the participation of our chairman of the board of directors, chief executive officerand chief financial officer, our management conducted an assessment of the effectiveness of internal control over financial reporting as ofDecember 31, 2021, based on the criteria established in Internal Control - Integrated Framework (2013), issued by the Committee of SponsoringOrganizations of the Treadway Commission (“COSO”). Based on this assessment, our management determined that our internal control overfinancial reporting was ineffective due to the presence of a material weakness.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections ofany evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, orthat the degree of compliance with the policies and procedures may deteriorate.A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is areasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on atimely basis. In preparing our consolidated financial statements for the fiscal years ended December 31, 2019 and 2020, we identified one materialand one significant deficiency. The material weakness identified related to the lack of accounting policies and procedures relating to financialreporting in accordance with U.S. GAAP and SEC financial reporting requirements. The significant control deficiency related to lack of formal riskassessment process and monitoring activities in connection with the preparation of our consolidated financial statements.To remediate our identified material weakness and improve our internal control over financial reporting, we have implemented a numberof measures to address the material weakness and significant deficiency. These measures including the follows:●we have developed a comprehensive accounting policies and procedures manual in accordance with U.S. GAAP available to guidethe day-to-day accounting operation and reporting work of our accounting personnel;●we have hired additional competent and qualified accounting and reporting personnel with relevant knowledge and workingexperiences of U.S. GAAP; and Table of Contents151●we have hired additional competent and qualified personnel with relevant knowledge and working experiences of internal controlover financial reporting to monitoring our daily activities.As of December 31, 2021, based on the measures implemented as described above, while we need to continue to improve our internalcontrols process, our management concluded the material weakness has been remediated while the significant deficiency remain as we are still inthe process of completing our implementation of remediation measures. We are in the process of implementing remediation measures to remediatethe significant deficiency. However, we cannot assure you that we will remediate our deficiencies in a timely manner.This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regardinginternal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered publicaccounting firm pursuant to the temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.Our independent registered public accounting firm were not required to perform an evaluation of our internal control over financialreporting as of December 31, 2021. Had our independent registered public accounting firm performed an audit of our internal control over financialreporting, additional control deficiencies may have been identified. See “Item 3. Key Information-D. Risk Factors—Risks Related to Our Business—If we fail to implement and maintain an effective system of internal control, we may be unable to accurately report our operating results, meetour reporting obligations or prevent fraud.”As a company with less than US$1.07 billion in revenue for our last fiscal year, we qualify as an “emerging growth company” pursuant tothe JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwiseapplicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of theSarbanes-Oxley Act of 2002, in the assessment of the emerging growth company’s internal control over financial reporting for five years.Changes in Internal Control Over Financial ReportingOther than as described above, there have been no changes in the Company’s internal control over financial reporting during the periodended December 31, 2021 that have materially affected the Company’s internal controls over financial reporting.ITEM 16.RESERVED[Reserved]ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERTOur board of directors has determined that each of Mr. Haibing Wu and Ms. Jue Yao, members of our audit committee and independentdirectors (under the standards set forth in Section 303A of the Corporate Governance Rules of the New York Stock Exchange and Rule 10A-3under the Securities Exchange Act of 1934), is an audit committee financial expert.ITEM 16B.CODE OF ETHICSOur board of directors adopted a code of business conduct and ethics that applies to our directors, officers and employees in August 2018.We have posted a copy of our code of business conduct and ethics on our website at https://ir.cootek.com/. Table of Contents152ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICESThe following table sets forth the aggregate fees by categories specified below in connection with certain professional services renderedby Deloitte Touche Tohmatsu Certified Public Accountants LLP, our principal external auditors, for the periods indicated. For theYear Ended December 31, 2020 2021(in US$ thousands)Audit fees (1) 830 1,100Audit-related fees (2) 200 120Tax fees (3) 37 62Notes:(1)“Audit fees” means the aggregate fees billed for professional services rendered by our independent registered public accounting firm for the audit of our annual financialstatements.(2)“Audit-related fees” includes the aggregate fees billed for the professional services rendered by our principal auditors for assurance and related services that are reasonably relatedto the performance of the audit or review of our consolidated financial statements and are not reported under “Audit Fees.” Audit-related fees in 2020 and 2021 were to supportthe submission of Registrant Statement on Form F-3.(3)“Tax fees” means the aggregate fees billed for professional services rendered by our independent registered public accounting firm for tax compliance, tax advice and taxplanning.The policy of our audit committee is to pre-approve all audit and other service provided by Deloitte Touche Tohmatsu Certified PublicAccountants LLP, our independent registered public accounting firm, including audit services, audit-related services, tax services and other servicesas described above, other than those for de minimis services which are approved by the Audit Committee prior to the completion of the audit.ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEESNot applicable.ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERSOn November 20, 2019, the Company announced a share repurchase program (the “2019 Program”) whereby the Company is authorizedto repurchase its class A ordinary shares in the form of American depository shares (“ADSs”) with an aggregate value of up to US$6 million duringthe 6-month period starting from November 20, 2019. The 2019 Program was early terminated on May 18, 2020. The Company had used anaggregate of US$5.9 million to repurchase 1.0 million ADSs under the 2019 Program and recorded as treasury stock as of December 31, 2021. Table of Contents153On May 18, 2020, the Company announced a share repurchase program (the “2020 Program”) on the same day. In the new sharerepurchase program, the Company is authorized to repurchase its class A ordinary shares in the form of ADSs with an aggregate value of up toUS$20 million during the 12-month period starting from May 18, 2020. The Company expects to fund the repurchases under this program with itsexisting cash balance. As of December 31, 2021, the Company had used an aggregate of US$6.0 million to repurchase 1.4 million ADSs under the2020 Program and recorded as treasury stock. The 2020 Program expired on May 17, 2021. MaximumTotal NumberDollar Value of ADSsof ADSs that Purchased asMay Yet Be Average PricePart of PubliclyPurchasedTotal Number ofPaid PerAnnouncedUnder PlansADSsADS(1)Plans oror Programs Purchased(1) (US$) Programs (US$)Month #1 (January 1, 2021 - January 31, 2021) 244,338 2.77 244,338 14,650,640Month #2 (February 1, 2021 - February 28, 2021) — — — 14,650,640Month #3 (March 1, 2021 - March 31, 2021) 204,400 2.68 204,400 14,102,516Month #4 (April 1, 2021 - April 30, 2021) 36,004 2.70 36,004 14,005,471Month #5 (May 1, 2021 - May 31, 2021) — — — 14,005,471Total 484,742 2.73 484,742 14,005,471Note:(1)Each ADS represents 50 Class A ordinary shares.ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANTNot applicable.ITEM 16G.CORPORATE GOVERNANCESection 303A.01 of the NYSE Listed Company Manual requires a listed company to have a majority of independent directors.Section 303A.07(a) of the NYSE Listed Company Manual requires the audit committee to have a minimum of three members.We are a Cayman Islands exempted company, and there are no requirements under applicable Cayman Islands law that correspond to thesesections of the NYSE Listed Company Manual. Pursuant to the exception granted to foreign private issuers under Section 303A.00 of the NYSEListed Company Manual, we have followed our home country practice and are exempted from the requirements of Sections 303A.01, and303A.07(a) of the NYSE Listed Company Manual.Our shareholders may be afforded less protection than they otherwise would under the New York Stock Exchange corporate governancelisting standards applicable to U.S. domestic issuers.Other than the requirements discussed above, there are no significant differences between our corporate governance practices and thosefollowed by domestic listed companies as required under the NYSE Listed Company Manual.ITEM 16H.MINE SAFETY DISCLOSURENot applicable.ITEM 16I.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Table of Contents154PART IIIITEM 17.FINANCIAL STATEMENTSWe have elected to provide financial statements pursuant to Item 18.ITEM 18.FINANCIAL STATEMENTSThe consolidated financial statements of CooTek (Cayman) Inc. are included at the end of this annual report. Table of Contents155ITEM 19. EXHIBITSExhibit Number Description of Document1.1Seventh Amended and Restated Memorandum and Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 from ourregistration statement on Form F-1, as amended, initially filed on August 16, 2018 (File No. 333- 226867))2.1*Specimen American Depositary Receipt of the Registrant (included in Exhibit 2.3)2.2Specimen Certificate for Class A Ordinary Shares of the Registrant (incorporated by reference to Exhibit 4.2 from our registration statement onForm F-1 (File No. 333-226867), as amended, initially filed with the Commission on August 16, 2018)2.3*Deposit Agreement among the Registrant, the depositary and holders and beneficial holders of the American Depositary Shares dated September27, 20182.4Fifth Amended and Restated Shareholders Agreement between the Registrant and other parties therein dated January 10, 2017 (incorporated byreference to Exhibit 4.4 from our registration statement on Form F-1 (File No. 333-226867), as amended, initially filed with the Commission onAugust 16, 2018)2.5*Description of rights of each class of securities registered under Section 12 of the Securities Exchange Act of 19344.12012 Stock Incentive Plan(incorporated by reference to Exhibit 10.1 from our registration statement on Form F-1 (File No. 333-226867), asamended, initially filed with the Commission on August 16, 2018)4.22018 Share Incentive Plan(incorporated by reference to Exhibit 10.2 from our registration statement on Form F-1 (File No. 333-226867), asamended, initially filed with the Commission on August 16, 2018)4.3Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated by reference to Exhibit 10.3 fromour registration statement on Form F-1 (File No. 333-226867), as amended, initially filed with the Commission on August 16, 2018)4.4Form of Employment Agreement between the Registrant and executive officers of the Registrant (incorporated by reference to Exhibit 10.4 fromour registration statement on Form F-1 (File No. 333-226867), as amended, initially filed with the Commission on August 16, 2018)4.5Executed form of exclusive business cooperation agreement between Shanghai Chule (CooTek) Information Technology Co., Ltd. and a VIE of theRegistrant, as currently in effect, and a schedule of all executed exclusive business cooperation agreements adopting the same form in respect ofeach of the VIEs of the Registrant (incorporated by reference to Exhibit 4.5 from our annual report on Form 20-F (File No. 001-38665) filed withthe Commission on April 20, 2020).4.6Executed form of exclusive purchase option agreements among Shanghai Chule (CooTek) Information Technology Co., Ltd. and each shareholderof the VIEs of the Registrant, as currently in effect, and a schedule of all executed exclusive purchase option agreements adopting the same form inrespect of each of the VIEs of the Registrant (incorporated by reference to Exhibit 4.6 from our annual report on Form 20-F (File No. 001-38665)filed with the Commission on April 20, 2020).4.7Executed form of equity pledge agreements among Shanghai Chule (CooTek) Information Technology Co., Ltd. and each shareholder of the VIEsof the Registrant, as currently in effect, and a schedule of all equity pledge agreement adopting the same form in respect of each of the VIEs of theRegistrant (incorporated by reference to Exhibit 4.7 from our annual report on Form 20-F (File No. 001-38665) filed with the Commission onApril 20, 2020).4.8Executed form of powers of attorney granted by each shareholder of the VIEs of the Registrant, as currently in effect, and a schedule of all powersof attorney adopting the same form in respect of each of VIEs of the Registrant (incorporated by reference to Exhibit 4.8 from our annual report onForm 20-F (File No. 001-38665) filed with the Commission on April 20, 2020).4.9Executed form of loan agreement between Shanghai Chule (CooTek) Information Technology Co., Ltd. and each shareholder of the VIEs of theRegistrant, as currently in effect, and a schedule of all executed loan agreements adopting the same form in respect of each of the VIEs of theRegistrant (incorporated by reference to Exhibit 4.9 from our annual report on Form 20-F (File No. 001-38665) filed with the Commission onApril 20, 2020).4.10The form spouse consent letter signed by each spouse of the shareholders of the VIEs of the Registrant, as currently in effect (incorporated byreference to Exhibit 4.10 from our annual report on Form 20-F (File No. 001-38665) filed with the Commission on April 20, 2020).4.11Series D-1 Preferred Share Purchase Agreement between the Registrant and other parties dated January 10, 2017 (incorporated by reference toExhibit 10.11 from our registration statement on Form F-1 (File No. 333-226867), as amended, initially filed with the Commission on August 16,2018)4.12The form of audience network terms between Facebook, Inc. and Facebook Ireland Limited and us (incorporated by reference to Exhibit 10.12from our registration statement on Form F-1 (File No. 333-226867), as amended, initially filed with the Commission on August 16, 2018)4.13The form of Google DoubleClick Platform Services Terms and Conditions between Google Inc. and us (incorporated by reference to Exhibit 10.13from our registration statement on Form F-1 (File No. 333-226867), as amended, initially filed with the Commission on August 16, 2018)4.14The form of DFP Small Business Online Standard Terms & Conditions between Google Inc. and us (incorporated by reference to Exhibit 10.14from our registration statement on Form F-1 (File No. 333-226867), as amended, initially filed with the Commission on August 16, 2018) Table of Contents156Exhibit Number Description of Document4.15The form of Google AdSense Online Terms of Service between Google Inc. and us (incorporated by reference to Exhibit 10.15 from ourregistration statement on Form F-1 (File No. 333-226867), as amended, initially filed with the Commission on August 16, 2018)4.16The form of MoPub Terms of Service between Twitter, Inc. and the Registrant (incorporated by reference to Exhibit 4.16 from our annual report onForm 20-F (File No. 001-38665), filed with the Commission on April 15, 2019)4.17The form of Chuan Shan Jia Distribution Cooperation Agreement signed by certain VIEs of the Registrant and a schedule of all executed ChuanShan Jia Distribution Cooperation Agreements adopting the same form in respect of each of these VIEs of the Registrant (incorporated byreference to Exhibit 4.17 from our annual report on Form 20-F (File No. 001-38665), filed with the Commission on April 26, 2021)4.18Securities Purchase Agreement between the Registrant and YA II PN, LTD. dated January 19, 2021 (incorporated by reference to Exhibit 10.1from our Form 6-K (File No. 001-38665), filed on January 19, 2021)4.19Convertible Note issued by the Registrant to YA II PN, LTD. dated January 19, 2021 (incorporated by reference to Exhibit 10.2 from our Form 6-K (File No. 001-38665), filed on January 19, 2021)4.20Letter of Agreement to Amend and Restate the Convertible Note issued by the Company to YA II PN, LTD. on March 19, 2021 dated October 29,2021 (incorporated by reference on Exhibit 10.1 from our Form 6-K (File No. 001-38665), filed on November 1, 20214.21Convertible Note issued by the Registrant to YA II PN, LTD. dated March 19, 2021 (incorporated by reference to Exhibit 10.2 from our Form 6-K(File No. 001-38665), filed on March 19, 2021)4.22Securities Purchase Agreement between the Registrant and Mercer Street Global Opportunity Fund LLC, dated August 16, 2021 (incorporated byreference on Exhibit 10.1 from our Form 6-K (File No. 001-38665), filed on August 16, 20218.1*List of Principal Subsidiaries and Variable Interest Entities of the Registrant11.1Code of Business Conduct and Ethics of Registrant (incorporated by reference to Exhibit 99.1 from our registration statement on Form F-1 (FileNo. 333-226867), as amended, initially filed with the Commission on August 16, 2018)12.1*Chief Executive Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200212.2*Chief Financial Officer Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 200213.1**Chief Executive Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200213.2**Chief Financial Officer Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 200215.1*Consent of Deloitte Touche Tohmatsu Certified Public Accountants LLP, an independent registered public accounting firm15.2*Consent of JunHe LLP15.3*Consent of Maples and Calder (Hong Kong) LLP101.INS*XBRL Instance Document - this instance document does not appear in the Interactive Data File because its XBRL tags are embedded within theInline XBRL document101.SCH*XBRL Taxonomy Extension Schema Document101.CAL*XBRL Taxonomy Extension Calculation Linkbase Document101.DEF*XBRL Taxonomy Extension Definition Linkbase Document101.LAB*XBRL Taxonomy Extension Label Linkbase Document101.PRE*XBRL Taxonomy Extension Presentation Linkbase Document104*Cover Page Interactive Data File (embedded within the Inline XBRL document)* Filed with this Annual Report on Form 20-F.** Furnished with Annual Report on Form 20-F. Table of Contents157SIGNATURESThe registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized theundersigned to sign this annual report on its behalf.CooTek (Cayman) Inc.By:/s/ Karl Kan ZhangName: Karl Kan ZhangTitle: Chairman of the Board of Directors and ChiefTechnology OfficerDate: April 29, 2022 Table of ContentsF-1INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm (PCAOB ID: 1113)F-2Consolidated Balance Sheets as of December 31, 2020 and 2021F-3Consolidated Statements of Operations for the years ended December 31, 2019, 2020 and 2021F-4Consolidated Statements of Comprehensive Loss for the years ended December 31, 2019, 2020 and 2021F-5Consolidated Statements of Changes in Shareholders’ Equity (Deficit) for the years ended December 31, 2019, 2020 and 2021F-6Consolidated Statements of Cash Flows for the years ended December 31, 2019, 2020 and 2021F-7Notes to the Consolidated Financial StatementsF-8Schedule I—Additional Financial Information of Parent CompanyF-40 Table of ContentsF-2REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and shareholders of CooTek (Cayman) Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of CooTek (Cayman) Inc., its subsidiaries and its consolidated variableinterest entities (the “Company”) as of December 31, 2020 and 2021, the related consolidated statements of operations, comprehensive income(loss), changes in shareholders’ equity (deficit), and cash flows for each of the three years in the period ended December 31, 2021 and the relatednotes and the schedule listed in the Schedule I (collectively referred to as the “financial statements”). In our opinion, the financial statementspresent fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2021, and the results of its operationsand its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally acceptedin the United States of America.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on theCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting OversightBoard (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Companyis not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we arerequired to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectivenessof the Company’s internal control over financial reporting. Accordingly, we express no such opinion.Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error orfraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amountsand disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for ouropinion.Explanatory Paragraph—Going ConcernThe accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed inNote 2(a) to the financial statements, the Company has suffered recurring losses from operations and negative working capital that raise substantialdoubt about its ability to continue as a going concern. Additionally, the Company received two non-compliance notifications related to its shareprice and market capitalization not meeting the minimum requirements of the New York Stock Exchange (“NYSE”), which if not cured wouldresult in the potential cash redemption of the outstanding convertible notes and repayment of bank borrowings which had outstanding amounts ofUS$11.2 million, and US$1.6 million, respectively as of December 31, 2021. Management's plans in regard to these matters are also described inNote 2(a). The financial statements do not include any adjustments that might result from the outcome of this uncertainty./s/ Deloitte Touche Tohmatsu Certified Public Accountants LLPShanghai, ChinaApril 29, 2022We have served as the Company’s auditor since 2018. Table of ContentsF-3COOTEK (CAYMAN) INC.CONSOLIDATED BALANCE SHEETSAs of December 31, Note 2020 2021US$US$ASSETS Current assets: Cash and cash equivalents 24,669,133 18,232,130Restricted cash 2(f)3,264,145 199,079Short-term investments50,02850,044Accounts receivable, net of allowance for doubtful accounts of US$1,161,955 and US$1,168,516 as of December31, 2020 and 2021, respectively 328,127,346 21,483,102Prepaid expenses and other current assets 412,073,226 10,864,280Total current assets 68,183,878 50,828,635Long-term restricted cash2(f)21,689,436—Property and equipment, net 55,393,742 3,088,209Intangible assets, net6396,495248,966Operating lease right-of-use assets2(r)—1,171,285Long-term investments7306,518313,691Other non-current assets 932,311 780,380TOTAL ASSETS 96,902,380 56,431,166LIABILITIES AND SHAREHOLDERS’ DEFICIT Current liabilities (including amounts of the consolidated VIEs without recourse to the Company. See Note2(b)): Accounts payable 76,125,973 27,760,127Short-term borrowings 810,958,022 9,097,040Accrued salary and benefits 9,143,476 4,602,304Operating lease liabilities, current2(r)—809,610Accrued expenses and other current liabilities 910,686,518 8,062,975Convertible notes10—9,175,892Derivative liabilities10—553,707Deferred revenue 3,331,511 1,943,168Total current liabilities 110,245,500 62,004,823Other non-current liabilities459,435323,305Operating lease liabilities, non-current2(r)—103,157TOTAL LIABILITIES 110,704,935 62,431,285Commitments and contingencies17 Shareholders’ deficit: Class A ordinary shares (US$0.00001 par value; 13,750,000,000 shares authorized as of December 31, 2020 and2021; 2,845,646,241 and 3,391,809,191 shares issued as of December 31, 2020 and 2021, respectively;2,801,135,191 and 3,391,809,191 shares outstanding as of December 31, 2020 and 2021, respectively)1328,45633,918Class B ordinary shares (US$0.00001 par value; 250,000,000 shares authorized； 246,224,465 shares issued andoutstanding as of December 31, 2020 and 2021)132,4622,462Treasury shares (44,511,050 and nil shares as of December 31, 2020 and 2021, respectively)14(4,672,334)—Additional paid-in capital 193,918,852 210,718,835Accumulated deficit (200,965,075) (214,842,438)Accumulated other comprehensive loss (2,114,916) (1,912,896)Total shareholders’ deficit (13,802,555) (6,000,119)TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT 96,902,380 56,431,166The accompanying notes are an integral part of these consolidated financial statements. Table of ContentsF-4COOTEK (CAYMAN) INC.CONSOLIDATED STATEMENTS OF OPERATIONSFor the years endedDecember 31, Note 2019 2020 2021 US$ US$US$Net revenues2(n)177,883,105441,505,231272,145,821Cost of revenues (including share-based compensation expense of US$91,597,US$276,085 and US$142,404 in 2019, 2020 and 2021, respectively) (15,300,854) (24,128,462)(32,825,888)Gross profit 162,582,251 417,376,769239,319,933Operating expenses: General and administrative expenses (including share-based compensationexpense of US$568,077, US$1,814,335 and US$1,754,275 in 2019, 2020 and2021, respectively) (16,256,192) (15,017,499)(17,815,839)Research and development expenses (including share-based compensationexpense of US$2,806,587, US$3,034,240 and US$1,716,316 in 2019, 2020and 2021, respectively) (26,935,497) (29,669,615)(34,433,316)Sales and marketing expenses (including share-based compensation expense ofUS$196,224, US$212,381 and US$103,324 in 2019, 2020 and 2021,respectively) (157,027,956) (418,261,754)(200,235,468)Other operating income (loss), net 11872,269 (2,274,507)4,453,462Total operating expenses (199,347,376) (465,223,375)(248,031,161)Loss from operations (36,765,125) (47,846,606)(8,711,228)Interest income (expense), net 763,497 395,629(5,689,947)Impairment loss of investment7(500,032)—(248,140)Foreign exchange (losses) gains, net (342,687) 91,335(219,642)Fair value change of derivatives10——1,108,648Loss before income taxes (36,844,347) (47,359,642)(13,760,309)Income tax expenses 12(1,714) (7,087)(51,970)Share of loss in equity method investment7——(65,084)Net loss(36,846,061)(47,366,729)(13,877,363)Deemed dividend in relation to the convertible notes10——(1,368,866)Net loss attributable to ordinary shareholders (36,846,061) (47,366,729)(15,246,229)Net loss per ordinary share: 16 Basic and diluted (0.01) (0.02)(0.005)Net loss per ADS (each of ADS represents 50 Class A ordinary shares):Basic and diluted(0.58)(0.77)(0.23)Weighted average shares used in calculating net loss per ordinary share: Basic and diluted 3,155,082,983 3,080,332,9243,303,168,725The accompanying notes are an integral part of these consolidated financial statements. Table of ContentsF-5COOTEK (CAYMAN) INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSSFor the years endedDecember 31, 2019 2020 2021 US$ US$US$Net Loss(36,846,061)(47,366,729)(13,877,363)Other comprehensive (loss) income Foreign currency translation adjustments, net of tax of nil (273,933) (682,083)202,020Comprehensive Loss attributable to CooTek (Cayman) Inc. (37,119,994) (48,048,812)(13,675,343)Deemed dividend in relation to convertible note (see Note 10)——(1,368,866)Total comprehensive loss attributable to ordinary shares of CooTek (Cayman) Inc.(37,119,994)(48,048,812)(15,044,209)The accompanying notes are an integral part of these consolidated financial statements. Table of ContentsF-6COOTEK (CAYMAN) INC.CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)AccumulatedAdditionalotherTotalClass AClass B paid-inAccumulated comprehensive shareholders’Ordinary sharesOrdinary shares Treasury Sharescapitaldeficit(loss) income equity (deficit) Shares US$ Shares US$ Shares US$ US$ US$ US$ US$Balance at January 1, 20192,949,757,23629,498246,224,4652,46215,550,500(2,499,167) 204,701,187 (116,752,285) (1,158,900) 84,322,795Net Loss—————— — (36,846,061) — (36,846,061)Issuance of ordinary shares upon vesting of restricted shares5,038,14650————(50)———Repurchase of ordinary shares————80,311,250(12,283,426) — — — (12,283,426)Exercise of share options11,185,700111———— 326,392 — — 326,503Share-based compensation——————3,662,485——3,662,485Cancellation of treasury shares(85,924,750)(859)——(85,924,750)13,719,046(13,718,187)———Foreign currency translation adjustments————————(273,933)(273,933)Balance at December 31, 20192,880,056,33228,800246,224,4652,4629,937,000(1,063,547)194,971,827(153,598,346)(1,432,833)38,908,363Net Loss———————(47,366,729)—(47,366,729)Issuance of ordinary shares upon vesting of restricted shares (Note 15)4,278,10043————(43)——Repurchase of ordinary shares (Note 14)————83,854,891(9,480,179)———(9,480,179)Cash settlement on vested share options and restricted shares(Note 15)——————(823,226)——(823,226)Exercise of share options(Note 15)10,592,650105————304,153——304,258Share-based compensation——————5,337,041——5,337,041Cancellation of treasury shares (Note 14)(49,280,841)(492)——(49,280,841)5,871,392(5,870,900)———Foreign currency translation adjustments—————— — — (682,083) (682,083)Balance at December 31, 20202,845,646,24128,456246,224,4652,46244,511,050(4,672,334) 193,918,852 (200,965,075) (2,114,916) (13,802,555)Net Loss———————(13,877,363)—(13,877,363)Issuance of ordinary shares upon vesting of restricted shares (Note 15)5,051,85051————(51)———Repurchase of ordinary shares (Note 14)————24,237,100(1,322,195)———(1,322,195)Conversion of convertible notes (Note 10)481,038,2004,810——(63,248,150)5,229,13213,607,968——18,841,910Beneficial conversion feature on convertible notes (Note 10)——————(1,368,866)——(1,368,866)Commitment fee paid to holders of convertible notes through issuanceof treasury shares (Note 10)————(5,500,000)765,397(436,247)——329,150Issuance of ordinary shares upon follow-on public offering, net ofissuance cost (Note 13)49,501,700495————1,199,505——1,200,000Exercise of share options (Note 15)10,571,200106————81,355——81,461Share-based compensation——————3,716,319——3,716,319Foreign currency translation adjustments————————202,020202,020Balance at December 31, 20213,391,809,19133,918246,224,4652,462——210,718,835(214,842,438)(1,912,896)(6,000,119)The accompanying notes are an integral part of these consolidated financial statements. Table of ContentsF-7COOTEK (CAYMAN) INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2019 2020 2021 US$ US$US$Cash flows from operating activities: Net Loss (36,846,061)(47,366,729)(13,877,363)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 3,005,008 3,769,2733,772,121Provision for allowance of doubtful accounts 4,104,458 359,252240,658Impairment loss of investment500,032—248,140Share-based compensation expense 3,662,485 5,337,0413,716,319Amortization of issuance cost and debt discounts related to convertible notes——5,647,358Change in fair value of derivatives——(1,108,648)Gain on disposal of property and equipment (1,227) (18,702)(33,817)Noncash lease expense——1,580,933Share of loss in equity method investment——65,084Changes in assets and liabilities: Accounts receivable (7,868,673) 524,3126,993,094Prepaid expenses and other current assets (2,939,454) (4,085,968)1,397,809Other non-current assets 280,438 (652,747)177,780Accounts payable 12,964,414 33,692,043(48,466,953)Accrued salary and benefits 1,089,969 2,802,408(4,807,311)Accrued expenses and other current liabilities 3,234,779 3,622,072(2,178,255)Operating lease liabilities——(1,839,838)Deferred revenue 3,431,816 1,320,706(2,429,459)Other non-current liabilities(282,263)(154,719)(141,341)Net cash used in operating activities (15,664,279) (851,758)(51,043,689)Cash flows from investing activities: Purchases of property and equipment and intangible assets (4,760,874) (2,919,854)(1,464,575)Proceeds from disposal of property and equipment1,29959,321133Purchases of short-term investments(571,352)(13,000,000)—Proceeds from maturity/sale of short-term investments—13,522,756—Purchases of long-term investments—(306,518)(314,091)Net cash used in investing activities (5,330,927) (2,644,295)(1,778,533)Cash flows from financing activities: Proceeds from short-term borrowings 14,083,153 32,517,81683,146,674Repayment of short-term borrowings (5,112,762) (31,018,904)(85,229,391)Proceeds from issuance of ordinary shares upon exercise of options326,503304,25981,339Proceeds from issuance of convertible notes, net of debt discounts and issuance cost of US$2.8 million——27,175,000Repayment of convertible notes——(4,181,918)Proceeds from issuance of ordinary shares upon follow-on public offering——1,390,000Cash paid to settle vested share options and restricted shares—(823,226)—Cash paid for issuance costs(809,952)—(159,624)Payment of share repurchase(12,283,426)(9,480,179)(1,322,195)Net cash (used in) provided by financing activities (3,796,484) (8,500,234)20,899,885Net decrease in cash, cash equivalents, and restricted cash (24,791,690) (11,996,287)(31,922,337)Cash, cash equivalents, and restricted cash at beginning of year 84,859,915 59,966,03149,622,714Effect of exchange rate changes on cash, cash equivalents and restricted cash (102,194) 1,652,970730,832Cash, cash equivalents, and restricted cash at end of year 59,966,031 49,622,71418,431,209Supplemental disclosure of cash flow information: Income taxes paid 1,714 7,08751,970Interest paid 134,991 588,533721,276Cash paid for amounts included in the measurement of operating lease liabilities——1,666,271Operating lease right-of-use assets obtained in exchange for operating lease liabilities——199,474Supplemental disclosure of noncash investing and financing activities:Purchases of property and equipment included in payables310,865231,82354,814Conversion of convertible notes into ordinary shares——17,473,045Deemed dividend from issuance of convertible notes——1,368,866Commitment fees on convertible notes through issuance of treasury shares——329,150Reconciliation in amounts on consolidated balance sheets: Cash and cash equivalents 59,905,827 24,669,13318,232,130Restricted cash 60,204 24,953,581199,079Total cash, cash equivalents, and restricted cash 59,966,031 49,622,71418,431,209 Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSF-81.Organization and Principal ActivitiesCooTek (Cayman) Inc. (the “Company”) was incorporated in the Cayman Islands on March 5, 2012. The Company, its subsidiaries, itsconsolidated variable interest entities (“VIEs”) and VIEs’ subsidiaries (collectively referred to as the “Group”) are a fast-growing mobile internetcompany with a global vision, offering mobile applications.History of the Group and reorganizationThe Group’s history began in August 2008 with the commencement of operations of Shanghai Han Xiang (CooTek) InformationTechnology Co., Ltd (“Han Xiang”), a limited liability company incorporated in the People’s Republic of China (“PRC”) by certain individuals. InOctober 2010, three outside investors acquired an aggregate of 24.24% equity interest of Han Xiang. In 2012, Han Xiang and its shareholdersundertook a reorganization which was conducted to establish a Cayman holding company for the existing business to obtain investment fromoutside investors and in preparation of an overseas initial public offering. The Group has recognized the net assets of Han Xiang on a historical costwith no change in basis in the consolidated financial statements upon the completion of the reorganization. The shareholders’ rights and obligationsremained the same after the reorganization.On October 2, 2018 the Group completed its initial public offering (“IPO”) in the United States and issued 4,350,000 American depositaryshares representing 217,500,000 of the Group’s ordinary shares. Net proceeds from the IPO after deducting underwriting discount and offeringcosts were US$45.1 million.2.Summary of Significant Accounting Policies(a) Basis of PresentationThe consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in theUnited States of America (“US GAAP”).The accompanying consolidated financial statements have been prepared assuming that the Group will continue as a going concern, whichcontemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The realization of assets and thesatisfaction of liabilities in the normal course of business are dependent on, among other things, the Group’s ability to generate cash flows fromoperations, and the Group’s ability to arrange adequate financing arrangements, including the renewal or rollover of its bank borrowings, to supportits working capital requirements.The Group has incurred net losses of US$47.4 million and US$13.9 million for the years ended December 31, 2020 and 2021,respectively. The accumulated deficit amounted to US$214.8 million as of December 31, 2021. Net cash used in operating activities were US$0.9million and US$51.0 million for the years ended December 31, 2020 and 2021, respectively. As of December 31, 2021, the Group’s currentliabilities exceed its current assets by US$11.2 million. Additionally, the Group received two non-compliance notifications from the New YorkStock Exchange ("NYSE") related to its share price and market capitalization not meeting the minimum requirements. The potential cashredemption of the outstanding convertible notes and repayment of bank borrowings which had outstanding amounts of US$11.2 million andUS$1.6 million, respectively as of December 31, 2021, will be triggered if delisting from NYSE occurs. With respect to the non-compliancenotification related to Company's market capitalization, the Company submitted its business plan to NYSE to demonstrate its plan to cure the non-compliance, and such plan has been accepted by NYSE. However, the Company's subsequent quarterly financial information will be subject to theNYSE's review through July, 2023 for compliance with the goals and initiatives as outlined in Company's plan. Failure to achieve these goals willresult in the Company being subject to NYSE trading suspension at the point when the goals or the initiatives are not met. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-92.Summary of Significant Accounting Policies (Continued)(a) Basis of Presentation (Continued)Such recurring losses, negative working capital and funding requirement relating to the potential redemption of its outstanding convertiblenotes and bank borrowings may raise substantial doubt about the Group’s ability to continue as a going concern, which indicates that it is probablethat the Group will be unable to meet its obligations as they become due within one year after the date that the financial statements are issued. TheGroup’s liquidity is dependent on its ability to enhance its operating cash flow, obtain capital financing from investors and borrowings fromcommercial banks to fund its general operations including its marketing activities. The Group’s ability to continue as a going concern is dependenton the following factors:●The successful implementation of a balanced growth strategy and an effective financial management which can contribute to theoptimization of the operating cost and expense structure. To implement the plans, the Group plans to continue to improve the stickiness ofits existing users by offering higher quality and diversified contents and user incentive program. In order to optimize cost structure andimprove operating efficiency, the Group will continue to implement various measures to control its costs and expenses, by reducingvarious discretional expenditures, including spending on user acquisition, labor costs and other operating expenses. The Group plans tofurther strengthen the monetization capability by diversifying its revenue structure and improving the return on investment of its keyproducts.●With respect to the non-compliance notification related to Company's average closing price, the Group plans to effect a reverse share splitin May 2022 to cure this deficiency.●The Group will continue to seek external financing to improve its liquidity position to fund continuing operations, though there is noassurance that the Group will be successful in obtaining sufficient funding on terms acceptable to the Group.●While there can be no assurance that the Group will be able to refinance its short-term bank borrowings as they become due, historically,the Group has renewed its short term credit facility upon the maturity of the loans and believes the Group will continue to be able to do so.Management has concluded, after giving consideration to its plans as noted above, that the Group has sufficient cash and liquidity to fundits operations for one year from the date of the issuance of the consolidated financial statements. Accordingly, the consolidated financial statementshave been prepared on a going concern basis, which contemplates the realization of assets and liquidation of liabilities during the normal course ofoperations.(b) Principles of ConsolidationThe consolidated financial statements include the financial information of the Company, its wholly owned subsidiaries, its consolidatedVIEs and VIEs’ subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.Applicable PRC laws and regulations currently limit foreign ownership of companies that provide internet content distribution servicesand any other restrictions. The Company is deemed a foreign legal person under PRC laws and accordingly subsidiaries owned by the Company arenot eligible to engage in provisions of internet content or online services. The Group therefore conducts its online business through the followingmajor consolidated VIEs:●Shanghai Chu Bao (CooTek) Information Technology Co., Ltd. (“Chu Bao”)●Shanghai Qiaohan Technology Co., Ltd. (“Qiaohan”)●Molihong (Shenzhen) Internet Technology Co., Ltd. (“Molihong”) Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-102.Summary of Significant Accounting Policies (Continued)(b) Principles of Consolidation (Continued)●Shanghai Dengyong Information Technology Co., Ltd. (“Dengyong”)●Yingsun Information Technology (Ningbo) Co., Ltd. (“Yingsun”)*●Shanghai Qinglin Network Technology Co., Ltd. (“Qinglin”)* The Group restructured its VIEs and Yingsun was directly controlled by one of subsidiaries of the Group since November 2020.To provide the Group effective control over the VIEs and receive substantially all of the economic benefits of the VIEs, the Company’swholly owned subsidiary, Shanghai ChuLe (CooTek) Information Technology Co., Ltd. (“Chu Le” or “WFOE”) entered into a series of contractualarrangements, described below, with The VIEs and their respective shareholders.Agreements that provide the Company effective control over the VIEs include:Voting Rights Proxy Agreements & Irrevocable Power of AttorneyPursuant to which each of the shareholders of VIEs has executed voting rights proxy agreements, appointing the WFOE, or any persondesignated by the WFOE, as their attorney-in-fact to (i) call and attend shareholders’ meetings of VIEs and execute relevant shareholders’resolutions; (ii) exercise on their behalf all his rights as a shareholder of VIEs, including those rights under PRC laws and regulations and thearticles of association of VIEs, such as voting, appointing, replacing or removing directors, (iii) submit all documents as required by governmentalauthorities on behalf of VIEs, and (iv) assign the shareholding rights of VIEs, including receiving dividends, disposing of equity interest andenjoying the rights and interests during and after liquidation.Exclusive Purchase Option AgreementsPursuant to which each the VIE shareholders unconditionally and irrevocably granted the WFOE or its designee exclusive options topurchase, to the extent permitted under PRC laws and regulations, all or part of the equity interests in the VIEs. The WFOE has the sole discretionto decide when to exercise the options, and whether to exercise the options in part or in full. Without the WFOE’s written consent, the VIEshareholders may not sell, transfer, pledge or otherwise dispose of or create any encumbrance on any of VIEs’ assets or equity interests.Equity Pledge AgreementsThe VIE shareholders agreed to pledge their equity interests in VIEs to the WFOE to secure the performance of the VIEs’ obligationsunder the series of contractual agreements and any such agreements to be entered into in the future. Without prior written consent of the WFOE, theVIEs’ shareholders shall not transfer or dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests.If any economic interests were received by means of their equity interests in the VIEs, such interests belong to the WFOE. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-112.Summary of Significant Accounting Policies (Continued)(b) Principles of Consolidation (Continued)Agreements that transfer economic benefits of VIEs to the Group include:Exclusive Business Cooperation AgreementsUnder the exclusive services agreement, the Company and the WFOE have the exclusive right to provide comprehensive technical andbusiness support services to the VIEs. In exchange, the VIEs pay monthly service fees to the WFOE in the amount equivalent to all of their netincome as confirmed by the WFOE. The WFOE has the right to adjust the service fee rates at its sole discretion. The agreement can be earlyterminated by the WFOE by giving a 30-day prior notice, but not by the VIEs or VIE shareholders.Loan AgreementsThe WFOE entered into loan agreements with each shareholder of the VIEs. Pursuant to the terms of these loan agreements, the WFOEgranted an interest-free loan to each shareholder of the VIEs for the explicit purpose of making a capital contribution to the VIEs. The term of theloans are 10 years and shall be renewed automatically every 3 years for an additional 3 years unless the WFOE terminates the agreement (whichoption is at the WFOE’s sole discretion) at which point the loans are payable on demand. The shareholders of the VIEs may not prepay all or anyportion of the loans without the WFOE’s consent.Voting Rights Proxy Agreements & Irrevocable Powers of Attorney and Exclusive Purchase Option Agreements provide the Companyeffective control over the VIEs and its subsidiaries, while the Exclusive Business Cooperation Agreements and Equity Pledge Agreements securethe obligations of the shareholders of the VIEs under the relevant agreements. Because the Company, through the WFOE, has (i) the power todirect the activities of the VIEs that most significantly affect the entity’s economic performance and (ii) the right to receive substantially all of thebenefits from the VIEs, the Company is deemed the primary beneficiary of the VIEs. Accordingly, the Company has consolidated the VIEs’financial results of operations, assets and liabilities in the Group’s consolidated financial statements. The aforementioned agreements are effectiveagreements between a parent and consolidated subsidiaries, neither of which is accounted for in the consolidated financial statements or areultimately eliminated upon consolidation (i.e. service fees under the Exclusive Business Cooperation Agreement).The Group believes that the contractual arrangements with the VIEs are in compliance with PRC law and are legally enforceable.However, uncertainties in the PRC legal system could limit the Company’s ability to enforce the contractual arrangements. If the legal structure andcontractual arrangements were found to be in violation of PRC laws and regulations, the PRC government could:●Revoke the business and operating licenses of the Company’s PRC subsidiaries and VIEs;●Discontinue or restrict the operations of any related-party transactions between the Company’s PRC subsidiaries and VIEs;●Limit the Group’s business expansion in China by way of entering into contractual arrangements;●Impose fines or other requirements with which the Company’s PRC subsidiaries and VIEs may not be able to comply;●Require the Company or the Company’s PRC subsidiaries or VIEs to restructure the relevant ownership structure or operations; or Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-122.Summary of Significant Accounting Policies (Continued)(b) Principles of Consolidation (Continued)●Restrict or prohibit the Company’s use of the proceeds of the additional public offering to finance the Group’s business and operations inChina.The following consolidated financial statement balances and amounts of the Group’s VIEs were included in the accompanyingconsolidated financial statements after the elimination of intercompany balances and transactions among the Company, its subsidiaries and itsVIEs.As of December 31, 2020 2021US$US$ASSETS Cash and cash equivalents 7,105,349 4,263,844Restricted cash 138,964 139,080Accounts receivable, net 16,115,202 6,911,955Prepaid expense and other assets 7,912,712 6,677,808Long-term restricted cash21,689,436—Long-term investments306,518313,691Property and equipment, net 36,422 159,514Operating lease right-of-use assets—485,196Other non-current assets224,235174,957Total Assets 53,528,838 19,126,045LIABILITIES Accounts payable 43,099,067 13,149,951Short-term bank borrowings 267,917 5,126,484Accrued salary and benefits 694,225 145,698Accrued expenses and other current liabilities 4,228,532 4,033,675Deferred revenue 620,688 459,887Operating lease liabilities, current—300,894Operating lease liabilities, non-current—37,097Total Liabilities 48,910,429 23,253,686For the years endedDecember 31, 2019 2020 2021 US$ US$US$Net revenues91,701,068355,516,582101,383,320(Loss) income from operations (26,589,386) 1,310,310(31,302,836)Net (loss) income (27,062,076) 1,805,819(31,694,750)Net cash provided (used in) by operating activities 11,577,601 17,304,417(27,664,505)Net cash used in investing activities (21,502) (344,681)(475,661)Net cash provided by (used in) financing activities 405,304 (163,132)4,772,782The VIEs’ assets are comprised of recognized and unrecognized revenue-producing assets. The recognized revenue producing assetsmainly include purchased servers, which are presented in the account of “Property and equipment, net”. The unrecognized revenue-producingassets mainly consist of the Internet Content Provider license (“ICP” license), trademarks, copyrights and registered patents, which are notrecognized in the consolidated balance sheets. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-132.Summary of Significant Accounting Policies (Continued)(b) Principles of Consolidation (Continued)Revenues of VIEs included in the consolidated financial statements mainly include revenue of advertising services. The VIEs contributed52%, 81% and 37% of the Group’s consolidated net revenues for years ended December 31, 2019, 2020 and 2021, respectively. As ofDecember 31, 2020 and 2021, the VIEs accounted for an aggregate of 55% and 34% respectively, of the consolidated total assets, and 44% and37% respectively, of the consolidated total liabilities.There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Companyor its subsidiaries to provide financial support to the VIEs. However, if the VIEs were ever to need financial support, the Group may, at its optionand subject to statutory limits and restrictions, provide financial support to its VIE through loans to the shareholders of the VIEs.The Group believes that there are no assets held in the VIEs that can be used only to settle obligations of the VIEs, except for registeredcapital and the PRC statutory reserves. As the VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of theVIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs. Relevant PRC laws and regulations restrict theVIEs from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in theform of loans and advances or cash dividends. Please refer to Note 20 for disclosure of restricted net assets.(c) Use of EstimatesThe preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affectthe reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during thereporting period. Actual results may differ from these estimates. The Group bases its estimates on historical experience and various other factorsbelieved to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets andliabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group’s financial statements includingbut not limited to allowance for doubtful accounts, accruals for user incentive programs, valuation allowances of deferred tax assets, valuation ofshare-based compensation, and valuation of embedded derivative liabilities. Actual results may differ materially from those estimates.(d) Fair ValueFair value reflects the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction betweenmarket participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to berecorded at fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptions thatmarket participants would use when pricing the assets or liabilities. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-142.Summary of Significant Accounting Policies (Continued)(d) Fair Value (Continued)The Group applies a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use ofunobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowestlevel of input that is significant to the fair value measurement. This guidance specifies a hierarchy of valuation techniques, which is based onwhether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:●Level 1—Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities thatare identical to the assets or liabilities being measured.●Level 2—Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that aresimilar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets orliabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significantvalue drivers are observable in active markets are Level 2 valuation techniques.●Level 3—Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputsare valuation technique inputs that reflect the Group’s own assumptions about the assumptions that market participants would use inpricing an asset or liability.The fair value guidance describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2)income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactionsinvolving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single presentvalue amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach isbased on the amount that would currently be required to replace an asset.When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are notavailable, the Group will measure fair value using valuation techniques that use, when possible, current market-based or independently sourcedmarket parameters, such as interest rates and currency rates.Beginning January 1, 2019, the Group’s equity investments without readily determinable fair values, which do not qualify for Net AssetValue (“NAV”) practical expedient and over which the Group does not have the ability to exercise significant influence through the investments incommon stock or in substance common stock, are accounted for under the measurement alternative upon the adoption of Accounting StandardsUpdate (“ASU”) 2016-01 Recognition and Measurement of Financial Assets and Liabilities (the “Measurement Alternative”). Under theMeasurement Alternative, the carrying value is measured at cost, less any impairment, plus and minus changes resulting from observable pricechanges in orderly transactions for identical or similar investments. After management’s assessment of each of the long-term investments,management concluded that investments do not have readily determinable fair values, and elects the measurement alternative.The Company measures equity method investments at fair value on a nonrecurring basis when they are deemed to be impaired. The fairvalues of these investments are determined based on valuation techniques using the best information available, and may include future performanceprojections, discount rate and other assumptions that are significant to the measurements of fair value. An impairment charge to these investmentsis recorded when the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than-temporary. Duringthe years ended December 31, 2019, 2020 and 2021, the Group recognized nil, nil and US$0.25 million impairment loss of equity methodinvestments, respectively. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-152.Summary of Significant Accounting Policies (Continued)(d) Fair Value (Continued)Financial instruments not reported at fair value include cash and cash equivalents, restricted cash, short-term investments, accountsreceivable, accounts payable, other current liabilities, short-term borrowings, and convertible note payable (see Note 10). The embedded monthlyredemption right of the convertible note was measured at fair value and the Group determined these recurring fair value measurements resideprimarily within Level 3 of the fair value hierarchy because the absence of observable inputs used in Monte Carlo simulation. The significantinputs applied in Monte Carlo simulation include expected volatility, dividend yield and present value discount rate. The carrying amounts of otherfinancial instruments as of December 31, 2020 and December 31, 2021 were considered representative of their fair values due to their short-termnature.(e) Foreign Currency TranslationThe functional currency of the Company is the United States Dollar (“US$”). The functional currency of the VIEs and the VIEs’subsidiaries in the PRC is Renminbi (“RMB”). The functional currency of all the other subsidiaries is US$.Foreign currency transactions have been translated into the functional currency at the exchange rates prevailing on the date of transactions.Foreign currency denominated monetary assets and liabilities are re-measured into the functional currency at exchange rates prevailing on thebalance sheet date. Exchange gains and losses are recorded in the statements of operations.The Group has chosen the US$ as its reporting currency. Assets and liabilities have been translated using exchange rates prevailing on thebalance sheet date. Equity accounts are translated at historical exchange rates. Income statement items have been translated using the averageexchange rate for the year. Translation adjustments have been reported as cumulative translation adjustments and are shown as a component ofother comprehensive (loss) income in the consolidated statements of comprehensive loss and consolidated statements of changes in shareholders’ equity (deficit).(f) Cash, Cash Equivalents and Restricted cashCash and cash equivalents consist of cash on hand, demand deposits and floating rate financial instruments which are unrestricted as towithdrawal or use, and which have original maturities of three months or less when purchased.As of December 31, 2021, the Group’s restricted cash represents amounts held in Group’s bank account as guarantee deposit for loanfacility provided by the bank. Long-term restricted cash of US$21.7 million frozen by local authorities on the alleged illegal acts of certaincustomers were released upon the completion of investigations as of December 31, 2021.(g) Short-term InvestmentsShort-term investments primarily consist of the time deposits with maturities between three months and one year. The Group classifies theshort-term investments as “held-to-maturity” securities and stated at amortized cost within Level 2.For investments classified as held-to-maturity securities, the Group evaluates whether a decline in fair value below the amortized costbasis is other-than-temporary in accordance with the Company’s policy and ASC 320. The other-than-temporary impairment loss is recognized inearnings equal to the entire excess of the investment’s amortized cost basis over its fair value at the balance sheet date of the reporting period forwhich the assessment is made. No impairment losses in relation to its short-term investments were recorded for the years ended December 31,2019, 2020 and 2021. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-162.Summary of Significant Accounting Policies (Continued)(h) Accounts Receivable, netAccounts receivable, net represents those receivables derived from the ordinary course of business and are recorded net of allowance fordoubtful accounts. The Group maintains an allowance for doubtful accounts that reflect its best estimate of probable losses inherent in the accountsreceivables. In determining collectability of the accounts receivables, the Group considers many factors, such as: creditworthiness of customers,aging of the receivables, payment history of customers, financial condition of the customers and market trends, and specific facts andcircumstances.The allowance for doubtful accounts is reduced by subsequent collections of the specific allowances or by any write-off of customeraccounts that are deemed uncollectible.(i) Long-term InvestmentsInvestments represent equity-method investments and equity investments without readily determinable fair value.The Group accounts for equity investment in entities with significant influence but holds no controlling interest under equity-methodaccounting. Under this method, the Group’s pro rata share of income (loss) from investment is recognized in the consolidated statements ofoperation. When the Group’s share of loss in an equity-method investee equals or exceeds its carrying value of the investment in that entity, theGroup continues to report its share of equity method losses in the statements of operation to the extent and as an adjustment to the carrying amountof its other investments in the investee. Equity-method investment is reviewed for impairment by assessing if the decline in market value of theinvestment below the carrying value is other-than-temporary. In making this determination, factors are evaluated in determining whether a loss invalue should be recognized. These include consideration of the intent and ability of the Group to hold investment and the ability of the investee tosustain an earnings capacity, justifying the carrying amount of the investment. Impairment losses are recognized in impairment losses of investmentwhen a decline in value is deemed to be other-than- temporary.Investments in equity securities without readily determinable fair values are measured at cost minus impairment adjusted by observableprice changes in orderly transactions for the identical or a similar investment of the same issuer. An impairment loss is recognized in theconsolidated statements of operation equal to the amount by which the carrying value exceeds the fair value of the investment.The Group recognized US$500,032, nil and US$248,140 of impairment loss to write down the long-term investments for the years endedDecember 31, 2019, 2020 and 2021, respectively.(j) Property and Equipment, netProperty and equipment is recorded at cost less accumulated depreciation and impairment. Depreciation expense of long-lived assets isrecorded as either cost of revenue or operating expenses, as appropriate. Depreciation is computed using the straight-line method over thefollowing estimated useful lives by major asset category:Electronic equipment 3 yearsOffice equipment and furniture 3 - 5 yearsMotor vehicles 3 yearsLeasehold improvements Shorter of the lease term or expected useful life Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-172.Summary of Significant Accounting Policies (Continued)(j) Property and Equipment, net (Continued)Repair and maintenance costs are charged directly to expense as incurred, whereas the cost of renewals and improvement that extend theuseful lives of property and equipment are capitalized as additions to the related assets.(k) Intangible AssetsIntangible assets mainly consist of externally purchased software and other intangible assets which are amortized over an estimated usefullife of 3-10 years on a straight-line basis.(l) Impairment of Long-lived AssetsLong-lived assets, including property and equipment and intangible assets, are evaluated for impairment whenever events or changes incircumstances indicate that the carrying value of an asset may not be recoverable. Factors considered important that could result in an impairmentreview include, but are not limited to, significant under-performance relative to historical or planned operating results, significant changes in themanner of use or expected life of the assets or significant changes in business strategies. An impairment analysis is performed at the lowest level ofidentifiable cash flows for an asset or asset group based on valuation techniques such as discounted cash flow analysis. An impairment charge isrecognized when the estimated undiscounted cash flows expected to result from the use of the asset plus net proceeds expected from the dispositionof the asset, if any, are less than the carrying value of the asset net of other liabilities. The estimation of future cash flows requires significantmanagement judgment and actual results may differ from estimated amounts. No impairment was recognized for the years ended December 31,2019, 2020 and 2021.(m) Treasury SharesTreasury shares represents ordinary shares repurchased by the Company that are no longer outstanding and are held by the Group.Treasury shares are accounted for under the cost method. Under this method, repurchased ordinary shares were recorded as treasury shares athistorical purchase price. At retirement, the ordinary shares account is charged only for the aggregate par value of the shares. The excess of theacquisition cost of treasury shares over the aggregate par value is allocated between additional paid-in capital (up to the amount credited to theadditional paid-in capital upon original issuance of the shares) and retained earnings.(n) Revenue RecognitionMobile AdvertisingThe Group generates substantially all of its revenue through mobile advertising and recognizes the revenue according to ASC Topic 606.The Group provides advertising services to customers for promotion of their brands and products through its mobile applications,including a portfolio of content-rich mobile applications. The Group has two general pricing models for its advertising products: cost over a timeperiod and cost for performance basis including per impression basis. For advertising contracts over a time period, the Group generally recognizesrevenue ratably over time, because the customer simultaneously receives and consumes the benefits as the Group performs throughout a fixedcontract term. For contracts that are charged on the cost for performance basis, the Group charges an agreed-upon fee to its customers determinedbased on the effectiveness of advertising links, which is typically measured by clicks, transactions, installations, user registrations, and otheractions originating from the Group’s mobile applications. Revenue is recognized at a point in time when there is an effective click, transaction,installations, user registrations, and other actions originating from the Group’s mobile applications. For contracts that are charged on the cost perimpression basis, the Group recognizes the revenue at a point in time when the impressions are delivered. Revenue for performance-basedadvertising services is recognized at a point in time when all the revenue recognition criteria are met. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-182.Summary of Significant Accounting Policies (Continued)(n) Revenue Recognition (Continued)For certain of the Group’s advertising service arrangements, customers are required to pay a deposit before using Group’s services.Deposits received are recorded as deferred revenue on the consolidated balance sheets. Service fees due to the Group are deducted from thedeposited amounts when performance criteria have been satisfied.OthersThe Group also generates other revenues through VIP user subscription fee, licensing of online literature works and licensing of itsportfolio products. The revenue is recognized when service is rendered.Sales IncentivesThe Group provides sales incentives to certain customers in the form of sales rebates which entitle them to receive reductions in the price.The Group accounts for these incentives granted to customers as variable consideration and records it as reduction of revenue. The amount ofvariable consideration is measured based on the most likely amount of incentives to be. For the years ended December 31, 2019, 2020 and 2021,the rebates recorded by the Group were US$6,473,774, US$54,320,688 and US$10,897,346, respectively.Disaggregation of RevenueIn the following table, revenue is disaggregated by revenue streams and geographic location of customers’ headquarters.For the years ended December 31, 201920202021 US$ US$ US$Revenue:Advertising revenue 175,040,033 438,384,470 267,266,716Other revenue 2,843,072 3,120,761 4,879,105Total 177,883,105 441,505,231 272,145,821For the years ended December 31, 201920202021 US$ US$ US$PRC 121,105,976 413,141,394 232,300,929USA 53,469,745 22,192,632 30,023,116Others 3,307,384 6,171,205 9,821,776Total 177,883,105 441,505,231 272,145,821Contract BalancesTiming of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represents the amount to becollected from customers for which service has been delivered. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-192.Summary of Significant Accounting Policies (Continued)(n) Revenue Recognition (Continued)Contract liabilities include payments received in advance of performance under the contract or for differences between the amount billedto a customer and the revenue recognized for the completed performance obligation which is presented as deferred revenue on the consolidatedbalance sheets. Due to the generally short-term duration of the Group’s contracts, majority of the performance obligations are satisfied in one year.The movements of the Group’s accounts receivable and deferred revenue are as follows: Accounts Receivable Deferred RevenueUS$US$Opening Balance as of January 1, 2020 27,254,634 3,887,908Increase (decrease), net 872,712 (556,397)Ending Balance as of December 31, 2020 28,127,346 3,331,511Decrease, net (6,644,244) (1,388,343)Ending Balance as of December 31, 2021 21,483,102 1,943,168Revenue amounted US$3,862,177 and US$3,301,256 were recognized in the years ended December 31, 2020 and 2021, respectively,which were included in the balance of deferred revenue at the beginning of each year.Transaction Price Allocated to the Remaining Performance ObligationsRevenue expected to be recognized in any future year related to remaining performance obligations, excluding revenue pertaining tocontracts that have an original expected duration of one year or less, contracts where revenue is recognized as invoiced and contracts with variableconsideration related to undelivered performance obligations, is not material.Practical Expedients and ExemptionsThe Group elects not to disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of oneyear or less (ii) contracts for which the Group recognizes revenues at the amount to which it has the right to invoice for services performed and (iii)contracts with variable consideration related to wholly unsatisfied performance obligations.(o) Cost of RevenueCost of revenues consists of direct costs primarily relating to generating advertising revenue, which includes bandwidth costs and cloudservice costs, content costs paid to signed authors and third-party content providers for the publishing and licensing of relevant online literatureworks, third-party outsourcing fees for checking online literature works and producing audio and video, depreciation expenses and service fees forinternet data center, and salary and benefits expenses of operation and maintenance department.(p) Research and Development ExpensesResearch and development expenses primarily consist of (1) salary and benefits expenses incurred in the research and development of newproducts and new functionality, and (2) general expenses and depreciation expenses associated with the research and development activities.Expenditures incurred during the research phase are expensed as incurred and no research and development expenses were capitalized asof December 31, 2019,2020 and 2021. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-202.Summary of Significant Accounting Policies (Continued)(q) Sales and Marketing ExpensesSales and marketing expenses primarily consist of advertising and promotion expenses, expenses incurred for the user incentive programs,salaries and benefits of sales and marketing personnel and fees paid to mobile device manufacturers to pre-install the Group’s smart input products.Advertising and promotion expenses which mainly include user acquisition costs that represent payment to the third parties for online useracquisition of the Group’s products via social media and demand-side platforms amounted to US$147,798,957, US$408,131,372 andUS$145,992,236 for the years ended December 31, 2019, 2020 and 2021, respectively.The Group launched the user incentive programs for itsregistered users in its various applications to enhance user engagements.(r) LeasesThe Group leases office space in different cities in PRC and USA under non-cancellable operating lease agreements that expire at variousdates through December 2023. Before January 1, 2021, the Group applied the ASC 840, Leases, under which each lease is classified at theinception date as either a capital lease or an operating lease. All the Group’s leases were classified as operating lease under ASC 840.Effective January 1, 2021, the Group adopted ASU No. 2016-02 “Leases” (“ASC 842”) using the modified retrospective approach. TheGroup elected the transition package of practical expedients permitted within the standard, which allowed it not to reassess initial direct costs, leaseclassification, or whether the contracts contain or are leases for any leases that existed prior to January 1, 2021. The Group also elected the short-term lease exemption for all contracts with an original lease term of 12 months or less. Upon the adoption, the Group recognized operating leaseright of use (“ROU”) assets of US$2,563,151 with corresponding lease liabilities of US$2,470,968 on the consolidated balance sheets. Theoperating lease ROU assets include adjustments for prepayments. The adoption did not impact the Group’s beginning retained earnings as ofJanuary 1, 2021, or the Group’s prior years’ financial statements.Under ASC 842, the Group determines whether an arrangement constitutes a lease and records lease liabilities and ROU assets on itsconsolidated balance sheets at the lease commencement. The Group measures the operating lease liabilities at the commencement date based on thepresent value of remaining lease payments over the lease term, which is computed using the Group’s incremental borrowing rate, an estimated ratethe Group would be required to pay for a collateralized borrowing equal to the total lease payments over the lease term. The Group measures theoperating lease ROU assets based on the corresponding lease liability adjusted for payments made to the lessor at or before the commencementdate, and initial direct costs it incurs under the lease. The Group begins recognizing operating lease expense based on lease payments on a straight-line basis over the lease term after the lessor makes the underlying asset available to the Group. Some of the Group’s lease contracts includeoptions to extend the leases for an additional period which has to be agreed with the lessors based on mutual negotiation. After considering thefactors that create an economic incentive, the Group does not include renewal option periods in the lease term for which it is not reasonably certainto exercise.The Group incurred operating lease costs amounting to US$1,426,926 and US$1,680,814 (excluding US$64,559 for short-term leases notcapitalized as ROU assets) for the years ended December 31 2020 and 2021, respectively. Cash payments against operating lease liabilities wereUS$1,666,271 for the year ended December 31,2021. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-212.Summary of Significant Accounting Policies (Continued)(r) Leases (Continued)As of December 31, 2021, Group’s operating leases had a weighted average remaining lease term of 1.0 years and a weighted averagediscount rate of 6.0%. Future lease payments under operating leases as of December 31, 2021 were as follows: As of December 31, 2021US$2022 834,3152023 105,216Total lease payment 939,531Less: imputed interest (26,764)Total lease liability balance 912,767Less: Operating lease liabilities, current (809,610)Long-term operating lease liabilities 103,157As of December 31, 2020, the future minimum lease payments under the Group’s non-cancelable operating lease agreements based onASC 840 are as follows: As of December 31, 2020US$20211,650,1022022 947,7942023 62,003Total lease commitment 2,659,899(s) Convertible Notes, Beneficial Conversion Feature (“BCF”) and Redemption FeatureThe Group issued convertible notes in January and March 2021. The Group has evaluated whether the conversion feature of the notes isconsidered an embedded derivative instrument subject to bifurcation in accordance with Topic 815, Derivatives and Hedging (“ASC 815”),Accounting for Derivative Instruments and Hedging Activities. Based on the Group’s evaluation, the conversion feature is not considered anembedded derivative instrument subject to bifurcation as conversion option does not provide the holder of the notes with means to net settle thecontracts. Convertible notes, for which the embedded conversion feature does not qualify for derivative treatment, are evaluated to determine if theeffective rate of conversion per the terms of the convertible note agreement is below market value. In these instances, the value of the BCF isdetermined as the intrinsic value of the conversion feature is recorded as deduction to the carrying amount of the notes and credited to additionalpaid-in-capital. The value of the BCF is recorded in the financial statements as a debt discount from the face amount of the notes, which is thenaccreted to interest expense over the life of the related debt using the effective interest method. The Group presents the occurred debt issuance costsas a direct deduction from the convertible note rather than as an asset. Amortization of the costs is reported as interest expense. At the date of aboveconversion, the remaining amount has been fully amortized to interest expense. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-222.Summary of Significant Accounting Policies (Continued)(s) Convertible Notes, Beneficial Conversion Feature (“BCF”) and Redemption Feature (Continued)The convertible notes issued in March 2021 also include a monthly redemption feature which trigger a mandatory monthly redemption ofa portion of the principal amount plus an 8% redemption premium and accrued and unpaid interest to be redeem in cash, the shares of the Group ora combination of both at the option of the Group if certain conditions relating to trading prices of the Group’s shares are not met (“MonthlyRedemption”). The Group has evaluated whether the Monthly Redemption feature is considered an embedded derivative instrument subject tobifurcation in accordance with ASC 815, Accounting for Derivative Instruments and Hedging Activities. Based on the Group’s evaluation, themonthly redemption has an underlying based on the fair value of the Group’s shares. An underlying that is based on common stock is notconsidered to be clearly and closely related to a debt host instrument, therefore, the Monthly Redemption feature should be separately accountedfor as a standalone derivative under ASC 815. This derivative is presented at fair value with change in fair value recognized in earnings. For theconvertible note issued with this derivative, a portion of the note’s proceed is allocated to the derivative based on the fair value at the date of theissuance. The allocated fair value for the derivative is recorded as a debt discount from the face amount of the notes, which is then accredited tointerest expense over the life of the related debt using the effective interest method.(t) Income TaxesCurrent income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense itemswhich are not assessable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions. The Groupfollows the asset and liability method of accounting for income taxes.In accordance with the provisions of ASC 740, Income Taxes, the Group recognizes in the financial statements the benefit of a tax positionif the tax position is “more likely than not” to prevail based on the facts and technical merits of the position. Tax positions that meet the “morelikely than not” recognition threshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of beingrealized upon settlement. The Group estimates liability for unrecognized tax benefits which are periodically assessed and may be affected bychanging interpretations of laws, rulings by tax authorities, changes and/or developments with respect to tax audits, and expiration of the statute oflimitations. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, insome cases, appeal or litigation process.Under this method, deferred tax assets and liabilities are determined based on the temporary differences between the financial statementscarrying amounts and tax bases of assets and liabilities by applying enacted statutory tax rates that will be in effect in the period in which thetemporary differences are expected to reverse. The Group considers positive and negative evidence when determining whether some portion or allof the deferred tax assets will not be realized. This assessment considers, among other matters, the nature, frequency and severity of current andcumulative losses, forecasts of future profitability, the duration of statutory carry-forward periods, historical results of operations, and tax planningstrategies. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in whichthose temporary differences become deductible.The actual benefits that are ultimately realized may differ from estimates. As each audit is concluded, adjustments, if any, are recorded inthe financial statements in the period in which the audit is concluded. Additionally, in future periods, changes in facts, circumstances and newinformation may require us to adjust the recognition and measurement estimates with regard to individual tax positions. Changes in recognition andmeasurement estimates are recognized in the period in which the changes occur. As of December 31, 2019,2020 and 2021, the Group did not haveany significant unrecognized uncertain tax positions. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-232.Summary of Significant Accounting Policies (Continued)(u) Employee Contribution PlanPursuant to the relevant labor rules and regulations in the PRC, the Group participates in defined contribution retirement schemes (the“Schemes”) organized by the relevant local government authorities for its eligible employees whereby the Group is required to make contributionsto the Schemes at certain percentages of the deemed salary rate announced annually by the local government authorities. Contributions to thedefined contribution plan are expensed as incurred.The Group has no other material obligation for payment of pension benefits except for the annual contributions described above.(v) Share-based CompensationFair value recognition provisions according to ASC718, Compensation—Stock Compensation: Overall, is applied to share-basedcompensation, which requires the Group to recognize expense for the fair value of its share-based compensation awards. Compensation expenseadjusted for forfeiture effect on a straight-line basis over the requisite service period, with a corresponding impact reflected in additional paid-incapital.Employees’ share-based awards are measured at the grant date fair value of the awards and recognized as expenses a) immediately at grantdate if no vesting conditions are required, or b) using grade vesting method, net of actual forfeitures, over the requisite service, which is the vestingperiod.The Group determines fair value of share options as of the grant date using binomial option pricing model and the fair value of restrictedshare units as of the grant date based on the fair market value of the underlying ordinary shares.The expected term represents the period that share-based awards are expected to be outstanding, giving consideration to the contractualterms of the share-based awards, vesting schedules and expectations of future employee exercise behavior. Volatility is estimated based onannualized standard deviation of daily stock price return of comparable companies for the period before valuation date and with similar span as theexpected expiration term. The Group accounts for forfeitures of the share-based awards when they occur. Previously recognized compensation costfor the awards is reversed in the period that the award is forfeited. Amortization of share-based compensation is presented in the same line item inthe consolidated statements of operations as the cash compensation of those employees receiving the award.(w) Comprehensive LossComprehensive Loss includes all changes in equity except those resulting from investments by owners and distributions to owners. Forthe years presented, the Group’s total comprehensive loss includes net loss and foreign currency translation adjustments.(x) Loss per ShareBasic loss per share are computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinaryshares outstanding during the period. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-242.Summary of Significant Accounting Policies (Continued)(x) Loss per Share (Continued)Diluted loss per share reflects the potential dilution that could occur if securities or other contracts to issue ordinary shares were exercisedor converted into ordinary shares, which consists of the ordinary shares issuable upon the conversion of the convertible notes (using the if-converted method), ordinary shares issuable upon the exercise of share options and vest of non-vested restricted share units (using the treasurystock method).(y) Concentration and risksConcentration of CustomersFinancial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents,short-term investments, accounts receivable and prepayments. The Group places its cash and cash equivalents and short-term investments withfinancial institutions with high-credit ratings and quality.The Group conducts credit evaluations of customers, and generally does not requirecollateral or other security from its customers. The Group establishes an allowance for doubtful accounts primarily based upon the age of thereceivables and factors surrounding the credit risk of specific customers. With respect to prepayments, the Group performs on-going creditevaluations of the financial condition of these suppliers and has noted no significant credit risk.The following customers accounted for 10% or more of revenue:For the years ended December 31, 201920202021 US$ % US$ % US$ %Company A51,013,29628.68% ****Company B 28,417,37915.98% ****Company C21,988,97512.36% ****Company D21,335,69811.99%****Company E**115,829,77026.24%75,896,20727.89%Company F**58,667,03113.29%68,943,51325.33%* Less than 10%.The following customers accounted for 10% or more of accounts receivable:As of December 31, 20202021 US$ % US$ % Company E7,498,56325.60%7,233,55931.93%Company F11,559,39839.47%2,299,038 10.15%Company G **2,298,86410.15%*Less than 10%. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-252.Summary of Significant Accounting Policies (Continued)(y) Concentration and risks (Continued)Concentration of VendorsThe Group uses certain vendors to acquire users and those cost are recorded as sales and marketing expenses. Vendors accounted for 10%or more are listed as below:For the years ended December 31, 201920202021 US$ % US$ % US$ % Company H * ** * 24,058,293 12.02%Company I * ** * 22,034,256 11.00%Company J * * 52,426,534 12.53%* ** Less than 10%.The following vendors accounted for 10% or more of accounts payable:As of December 31, 20202021 US$ % US$ % Company G**5,560,85420.03%Company H**4,913,19417.70%Company I**4,041,70514.56%Company K 16,072,255 21.11%* *Company J 9,461,038 12.43%* *Company L 7,604,056 10.00%* ** Less than 10%.Business and Economic RisksThe Group participates in the dynamic and competitive high technology industry and believes that changes in any of the following areascould have a material adverse effect on the Group’s future financial position, results of operations and cash flows: changes in the overall demandfor services and products; competitive pressures due to existing and new entrants; advances and new trends in new technologies and industrystandards; changes in certain strategic relationships or customer relationships; regulatory considerations; copyright regulations; brand maintenanceand enhancement; and risks associated with the Group’s ability to attract and retain employees necessary to support its growth.The Group’s operations could be adversely affected by significant political, economic and social uncertainties in the PRC.Foreign Currency RiskThe RMB is not a freely convertible currency. The State Administration for Foreign Exchange in the PRC, under the authority of thePeoples Bank of China, controls the conversion of RMB into other currencies. The value of the RMB is subject to changes in central governmentpolicies, international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.The Group’s cash and cash equivalents and restricted cash denominated in RMB amounted to RMB 280,266,558 (amounted to US$42,953,388)and RMB 87,782,986 (amounted to US$13,768,368) as of December 31, 2020 and 2021, respectively. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-262.Summary of Significant Accounting Policies (Continued)(z) Recent Accounting PronouncementsNew accounting pronouncements recently adoptedIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a right-of-use asset and leaseliability on their balance sheet for all leases with terms beyond twelve months. Effective January 1, 2021, the Group adopted the requirements ofthis ASU using the modified retrospective approach with comparative periods continuing to be reported under Topic 840. The Group elected thetransition package of practical expedients permitted within the standard. As a result, the Group did not reassess initial direct costs, leaseclassification, or whether the contracts contain or are leases. The consolidated financial statements for the year ended December 31, 2021 arepresented under the new standard, while comparative periods presented have not been adjusted and continue to be reported in accordance with theprevious standard.In December 2019, the FASB has issued ASU No. 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes.The guidance issued in this update simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC740 relatedto the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition for deferredtax liabilities for outside basis differences. This ASU also simplifies aspects of the accounting for franchise taxes and enacted changes in tax lawsor rates and clarifies the accounting for transactions that result in a step-up in the tax basis of goodwill. The amendments in this ASU are effectivefor fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Group hasadopted the guidance on January 1, 2021. There was no material impact on the consolidated financial statements and related disclosures as a resultof adopting this new standard.In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives andHedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity,which simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debtinstruments. This guidance also eliminates the treasury stock method to calculate diluted earnings per share for convertible instruments andrequires the use of the if-converted method. The amendments in this ASU are effective for fiscal years beginning after December 15, 2023,including interim periods within those fiscal years for smaller reporting companies (as defined by the U.S. Securities and Exchange Commission)and other non-SEC reporting entities and early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, includinginterim periods within those fiscal years. The Group has adopted this guidance on January 1, 2021 and it did not have a material impact on itsconsolidated financial statements and related disclosures.New accounting pronouncements not yet adoptedIn June 2016, the FASB issued ASU 2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments. This ASU providesmore useful information about expected credit losses to financial statement users and changes how entities will measure credit losses on financialinstruments and timing of when such losses should be recognized. This ASU is effective for annual and interim periods beginning after December15, 2019 for the public business entities. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, andinterim periods therein. In November 2019, the FASB issued ASU No. 2019-10 which delayed the effective date of ASU 2016-13 for smallerreporting companies and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including interim periods within thosefiscal periods. Early adoption is permitted. The Group is currently assessing the impact the guidance will have on its consolidated financialstatements. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-273.Accounts Receivable, netAccounts receivable, net, consisted of the following:As of December 31, 2019 2020 2021US$US$US$Accounts receivable29,028,82629,289,30122,651,618Allowance for doubtful accounts: Balance at beginning of the year (1,286,120)(1,774,192) (1,161,955)Additions charged to bad debt expense (4,104,458)(359,252) (34,005)Write-off3,616,076964,47428,367Foreign exchange effect3107,015(923)Balance at end of the year (1,774,192)(1,161,955) (1,168,516)Accounts receivable, net 27,254,63428,127,346 21,483,1024.Prepaid Expenses and Other Current AssetsPrepaid expenses and other current assets consisted of the followings:As of December 31, 2020 2021US$US$Value added tax recoverable5,498,4005,294,393Other receivables 3,875,800 2,790,875Advance to suppliers 882,793 1,368,850Others 1,816,233 1,410,162Prepaid expenses and other current assets 12,073,226 10,864,2805.Property and Equipment, netProperty and equipment, net, consisted of the followings:As of December 31, 2020 2021US$US$Electronic equipment12,729,69613,572,581Office equipment and furniture 363,163 325,449Motor vehicles 82,470 242,605Leasehold improvements 1,714,381 1,764,589Construction in progress 5,811 —Total 14,895,521 15,905,224Less: Accumulated depreciation (9,501,779) (12,817,015)Property and equipment, net 5,393,742 3,088,209For the years ended December 31, 2019, 2020 and 2021, depreciation expenses were US$2,958,276, US$3,639,269 and US$3,619,036,respectively. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-286.Intangible Assets, netIntangible assets, net consist of the following:As of December 31, 2020 2021US$US$Purchased software 566,123 591,920Others8,964—Less: Accumulated amortization (178,592) (342,954)Intangible Assets, net 396,495 248,966Amortization expense of intangible assets for the years ended December 31, 2019, 2020 and 2021 amounted to US$46,732, US$130,004and US$153,085, respectively. Estimated amortization expenses of the existing intangible assets for each of the five years ending December 31,2026 and thereafter is US$151,592, US$80,016, US$17,358, nil and nil respectively.7.Long-term InvestmentsIn April 2020, the Group partnered with an unrelated third party investor to form a privately-held investing company in limitedpartnership, of which the Group holds 4% equity interest. The business is to invest enterprises in high-tech industries. The Group measures itsequity securities without a readily determinable fair value at its cost minus impairment, if any, plus or minus changes resulting from observableprice changes in orderly transactions for the identical or a similar investment of the same issuer. No impairment was recognized for the year endedDecember 31,2021.In April 2021, the Group acquired 13.33% equity interests in a privately-held company for cash consideration of US$0.3 million, whichthe Group plans to hold for long term investment purpose. The Group accounts for equity investment in entities with significant influence but doesnot own a majority equity interest or otherwise control under equity-method accounting. The Group records equity method adjustments in share ofprofits and losses and continually reviews equity method investments to determine whether a decline in fair value to below the carrying value isother-than-temporary. The Group recognized a share of loss in equity method investment of US$0.07 million and a full impairment of US$0.25million on this investment for the year ended December 31, 2021.8.Short-term BorrowingsIn July 2016, the Group entered into a credit facility agreement with a commercial bank under which the Group can draw-down up toUS$6.0 million by October, 2018. In June 2020, the Group renewed the bank credit facility under which the Group can borrow up to US$11.0million collateralized by its accounts receivable by June 2021. The interest rate for this credit facility is the Loan Prime Rate (“LPR”) plus 1.30%.Cash amount of US$3.1 million has been deposited in the bank as guarantee as of December 31, 2020. In 2020, the Group has aggregately drawndown the credit facility of US$28.8 million and repaid US$24.1 million, and the weighted average interest rate for borrowings drawn under suchcredit facility was 5.15%.In June 2021, the Group renewed the bank credit facility under which the Group can borrow up to US$10.0 millioncollateralized by its accounts receivable by June 2022, which contains maximum quarterly net loss and maximum monthly debt ratio as financialcovenants. The interest rate for this credit facility is the LPR plus 1.30%. No guarantee has been deposited in the bank as of December 31, 2021. In2021, the Group has aggregately drawn down the credit facility of US$74.7 million and repaid US$79.8 million with the weighted average interestrate of 5.15%.In March 2021, the Group entered into two short-term interest-free loan agreements with a local Hi-tech industrial park, under which theGroup received a total of US$5.4 million and fully repaid the amount by the end of August 2021. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-298.Short-term Bank Borrowings (Continued)In July 2021, the Group entered into a credit facility agreement with a commercial bank under which the Group can draw down up toUS$1.6 million by July 2022, which contains maximum external investment and debt financing as financial covenants for its subsidiary. InDecember 2021, the Group entered into a loan agreement with another commercial bank under which the Group can draw down US$1.6 milliononce by December 31,2021, which contains minimum net income and minimum operating cash inflow for its subsidiary as financial covenants, andminimum annual active user for the Group as operating covenant. The interest rates for these two agreements are the LPR. In 2021, the Group hasdrawn down US$1.6 million without repayment under each of the two agreements.As of December 31, 2021, the Group is in compliance of the financial covenants and there was no unused facilities under theseagreements.9.Accrued Expenses and Other Current LiabilitiesAccrued expenses and other current liabilities consisted of the following:As of December 31, 2020 2021US$US$Other tax payables (Note 1)4,386,517739,896Accruals for user incentive programs—3,756,933Accrued expenses (Note 2) 2,772,237 3,034,970Accrued loss contingencies relating litigation and asserted claims2,872,150166,887Others 655,614 364,289Total 10,686,518 8,062,975Note 1: Other tax payables mainly consisted of value-added tax payable of US$3.5 million and US$0.4 million as of December 31, 2020 and 2021,and other taxes such as individual income tax and stamp duty tax.Note 2: Accrued expenses mainly consisted of accrued professional service fees and other miscellaneous expenses related to marketing andoperation activities.10.Convertible notes and Standby Equity Distribution AgreementJanuary 2021 NoteOn January 19, 2021, the Group issued a convertible note for a principle amount of US$10.0 million with a 3% discount, an annualinterest rate of 5% and a maturity date of January 19, 2022, refer to as the “January 2021 Note”. The Group received a cash proceed of US$8.9million from this issuance. The note is convertible into the Group’s shares at the option of the holders based on a conversion prices determined tobe the lower of (1) US$4.20 per ADS, or (2) 88% of the lowest daily volume weighted average trading price (“VWAP”) of the Group’s ADSsduring the ten consecutive trading days immediately preceding the conversion date or other date of determination.The January 2021 Note also include provision which require the Group to pay the note holders a commitment fee of 1,750,000 ordinaryshares at the date of closing which is considered to be further discount on the note provided to the debt holders. The Group settle this commitmentfee by issuing 1,750,000 ordinary shares out of treasury shares to the convertible note holders. The Group has recognized this commitment feesamounted to US$0.1 million determined based on the fair value of shares issued at the date of closing as a part of debt discount. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-3010.Convertible notes and Standby Equity Distribution Agreement (Continued)The note has been fully converted to 196,665,850 ordinary shares with a conversion price of US$0.0508 per ordinary share during three-month period ended March 31, 2021. The Group recorded a beneficial conversion feature amounted to US$1.4 million representing the differencebetween the conversion price and the fair value per share as deemed dividend relating to this conversion as the conversion price is determined to belower than fair value at the date of conversion.Loan discount of US$0.4 million and issuance costs of US$0.7 million relating to the January 2021 Notes are being amortized to interestexpense using effective interest method.March 2021 NoteOn March 19, 2021, the Group issued a convertible note for a principle amount of US$20.0 million with a 2% discount, an annual interestof 5% per year, a floor price of US$0.75 per ADS and a fixed conversion price of US$5.0 per ADS, refer to as the “March 2021 Note”. Thematurity date of the March 2021 Note is March 19, 2022. The Group received a cash proceed of US$18.2 million from this issuance.The March 2021 Note also include provision which require the Group to pay the note holders a commitment fee of 3,750,000 ordinaryshares at the date of closing which is considered to be further discount on the note provided to the debt holders. The Group settled this commitmentfee by issuing 3,750,000 ordinary shares out of treasury shares to the convertible note holders. The Group has recognized this commitment feesamounted to US$0.2 million determined based on the fair value of shares issued at the date of closing as a part of debt discount.During the time that any portion of this Note is outstanding, if any event of default such as cease to be listed for trading in NYSE for 10consecutive trading days has occurred and is continuing, the full unpaid principal amount of this note, together with interest and other amountsowing in respect thereof, to the date of acceleration shall become at the holder’s election, immediately due and payable in cash.Beginning from June 1, 2021 and continuing on the first day of each calendar month thereafter through January 2022 as set forth on theredemption schedule, a portion of the principal amount plus an 8% redemption premium and plus accrued and unpaid interest will be subject toredemption in cash, ADSs through conversion of the note or a combination of both at the Group’s option in the event that the daily VWAP on eachof the five consecutive trading days immediately prior to the redemption date does not exceed a price equal to 108% of the fixed conversion price(the “Monthly Redemption”). In the event that the daily VWAP on each of the five consecutive trading days immediately prior to the scheduledredemption date exceeds a price equal to 108% of the fixed conversion price, then no Monthly Redemption shall be due on such scheduledredemption date. If the daily VWAP is less than the floor price for a period of 5 consecutive trading days, then the interest rate shall increase to anannual rate of 15%.In accordance with ASC 815, the Group determined that the Monthly Redemption feature is an embedded financial instrument whichrequires bifurcation from the host debt instrument. The Group performs a valuation with the assistance of a third party appraiser to evaluate fairvalue of the embedded derivative associated with this note at the date of issuance and subsequently at each reporting date. Initially, the Grouprecorded a derivative liability of US$1,662,355 relating to the Monthly Redemption feature based on its fair value at the date of issuance. A portionof the note’s proceed is allocated to the derivative based on the fair value at the date of the issuance. The allocated fair value for the derivative isrecorded as a debt discount from the face amount of the notes, which is then accredited to interest expense over the life of the related debt using theeffective interest method. This derivative liability is revalued at each reporting date and immediately prior to conversion with changes in fair valuerecorded to fair value change at derivative liabilities in the statement of operations. As of December 31, 2021, the fair value of the derivativeliability is determined to be US$553,707 and the gain of US$1,108,648 representing the change in fair value has been recorded in earnings for theyear ended December 31, 2021.Total discount of US$2 million and issuance costs of US$1.6 million relating to the March 2021 Notes are being amortized to interestexpense using effective interest method. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-3110.Convertible notes and Standby Equity Distribution Agreement (Continued)On October 29, 2021, the Group agreed with the investor that the maturity date of the March 2021 Note was extended to August 31, 2022from March 19, 2022. The redemption period was extended to August 2022 and the redemption amounts from September 2021 to August 2022were amended as well. The fixed conversion price was changed from $0.1 per ordinary shares to $0.06 per ordinary shares, and the floor price waschanged from $0.015 per ordinary shares to $0.01 per ordinary shares. The Group has evaluated the changes to the March 2021 Notes inaccordance with ASC 470-50, Debt – Modifications and Extinguishments and determined the new terms of the notes are not substantially differentfrom the original terms. Accordingly, these changes are accounted for as modification with an application of new effective interest rate on theMarch 2021 Notes starting in October 2021.Monthly Redemption has been effective since June 2021. As of December 31, 2021, the Group redeemed the loan principle, redemptionpremium and unpaid interests total amounted to US$7.4 million through issuance of 347,620,500 ordinary shares with a weighted averageconversion price of US$0.0214 per ordinary shares and US$4.2 million through cash payments.Standby Equity Distribution Agreement with YA II PN, Ltd.On January 22, 2021, the Company entered into a standby equity distribution agreement (the “SEDA”) with this investor pursuant towhich the Company has an option to sell up to US$20.0 million of its ADSs solely at the Company’s request any time during the 36 monthsfollowing the date of the SEDA at a price determined to be at 90% of the market price, which is defined as the lowest daily VWAP of theCompany’s ADSs during the five consecutive trading days commencing on the trading day following the date the Company submits an advancenotice to this investor. As of December 31, 2021 the outstanding equity financing available was US$20.0 million.11.Other Operating Income (Loss), netFor the year ended December 31, 201920202021 US$ US$ US$Government subsidies 917,223 2,026,269 4,231,406(Provision) reversal of contingent losses (95,857) (2,776,293) 254,833Compensation payments — (1,587,473) —Others 50,903 62,990 (32,777)Total 872,269 (2,274,507) 4,453,462Other operating income, net for the year ended December 31, 2021, primarily consisted of government subsidies and the reversals ofaccrued contingent losses for an intellectual property infringement lawsuit upon the settlement result in December 2021.12.Income Taxes ExpensesFor the years ended December 31, 2019, 2020 and 2021, income tax expenses were US$1,714, US$7,087 and US$51,970, respectively.Cayman IslandsCooTek (Cayman) Inc. is incorporated in the Cayman Islands. Under the current laws of the Cayman Islands, CooTek (Cayman) Inc. is notsubject to income or capital gains taxes. In addition, dividend payments are not subject to withholdings tax in the Cayman Islands. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-3212.Income Taxes Expenses (Continued)USAThe Group’s subsidiaries incorporated in U.S. are subject to U.S. federal corporate income tax at a rate of 21%, and also subject to stateincome tax in California.Hong KongUnder the current Hong Kong Inland Revenue Ordinance, the Group’s subsidiaries domiciled in Hong Kong has introduced a two-tieredprofits tax rate regime which is applicable to any year of assessment commencing on or after April 1, 2018. The profits tax rate for the first HK$2million of profits of corporations will be lowered to 8.25%, while profits above that amount will continue to be subject to the tax rate of 16.5%.Additionally, payments of dividends by the subsidiary incorporated in Hong Kong to the Group are not subject to any Hong Kong withholding tax.PRCUnder the Law of the People’s Republic of China on Enterprise Income Tax (“EIT Law”), the Group’s subsidiaries and VIEs incorporatedin the PRC are subject to statutory rate of 25% with the exception of Chu Le. Chu Le is a foreign-invested enterprise established in June, 2012located in Shanghai, China. Chu Le obtained the High and New Technology Enterprise (“HNTE”) certificate in 2020, valid for a period of 3 yearsfrom 2020 to 2022. For the years ended December 31, 2020 and 2021, Chu Le was eligible for a preferential tax rate of 15%.(Loss) income before income taxes consists of:For the years ended December 31, 2019 2020 2021 US$ US$ US$PRC(16,601,650)(21,862,391)15,109,493HK (14,046,405) (9,697,599) 8,228,582US (2,744,517) (9,297,488) (24,846,729)Cayman (3,451,775) (6,502,164) (12,251,655)Total (36,844,347) (47,359,642) (13,760,309) Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-3312.Income Taxes Expenses (Continued)PRC (Continued)Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities forfinancial reporting purposes and the amounts used for income tax purposes. The Group has no deferred tax liabilities. The Group’s deferred taxassets were as follows:As of December 31, 2019 2020 2021US$US$US$Deferred tax assets: Net operating loss carry-forward 18,196,880 22,456,24430,042,281Accrued expenses 3,833,970 1,082,761331,770Advertising fees 10,854,554 23,293,38918,287,319Deferred subsidies and revenue 70,193 507,414—Provision for doubtful accounts 515,870 204,936197,592Depreciation difference of property, plant and equipment109,385530,685965,052Impairment loss82,50582,505161,993Total deferred tax assets 33,663,357 48,157,93449,986,007Valuation allowance on deferred tax assets (33,663,357) (48,157,934)(49,986,007)Net deferred tax assets — ——As of December 31, 2021, the PRC companies had tax loss carry forwards amounted to US$62,405,196, of which US$15,383,159,US$810,090, US$3,057,392, US$1,558,187, US$25,082,351 and US$16,514,017 will expire in 2021, 2022, 2023, 2024, 2025 and thereafter,respectively. As of December 31, 2021, the companies incorporated in Hong Kong and USA had tax loss carry forwards of US$28,519,536 andUS$32,691,014, which can be offset taxable loss in the future without any time restriction.The Group operates its business through its subsidiaries and VIEs. The Group does not file consolidated tax returns, therefore, losses fromindividual subsidiaries or the VIEs may not be used to offset other subsidiaries’ or VIEs’ earnings within the Group.The Group considers positive and negative evidence to determine whether some portion or all of the deferred tax assets will be more likelythan not realized. This assessment considers, among other matters, the nature, frequency and severity of recent losses and forecasts of futureprofitability. These assumptions require significant judgment and the forecasts of future taxable income are consistent with the plans and estimatesthe Group is using to manage the underlying businesses. Valuation allowances are established for deferred tax assets based on a more likely thannot threshold. The Group’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carry forwardperiods provided for in the tax law. The Group has provided a full valuation allowance for the deferred tax assets as of December 31, 2019, 2020and 2021, as management is not able to conclude that the future realization of those net operating loss carry forwards and other deferred tax assetsare more likely than not.The changes in valuation allowance are as follows:For the years ended December 31, 2019 2020 2021US$US$US$Balance at the beginning of the year25,704,00533,663,35748,157,934Movement 8,051,215 14,496,6001,834,481Tax loss carry forwards expired (91,863) (2,023)(6,408)Balance at the end of the year 33,663,357 48,157,93449,986,007 Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-3412.Income Taxes Expenses (Continued)PRC (Continued)Uncertainties exist with respect to how the current income tax law in the PRC applies to the Group’s overall operations, and morespecifically, with regard to tax residency status. The EIT Law includes a provision specifying that legal entities organized outside of the PRC, willbe considered residents for Chinese Income tax purposes if the place of effective management or control is within the PRC. The implementationrules to the EIT Law provide that non-resident legal entities will be considered PRC residents if substantial and overall management and controlover the manufacturing and business operations, personnel, accounting and properties, occurs within the PRC. Despite the present uncertaintiesresulting from the limited PRC tax guidance on the issue, the Group does not believe that the legal entities organized outside of the PRC within theGroup should be treated as residents for EIT law purposes. If the PRC tax authorities subsequently determine that the Group and its subsidiariesregistered outside the PRC should be deemed resident enterprises, the Group and its subsidiaries registered outside the PRC will be subject to thePRC income taxes, at a statutory income tax rate of 25%. The Group is not subject to any other uncertain tax position.According to PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due tocomputational errors made by the taxpayer or withholding agent. The statute of limitations will be extended to five years under specialcircumstances, which are not clearly defined (but an underpayment of tax liability exceeding RMB0.1 million, equivalent to US$ 15,685, isspecifically listed as a special circumstance). In the case of a related party transaction, the statute of limitations is ten years. There is no statute oflimitations in the case of tax evasion. From inception to the calendar year of 2021, the Group is subject to examination of the PRC tax authorities.In accordance with the EIT Law, dividends, which arise from profits of foreign invested enterprises (“FIEs”) earned after January 1, 2008,are subject to a 10% withholding income tax. In addition, under the tax treaty between the PRC and Hong Kong, if the foreign investor isincorporated in Hong Kong and qualifies as the beneficial owner, the applicable withholding tax rate is reduced to 5%, if the investor holds at least25% in the FIE, or 10%, if the investor holds less than 25% in the FIE. A deferred tax liability should be recognized for the undistributed profits ofPRC subsidiaries unless the Group has sufficient evidence to demonstrate that the undistributed dividends will be reinvested and the remittance ofthe dividends will be postponed indefinitely.Aggregate accumulated deficit of the Group’s subsidiaries and VIEs located in the PRC was approximately US$93,453,672,US$115,319,815 and US$100,275,583 as of December 31, 2019, 2020 and 2021, respectively. Aggregate accumulated deficit of the Group’ssubsidiaries located in Hong Kong was approximately US$27,463,453, US$37,179,946 and US$28,520,674 as of December 31, 2019, 2020 and2021, respectively. Accordingly, no deferred tax liability has been accrued for the PRC dividend withholding taxes that would be payable upon thedistribution of those amounts to the Group as of December 31, 2019, 2020 and 2021.Reconciliations of the differences between PRC statutory income tax rate and the Group’s effective income tax rate for the years endedDecember 31, 2019, 2020 and 2021 are as follows:For the years ended December 31, 2019 2020 2021 Statutory income tax rate25% 25%25%Valuation allowance (26)% (25)%(5)%Additional tax deduction 6% 4%11%Effect of different tax rate of subsidiary operation in other jurisdiction (5)% (4)%(9)%Non-Deductible expense——(22)%Effective tax rate ——— Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-3513.Ordinary SharesDuring the year ended December 31, 2021, the Group issued 196,665,850 and 347,620,500 Class A ordinary shares with a weightedaverage conversion price of US$0.0508 and US$0.0214 per share upon conversion of January and March 2021 convertible notes, respectively.On August 16, 2021, the Company entered into a securities purchase agreement with a third party investor under which it issued49,501,700 Class A ordinary shares with the price of US$ 0.0303 per share, totaling to US$1.4 million net proceeds deducting underwritingdiscount and issuance costs.14.Treasury SharesTreasury shares represent shares repurchased by the Group that are no longer outstanding and are held by the Group. For the year endedDecember 31, 2020 and 2021, under the repurchase plan, the Group had repurchased an aggregate of 83,854,891 and 24,237,100 Class A ordinaryshares on the open market for a total cash consideration of US$ 9,480,179 and US$ 1,322,195, respectively, which were accounted for as the costof the treasury shares. The repurchase plan was terminated on May 17, 2021.As of December 31, 2020, 135,205,591 treasury shares have been cancelled. As of December 31, 2021, 68,748,150 treasury shares havebeen reissued for the conversion of convertible notes and commitment fee for the issuance of convertible notes to the convertible note holders.15.Share-based CompensationIn August 2012, the Group’s board of directors adopted the share incentive plan (“2012 Option Plan”). Under the 2012 Option Plan, theGroup’s shareholders have authorized the issuance of up to 75,268,817 ordinary shares underlying all options (including incentive share options, orISOs), restricted shares and restricted share units granted to a participant under the plan, or the awards. The 2012 Option Plan was amended inOctober 2012 to increase the maximum aggregate number of ordinary shares to 155,631,013 Shares. The 2012 Option Plan was amended inJuly 2014 to increase the maximum aggregate number of ordinary shares to 266,153,637 Shares.In August 2018, the Group’s board of directors adopted the 2018 Share Incentive Plan (“2018 Plan”). The maximum aggregate number ofshares which may be issued under the 2018 Plan shall initially be 2.0% of the total number of shares issued and outstanding immediately followingthe completion of IPO, plus an annual increase on the first day of each of the first five (5) complete fiscal years after the completion of IPO andduring the term of this plan commencing with the fiscal year beginning January 1, 2019, by an amount equal to 2.0% of the total number of sharesissued and outstanding on the last day of the immediately preceding fiscal year (excluding issued shares reserved for future option exercise andrestricted share unit vesting).Share OptionsThe options have a contractual term of ten years. The vesting date starts on the grant date or the commencement date of a participant’semployment agreement. The options vest 20% or 25% on each of the four or five anniversary dates of the vesting date and upon continuedemployment. In the event of termination of a participant’s employment, the unvested options shall be terminated immediately. The participant’sright to exercise the vested options shall be terminated 2 or 3 months after the termination of the employment. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-3615.Share-based Compensation (Continued)Share Options (Continued)The Group uses the binomial option pricing model and the following assumptions to estimate the fair value of the options at the date ofgranted.Year ended December 31 2020 2021Average risk-free rate of interest0.67%1.47%Expected volatility 43.15%-43.38%41.8%Dividend yield 0%0%Contractual term 10 years 10 yearsFair value of the underlying shares on the date of option grants 0.05-0.13 0.009-0.0508On November 6, 2018, the Board of Directors approved an option modification to reduce the exercise price of certain options granted toemployees. All other terms of the share options granted remain unchanged. The modification resulted in incremental compensation cost ofUS$285,661, of which US$87,904, US$52,216 and US$8,623 was recorded during the years ended December 31, 2019, 2020 and 2021,respectively. Due to the termination of employment, the Group will not recognize the rest of unvested amount of the modified options.The risk-free rate of interest is based on the US Treasury yield curve as of valuation date. Volatility is estimated based on annualizedstandard deviation of daily stock price return of comparable companies for the period before valuation date and with similar span as the expectedexpiration term. The Group has never declared or paid any cash dividends on its capital stock, and the Group does not anticipate any dividendpayments in the foreseeable future.A summary of the aggregate option activity and information regarding options outstanding as of December 31, 2021 is as follows:Weighted Weightedaverage averageremainingAggregate WeightedNumber ofexercisecontractualintrinsic average grant options price term value date fair valueUS$US$US$Outstanding on January 1, 2021 290,614,107 0.02 6.62 11,551,1530.06Granted145,165,5000.000.03Forfeited(96,921,541)0.000.07Exercised(10,571,200)0.010.05Outstanding on December 31, 2021328,286,8660.026.502,461,6230.05Options exercisable on December 31, 2021160,478,4150.053.80447,9220.04Vested or expected to vest as of December 31, 2021328,286,8660.026.502,461,6230.05The weighted average grant date fair values of options granted during the years ended December 31, 2020 and 2021 were US$0.10 andUS$0.03, respectively.For the year ended December 31, 2020, 16,397,050 of options were exercised with an aggregate intrinsic value of US$460,369. For theyear ended December 31, 2021, 10,571,200 of options were exercised with an aggregate intrinsic value of US$ 66,014. Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-3715.Share based Compensation (Continued)Share Options (Continued)For the years ended December 31, 2019, 2020 and 2021, excluding the incremental compensation cost resulted from the modificationdiscussed above, the Group recognized share-based compensation expense of US$533,482, US$3,254,051 and US$2,359,228, respectively. As ofDecember 31, 2021, there was US$ 6,938,533 in total unrecognized compensation cost related to non-vested stock options, which is expected to berecognized over a weighted-average period of 2.72 years.Restricted Share UnitsIn 2020, the Group granted to certain employees 1,578,500 Restricted Share Units (“RSUs”)and the Group did not grant additional RSUsin 2021. The RSUs have a contractual term of ten years and vest 25% on each anniversary over four years from the grant date. The vesting of theseRSUs is conditioned on continued employment. Compensation expense based on fair value is amortized over the requisite service period of awardusing the straight line vesting attribution method.A summary of the RSUs activity for the year ended December 31, 2021 is as follows:Weighted average grant date Number of restricted shares fair value US$Unvested restricted shares outstanding at January 1, 2021 37,740,804 0.20Granted — —Vested (5,051,850) 0.22Forfeited (9,035,531) 0.19Unvested restricted shares outstanding at December 31, 202123,653,4230.21Expected to vest at December 31, 2021 23,653,423 0.21The share-based compensation expense related to RSUs of US$3,041,099, US$2,030,774 and US$1,348,468 were recognized by theGroup for the years ended December 31, 2019, 2020 and 2021, respectively.As of December 31, 2021, there was US$808,842 unrecognized compensation costs, net of actual forfeitures, related to unvested restrictedshares, which is expected to be recognized over a weighted-average period of 1.22 years.16.Net Loss per Ordinary ShareNet loss per ordinary share was computed by dividing net loss attributable to ordinary shareholders by the weighted average number ofordinary shares outstanding for the years ended December 31, 2019, 2020 and 2021:For the years endedDecember 31, 2019 2020 2021US$US$US$Numerator: Net loss —basic and diluted (36,846,061) (47,366,729) (13,877,363)Deemed dividend in relation to the convertible note — — (1,368,866)Net loss attributable to ordinary shareholders (36,846,061) (47,366,729) (15,246,229)Shares (Denominator): Weighted average number of ordinary shares outstanding Basic and diluted3,155,082,9833,080,332,9243,303,168,725Net loss per share—basic and diluted (0.01) (0.02) (0.005) Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-3816.Net Loss per Ordinary Share (Continued)As of December 31, 2019, 2020 and 2021, diluted net loss per share does not include the following instruments as their inclusion would beantidilutive:For the years ended December 31, 2019 2020 2021Share options 160,800,982290,614,107 328,286,866Restricted shares units50,725,91237,740,80423,653,423Shares of convertible notes——182,060,731Total211,526,894328,354,911534,001,02017.Commitments and contingenciesCommitmentsThe Group did not have other significant capital commitments or significant guarantees as of December 31, 2020 and 2021, respectively.ContingenciesManagement records and discloses legal contingencies in accordance with ASC Topic 450, Contingencies. The Group establishes reservesfor these contingencies at the best estimate, or if no one number within the range of possible losses is more probable than any other, the Grouprecords a liability at the low end of the range of losses. Contingencies affecting the Group primarily relate to legal and regulatory matters, whichare inherently difficult to evaluate and are subject to significant changes. A provision is recorded when it is both probable that a liability has beenincurred and the amount of the loss can be reasonably estimated. The Group monitors the stage of progress of its litigation matters to determine ifany adjustments are required. The Group’s management does not expect any liability from the disposition of such claims and litigation individuallyor in aggregate would have a material adverse impact on the Group’s consolidated financial position, results of operations and cash flows.18.Segment InformationThe Group has only one reportable segment since the Group does not distinguish revenues, costs and expenses between segments in itsinternal reporting, and reports costs and expenses by nature as a whole.The Group’s chief operating decision maker, who has been identified as the Chairman of the Board of Directors and Chief TechnologyOfficer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole.The Group does not distinguish among markets or segments for the purpose of internal reports.Information about the Group’s non-current assets is presented based on the geographical location of the assets as follows:As of December 31, 2020 2021US$US$PRC26,560,1434,877,143USA 2,158,359 725,388Total 28,718,502 5,602,531 Table of ContentsCOOTEK (CAYMAN) INC.NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)F-3919.Mainland China Contribution PlanFull time employees of the Group in the PRC participate in a government-mandated defined contribution plan, pursuant to which certainpension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. The PRClabor regulations require the Group to accrue for these benefits based on certain percentages of the employees’ salaries. The total contributions forsuch employee benefits were US$5,627,573, US$3,626,897 and US$8,863,323 for the years ended December 31, 2019, 2020 and 2021,respectively.20.Restricted Net AssetsAs a result of the PRC laws and regulations and the requirement that distributions by PRC entities can only be paid out of distributableprofits computed in accordance with PRC GAAP, the PRC entities are restricted from transferring a portion of their net assets to the Group.Amounts restricted include paid-in capital, additional paid-in capital and the statutory reserves of the Group’s PRC subsidiaries, affiliates and VIEs.As of December 31, 2021, the total of restricted net assets were US$87,500,000.21.Subsequent EventIn January and February 2022, the Group modified the floor price of the March 2021 Note to US$0.30 and US$0.20 per ADS,respectively. From January 1, 2022 to April 29, 2022, the Group redeemed the loan principle, redemption premium and unpaid interests totalamounted to US$4.8 million through issuance of 1,044,267,700 ordinary shares with a weighted average conversion price of US$0.0046 perordinary shares.From January 1, 2022 to April 29, 2022, the Group granted options to its management team to purchase 12,427,200 Class A ordinaryshares of the Company with exercise price of US$0.0002 with 4 year vesting schedule under the 2012 Share Incentive Plan and 2018 ShareIncentive Plan.In April 2022, the Group entered into a short-term interest-free loan agreement with a local Hi-tech industrial park, under which the Groupreceived a total of US$5.5 million and the repayment of this amount will be due by May 31, 2022.On April 28, 2022, the Company announced that it plans to change the ratio of its American Depositary Shares (“ADSs”) to its Class Aordinary shares (the “ADS Ratio”), from the current ADS Ratio of one ADS to fifty Class A ordinary shares to a new ADS Ratio of one ADS to sixhundred and fifty Class A ordinary shares. Table of ContentsF-40SCHEDULE I—ADDITIONAL FINANCIAL INFORMATION OF PARENT COMPANYCOOTEK (CAYMAN) INC.CONDENSED BALANCE SHEETSAs of December 31, 2020 2021US$US$ASSETS Current assets: Cash and cash equivalents 128,005 442,771Prepaid expenses and other current assets 30,596 463,093Total current assets 158,601 905,864Advances to subsidiaries and VIEs 1,568,094 10,559,139TOTAL ASSETS 1,726,695 11,465,003LIABILITIES AND SHAREHOLDERS’ DEFICIT Current liabilities: Accrued expenses and other current liabilities136,129136,129Convertible notes—9,175,892Derivative liabilities—553,707Other current liabilities 140 478,683Total current liabilities 136,269 10,344,411Advances from subsidiaries and VIEs14,909,9076,797,406Other non-current liabilities483,074323,305TOTAL LIABILITIES 15,529,250 17,465,122SHAREHOLDERS’ DEFICIT: Ordinary shares 30,918 36,380Treasury shares(4,672,334)—Additional paid-in capital 193,918,852 210,718,835Accumulated deficit (200,965,075) (214,842,438)Accumulated other comprehensive loss (2,114,916) (1,912,896)Total shareholders’ deficit (13,802,555) (6,000,119)TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT 1,726,695 11,465,003 Table of ContentsF-41SCHEDULE I—ADDITIONAL FINANCIAL INFORMATION OF PARENT COMPANYCOOTEK (CAYMAN) INC.CONDENSED STATEMENTS OF OPERATIONSFor the years ended December 31, 2019 2020 2021US$US$US$Net revenues51,152——Cost of revenues (101,689) (276,085) (304,356)Gross loss (50,537) (276,085) (304,356)Operating expenses: General and administrative expenses (558,078) (2,607,390) (4,516,554)Research and development expenses (2,806,588) (3,034,240) (2,762,190)Sales and marketing expenses (196,224) (212,381) (103,324)Other operating income, net119,146112,478136,129Total operating expenses (3,441,744) (5,741,533) (7,245,939)Loss from operations (3,492,281) (6,017,618) (7,550,295)Interest expenses, net(2,494)—(5,527,327)Fair value change of derivatives——1,108,648Foreign exchange gains — 3 —Loss before income taxes and equity in earnings of subsidiaries (3,494,775) (6,017,615) (11,968,974)Net loss before equity in earnings of subsidiaries (3,494,775) (6,017,615) (11,968,974)Equity in loss of subsidiaries, VIEs and VIEs’ subsidiaries (33,351,286) (41,349,114) (1,908,389)Net loss attributed to CooTek (Cayman) Inc. (36,846,061) (47,366,729) (13,877,363) Table of ContentsF-42SCHEDULE I—ADDITIONAL FINANCIAL INFORMATION OF PARENT COMPANYCOOTEK (CAYMAN) INC.CONDENSED STATEMENTS OF CASH FLOWSFor the years ended December 31, 2019 2020 2021US$US$ US$Operating activities: Net loss (36,846,061) (47,366,729)(13,877,363)Equity in loss of subsidiaries, VIEs and VIEs’ subsidiaries 33,351,286 41,349,1141,908,389Adjustment to reconcile net loss to net cash provided by (used in) operating activities: Share-based compensation 3,662,485 5,337,0413,716,319Amortization of issuance cost and debt discounts related to convertible notes——5,647,339Change in fair value of derivatives——(1,108,648)Changes in assets and liabilities: Accounts receivable 7,222 ——Accrued expenses and other current liabilities (21,670) (5,371)288,562Other receivables, deposits and other assets(18,427)21,858(432,374)Other non-current liabilities(9,066)(112,489)(159,769)Net cash provided by (used in) operating activities 125,769 (776,576)(4,017,545)Investing activities: Advances to subsidiaries and VIEs (5,400,000) (16,000,000)(37,795,461)Repayment of advances to subsidiary8,000,00025,900,16019,145,170Net cash provided by (used in) investing activities 2,600,000 9,900,160(18,650,291)Financing activities: Proceeds from IPO — ——Cash paid for deferred issuance costs(809,952)—(159,624)Cash paid to settle vested options and restricted shares—(823,226)—Proceeds from issuance of ordinary shares upon exercise of options326,503304,25981,339Proceeds from issuance of convertible notes net of issuance cost and debt discounts paid toInvestors of US$2.7 million——27,175,000Repayment of convertible notes——(4,181,918)Proceeds from issuance of ordinary shares upon follow-on public offering——1,390,000Payment of share repurchase (12,283,426) (9,480,179)(1,322,195)Net cash (used in) provided by financing activities (12,766,875) (9,999,146)22,982,602Net (decrease) increase in cash, cash equivalents and restricted cash (10,041,106) (875,562)314,766Cash, cash equivalents and restricted cash at beginning of year 11,044,673 1,003,567128,005Cash, cash equivalents and restricted cash at end of year 1,003,567 128,005442,771 Table of ContentsF-43SCHEDULE I—COOTEK (CAYMAN) INC CONDENSED FINANCIAL STATEMENTSNotes to Schedule I1.Schedule I has been provided pursuant to the requirements of Rule 12-04(a) and 5-04(c) of Regulation S-X, which require condensedfinancial information as to the financial position, changes in financial position and results of operations of a parent company as of the same datesand for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of consolidatedsubsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.2.The condensed financial information has been prepared using the same accounting policies as set out in the consolidated financialstatements except that the equity method has been used to account for investments in its subsidiaries and VIEs and VIEs’ subsidiaries. For theparent company, the Company records its investments in subsidiaries VIEs and VIEs subsidiaries under the equity method of accounting asprescribed in ASC 323, Investments—Equity Method and Joint Ventures.3.Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP havebeen condensed or omitted. The footnote disclosures provide certain supplemental information relating to the operations of the Company and, assuch, these statements should be read in conjunction with the notes to the accompanying consolidated financial statements.4.As of December 31, 2020 and 2021, there were no material contingencies, significant provisions of long-term obligations, mandatorydividend or redemption requirements of redeemable stocks or guarantees of the Company. Exhibit 2.3Execution VersionDEPOSIT AGREEMENTby and amongCOOTEK (CAYMAN) INC.as Issuer,DEUTSCHE BANK TRUST COMPANY AMERICASas Depositary,ANDTHE HOLDERS AND BENEFICIAL OWNERSOF AMERICAN DEPOSITARY SHARES EVIDENCED BYAMERICAN DEPOSITARY RECEIPTS ISSUED HEREUNDERDated as of September 27, 2018 1DEPOSIT AGREEMENTDEPOSIT AGREEMENT, dated as of September 27, 2018, by and among (i) CooTek (Cayman) Inc., a companyincorporated in the Cayman Islands, with its principal executive office at Building 7, No. 2007 Hongmei Road, XuhuiDistrict, Shanghai, 201103, the People’s Republic of China and its registered office at the office of Maples CorporateServices Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands (together with its successors,the “Company”), (ii) Deutsche Bank Trust Company Americas, an indirect wholly owned subsidiary of Deutsche BankA.G., acting in its capacity as depositary, with its principal office at 60 Wall Street, New York, NY 10005, United States ofAmerica (the “Depositary”, which term shall include any successor depositary hereunder) and (iii) all Holders andBeneficial Owners of American Depositary Shares evidenced by American Depositary Receipts issued hereunder (all suchcapitalized terms as hereinafter defined).W I T N E S S E T H T H A T:WHEREAS, the Company desires to establish an ADR facility with the Depositary to provide for the deposit of theShares and the creation of American Depositary Shares representing the Shares so deposited;WHEREAS, the Depositary is willing to act as the depositary for such ADR facility upon the terms set forth in thisDeposit Agreement;WHEREAS, the American Depositary Receipts evidencing the American Depositary Shares issued pursuant to the termsof this Deposit Agreement are to be substantially in the form of Exhibit A and Exhibit B annexed hereto, with appropriateinsertions, modifications and omissions, as hereinafter provided in this Deposit Agreement;WHEREAS, the American Depositary Shares to be issued pursuant to the terms of this Deposit Agreement are acceptedfor trading on the New York Stock Exchange; andWHEREAS, the Board of Directors of the Company (or an authorized committee thereof) has duly approved theestablishment of an ADR facility upon the terms set forth in this Deposit Agreement, the execution and delivery of thisDeposit Agreement on behalf of the Company, and the actions of the Company and the transactions contemplated herein.NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are herebyacknowledged, the parties hereto agree as follows:ARTICLE I.DEFINITIONSAll capitalized terms used, but not otherwise defined, herein shall have the meanings set forth below, unless otherwiseclearly indicated:SECTION 1.1 “Affiliate” shall have the meaning assigned to such term by the Commission under Regulation Cpromulgated under the Securities Act. 2SECTION 1.2 “Agent” shall mean such entity or entities as the Depositary may appoint under Section 7.8 hereof,including the Custodian or any successor or addition thereto.SECTION 1.3 “American Depositary Share(s)” and “ADS(s)” shall mean the securities represented by the rightsand interests in the Deposited Securities granted to the Holders and Beneficial Owners pursuant to this Deposit Agreementand evidenced by the American Depositary Receipts issued hereunder. Each American Depositary Share shall representthe right to receive fifty (50) Shares, until there shall occur a distribution upon Deposited Securities referred to in Section4.2 hereof or a change in Deposited Securities referred to in Section 4.9 hereof with respect to which additional AmericanDepositary Receipts are not executed and delivered and thereafter each American Depositary Share shall represent theShares or Deposited Securities specified in such Sections.SECTION 1.4 “Article” shall refer to an article of the American Depositary Receipts as set forth in the Form ofFace of Receipt and Form of Reverse of Receipt in Exhibit A and Exhibit B annexed hereto.SECTION 1.5 “Articles of Association” shall mean the articles of association of the Company, as amended fromtime to time.SECTION 1.6 “ADS Record Date” shall have the meaning given to such term in Section 4.7 hereof.SECTION 1.7 “Beneficial Owner” shall mean as to any ADS, any person or entity having a beneficial interest insuch ADS. A Beneficial Owner need not be the Holder of the ADR evidencing such ADSs. A Beneficial Owner mayexercise any rights or receive any benefits hereunder solely through the Holder of the ADR(s) evidencing the ADSs inwhich such Beneficial Owner has an interest.SECTION 1.8 “Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not(a) a day on which banking institutions in the Borough of Manhattan, The City of New York are authorized or obligated bylaw or executive order to close and (b) a day on which the market(s) in which ADSs are traded are closed.SECTION 1.9 “Commission” shall mean the Securities and Exchange Commission of the United States or anysuccessor governmental agency in the United States.SECTION 1.10 “Company” shall mean CooTek (Cayman) Inc., a company incorporated and existing under thelaws of the Cayman Islands, and its successors.SECTION 1.11 “Corporate Trust Office” when used with respect to the Depositary, shall mean the corporate trustoffice of the Depositary at which at any particular time its depositary receipts business shall be administered, which, at thedate of this Deposit Agreement, is located at 60 Wall Street, New York, New York 10005, U.S.A.SECTION 1.12 “Custodian” shall mean, as of the date hereof, Deutsche Bank AG, Hong Kong Branch, having itsprincipal office at 57/F International Commerce Centre, 1 Austin Road West, Kowloon, Hong Kong S.A.R., People’sRepublic of China, as the custodian for the purposes of this Deposit Agreement, and any other firm or corporation whichmay hereinafter be appointed by the Depositary pursuant to the terms of Section 5.5 3hereof as a successor or an additional custodian or custodians hereunder, as the context shall require. The term“Custodian” shall mean all custodians, collectively.SECTION 1.13 “Deliver”, “Deliverable” and “Delivery” shall mean, when used in respect of AmericanDepositary Shares, Receipts, Deposited Securities and Shares, the physical delivery of the certificate representing suchsecurity, or the electronic delivery of such security by means of book-entry transfer, as appropriate, including, withoutlimitation, through DRS/Profile. With respect to DRS/Profile ADRs, the terms “execute”, “issue”, “register”, “surrender”,“transfer” or “cancel” refer to applicable entries or movements to or within DRS/Profile.SECTION 1.14 “Deposit Agreement” shall mean this Deposit Agreement and all exhibits annexed hereto, as thesame may from time to time be amended and supplemented in accordance with the terms hereof.SECTION 1.15 “Depositary” shall mean Deutsche Bank Trust Company Americas, an indirect wholly ownedsubsidiary of Deutsche Bank AG, in its capacity as depositary under the terms of this Deposit Agreement, and anysuccessor depositary hereunder.SECTION 1.16 “Deposited Securities” as of any time shall mean Shares at such time deposited or deemed to bedeposited under this Deposit Agreement and any and all other securities, property and cash received or deemed to bereceived by the Depositary or the Custodian in respect thereof and held hereunder, subject, in the case of cash, to theprovisions of Section 4.6.SECTION 1.17 “Dollars” and “$” shall mean the lawful currency of the United States.SECTION 1.18 “DRS/Profile” shall mean the system for the uncertificated registration of ownership of securitiespursuant to which ownership of ADSs is maintained on the books of the Depositary without the issuance of a physicalcertificate and transfer instructions may be given to allow for the automated transfer of ownership between the books ofDTC and the Depositary. Ownership of ADSs held in DRS/Profile is evidenced by periodic statements issued by theDepositary to the Holders entitled thereto.SECTION 1.19 “DTC” shall mean The Depository Trust Company, the central book-entry clearinghouse andsettlement system for securities traded in the United States, and any successor thereto.SECTION 1.20 “DTC Participants” shall mean participants within DTC.SECTION 1.21 “Exchange Act” shall mean the U.S. Securities Exchange Act of 1934, as from time to timeamended.SECTION 1.22 “Foreign Currency” shall mean any currency other than Dollars.SECTION 1.23 “Foreign Registrar” shall mean the entity, if any, that carries out the duties of registrar for theShares or any successor as registrar for the Shares and any other appointed agent of the Company for the transfer andregistration of Shares or, if no such agent is so appointed and acting, the Company. 4SECTION 1.24 “Holder” shall mean the person in whose name a Receipt is registered on the books of theDepositary (or the Registrar, if any) maintained for such purpose. A Holder may or may not be a Beneficial Owner. AHolder shall be deemed to have all requisite authority to act on behalf of those Beneficial Owners of the ADRs registeredin such Holder’s name.SECTION 1.25 “Indemnified Person” and “Indemnifying Person” shall have the respective meanings set forth inSection 5.8 hereof.SECTION 1.26 “Losses” shall have the meaning set forth in Section 5.8 hereof.SECTION 1.27 “Memorandum” shall mean the memorandum of association of the Company.SECTION 1.28 “Opinion of Counsel” shall mean a written opinion from legal counsel to the Company who isacceptable to the Depositary.SECTION 1.29 “Receipt(s); “American Depositary Receipt(s)”; and “ADR(s)” shall mean the certificate(s) orstatement(s) issued by the Depositary evidencing the American Depositary Shares issued under the terms of this DepositAgreement, as such Receipts may be amended from time to time in accordance with the provisions of this DepositAgreement. References to Receipts shall include physical certificated Receipts as well as ADSs issued through any book-entry system, including, without limitation, DRS/Profile, unless the context otherwise requires.SECTION 1.30 “Registrar” shall mean the Depositary or any bank or trust company having an office in theBorough of Manhattan, The City of New York, which shall be appointed by the Depositary to register ownership ofReceipts and transfer of Receipts as herein provided, and shall include any co-registrar appointed by the Depositary forsuch purposes. Registrars (other than the Depositary) may be removed and substitutes appointed by the Depositary.SECTION 1.34 “Restricted Securities” shall mean Shares which (i) have been acquired directly or indirectly fromthe Company or any of its Affiliates in a transaction or chain of transactions not involving any public offering and subjectto resale limitations under the Securities Act or the rules issued thereunder, or (ii) are held by an officer or director (orpersons performing similar functions) or other Affiliate of the Company or (iii) are subject to other restrictions on sale ordeposit under the laws of the United States or the Cayman Islands, under a shareholders’ agreement, shareholders’ lock-upagreement or the Articles of Association or under the regulations of an applicable securities exchange unless, in each case,such Shares are being sold to persons other than an Affiliate of the Company in a transaction (x) covered by an effectiveresale registration statement or (y) exempt from the registration requirements of the Securities Act (as hereafter defined)and the Shares are not, when held by such person, Restricted Securities.SECTION 1.36 “Securities Act” shall mean the United States Securities Act of 1933, as from time to timeamended.SECTION 1.37 “Shares” shall mean Class A ordinary shares in registered form of the Company, par value U.S.$0.00001 each, heretofore or hereafter validly issued and outstanding and fully paid. References to Shares shall includeevidence of rights to receive 5Shares, whether or not stated in the particular instance; provided, however, that in no event shall Shares include evidenceof rights to receive Shares with respect to which the full purchase price has not been paid or Shares as to which pre-emptive rights have theretofore not been validly waived or exercised; provided further, however, that, if there shall occurany change in par value, split-up, consolidation, reclassification, exchange, conversion or any other event described inSection 4.9 hereof in respect of the Shares, the term “Shares” shall thereafter, to the extent permitted by law, represent thesuccessor securities resulting from such change in par value, split-up, consolidation, reclassification, exchange, conversionor event.SECTION 1.38 “United States” or “U.S.” shall mean the United States of America.ARTICLE II.APPOINTMENT OF DEPOSITARY; FORM OF RECEIPT; DEPOSIT OF SHARES;EXECUTION AND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTSSECTION 2.1 Appointment of Depositary. The Company hereby appoints the Depositary as exclusive depositaryfor the Deposited Securities and hereby authorizes and directs the Depositary to act in accordance with the terms set forthin this Deposit Agreement. Each Holder and each Beneficial Owner, upon acceptance of any ADSs (or any interesttherein) issued in accordance with the terms of this Deposit Agreement, shall be deemed for all purposes to (a) be a partyto and bound by the terms of this Deposit Agreement and the applicable ADR(s) and (b) appoint the Depositary itsattorney-in-fact, with full power to delegate, to act on its behalf and to take any and all actions contemplated in thisDeposit Agreement and the applicable ADR(s), to adopt any and all procedures necessary to comply with applicable lawand to take such action as the Depositary in its sole discretion may deem necessary or appropriate to carry out the purposesof this Deposit Agreement and the applicable ADR(s) (the taking of such actions to be the conclusive determinant of thenecessity and appropriateness thereof).SECTION 2.2 Form and Transferability of Receipts.(a)Form. Receipts in certificated form shall be substantially in the form set forth in Exhibit A and Exhibit B annexedto this Deposit Agreement, with appropriate insertions, modifications and omissions, as hereinafter provided. Receiptsmay be issued in denominations of any number of American Depositary Shares. No Receipt in certificated form shall beentitled to any benefits under this Deposit Agreement or be valid or obligatory for any purpose, unless such Receipt shallhave been dated and signed by the manual or facsimile signature of a duly authorized signatory of the Depositary. TheDepositary shall maintain books on which each Receipt so executed and Delivered, in the case of Receipts in certificatedform, and each Receipt issued through any book-entry system, including, without limitation, DRS/Profile, in either case ashereinafter provided, and the transfer of each such Receipt shall be registered. Receipts in certificated form bearing themanual or facsimile signature of a duly authorized signatory of the Depositary who was at any time a proper signatory ofthe Depositary shall bind the Depositary, notwithstanding the fact that such signatory has ceased to hold such office priorto the execution and Delivery of such Receipts by the Registrar or did not hold such office on the date of issuance of suchReceipts.Notwithstanding anything in this Deposit Agreement or in the form of Receipt to the contrary, to the extent available bythe Depositary, ADSs shall be evidenced by Receipts 6issued through any book-entry system, including, without limitation, DRS/Profile, unless certificated Receipts arespecifically requested by the Holder. Holders and Beneficial Owners shall be bound by the terms and conditions of thisDeposit Agreement and of the form of Receipt, regardless of whether their Receipts are in certificated form or are issuedthrough any book-entry system, including, without limitation, DRS/Profile.(b)Legends. In addition to the foregoing, the Receipts may, and upon the written request of the Company shall, beendorsed with, or have incorporated in the text thereof, such legends or recitals or modifications not inconsistent with theprovisions of this Deposit Agreement as may be (i) necessary to enable the Depositary and the Company to perform theirrespective obligations hereunder, (ii) required to comply with any applicable laws or regulations, or with the rules andregulations of any securities exchange or market upon which ADSs may be traded, listed or quoted, or to conform withany usage with respect thereto, (iii) necessary to indicate any special limitations or restrictions to which any particularADRs or ADSs are subject by reason of the date of issuance of the Deposited Securities or otherwise or (iv) required byany book-entry system in which the ADSs are held. Holders and Beneficial Owners shall be deemed, for all purposes, tohave notice of, and to be bound by, the terms and conditions of the legends set forth, in the case of Holders, on the ADRregistered in the name of the applicable Holders or, in the case of Beneficial Owners, on the ADR representing the ADSsowned by such Beneficial Owners.(c)Title. Subject to the limitations contained herein and in the form of Receipt, title to a Receipt (and to the ADSsevidenced thereby), when properly endorsed (in the case of certificated Receipts) or upon delivery to the Depositary ofproper instruments of transfer, shall be transferable by delivery with the same effect as in the case of a negotiableinstrument under the laws of the State of New York; provided, however, that the Depositary, notwithstanding any notice tothe contrary, may treat the Holder thereof as the absolute owner thereof for the purpose of determining the person entitledto distribution of dividends or other distributions or to any notice provided for in this Deposit Agreement and for all otherpurposes and neither the Depositary nor the Company will have any obligation or be subject to any liability under theDeposit Agreement to any holder of a Receipt, unless such holder is the Holder thereof.SECTION 2.3 Deposits.(a)Subject to the terms and conditions of this Deposit Agreement and applicable law, Shares or evidence of rights toreceive Shares may be deposited by any person (including the Depositary in its individual capacity but subject, however,in the case of the Company or any Affiliate of the Company, to Section 5.7 hereof) at any time beginning on the 181st dayafter the date of the prospectus contained in the registration statement on Form F-1 under which the ADSs are first sold oron such earlier date as the Company (with the approval of the underwriters referred to in the said prospectus) may specifyin writing to the Depositary, whether or not the transfer books of the Company or the Foreign Registrar, if any, are closed,by Delivery of the Shares to the Custodian. Except for Shares deposited by the Company in connection with the initialsale of ADSs under the registration statement on Form F-1, no deposit of Shares shall be accepted under this DepositAgreement prior to such date. Every deposit of Shares shall be accompanied by the following: (A)(i) in the case of Sharesrepresented by certificates issued in registered form, appropriate instruments of transfer or endorsement, in a formsatisfactory to the Custodian, (ii) in the case of Shares represented by certificates issued in bearer form, such Shares or thecertificates representing such Shares and (iii) in the case of Shares Delivered by book-entry transfer, confirmation of suchbook-entry 7transfer to the Custodian or that irrevocable instructions have been given to cause such Shares to be so transferred, (B)such certifications and payments (including, without limitation, the Depositary’s fees and related charges) and evidence ofsuch payments (including, without limitation, stamping or otherwise marking such Shares by way of receipt) as may berequired by the Depositary or the Custodian in accordance with the provisions of this Deposit Agreement, (C) if theDepositary so requires, a written order directing the Depositary to execute and Deliver to, or upon the written order of, theperson or persons stated in such order a Receipt or Receipts for the number of American Depositary Shares representingthe Shares so deposited, (D) evidence satisfactory to the Depositary (which may include an opinion of counsel reasonablysatisfactory to the Depositary provided at the cost of the person seeking to deposit Shares) that all conditions to suchdeposit have been met and all necessary approvals have been granted by, and there has been compliance with the rules andregulations of, any applicable governmental agency and (E) if the Depositary so requires, (i) an agreement, assignment orinstrument satisfactory to the Depositary or the Custodian which provides for the prompt transfer by any person in whosename the Shares are or have been recorded to the Custodian of any distribution, or right to subscribe for additional Sharesor to receive other property in respect of any such deposited Shares or, in lieu thereof, such indemnity or other agreementas shall be satisfactory to the Depositary or the Custodian and (ii) if the Shares are registered in the name of the person onwhose behalf they are presented for deposit, a proxy or proxies entitling the Custodian to exercise voting rights in respectof the Shares for any and all purposes until the Shares so deposited are registered in the name of the Depositary, theCustodian or any nominee. No Share shall be accepted for deposit unless accompanied by confirmation or such additionalevidence, if any is required by the Depositary, that is reasonably satisfactory to the Depositary or the Custodian that allconditions to such deposit have been satisfied by the person depositing such Shares under the laws and regulations of theCayman Islands and any necessary approval has been granted by any governmental body in the Cayman Islands, if any,which is then performing the function of the regulator of currency exchange. The Depositary may issue Receipts againstevidence of rights to receive Shares from the Company, any agent of the Company or any custodian, registrar, transferagent, clearing agency or other entity involved in ownership or transaction records in respect of the Shares. Withoutlimitation of the foregoing, the Depositary shall not knowingly accept for deposit under this Deposit Agreement anyShares or other Deposited Securities required to be registered under the provisions of the Securities Act, unless aregistration statement is in effect as to such Shares or other Deposited Securities, or any Shares or other DepositedSecurities the deposit of which would violate any provisions of the Memorandum and Articles of Association. TheDepositary shall use commercially reasonable efforts to comply with reasonable written instructions of the Company thatthe Depositary shall not accept for deposit hereunder any Shares specifically identified in such instructions at such timesand under such circumstances as may reasonably be specified in such instructions in order to facilitate the Company’scompliance with the securities laws in the United States and other jurisdictions, provided that the Company shallindemnify the Depositary and the Custodian for any claims and losses arising from not accepting the deposit of any Sharesidentified in the Company’s instructions.(b)As soon as practicable after receipt of any permitted deposit hereunder and compliance with the provisions of thisDeposit Agreement, the Custodian shall present the Shares so deposited, together with the appropriate instrument orinstruments of transfer or endorsement, duly stamped, to the Foreign Registrar for transfer and registration of the Shares(as soon as transfer and registration can be accomplished and at the expense of the person for whom the deposit is made)in the name of the Depositary, the Custodian or a 8nominee of either. Deposited Securities shall be held by the Depositary or by a Custodian for the account and to the orderof the Depositary or a nominee, in each case for the account of the Holders and Beneficial Owners, at such place or placesas the Depositary or the Custodian shall determine.(c)In the event any Shares are deposited which entitle the holders thereof to receive a per-share distribution or otherentitlement in an amount different from the Shares then on deposit, the Depositary is authorized to take any and all actionsas may be necessary (including, without limitation, making the necessary notations on Receipts) to give effect to theissuance of such ADSs and to ensure that such ADSs are not fungible with other ADSs issued hereunder until such time asthe entitlement of the Shares represented by such non-fungible ADSs equals that of the Shares represented by ADSs priorto such deposit. The Company agrees to give timely written notice to the Depositary if any Shares issued or to be issuedcontain rights different from those of any other Shares theretofore issued and shall assist the Depositary with theestablishment of procedures enabling the identification of such non-fungible Shares upon Delivery to the Custodian.SECTION 2.4 Execution and Delivery of Receipts. After the deposit of any Shares pursuant to Section 2.3 hereof,the Custodian shall notify the Depositary of such deposit and the person or persons to whom or upon whose written order aReceipt or Receipts are Deliverable in respect thereof and the number of American Depositary Shares to be evidencedthereby. Such notification shall be made by letter, first class airmail postage prepaid, or, at the request, risk and expense ofthe person making the deposit, by cable, telex, SWIFT, facsimile or electronic transmission. After receiving such noticefrom the Custodian, the Depositary, subject to this Deposit Agreement (including, without limitation, the payment of thefees, expenses, taxes and/or other charges owing hereunder), shall issue the ADSs representing the Shares so deposited toor upon the order of the person or persons named in the notice delivered to the Depositary and shall execute and Deliver aReceipt registered in the name or names requested by such person or persons evidencing in the aggregate the number ofAmerican Depositary Shares to which such person or persons are entitled.SECTION 2.5 Transfer of Receipts; Combination and Split-up of Receipts.(a)Transfer. The Depositary, or, if a Registrar (other than the Depositary) for the Receipts shall have been appointed,the Registrar, subject to the terms and conditions of this Deposit Agreement, shall register transfers of Receipts on itsbooks, upon surrender at the Corporate Trust Office of the Depositary of a Receipt by the Holder thereof in person or byduly authorized attorney, properly endorsed in the case of a certificated Receipt or accompanied by, or in the case ofReceipts issued through any book-entry system, including, without limitation, DRS/Profile, receipt by the Depositary of,proper instruments of transfer (including signature guarantees in accordance with standard industry practice) and dulystamped as may be required by the laws of the State of New York, of the United States, of the Cayman Islands and of anyother applicable jurisdiction. Subject to the terms and conditions of this Deposit Agreement, including payment of theapplicable fees and charges of the Depositary set forth in Section 5.9 hereof and Article (9) of the Receipt, the Depositaryshall execute a new Receipt or Receipts and Deliver the same to or upon the order of the person entitled thereto evidencingthe same aggregate number of American Depositary Shares as those evidenced by the Receipts surrendered.(b)Combination and Split Up. The Depositary, subject to the terms and conditions of this Deposit Agreement shall,upon surrender of a Receipt or Receipts for the purpose of 9effecting a split-up or combination of such Receipt or Receipts and upon payment to the Depositary of the applicable feesand charges set forth in Section 5.9 hereof and Article (9) of the Receipt, execute and Deliver a new Receipt or Receiptsfor any authorized number of American Depositary Shares requested, evidencing the same aggregate number of AmericanDepositary Shares as the Receipt or Receipts surrendered.(c)Co-Transfer Agents. The Depositary may appoint one or more co-transfer agents for the purpose of effectingtransfers, combinations and split-ups of Receipts at designated transfer offices on behalf of the Depositary. In carrying outits functions, a co-transfer agent may require evidence of authority and compliance with applicable laws and otherrequirements by Holders or persons entitled to such Receipts and will be entitled to protection and indemnity, in each caseto the same extent as the Depositary. Such co-transfer agents may be removed and substitutes appointed by the Depositary. Each co-transfer agent appointed under this Section 2.5 (other than the Depositary) shall give notice in writing to theDepositary accepting such appointment and agreeing to be bound by the applicable terms of this Deposit Agreement.(d)Substitution of Receipts. At the request of a Holder, the Depositary shall, for the purpose of substituting acertificated Receipt with a Receipt issued through any book-entry system, including, without limitation, DRS/Profile, orvice versa, execute and Deliver a certificated Receipt or deliver a statement, as the case may be, for any authorized numberof ADSs requested, evidencing the same aggregate number of ADSs as those evidenced by the relevant Receipt.SECTION 2.6 Surrender of Receipts and Withdrawal of Deposited Securities. Upon surrender, at the CorporateTrust Office of the Depositary, of American Depositary Shares for the purpose of withdrawal of the Deposited Securitiesrepresented thereby, and upon payment of (i) the fees and charges of the Depositary for the making of withdrawals ofDeposited Securities and cancellation of Receipts (as set forth in Section 5.9 hereof and Article (9) of the Receipt) and (ii)all fees, taxes and/or governmental charges payable in connection with such surrender and withdrawal, and subject to theterms and conditions of this Deposit Agreement, the Memorandum and Articles of Association, Section 7.10 hereof andany other provisions of or governing the Deposited Securities and other applicable laws, the Holder of such AmericanDepositary Shares shall be entitled to Delivery, to him or upon his order, of the Deposited Securities at the timerepresented by the American Depositary Shares so surrendered. American Depositary Shares may be surrendered for thepurpose of withdrawing Deposited Securities by Delivery of a Receipt evidencing such American Depositary Shares (ifheld in certificated form) or by book-entry Delivery of such American Depositary Shares to the Depositary.A Receipt surrendered for such purposes shall, if so required by the Depositary, be properly endorsed in blank oraccompanied by proper instruments of transfer in blank, and if the Depositary so requires, the Holder thereof shall executeand deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn tobe Delivered to or upon the written order of a person or persons designated in such order. Thereupon, the Depositary shalldirect the Custodian to Deliver (without unreasonable delay) at the designated office of the Custodian or through a book-entry delivery of the Shares (in either case, subject to Sections 2.7, 3.1, 3.2, 5.9, hereof and to the other terms andconditions of this Deposit Agreement, to the Memorandum and Articles of Association, and to the provisions of orgoverning the Deposited Securities and applicable laws, now or hereafter in effect) to or upon the written order of theperson or persons designated in the order delivered 10to the Depositary as provided above, the Deposited Securities represented by such American Depositary Shares, togetherwith any certificate or other proper documents of or relating to title of the Deposited Securities as may be legally required,as the case may be, to or for the account of such person.The Depositary may refuse to accept for surrender American Depositary Shares only in the circumstances described inArticle (4) of the Receipt. Subject thereto, in the case of surrender of a Receipt evidencing a number of AmericanDepositary Shares representing other than a whole number of Shares, the Depositary shall cause ownership of theappropriate whole number of Shares to be Delivered in accordance with the terms hereof, and shall, at the discretion of theDepositary, either (i) issue and Deliver to the person surrendering such Receipt a new Receipt evidencing AmericanDepositary Shares representing any remaining fractional Share, or (ii) sell or cause to be sold the fractional Sharesrepresented by the Receipt surrendered and remit the proceeds of such sale (net of (a) applicable fees and charges of, andexpenses incurred by, the Depositary and/or a division or Affiliate(s) of the Depositary and (b) taxes and/or governmentalcharges) to the person surrendering the Receipt.At the request, risk and expense of any Holder so surrendering a Receipt, and for the account of such Holder, theDepositary shall direct the Custodian to forward (to the extent permitted by law) any cash or other property (other thansecurities) held in respect of, and any certificate or certificates and other proper documents of or relating to title to, theDeposited Securities represented by such Receipt to the Depositary for delivery at the Corporate Trust Office of theDepositary, and for further Delivery to such Holder. Such direction shall be given by letter or, at the request, risk andexpense of such Holder, by cable, telex or facsimile transmission. Upon receipt by the Depositary of such direction, theDepositary may make delivery to such person or persons entitled thereto at the Corporate Trust Office of the Depositary ofany dividends or cash distributions with respect to the Deposited Securities represented by such American DepositaryShares, or of any proceeds of sale of any dividends, distributions or rights, which may at the time be held by theDepositary.SECTION 2.7 Limitations on Execution and Delivery, Transfer, etc. of Receipts; Suspension of Delivery, Transfer,etc..(a)Additional Requirements. As a condition precedent to the execution and Delivery, registration, registration oftransfer, split-up, subdivision, combination or surrender of any Receipt, the Delivery of any distribution thereon (whetherin cash or shares) or withdrawal of any Deposited Securities, the Depositary or the Custodian may require (i) paymentfrom the depositor of Shares or presenter of the Receipt of a sum sufficient to reimburse it for any tax or othergovernmental charge and any stock transfer or registration fee with respect thereto (including any such tax or charge andfee with respect to Shares being deposited or withdrawn) and payment of any applicable fees and charges of theDepositary as provided in Section 5.9 hereof and Article (9) of the Receipt hereto, (ii) the production of proof satisfactoryto it as to the identity and genuineness of any signature or any other matter contemplated by Section 3.1 hereof and (iii)compliance with (A) any laws or governmental regulations relating to the execution and Delivery of Receipts or AmericanDepositary Shares or to the withdrawal or Delivery of Deposited Securities and (B) such reasonable regulations andprocedures as the Depositary may establish consistent with the provisions of this Deposit Agreement and applicable law. 11(b)Additional Limitations. The issuance of ADSs against deposits of Shares generally or against deposits of particularShares may be suspended, or the issuance of ADSs against the deposit of particular Shares may be withheld, or theregistration of transfer of Receipts in particular instances may be refused, or the registration of transfers of Receiptsgenerally may be suspended, during any period when the transfer books of the Depositary are closed or if any such actionis deemed necessary or advisable by the Depositary or the Company, in good faith, at any time or from time to timebecause of any requirement of law, any government or governmental body or commission or any securities exchange onwhich the Receipts or Shares are listed, or under any provision of this Deposit Agreement or provisions of, or governing,the Deposited Securities, or any meeting of shareholders of the Company or for any other reason, subject, in all cases, toSection 7.10 hereof.(c)The Depositary shall not issue ADSs prior to the receipt of Shares or deliver Shares prior to the receipt andcancellation of ADSs.SECTION 2.8 Lost Receipts, etc. To the extent the Depositary has issued Receipts in physical certificated form, incase any Receipt shall be mutilated, destroyed, lost or stolen, unless the Depositary has notice that such ADR has beenacquired by a bona fide purchaser, subject to Section 5.9 hereof, the Depositary shall execute and Deliver a new Receipt(which, in the discretion of the Depositary may be issued through any book-entry system, including, without limitation,DRS/Profile, unless specifically requested otherwise) in exchange and substitution for such mutilated Receipt uponcancellation thereof, or in lieu of and in substitution for such destroyed, lost or stolen Receipt. Before the Depositary shallexecute and Deliver a new Receipt in substitution for a destroyed, lost or stolen Receipt, the Holder thereof shall have (a)filed with the Depositary (i) a request for such execution and Delivery before the Depositary has notice that the Receipthas been acquired by a bona fide purchaser and (ii) a sufficient indemnity bond in form and amount acceptable to theDepositary and (b) satisfied any other reasonable requirements imposed by the Depositary.SECTION 2.9 Cancellation and Destruction of Surrendered Receipts; Maintenance of Records. All Receiptssurrendered to the Depositary shall be cancelled by the Depositary. The Depositary is authorized to destroy Receipts socancelled in accordance with its customary practices. Cancelled Receipts shall not be entitled to any benefits under thisDeposit Agreement or be valid or obligatory for any purpose.SECTION 2.10 Maintenance of Records. The Depositary agrees to maintain records of all Receipts surrenderedand Deposited Securities withdrawn under Section 2.6, substitute Receipts Delivered under Section 2.8 and cancelled ordestroyed Receipts under Section 2.9, in keeping with the procedures ordinarily followed by stock transfer agents locatedin the United States.ARTICLE III.CERTAIN OBLIGATIONS OF HOLDERSAND BENEFICIAL OWNERS OF RECEIPTSSECTION 3.1 Proofs, Certificates and Other Information. Any person presenting Shares for deposit shall provide,any Holder and any Beneficial Owner may be required to provide, and every Holder and Beneficial Owner agrees, fromtime to time to provide to the Depositary or the Custodian such proof of citizenship or residence, taxpayer status, paymentof all applicable taxes or other governmental charges, exchange control approval, legal or 12beneficial ownership of ADSs and Deposited Securities, compliance with applicable laws and the terms of this DepositAgreement and the provisions of, or governing, the Deposited Securities or other information, to execute suchcertifications and to make such representations and warranties and to provide such other information and documentation asthe Depositary may deem necessary or proper or as the Company may reasonably require by written request to theDepositary consistent with its obligations hereunder. The Depositary and the Registrar, as applicable, may withhold theexecution or Delivery or registration of transfer of any Receipt or the distribution or sale of any dividend or otherdistribution of rights or of the proceeds thereof, or to the extent not limited by the terms of Section 7.10 hereof, theDelivery of any Deposited Securities, until such proof or other information is filed or such certifications are executed, orsuch representations and warranties are made, or such other documentation or information provided, in each case to theDepositary’s and the Company’s satisfaction. The Depositary shall from time to time on the written request of theCompany advise the Company of the availability of any such proofs, certificates or other information and shall, at theCompany’s sole expense, provide or otherwise make available copies thereof to the Company upon written requesttherefor by the Company, unless such disclosure is prohibited by law. Each Holder and Beneficial Owner agrees toprovide, any information requested by the Company or the Depositary pursuant to this Section 3.1. Nothing herein shallobligate the Depositary to (i) obtain any information for the Company if not provided by the Holders or Beneficial Ownersor (ii) verify or vouch for the accuracy of the information so provided by the Holders or Beneficial Owners.Every Holder and Beneficial Owner agrees to indemnify the Depositary, the Company, the Custodian, the Agentsand each of their respective directors, officers, employees, agents and Affiliates against, and to hold each of them harmlessfrom, any Losses which any of them may incur or which may be made against any of them as a result of or in connectionwith any inaccuracy in or omission from any such proof, certificate, representation, warranty, information or documentfurnished by or on behalf of such Holder and/or Beneficial Owner or as a result of any such failure to furnish any of theforegoing.The obligations of Holders and Beneficial Owners under Section 3.1 shall survive any transfer of Receipts, anysurrender of Receipts or withdrawal of Deposited Securities or the termination of the Deposit Agreement.SECTION 3.2 Liability for Taxes and Other Charges. If any present or future tax or other governmental chargeshall become payable by the Depositary or the Custodian with respect to any ADR or any Deposited Securities orAmerican Depositary Shares, such tax or other governmental charge shall be payable by the Holders and BeneficialOwners to the Depositary and such Holders and Beneficial Owners shall be deemed liable therefor. The Company, theCustodian and/or the Depositary may withhold or deduct from any distributions made in respect of Deposited Securitiesand may sell for the account of a Holder and/or Beneficial Owner any or all of the Deposited Securities and apply suchdistributions and sale proceeds in payment of such taxes (including applicable interest and penalties) and charges, with theHolder and the Beneficial Owner remaining fully liable for any deficiency. In addition to any other remedies available toit, the Depositary and the Custodian may refuse the deposit of Shares, and the Depositary may refuse to issue ADSs, toDeliver ADRs, to register the transfer, split-up or combination of ADRs and (subject to Section 7.10 hereof) thewithdrawal of Deposited Securities, until payment in full of such tax, charge, penalty or interest is received. The liabilityof Holders and Beneficial Owners under this Section 3.2 13shall survive any transfer of Receipts, any surrender of Receipts and withdrawal of Deposited Securities or the terminationof this Deposit Agreement.SECTION 3.3 Representations and Warranties on Deposit of Shares. Each person depositing Shares under thisDeposit Agreement shall be deemed thereby to represent and warrant that (i) such Shares and the certificates therefor areduly authorized, validly issued, fully paid, non-assessable and were legally obtained by such person, (ii) all preemptive(and similar) rights, if any, with respect to such Shares have been validly waived or exercised, (iii) the person making suchdeposit is duly authorized so to do, (iv) the Shares presented for deposit are free and clear of any lien, encumbrance,security interest, charge, mortgage or adverse claim and are not, and the American Depositary Shares issuable upon suchdeposit will not be, Restricted Securities, (v) the Shares presented for deposit have not been stripped of any rights orentitlements and (vi) the Shares are not subject to any lock-up agreement with the Company or other party, or the Sharesare subject to a lock-up agreement but such lock-up agreement has terminated or the lock-up restrictions imposedthereunder have expired. Such representations and warranties shall survive the deposit and withdrawal of Shares, theissuance and cancellation of American Depositary Shares in respect thereof and the transfer of such American DepositaryShares. If any such representations or warranties are false in any way, the Company and the Depositary shall beauthorized, at the cost and expense of the person depositing Shares, to take any and all actions necessary to correct theconsequences thereof.SECTION 3.4 Compliance with Information Requests. Notwithstanding any other provision of the DepositAgreement, the Articles of Association and applicable law, each Holder and Beneficial Owner agrees to (a) provide suchinformation as the Company or the Depositary may request pursuant to law (including, without limitation, relevantCayman Islands law, any applicable law of the United States, the Memorandum and Articles of Association, anyresolutions of the Company’s Board of Directors adopted pursuant to the Memorandum and Articles of Association, therequirements of any markets or exchanges upon which the Shares, ADSs or Receipts are listed or traded, or to anyrequirements of any electronic book-entry system by which the ADSs or Receipts may be transferred), (b) be bound byand subject to applicable provisions of the laws of the Cayman Islands, the Memorandum and Articles of Association andthe requirements of any markets or exchanges upon which the ADSs, Receipts or Shares are listed or traded, or pursuant toany requirements of any electronic book-entry system by which the ADSs, Receipts or Shares may be transferred, to thesame extent as if such Holder and Beneficial Owner held Shares directly, in each case irrespective of whether or not theyare Holders or Beneficial Owners at the time such request is made and, without limiting the generality of the foregoing, (c)comply with all applicable provisions of Cayman Islands law, the rules and requirements of any stock exchange on whichthe Shares are, or will be registered, traded or listed and the Articles of Association regarding any such Holder orBeneficial Owner's interest in Shares (including the aggregate of ADSs and Shares held by each such Holder or BeneficialOwner) and/or the disclosure of interests therein, whether or not the same may be enforceable against such Holder orBeneficial Owner. The Depositary agrees to use its reasonable efforts to forward upon the request of the Company, and atthe Company’s expense, any such request from the Company to the Holders and to forward to the Company any suchresponses to such requests received by the Depositary. 14ARTICLE IV.THE DEPOSITED SECURITIESSECTION 4.1 Cash Distributions. Whenever the Depositary receives confirmation from the Custodian of receiptof any cash dividend or other cash distribution on any Deposited Securities, or receives proceeds from the sale of anyShares, rights, securities or other entitlements under the terms hereof, the Depositary will, if at the time of receipt thereofany amounts received in a Foreign Currency can in the judgment of the Depositary (pursuant to Section 4.6 hereof) beconverted on a practicable basis into Dollars transferable to the United States, promptly convert or cause to be convertedsuch cash dividend, distribution or proceeds into Dollars (on the terms described in Section 4.6 hereof) and will distributepromptly the amount thus received (net of (a) the applicable fees and charges of, and expenses incurred by, the Depositaryand/or a division or Affiliate(s) of the Depositary and (b) taxes and/or governmental charges) to the Holders of record as ofthe ADS Record Date in proportion to the number of American Depositary Shares held by such Holders respectively as ofthe ADS Record Date. The Depositary shall distribute only such amount, however, as can be distributed withoutattributing to any Holder a fraction of one cent. Any such fractional amounts shall be rounded down to the nearest wholecent and so distributed to Holders entitled thereto. Holders and Beneficial Owners understand that in converting ForeignCurrency, amounts received on conversion are calculated at a rate which exceeds the number of decimal places used by theDepositary to report distribution rates. The excess amount may be retained by the Depositary as an additional cost ofconversion, irrespective of any other fees and expenses payable or owing hereunder and shall not be subject toescheatment. If the Company, the Custodian or the Depositary is required to withhold and does withhold from any cashdividend or other cash distribution in respect of any Deposited Securities an amount on account of taxes, duties or othergovernmental charges, the amount distributed to Holders of the ADSs representing such Deposited Securities shall bereduced accordingly. Such withheld amounts shall be forwarded by the Company, the Custodian or the Depositary to therelevant governmental authority. Evidence of payment thereof by the Company shall be forwarded by the Company to theDepositary upon request. The Depositary shall forward to the Company or its agent such information from its records asthe Company may reasonably request to enable the Company or its agent to file with governmental agencies such reportsas are necessary to obtain benefits under the applicable tax treaties for the Holders and Beneficial Owners of Receipts.SECTION 4.2 Distribution in Shares. If any distribution upon any Deposited Securities consists of a dividend in,or free distribution of, Shares, the Company shall cause such Shares to be deposited with the Custodian and registered, asthe case may be, in the name of the Depositary, the Custodian or any of their nominees. Upon receipt of confirmation ofsuch deposit from the Custodian, the Depositary shall establish the ADS Record Date upon the terms described in Section4.7 hereof and shall, subject to Section 5.9 hereof, either (i) distribute to the Holders as of the ADS Record Date inproportion to the number of ADSs held as of the ADS Record Date, additional ADSs, which represent in the aggregate thenumber of Shares received as such dividend, or free distribution, subject to the other terms of this Deposit Agreement(including, without limitation, (a) the applicable fees and charges of, and expenses incurred by, the Depositary and (b)taxes and/or governmental charges), or (ii) if additional ADSs are not so distributed, each ADS issued and outstandingafter the ADS Record Date shall, to the extent permissible by law, thenceforth also represent rights and interests in theadditional Shares distributed upon the Deposited Securities 15represented thereby (net of (a) the applicable fees and charges of, and expenses incurred by, the Depositary and (b) taxesand/or governmental charges). In lieu of Delivering fractional ADSs, the Depositary shall sell the number of Sharesrepresented by the aggregate of such fractions and distribute the proceeds upon the terms described in Section 4.1 hereof.The Depositary may withhold any such distribution of Receipts if it has not received satisfactory assurances from theCompany (including an Opinion of Counsel furnished at the expense of the Company) that such distribution does notrequire registration under the Securities Act or is exempt from registration under the provisions of the Securities Act. Tothe extent such distribution may be withheld, the Depositary may dispose of all or a portion of such distribution in suchamounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable, andthe Depositary shall distribute the net proceeds of any such sale (after deduction of applicable taxes and/or governmentalcharges and fees and charges of, and expenses incurred by, the Depositary and/or a division or Affiliate(s) of theDepositary) to Holders entitled thereto upon the terms described in Section 4.1 hereof.SECTION 4.3 Elective Distributions in Cash or Shares. Whenever the Company intends to distribute a dividendpayable at the election of the holders of Shares in cash or in additional Shares, the Company shall give notice thereof tothe Depositary at least 30 days prior to the proposed distribution stating whether or not it wishes such elective distributionto be made available to Holders of ADSs. Upon receipt of notice indicating that the Company wishes such electivedistribution to be made available to Holders of ADSs, the Depositary shall consult with the Company to determine, and theCompany shall assist the Depositary in its determination, whether it is lawful and reasonably practicable to make suchelective distribution available to the Holders of ADSs. The Depositary shall make such elective distribution available toHolders only if (i) the Company shall have timely requested that the elective distribution is available to Holders of ADRs,(ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7 hereof (including,without limitation, any legal opinions of counsel in any applicable jurisdiction that the Depositary in its reasonablediscretion may request, at the expense of the Company) and (iii) the Depositary shall have determined that suchdistribution is lawful and reasonably practicable. If the above conditions are not satisfied, the Depositary shall, to theextent permitted by law, distribute to the Holders, on the basis of the same determination as is made in the local market inrespect of the Shares for which no election is made, either cash upon the terms described in Section 4.1 hereof oradditional ADSs representing such additional Shares upon the terms described in Section 4.2 hereof. If the aboveconditions are satisfied, the Depositary shall establish an ADS Record Date (on the terms described in Section 4.7 hereof)and establish procedures to enable Holders to elect the receipt of the proposed dividend in cash or in additional ADSs. The Company shall assist the Depositary in establishing such procedures to the extent necessary. Subject to Section 5.9hereof, if a Holder elects to receive the proposed dividend in cash, the dividend shall be distributed upon the termsdescribed in Section 4.1 hereof or in ADSs, the dividend shall be distributed upon the terms described in Section 4.2hereof. Nothing herein shall obligate the Depositary to make available to Holders a method to receive the electivedividend in Shares (rather than ADSs). There can be no assurance that Holders generally, or any Holder in particular, willbe given the opportunity to receive elective distributions on the same terms and conditions as the holders of Shares. 16SECTION 4.4 Distribution of Rights to Purchase Shares.(a)Distribution to ADS Holders. Whenever the Company intends to distribute to the holders of the DepositedSecurities rights to subscribe for additional Shares, the Company shall give notice thereof to the Depositary at least 60days prior to the proposed distribution stating whether or not it wishes such rights to be made available to Holders ofADSs. Upon timely receipt of a notice indicating that the Company wishes such rights to be made available to Holders ofADSs, the Depositary shall consult with the Company to determine, and the Company shall determine, whether it is lawfuland reasonably practicable to make such rights available to the Holders. The Depositary shall make such rights availableto Holders only if (i) the Company shall have timely requested that such rights be made available to Holders, (ii) theDepositary shall have received satisfactory documentation within the terms of Section 5.7 hereof and (iii) the Depositaryshall have determined that such distribution of rights is lawful and reasonably practicable. In the event any of theconditions set forth above are not satisfied, the Depositary shall proceed with the sale of the rights as contemplated inSection 4.4(b) below or, if timing or market conditions may not permit, do nothing thereby allowing such rights to lapse. In the event all conditions set forth above are satisfied, the Depositary shall establish an ADS Record Date (upon theterms described in Section 4.7 hereof) and establish procedures to distribute such rights (by means of warrants orotherwise) and to enable the Holders to exercise the rights (upon payment of applicable fees and charges of, and expensesincurred by, the Depositary and taxes and/or other governmental charges). Nothing herein shall obligate the Depositary tomake available to the Holders a method to exercise such rights to subscribe for Shares (rather than ADSs).(b)Sale of Rights. If (i) the Company does not timely request the Depositary to make the rights available to Holdersor requests that the rights not be made available to Holders, (ii) the Depositary fails to receive satisfactory documentationwithin the terms of Section 5.7 hereof or determines it is not lawful or reasonably practicable to make the rights availableto Holders or (iii) any rights made available are not exercised and appear to be about to lapse, the Depositary shalldetermine whether it is lawful and reasonably practicable to sell such rights, and if it so determines that it is lawful andreasonably practicable, endeavour to sell such rights in a riskless principal capacity or otherwise, at such place and uponsuch terms (including public or private sale) as it may deem proper. The Company shall assist the Depositary to the extentnecessary to determine such legality and practicability. The Depositary shall, upon such sale, convert and distributeproceeds of such sale (net of applicable fees and charges of, and expenses incurred by, the Depositary and/or a division orAffiliate(s) of the Depositary and taxes and/or governmental charges) upon the terms set forth in Section 4.1 hereof.(c)Lapse of Rights. If the Depositary is unable to make any rights available to Holders upon the terms described inSection 4.4(a) hereof or to arrange for the sale of the rights upon the terms described in Section 4.4(b) hereof, theDepositary shall allow such rights to lapse.The Depositary shall not be responsible for (i) any failure to determine that it may be lawful or practicable to make suchrights available to Holders in general or any Holders in particular, (ii) any foreign exchange exposure or loss incurred inconnection with such sale or exercise or (iii) the content of any materials forwarded to the Holders on behalf of theCompany in connection with the rights distribution.Notwithstanding anything to the contrary in this Section 4.4, if registration (under the Securities Act or any otherapplicable law) of the rights or the securities to which any rights 17relate may be required in order for the Company to offer such rights or such securities to Holders and to sell the securitiesrepresented by such rights, the Depositary will not distribute such rights to the Holders (i) unless and until a registrationstatement under the Securities Act covering such offering is in effect or (ii) unless the Company furnishes at its expensethe Depositary with opinion(s) of counsel for the Company in the United States and counsel to the Company in any otherapplicable country in which rights would be distributed, in each case satisfactory to the Depositary, to the effect that theoffering and sale of such securities to Holders and Beneficial Owners are exempt from, or do not require registrationunder, the provisions of the Securities Act or any other applicable laws. In the event that the Company, the Depositary orthe Custodian shall be required to withhold and does withhold from any distribution of property (including rights) anamount on account of taxes and/or other governmental charges, the amount distributed to the Holders shall be reducedaccordingly. In the event that the Depositary determines that any distribution in property (including Shares and rights tosubscribe therefor) is subject to any tax or other governmental charges which the Depositary is obligated to withhold, theDepositary may dispose of all or a portion of such property (including Shares and rights to subscribe therefor) in suchamounts and in such manner, including by public or private sale, as the Depositary deems necessary and practicable to payany such taxes and/or charges.There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to exerciserights on the same terms and conditions as the holders of Shares or be able to exercise such rights. Nothing herein shallobligate the Company to file any registration statement in respect of any rights or Shares or other securities to be acquiredupon the exercise of such rights or otherwise to register or qualify the offer or sale of such rights or securities under theapplicable law of any other jurisdiction for any purpose.SECTION 4.5 Distributions Other Than Cash, Shares or Rights to Purchase Shares.(a)Whenever the Company intends to distribute to the holders of Deposited Securities property other than cash, Sharesor rights to purchase additional Shares, the Company shall give notice thereof to the Depositary at least 30 days prior tothe proposed distribution and shall indicate whether or not it wishes such distribution to be made to Holders of ADSs. Upon receipt of a notice indicating that the Company wishes such distribution be made to Holders of ADSs, theDepositary shall determine whether such distribution to Holders is lawful and practicable. The Depositary shall not makesuch distribution unless (i) the Company shall have timely requested the Depositary to make such distribution to Holders,(ii) the Depositary shall have received satisfactory documentation within the terms of Section 5.7 hereof and (iii) theDepositary shall have determined that such distribution is lawful and reasonably practicable.(b)Upon receipt of satisfactory documentation and the request of the Company to distribute property to Holders ofADSs and after making the requisite determinations set forth in (a) above, the Depositary may distribute the property soreceived to the Holders of record as of the ADS Record Date, in proportion to the number of ADSs held by such Holdersrespectively and in such manner as the Depositary may deem practicable for accomplishing such distribution (i) uponreceipt of payment or net of the applicable fees and charges of, and expenses incurred by, the Depositary and (ii) net ofany taxes and/or other governmental charges. The Depositary may dispose of all or a portion of the property so distributedand deposited, in such amounts and in such manner (including public or private sale) as the Depositary may deempracticable or necessary to satisfy any taxes (including applicable interest and penalties) and other governmental chargesapplicable to the distribution. 18(c)If (i) the Company does not request the Depositary to make such distribution to Holders or requests the Depositarynot to make such distribution to Holders, (ii) the Depositary does not receive satisfactory documentation within the termsof Section 5.7 hereof or (iii) the Depositary determines that all or a portion of such distribution is not reasonablypracticable or feasible, the Depositary shall endeavor to sell or cause such property to be sold in a public or private sale, atsuch place or places and upon such terms as it may deem proper and shall distribute the net proceeds, if any, of such salereceived by the Depositary (net of applicable fees and charges of, and expenses incurred by, the Depositary and/or adivision or Affiliate(s) of the Depositary and taxes and/or governmental charges) to the Holders as of the ADS RecordDate upon the terms of Section 4.1 hereof. If the Depositary is unable to sell such property, the Depositary may dispose ofsuch property in any way it deems reasonably practicable under the circumstances for nominal or no consideration andHolders and Beneficial Owners shall have no rights thereto or arising therefrom.SECTION 4.6 Conversion of Foreign Currency. Whenever the Depositary or the Custodian shall receive ForeignCurrency, by way of dividends or other distributions or the net proceeds from the sale of securities, property or rights, andin the judgment of the Depositary such Foreign Currency can at such time be converted on a practicable basis (by sale orin any other manner that it may determine in accordance with applicable law) into Dollars transferable to the United Statesand distributable to the Holders entitled thereto, the Depositary shall convert or cause to be converted, by sale or in anyother manner that it may determine, such Foreign Currency into Dollars, and shall distribute such Dollars (net of any fees,expenses, taxes and/or other governmental charges incurred in the process of such conversion) in accordance with theterms of the applicable sections of this Deposit Agreement. If the Depositary shall have distributed warrants or otherinstruments that entitle the holders thereof to such Dollars, the Depositary shall distribute such Dollars to the holders ofsuch warrants and/or instruments upon surrender thereof for cancellation, in either case without liability for interestthereon. Such distribution may be made upon an averaged or other practicable basis without regard to any distinctionsamong Holders on account of exchange restrictions, the date of delivery of any Receipt or otherwise.In converting Foreign Currency, amounts received on conversion may be calculated at a rate which exceeds the number ofdecimal places used by the Depositary to report distribution rates (which in any case will not be less than two decimalplaces). Any excess amount may be retained by the Depositary as an additional cost of conversion, irrespective of anyother fees and expenses payable or owing hereunder and shall not be subject to escheatment.If such conversion or distribution can be effected only with the approval or license of any government or agency thereof,the Depositary may file such application for approval or license, if any, as it may deem necessary, practicable and atnominal cost and expense. Nothing herein shall obligate the Depositary to file or cause to be filed, or to seek effectivenessof any such application or license.If at any time the Depositary shall determine that in its judgment the conversion of any Foreign Currency and the transferand distribution of proceeds of such conversion received by the Depositary is not practical or lawful, or if any approval orlicense of any governmental authority or agency thereof that is required for such conversion, transfer and distribution isdenied, or not obtainable at a reasonable cost, within a reasonable period or otherwise sought, the Depositary shall, in itssole discretion but subject to applicable laws and regulations, either (i) distribute the Foreign Currency (or an appropriatedocument evidencing the right to receive such Foreign Currency) received by the Depositary to the Holders entitled toreceive 19such Foreign Currency or (ii) hold such Foreign Currency uninvested and without liability for interest thereon for therespective accounts of the Holders entitled to receive the same.Holders and Beneficial Owners are directed to refer to Section 7.9 hereof for certain disclosure related to conversion ofForeign Currency.SECTION 4.7 Fixing of Record Date. Whenever necessary in connection with any distribution (whether in cash,Shares, rights, or other distribution), or whenever for any reason the Depositary causes a change in the number of Sharesthat are represented by each American Depositary Share, or whenever the Depositary shall receive notice of any meetingof or solicitation of holders of Shares or other Deposited Securities, or whenever the Depositary shall find it necessary orconvenient, the Depositary shall fix a record date (the “ADS Record Date”), as close as practicable to the record date fixedby the Company with respect to the Shares (if applicable), for the determination of the Holders who shall be entitled toreceive such distribution, to give instructions for the exercise of voting rights at any such meeting, to give or withholdsuch consent, to receive such notice or solicitation or to otherwise take action or to exercise the rights of Holders withrespect to such changed number of Shares represented by each American Depositary Share or for any other reason. Subject to applicable law and the provisions of Sections 4.1 through 4.6 hereof and to the other terms and conditions ofthis Deposit Agreement, only the Holders of record at the close of business in New York on such ADS Record Date shallbe entitled to receive such distribution, to give such voting instructions, to receive such notice or solicitation, or otherwisetake action.SECTION 4.8 Voting of Deposited Securities. Subject to the next sentence, as soon as practicable after receipt ofnotice of any meeting at which the holders of Deposited Securities are entitled to vote, or of solicitation of consents orproxies from holders of Deposited Securities, the Depositary shall fix the ADS Record Date in respect of such meeting orsuch solicitation of consents or proxies. The Depositary shall, if requested by the Company in writing in a timely manner(the Depositary having no obligation to take any further action if the request shall not have been received by theDepositary at least 30 Business Days prior to the date of such vote or meeting) and at the Company’s expense, andprovided no U.S. legal prohibitions exist, mail by regular, ordinary mail delivery (or by electronic mail or as otherwisemay be agreed between the Company and the Depositary in writing from time to time) or otherwise distribute as soon aspracticable after receipt thereof to Holders as of the ADS Record Date: (a) such notice of meeting or solicitation of consentor proxy; (b) a statement that the Holders at the close of business on the ADS Record Date will be entitled, subject to anyapplicable law, the provisions of this Deposit Agreement, the Company’s Memorandum and Articles of Association andthe provisions of or governing the Deposited Securities (which provisions, if any, shall be summarized in pertinent part bythe Company), to instruct the Depositary as to the exercise of the voting rights, if any, pertaining to the DepositedSecurities represented by such Holder’s American Depositary Shares; and (c) a brief statement as to the manner in whichsuch voting instructions may be given to the Depositary, or in which instructions may be deemed to have been given inaccordance with this Section 4.8, including an express indication that instructions may be given (or be deemed to havebeen given in accordance with the immediately following paragraph of this section if no instruction is received) to theDepositary to give a discretionary proxy to a person or persons designated by the Company. Voting instructions may begiven only in respect of a number of American Depositary Shares representing an integral number of Deposited Securities. Upon the timely receipt of voting instructions of a Holder on the ADS Record 20Date in the manner specified by the Depositary, the Depositary shall endeavor, insofar as practicable and permitted underapplicable law, the provisions of this Deposit Agreement, the Company’s Memorandum and Articles of Association andthe provisions of or governing the Deposited Securities, to vote or cause the Custodian to vote the Deposited Securities (inperson or by proxy) represented by American Depositary Shares evidenced by such Receipt in accordance with suchvoting instructions.In the event that (i) the Depositary timely receives voting instructions from a Holder which fail to specify the manner inwhich the Depositary is to vote the Deposited Securities represented by such Holder’s ADSs or (ii) no timely instructionsare received by the Depositary from a Holder with respect to any of the Deposited Securities represented by the ADSs heldby such Holder on the ADS Record Date, the Depositary shall (unless otherwise specified in the notice distributed toHolders) deem such Holder to have instructed the Depositary to give a discretionary proxy to a person designated by theCompany with respect to such Deposited Securities and the Depositary shall give a discretionary proxy to a persondesignated by the Company to vote such Deposited Securities, provided, however, that no such instruction shall be deemedto have been given and no such discretionary proxy shall be given with respect to any matter as to which the Companyinforms the Depositary (and the Company agrees to provide such information as promptly as practicable in writing, ifapplicable) that (x) the Company does not wish to give such proxy, (y) the Company is aware or should reasonably beaware that substantial opposition exists from Holders against the outcome for which the person designated by theCompany would otherwise vote or (z) the outcome for which the person designated by the Company would otherwise votewould materially and adversely affect the rights of holders of Deposited Securities, provided, further, that the Companywill have no liability to any Holder or Beneficial Owner resulting from such notification.In the event that voting on any resolution or matter is conducted on a show of hands basis in accordance with theMemorandum and Articles of Association, the Depositary will refrain from voting and the voting instructions (or thedeemed voting instructions, as set out above) received by the Depositary from Holders shall lapse. The Depositary willhave no obligation to demand voting on a poll basis with respect to any resolution and shall have no liability to any Holderor Beneficial Owner for not having demanded voting on a poll basis.Neither the Depositary nor the Custodian shall, under any circumstances exercise any discretion as to voting, and neitherthe Depositary nor the Custodian shall vote, attempt to exercise the right to vote, or in any way make use of for purposesof establishing a quorum or otherwise, the Deposited Securities represented by ADSs except pursuant to and in accordancewith such written instructions from Holders, including the deemed instruction to the Depositary to give a discretionaryproxy to a person designated by the Company. Deposited Securities represented by ADSs for which (i) no timely votinginstructions are received by the Depositary from the Holder, or (ii) timely voting instructions are received by theDepositary from the Holder but such voting instructions fail to specify the manner in which the Depositary is to vote theDeposited Securities represented by such Holder’s ADSs, shall be voted in the manner provided in this Section 4.8. Notwithstanding anything else contained herein, and subject to applicable law, regulation and the Memorandum andArticles of Association, the Depositary shall, if so requested in writing by the Company, represent all Deposited Securities(whether or not voting instructions have been received in respect of such Deposited Securities from Holders as of the ADSRecord Date) for the purpose of establishing quorum at a meeting of shareholders. 21There can be no assurance that Holders or Beneficial Owners generally or any Holder or Beneficial Owner in particularwill receive the notice described above with sufficient time to enable the Holder to return voting instructions to theDepositary in a timely manner.Notwithstanding the above, save for applicable provisions of the law of the Cayman Islands, and in accordance with theterms of Section 5.3 hereof, the Depositary shall not be liable for any failure to carry out any instructions to vote any of theDeposited Securities or the manner in which such vote is cast or the effect of such vote.SECTION 4.9 Changes Affecting Deposited Securities. Upon any change in par value, split-up, subdivision,cancellation, consolidation or any other reclassification of Deposited Securities or upon any recapitalization,reorganization, amalgamation, merger or consolidation or sale of assets affecting the Company or to which it is otherwise aparty, any securities which shall be received by the Depositary or the Custodian in exchange for, or in conversion of orreplacement or otherwise in respect of, such Deposited Securities shall, to the extent permitted by law, be treated as newDeposited Securities under this Deposit Agreement and the Receipts shall, subject to the provisions of this DepositAgreement and applicable law, evidence American Depositary Shares representing the right to receive such additionalsecurities. Alternatively, the Depositary may, with the Company’s approval, and shall, if the Company shall so request,subject to the terms of this Deposit Agreement and receipt of an Opinion of Counsel furnished at the Company’s expensesatisfactory to the Depositary (stating that such distributions are not in violation of any applicable laws or regulations),execute and deliver additional Receipts, as in the case of a stock dividend on the Shares, or call for the surrender ofoutstanding Receipts to be exchanged for new Receipts. In either case, as well as in the event of newly deposited Shares,necessary modifications to the form of Receipt contained in Exhibit A and Exhibit B hereto, specifically describing suchnew Deposited Securities and/or corporate change, shall also be made. The Company agrees that it will, jointly with theDepositary, amend the Registration Statement on Form F-6 as filed with the Commission to permit the issuance of suchnew form of Receipt. Notwithstanding the foregoing, in the event that any security so received may not be lawfullydistributed to some or all Holders, the Depositary may, with the Company’s approval, and shall, if the Company requests,subject to receipt of an Opinion of Counsel (furnished at the Company’s expense) satisfactory to the Depositary that suchaction is not in violation of any applicable laws or regulations, sell such securities at public or private sale, at such place orplaces and upon such terms as it may deem proper and may allocate the net proceeds of such sales (net of fees and chargesof, and expenses incurred by, the Depositary and/or a division or Affiliate(s) of the Depositary and taxes and/orgovernmental charges) for the account of the Holders otherwise entitled to such securities upon an averaged or otherpracticable basis without regard to any distinctions among such Holders and distribute the net proceeds so allocated to theextent practicable as in the case of a distribution received in cash pursuant to Section 4.1 hereof. The Depositary shall notbe responsible for (i) any failure to determine that it may be lawful or feasible to make such securities available to Holdersin general or to any Holder in particular, (ii) any foreign exchange exposure or loss incurred in connection with such saleor (iii) any liability to the purchaser of such securities.SECTION 4.10 Available Information. The Company is subject to the periodic reporting requirements of theExchange Act applicable to foreign private issuers (as defined in Rule 405 of the Securities Act) and accordingly filescertain information with the Commission. These reports and documents can be inspected and copied at the Commission’s 22website at www.sec.gov or at the public reference facilities maintained by the Commission located at 100 F Street, N.E.,Washington D.C. 20549, U.S.A.SECTION 4.11 Reports. The Depositary shall make available during normal business hours on any Business Dayfor inspection by Holders at its Corporate Trust Office any reports and communications, including any proxy solicitingmaterials, received from the Company which are both received by the Depositary, the Custodian, or the nominee of eitherof them as the holder of the Deposited Securities and made generally available to the holders of such Deposited Securitiesby the Company. The Company agrees to provide to the Depositary, at the Company’s expense, all such documents that itprovides to the Custodian. Unless otherwise agreed in writing by the Company and the Depositary, the Depositary shall, atthe expense of the Company and in accordance with Section 5.6 hereof, also mail to Holders by regular, ordinary maildelivery or by electronic transmission (if agreed by the Company and the Depositary) copies of notices and reports whenfurnished by the Company pursuant to Section 5.6 hereof.SECTION 4.12 List of Holders. Promptly upon written request by the Company, the Depositary shall, at theexpense of the Company, furnish to it a list, as of a recent date, of the names, addresses and holdings of AmericanDepositary Shares by all persons in whose names Receipts are registered on the books of the Depositary.SECTION 4.13 Taxation; Withholding. The Depositary will, and will instruct the Custodian to, forward to theCompany or its agents such information from its records as the Company may request to enable the Company or its agentsto file necessary tax reports with governmental authorities or agencies. The Depositary, the Custodian or the Company andits agents may, but shall not be obligated to, file such reports as are necessary to reduce or eliminate applicable taxes ondividends and on other distributions in respect of Deposited Securities under applicable tax treaties or laws for the Holdersand Beneficial Owners. Holders and Beneficial Owners of American Depositary Shares may be required from time totime, and in a timely manner, to provide and/or file such proof of taxpayer status, residence and beneficial ownership (asapplicable), to execute such certificates and to make such representations and warranties, or to provide any otherinformation or documents, as the Depositary or the Custodian may deem necessary or proper to fulfill the Depositary’s orthe Custodian’s obligations under applicable law. The Holders and Beneficial Owners shall indemnify the Depositary, theCompany, the Custodian, the Agents and their respective directors, officers, employees, agents and Affiliates against, andhold each of them harmless from, any claims by any governmental authority with respect to taxes, additions to tax,penalties or interest arising out of any refund of taxes, reduced rate of withholding at source or other tax benefit obtainedby the Beneficial Owner or Holder or out of or in connection with any inaccuracy in or omission from any such proof,certificate, representation, warranty, information or document furnished by or on behalf of such Holder or BeneficialOwner. The obligations of Holders and Beneficial Owners under this Section 4.13 shall survive any transfer of Receipts,any surrender of Receipts and withdrawal of Deposited Securities or the termination of this Deposit Agreement.The Company shall remit to the appropriate governmental authority or agency any amounts required to be withheld by theCompany and owing to such governmental authority or agency. Upon any such withholding, the Company shall remit tothe Depositary information, in a form reasonably satisfactory to the Depositary, about such taxes and/or governmentalcharges withheld or paid, and, if so requested, the tax receipt (or other proof of payment to the applicable governmentalauthority) therefor. The Depositary shall, to the extent required 23by U.S. law, report to Holders (i) any taxes withheld by it; (ii) any taxes withheld by the Custodian, subject to informationbeing provided to the Depositary by the Custodian and (iii) any taxes withheld by the Company, subject to informationbeing provided to the Depositary by the Company. The Depositary and the Custodian shall not be required to provide theHolders with any evidence of the remittance by the Company (or its agents) of any taxes withheld, or of the payment oftaxes by the Company, except to the extent the evidence is provided by the Company to the Depositary. None of theDepositary, the Custodian or the Company shall be liable for the failure by any Holder or Beneficial Owner to obtain thebenefits of credits on the basis of non-U.S. tax paid against such Holder’s or Beneficial Owner’s income tax liability.In the event that the Depositary determines that any distribution in property (including Shares and rights to subscribetherefor) is subject to any tax or other governmental charge which the Depositary is obligated to withhold, the Depositaryshall withhold the amount required to be withheld and may by public or private sale dispose of all or a portion of suchproperty (including Shares and rights to subscribe therefor) in such amounts and in such manner as the Depositary deemsnecessary and practicable to pay such taxes and/or charges and the Depositary shall distribute the net proceeds of any suchsale after deduction of such taxes and/or charges to the Holders entitled thereto in proportion to the number of AmericanDepositary Shares held by them respectively.The Depositary is under no obligation to provide the Holders and Beneficial Owners with any information about the taxstatus of the Company. The Depositary shall not incur any liability for any tax consequences that may be incurred byHolders and Beneficial Owners on account of their ownership of the American Depositary Shares, including withoutlimitation, tax consequences resulting from the Company (or any of its subsidiaries) being treated as a “Passive ForeignInvestment Company” (as defined in the U.S. Internal Revenue Code of 1986, as amended and the regulations issuedthereunder) or otherwise.ARTICLE V.THE DEPOSITARY, THE CUSTODIAN AND THE COMPANYSECTION 5.1 Maintenance of Office and Transfer Books by the Registrar. Until termination of this DepositAgreement in accordance with its terms, the Depositary or if a Registrar for the Receipts shall have been appointed, theRegistrar shall maintain in the Borough of Manhattan, the City of New York, an office and facilities for the execution anddelivery, registration, registration of transfers, combination and split-up of Receipts, the surrender of Receipts and theDelivery and withdrawal of Deposited Securities in accordance with the provisions of this Deposit Agreement.The Depositary or the Registrar as applicable, shall keep books for the registration of Receipts and transfers of Receiptswhich at all reasonable times shall be open for inspection by the Company and by the Holders of such Receipts, providedthat such inspection shall not be, to the Depositary’s or the Registrar’s knowledge, for the purpose of communicating withHolders of such Receipts in the interest of a business or object other than the business of the Company or other than amatter related to this Deposit Agreement or the Receipts.The Depositary or the Registrar, as applicable, may close the transfer books with respect to the Receipts, at any time andfrom time to time, when deemed necessary or advisable by it in 24connection with the performance of its duties hereunder, or at the reasonable written request of the Company.If any Receipts or the American Depositary Shares evidenced thereby are listed on one or more stock exchanges orautomated quotation systems in the United States, the Depositary shall act as Registrar or appoint a Registrar or one ormore co-registrars for registration of Receipts and transfers, combinations and split-ups, and to countersign such Receiptsin accordance with any requirements of such exchanges or systems. Such Registrar or co-registrars may be removed and asubstitute or substitutes appointed by the Depositary.If any Receipts or the American Depositary Shares evidenced thereby are listed on one or more securities exchanges,markets or automated quotation systems, (i) the Depositary shall be entitled to, and shall, take or refrain from taking suchaction(s) as it may deem necessary or appropriate to comply with the requirements of such securities exchange(s),market(s) or automated quotation system(s) applicable to it, notwithstanding any other provision of this DepositAgreement; and (ii) upon the reasonable request of the Depositary, the Company shall provide the Depositary suchinformation and assistance as may be reasonably necessary for the Depositary to comply with such requirements, to theextent that the Company may lawfully do so.Each Registrar and co-registrar appointed under this Section 5.1 shall give notice in writing to the Depositary acceptingsuch appointment and agreeing to be bound by the applicable terms of the Deposit Agreement.SECTION 5.2 Exoneration. None of the Depositary, the Custodian or the Company shall be obligated to do orperform any act which is inconsistent with the provisions of this Deposit Agreement or shall incur any liability to Holders,Beneficial Owners or any third parties (i) if the Depositary, the Custodian or the Company or their respective controllingpersons or agents (including without limitation, the Agents) shall be prevented or forbidden from, or delayed in, doing orperforming any act or thing required by the terms of this Deposit Agreement, by reason of any provision of any present orfuture law or regulation of the United States or any state thereof, the Cayman Islands or any other country, or of any othergovernmental authority or regulatory authority or stock exchange, or on account of the possible criminal or civil penaltiesor restraint, or by reason of any provision, present or future, of the Memorandum and Articles of Association or anyprovision of or governing any Deposited Securities, or by reason of any act of God or war or other circumstances beyondits control (including, without limitation, nationalization, expropriation, currency restrictions, work stoppage, strikes, civilunrest, revolutions, rebellions, explosions and computer failure), (ii) by reason of any exercise of, or failure to exercise,any discretion provided for in this Deposit Agreement or in the Memorandum and Articles of Association or provisions ofor governing Deposited Securities, (iii) for any action or inaction of the Depositary, the Custodian or the Company or theirrespective controlling persons or agents (including without limitation, the Agents) in reliance upon the advice of orinformation from legal counsel, accountants, any person presenting Shares for deposit, any Holder, any Beneficial Owneror authorized representative thereof, or any other person believed by it in good faith to be competent to give such advice orinformation, (iv) for the inability by a Holder or Beneficial Owner to benefit from any distribution, offering, right or otherbenefit which is made available to holders of Deposited Securities but is not, under the terms of this Deposit Agreement,made available to Holders of American Depositary Shares or (v) for any special, consequential, indirect or punitivedamages for any breach of the terms of this Deposit Agreement or otherwise. 25The Depositary, its controlling persons, its agents (including without limitation, the Agents), the Custodian and theCompany, its controlling persons and its agents may rely and shall be protected in acting upon any written notice, request,opinion or other document believed by it to be genuine and to have been signed or presented by the proper party or parties.No disclaimer of liability under the Securities Act or the Exchange Act is intended by any provision of this DepositAgreement.SECTION 5.3 Standard of Care. The Company and the Depositary and their respective directors, officers,Affiliates, employees and agents (including without limitation, the Agents) assume no obligation and shall not be subjectto any liability under this Deposit Agreement or any Receipts to any Holder(s) or Beneficial Owner(s) or other persons,except in accordance with Section 5.8 hereof, provided, that the Company and the Depositary and their respectivedirectors, officers, Affiliates, employees and agents (including without limitation, the Agents) agree to perform theirrespective obligations specifically set forth in this Deposit Agreement or the applicable ADRs without gross negligence orwillful misconduct.Without limitation of the foregoing, neither the Depositary, nor the Company, nor any of their respective controllingpersons, directors, officers, affiliates, employees or agents (including without limitation, the Agents), shall be under anyobligation to appear in, prosecute or defend any action, suit or other proceeding in respect of any Deposited Securities orin respect of the Receipts, which in its opinion may involve it in expense or liability, unless indemnity satisfactory to itagainst all expenses (including fees and disbursements of counsel) and liabilities be furnished as often as may be required(and no Custodian shall be under any obligation whatsoever with respect to such proceedings, the responsibility of theCustodian being solely to the Depositary).The Depositary and its directors, officers, affiliates, employees and agents (including without limitation, the Agents) shallnot be liable for any failure to carry out any instructions to vote any of the Deposited Securities, or for the manner inwhich any vote is cast or the effects of any vote. The Depositary shall not incur any liability for any failure to determinethat any distribution or action may be lawful or reasonably practicable, for the content of any information submitted to itby the Company for distribution to the Holders or for any inaccuracy of any translation thereof, for any investment riskassociated with acquiring an interest in the Deposited Securities, for the validity or worth of the Deposited Securities or forany tax consequences that may result from the ownership of ADSs, Shares or Deposited Securities, for the credit-worthiness of any third party, for allowing any rights to lapse upon the terms of this Deposit Agreement or for the failureor timeliness of any notice from the Company, or for any action or non action by it in reliance upon the opinion, advice ofor information from legal counsel, accountants, any person presenting Shares for deposit, any Holder or any other personbelieved by it in good faith to be competent to give such advice or information. The Depositary and its agents (includingwithout limitation, the Agents) shall not be liable for any acts or omissions made by a successor depositary whether inconnection with a previous act or omission of the Depositary or in connection with any matter arising wholly after theremoval or resignation of the Depositary, provided that in connection with the issue out of which such potential liabilityarises the Depositary performed its obligations without gross negligence or willful misconduct while it acted asDepositary.SECTION 5.4 Resignation and Removal of the Depositary; Appointment of Successor Depositary. TheDepositary may at any time resign as Depositary hereunder by 26written notice of resignation delivered to the Company, such resignation to be effective on the earlier of (i) the 90th dayafter delivery thereof to the Company (whereupon the Depositary shall, in the event no successor depositary has beenappointed by the Company, be entitled to take the actions contemplated in Section 6.2 hereof) and (ii) the appointment bythe Company of a successor depositary and its acceptance of such appointment as hereinafter provided, save that, anyamounts, fees, costs or expenses owed to the Depositary hereunder or in accordance with any other agreements otherwiseagreed in writing between the Company and the Depositary from time to time shall be paid to the Depositary prior to suchresignation.The Company shall use reasonable efforts to appoint such successor depositary, and give notice to the Depositary of suchappointment, not more than 90 days after delivery by the Depositary of written notice of resignation as provided in thisSection 5.4. In the event that notice of the appointment of a successor depositary is not provided by the Company inaccordance with the preceding sentence, the Depositary shall be entitled to take the actions contemplated in Section 6.2hereof.The Depositary may at any time be removed by the Company by written notice of such removal, which removal shall beeffective on the later of (i) the 90th day after delivery thereof to the Depositary (whereupon the Depositary shall be entitledto take the actions contemplated in Section 6.2 hereof if a successor depositary has not been appointed), and (ii) theappointment by the Company of a successor depositary and its acceptance of such appointment as hereinafter provided,save that, any amounts, fees, costs or expenses owed to the Depositary hereunder or in accordance with any otheragreements otherwise agreed in writing between the Company and the Depositary from time to time shall be paid to theDepositary prior to such removal.In case at any time the Depositary acting hereunder shall resign or be removed, the Company shall use its best efforts toappoint a successor depositary, which shall be a bank or trust company having an office in the Borough of Manhattan, theCity of New York. Every successor depositary shall be required by the Company to execute and deliver to its predecessorand to the Company an instrument in writing accepting its appointment hereunder, and thereupon such successordepositary, without any further act or deed (except as required by applicable law), shall become fully vested with all therights, powers, duties and obligations of its predecessor. The predecessor depositary, upon payment of all sums due to itand on the written request of the Company, shall (i) execute and deliver an instrument transferring to such successor allrights and powers of such predecessor hereunder (other than as contemplated in Sections 5.8 and 5.9 hereof), (ii) dulyassign, transfer and deliver all right, title and interest to the Deposited Securities to such successor, and (iii) deliver to suchsuccessor a list of the Holders of all outstanding Receipts and such other information relating to Receipts and Holdersthereof as the successor may reasonably request. Any such successor depositary shall promptly mail notice of itsappointment to such Holders.Any corporation into or with which the Depositary may be merged or consolidated shall be the successor of the Depositarywithout the execution or filing of any document or any further act and, notwithstanding anything to the contrary in thisDeposit Agreement, the Depositary may assign or otherwise transfer all or any of its rights and benefits under this DepositAgreement (including any cause of action arising in connection with it) to Deutsche Bank AG or any branch thereof or anyentity which is a direct or indirect subsidiary or other affiliate of Deutsche Bank AG. 27SECTION 5.5 The Custodian. The Custodian or its successors in acting hereunder shall be subject at all times andin all respects to the direction of the Depositary for the Deposited Securities for which the Custodian acts as custodian andshall be responsible solely to it. If any Custodian resigns or is discharged from its duties hereunder with respect to anyDeposited Securities and no other Custodian has previously been appointed hereunder, the Depositary shall promptlyappoint a substitute custodian. The Depositary shall require such resigning or discharged Custodian to deliver theDeposited Securities held by it, together with all such records maintained by it as Custodian with respect to suchDeposited Securities as the Depositary may request, to the Custodian designated by the Depositary. Whenever theDepositary determines, in its discretion, that it is appropriate to do so, it may appoint an additional entity to act asCustodian with respect to any Deposited Securities, or discharge the Custodian with respect to any Deposited Securitiesand appoint a substitute custodian, which shall thereafter be Custodian hereunder with respect to the Deposited Securities. After any such change, the Depositary shall give notice thereof in writing to all Holders.Upon the appointment of any successor depositary, any Custodian then acting hereunder shall, unless otherwise instructedby the Depositary, continue to be the Custodian of the Deposited Securities without any further act or writing and shall besubject to the direction of the successor depositary. The successor depositary so appointed shall, nevertheless, on thewritten request of any Custodian, execute and deliver to such Custodian all such instruments as may be proper to give tosuch Custodian full and complete power and authority to act on the direction of such successor depositary.SECTION 5.6 Notices and Reports. On or before the first date on which the Company gives notice, by publicationor otherwise, of any meeting of holders of Shares or other Deposited Securities, or of any adjourned meeting of suchholders, or of the taking of any action by such holders other than at a meeting, or of the taking of any action in respect ofany cash or other distributions or the offering of any rights in respect of Deposited Securities, the Company shall transmitto the Depositary and the Custodian a copy of the notice thereof in English but otherwise in the form given or to be givento holders of Shares or other Deposited Securities. The Company shall also furnish to the Custodian and the Depositary asummary, in English, of any applicable provisions or proposed provisions of the Memorandum and Articles of Associationthat may be relevant or pertain to such notice of meeting or be the subject of a vote thereat.The Company will also transmit to the Depositary (a) English language versions of the other notices, reports andcommunications which are made generally available by the Company to holders of its Shares or other Deposited Securitiesand (b) English language versions of the Company’s annual and other reports prepared in accordance with the applicablerequirements of the Commission. The Depositary shall arrange, at the request of the Company and at the Company’sexpense, for the mailing of copies thereof to all Holders, or by any other means as agreed between the Company and theDepositary (at the Company’s expense) or make such notices, reports and other communications available for inspectionby all Holders, provided, that, the Depositary shall have received evidence sufficiently satisfactory to it, including in theform of an Opinion of Counsel regarding U.S. law or of any other applicable jurisdiction, furnished at the expense of theCompany, as the Depositary reasonably requests, that the distribution of such notices, reports and any such othercommunications to Holders from time to time is valid and does not or will not infringe any local, U.S. or other applicablejurisdiction regulatory restrictions or requirements if so distributed and made available to Holders. The Company willtimely provide the Depositary with the quantity of such notices, 28reports, and communications, as requested by the Depositary from time to time, in order for the Depositary to effect suchmailings. The Company has delivered to the Depositary and the Custodian a copy of the Memorandum and Articles ofAssociation along with the provisions of or governing the Shares and any other Deposited Securities issued by theCompany or any Affiliate of the Company, in connection with the Shares, in each case, to the extent not in English, alongwith a certified English translation thereof, and promptly upon any amendment thereto or change therein, the Companyshall deliver to the Depositary and the Custodian a copy of such amendment thereto or change therein, to the extent not inEnglish, along with a certified English translation thereof. The Depositary may rely upon such copy for all purposes of thisDeposit Agreement.The Depositary will make available, at the expense of the Company, a copy of any such notices, reports orcommunications issued by the Company and delivered to the Depositary for inspection by the Holders of the Receiptsevidencing the American Depositary Shares representing such Shares governed by such provisions at the Depositary’sCorporate Trust Office, at the office of the Custodian and at any other designated transfer office.SECTION 5.7 Issuance of Additional Shares, ADSs etc. The Company agrees that in the event it or any of itsAffiliates proposes (i) an issuance, sale or distribution of additional Shares, (ii) an offering of rights to subscribe for Sharesor other Deposited Securities, (iii) an issuance of securities convertible into or exchangeable for Shares, (iv) an issuance ofrights to subscribe for securities convertible into or exchangeable for Shares, (v) an elective dividend of cash or Shares,(vi) a redemption of Deposited Securities, (vii) a meeting of holders of Deposited Securities, or solicitation of consents orproxies, relating to any reclassification of securities, merger, subdivision, amalgamation or consolidation or transfer ofassets, (viii) any reclassification, recapitalization, reorganization, merger, amalgamation, consolidation or sale of assetswhich affects the Deposited Securities or (ix) a distribution of property other than cash, Shares or rights to purchaseadditional Shares it will obtain U.S. legal advice and take all steps necessary to ensure that the application of the proposedtransaction to Holders and Beneficial Owners does not violate the registration provisions of the Securities Act, or anyother applicable laws (including, without limitation, the Investment Company Act of 1940, as amended, the Exchange Actor the securities laws of the states of the United States). In support of the foregoing, the Company will furnish to theDepositary at its request, at the Company’s expense, (a) a written opinion of U.S. counsel (satisfactory to the Depositary)stating whether or not application of such transaction to Holders and Beneficial Owners (1) requires a registrationstatement under the Securities Act to be in effect or (2) is exempt from the registration requirements of the Securities Actand/or (3) dealing with such other issues requested by the Depositary; (b) a written opinion of Cayman Islands counsel(satisfactory to the Depositary) stating that (1) making the transaction available to Holders and Beneficial Owners does notviolate the laws or regulations of the Cayman Islands and (2) all requisite regulatory consents and approvals have beenobtained in the Cayman Islands; and (c) as the Depositary may request, a written Opinion of Counsel in any otherjurisdiction in which Holders or Beneficial Owners reside to the effect that making the transaction available to suchHolders or Beneficial Owners does not violate the laws or regulations of such jurisdiction. If the filing of a registrationstatement is required, the Depositary shall not have any obligation to proceed with the transaction unless it shall havereceived evidence reasonably satisfactory to it that such registration statement has been declared effective and that suchdistribution is in accordance with all applicable laws or regulations. If, being advised by counsel, the Companydetermines that a transaction is required to be registered under the Securities Act, the Company will either (i) register suchtransaction to the extent 29necessary, (ii) alter the terms of the transaction to avoid the registration requirements of the Securities Act or (iii) direct theDepositary to take specific measures, in each case as contemplated in this Deposit Agreement, to prevent such transactionfrom violating the registration requirements of the Securities Act.The Company agrees with the Depositary that neither the Company nor any of its Affiliates will at any time (i) deposit anyShares or other Deposited Securities, either upon original issuance or upon a sale of Shares or other Deposited Securitiespreviously issued and reacquired by the Company or by any such Affiliate, or (ii) issue additional Shares, rights tosubscribe for such Shares, securities convertible into or exchangeable for Shares or rights to subscribe for such securities,unless such transaction and the securities issuable in such transaction areexempt from registration under the Securities Act or have been registered under the Securities Act (and such registrationstatement has been declared effective).Notwithstanding anything else contained in this Deposit Agreement, nothing in this Deposit Agreement shall be deemed toobligate the Company to file any registration statement in respect of any proposed transaction.SECTION 5.8 Indemnification. The Company agrees to indemnify the Depositary, any Custodian and each oftheir respective directors, officers, employees, agents (including without limitation, the Agents) and Affiliates against, andhold each of them harmless from, any losses, liabilities, taxes, costs, claims, judgments, proceedings, actions, demands andany charges or expenses of any kind whatsoever (including, but not limited to, reasonable fees and expenses of counseltogether with, in each case, value added tax and any similar tax charged or otherwise imposed in respect thereof)(collectively referred to as “Losses”) which the Depositary or any agent (including without limitation, the Agents) thereofmay incur or which may be made against it as a result of or in connection with its appointment or the exercise of itspowers and duties under this Agreement or that may arise (a) out of or in connection with any offer, issuance, sale, resale,transfer, deposit or withdrawal of Receipts, American Depositary Shares, the Shares, or other Deposited Securities, as thecase may be, (b) out of or in connection with any offering documents in respect thereof or (c) out of or in connection withacts performed or omitted, including, but not limited to, any delivery by the Depositary on behalf of the Company ofinformation regarding the Company in connection with this Deposit Agreement, the Receipts, the American DepositaryShares, the Shares, or any Deposited Securities, in any such case (i) by the Depositary, the Custodian or any of theirrespective directors, officers, employees, agents (including without limitation, the Agents) and Affiliates, except to theextent any such Losses arise out of the gross negligence or wilful misconduct of any of them, or (ii) by the Company orany of its directors, officers, employees, agents and Affiliates.The Depositary agrees to indemnify the Company and hold it harmless from any Losses which may arise out of actsperformed or omitted to be performed by the Depositary arising out of its gross negligence or wilful misconduct. Notwithstanding the above, in no event shall the Depositary or any of its directors, officers, employees, agents (includingwithout limitation, the Agents) and/or Affiliates be liable for any special, consequential, indirect or punitive damages tothe Company, Holders, Beneficial Owners or any other person.Any person seeking indemnification hereunder (an “Indemnified Person”) shall notify the person from whom it isseeking indemnification (the “Indemnifying Person”) of the commencement of any indemnifiable action or claimpromptly after such Indemnified Person becomes aware of such commencement (provided that the failure to make suchnotification 30shall not affect such Indemnified Person’s rights to indemnification except to the extent the Indemnifying Person ismaterially prejudiced by such failure) and shall consult in good faith with the Indemnifying Person as to the conduct of thedefense of such action or claim that may give rise to an indemnity hereunder, which defense shall be reasonable under thecircumstances. No Indemnified Person shall compromise or settle any action or claim that may give rise to an indemnityhereunder without the consent of the Indemnifying Person, which consent shall not be unreasonably withheld.The obligations set forth in this Section shall survive the termination of this Deposit Agreement and the succession orsubstitution of any party hereto.SECTION 5.9 Fees and Charges of Depositary. The Company, the Holders, the Beneficial Owners, and personsdepositing Shares or surrendering ADSs for cancellation and withdrawal of Deposited Securities shall be required to payto the Depositary the Depositary’s fees and related charges identified as payable by them respectively as provided forunder Article (9) of the Receipt. All fees and charges so payable may, at any time and from time to time, be changed byagreement between the Depositary and the Company, but, in the case of fees and charges payable by Holders andBeneficial Owners, only in the manner contemplated in Section 6.1 hereof. The Depositary shall provide, without charge,a copy of its latest fee schedule to anyone upon request.The Depositary and the Company may reach separate agreement in relation to the payment of any additional remunerationto the Depositary in respect of any exceptional duties which the Depositary finds necessary or desirable and agreed byboth parties in the performance of its obligations hereunder and in respect of the actual costs and expenses of theDepositary in respect of any notices required to be given to the Holders in accordance with Article (20) of the Receipt.In connection with any payment by the Company to the Depositary:(i)all fees, taxes, duties, charges, costs and expenses which are payable by the Company shall be paid or be procuredto be paid by the Company (and any such amounts which are paid by the Depositary shall be reimbursed to theDepositary by the Company upon demand therefor); and(ii)such payment shall be subject to all necessary applicable exchange control and other consents and approvalshaving been obtained. The Company undertakes to use its reasonable endeavours to obtain all necessary approvalsthat are required to be obtained by it in this connection.The Company agrees to promptly pay to the Depositary such other fees, charges and expenses and to reimburse theDepositary for such out-of-pocket expenses as the Depositary and the Company may agree to in writing from time to time. Responsibility for payment of such charges may at any time and from time to time be changed by agreement between theCompany and the Depositary.All payments by the Company to the Depositary under this Clause 5.9 shall be paid without set-off or counterclaim, andfree and clear of and without deduction or withholding for or on account of, any present or future taxes, levies, imports,duties, fees, assessments or other charges of whatever nature, imposed by the Cayman Islands or by any department,agency or 31other political subdivision or taxing authority thereof or therein, and all interest, penalties or similar liabilities with respectthereto.The right of the Depositary to receive payment of fees, charges and expenses as provided above shall survive thetermination of this Deposit Agreement. As to any Depositary, upon the resignation or removal of such Depositary asdescribed in Section 5.4 hereof, such right shall extend for those fees, charges and expenses incurred prior to theeffectiveness of such resignation or removal.SECTION 5.10 Restricted Securities Owners/Ownership Restrictions. From time to time or upon request of theDepositary, the Company shall provide to the Depositary a list setting forth, to the actual knowledge of the Company,those persons or entities who beneficially own Restricted Securities and the Company shall update such list on a regularbasis. The Depositary may rely on such list or update but shall not be liable for any action or omission made in reliancethereon. The Company agrees to advise in writing each of the persons or entities who, to the knowledge of the Company,holds Restricted Securities that such Restricted Securities are ineligible for deposit hereunder and, to the extentpracticable, shall require each of such persons to represent in writing that such person will not deposit Restricted Securitieshereunder. Holders and Beneficial Owners shall comply with any limitations on ownership of Shares under theMemorandum and Articles of Association or applicable Cayman Islands law as if they held the number of Shares theirADSs represent. The Company shall, in accordance with Article (24) of the Receipt, inform Holders and BeneficialOwners and the Depositary of any other limitations on ownership of Shares that the Holders and Beneficial Owners maybe subject to by reason of the number of ADSs held under the Articles of Association or applicable Cayman Islands law, assuch restrictions may be in force from time to time.The Company may, in its sole discretion, but subject to applicable law, instruct the Depositary to take action with respectto the ownership interest of any Holder or Beneficial Owner pursuant to the Memorandum and Articles of Association,including but not limited to, the removal or limitation of voting rights or the mandatory sale or disposition on behalf of aHolder or Beneficial Owner of the Shares represented by the ADRs held by such Holder or Beneficial Owner in excess ofsuch limitations, if and to the extent such disposition is permitted by applicable law and the Memorandum and Articles ofAssociation; provided that any such measures are practicable and legal and can be undertaken without undue burden orexpense, and provided further the Depositary’s agreement to the foregoing is conditional upon it being advised of anyapplicable changes in the Memorandum and Articles of Association. The Depositary shall have no liability for any actionstaken in accordance with such instructions.ARTICLE VI.AMENDMENT AND TERMINATIONSECTION 6.1 Amendment/Supplement. Subject to the terms and conditions of this Section 6.1 and applicablelaw, the Receipts outstanding at any time, the provisions of this Deposit Agreement and the form of Receipt attachedhereto and to be issued under the terms hereof may at any time and from time to time be amended or supplemented bywritten agreement between the Company and the Depositary in any respect which they may deem 32necessary or desirable and not materially prejudicial to the Holders without the consent of the Holders or BeneficialOwners. Any amendment or supplement which shall impose or increase any fees or charges (other than charges inconnection with foreign exchange control regulations, and taxes and/or other governmental charges, delivery and othersuch expenses payable byHolders or Beneficial Owners), or which shall otherwise materially prejudice any substantial existing right of Holders orBeneficial Owners, shall not, however, become effective as to outstanding Receipts until 30 days after notice of suchamendment or supplement shall have been given to the Holders of outstanding Receipts. Notice of any amendment to theDeposit Agreement or form of Receipts shall not need to describe in detail the specific amendments effectuated thereby,and failure to describe the specific amendments in any such notice shall not render such notice invalid, provided, however,that, in each such case, the notice given to the Holders identifies a means for Holders and Beneficial Owners to retrieve orreceive the text of such amendment (i.e., upon retrieval from the Commission's, the Depositary's or the Company's websiteor upon request from the Depositary).The parties hereto agree that any amendments or supplements which (i) arereasonably necessary (as agreed by the Company and the Depositary) in order for (a) the American Depositary Shares tobe registered on Form F-6 under the Securities Act or (b) the American Depositary Shares or the Shares to be traded solelyin electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne byHolders, shall be deemed not to materially prejudice any substantial rights of Holders or Beneficial Owners. Every Holderand Beneficial Owner at the time any amendment or supplement so becomes effective shall be deemed, by continuing tohold such American Depositary Share or Shares, to consent and agree to such amendment or supplement and to be boundby the Deposit Agreement as amended and supplemented thereby. In no event shall any amendment or supplement impairthe right of the Holder to surrender such Receipt and receive therefor the Deposited Securities represented thereby, exceptin order to comply with mandatory provisions of applicable law. Notwithstanding the foregoing, if any governmental bodyshould adopt new laws, rules or regulations which would require amendment or supplement of the Deposit Agreement toensure compliance therewith, the Company and the Depositary may amend or supplement the Deposit Agreement and theReceipt at any time in accordance with such changed laws, rules or regulations. Such amendment or supplement to theDeposit Agreement in such circumstances may become effective before a notice of such amendment or supplement isgiven to Holders or within any other period of time as required for compliance with such laws, rules or regulations.SECTION 6.2 Termination. The Depositary shall, at any time at the written direction of the Company, terminatethis Deposit Agreement by mailing notice of such termination to the Holders of all Receipts then outstanding at least 90days prior to the date fixed in such notice for such termination, provided that, the Depositary shall be reimbursed for anyamounts, fees, costs or expenses owed to it in accordance with the terms of this Deposit Agreement and in accordance withany other agreements as otherwise agreed in writing between the Company and the Depositary from time to time, prior tosuch termination shall take effect. If 90 days shall have expired after (i) the Depositary shall have delivered to theCompany a written notice of its election to resign, or (ii) the Company shall have delivered to the Depositary a writtennotice of the removal of the Depositary, and in either case a successor depositary shall not have been appointed andaccepted its appointment as provided in Section 5.4 hereof, the Depositary may terminate this Deposit Agreement bymailing notice of such termination to the Holders of all Receipts then outstanding at least 30 days prior to the date fixedfor such termination. On and after the date of termination of this Deposit Agreement, each Holder will, upon surrender ofsuch Receipt at the Corporate Trust 33Office of the Depositary, upon the payment of the charges of the Depositary for the surrender of Receipts referred to inSection 2.6 hereof and subject to the conditions and restrictions therein set forth, and upon payment of any applicabletaxes and/or governmental charges, be entitled to Delivery, to him or upon his order, of the amount of Deposited Securitiesrepresented by such Receipt. If any Receipts shall remain outstanding after the date of termination of this DepositAgreement, the Registrar thereafter shall discontinue the registration of transfers of Receipts, and the Depositary shallsuspend the distribution of dividends to the Holders thereof, and shall not give any further notices or perform any furtheracts under this Deposit Agreement, except that the Depositary shall continue to collect dividends and other distributionspertaining to Deposited Securities, shall sell rights or other property as provided in this Deposit Agreement, and shallcontinue to Deliver Deposited Securities, subject to the conditions and restrictions set forth in Section 2.6 hereof, togetherwith any dividends or other distributions received with respect thereto and the net proceeds of the sale of any rights orother property, in exchange for Receipts surrendered to the Depositary (after deducting, or charging, as the case may be, ineach case, the charges of the Depositary for the surrender of a Receipt, any expenses for the account of the Holder inaccordance with the terms and conditions of this Deposit Agreement and any applicable taxes and/or governmentalcharges or assessments). At any time after the expiration of six months from the date of termination of this DepositAgreement, the Depositary may sell the Deposited Securities then held hereunder and may thereafter hold uninvested thenet proceeds of any such sale, together with any other cash then held by it hereunder, in an unsegregated account, withoutliability for interest for the pro rata benefit of the Holders of Receipts whose Receipts have not theretofore beensurrendered. After making such sale, the Depositary shall be discharged from all obligations under this Deposit Agreementwith respect to the Receipts and the Shares, Deposited Securities and American Depositary Shares, except to account forsuch net proceeds and other cash (after deducting, or charging, as the case may be, in each case, the charges of theDepositary for the surrender of a Receipt, any expenses for the account of the Holder in accordance with the terms andconditions of this Deposit Agreement and any applicable taxes and/or governmental charges or assessments). Upon thetermination of this Deposit Agreement, the Company shall be discharged from all obligations under this DepositAgreement except for its obligations to the Depositary hereunder. The obligations under the terms of the DepositAgreement and Receipts of Holders and Beneficial Owners of ADSs outstanding as of the effective date of anytermination shall survive such effective date of termination and shall be discharged only when the applicable ADSs arepresented by their Holders to the Depositary for cancellation under the terms of the Deposit Agreement and the Holdershave each satisfied any and all of their obligations hereunder (including, but not limited to, any payment and/orreimbursement obligations which relate to prior to the effective date of termination but which payment and/orreimbursement is claimed after such effective date of termination).Notwithstanding anything contained in the Deposit Agreement or any ADR, in connection with the termination of theDeposit Agreement, the Depositary may, independently and without the need for any action by the Company, makeavailable to Holders of ADSs a means to withdraw the Deposited Securities represented by their ADSs and to direct thedeposit of such Deposited Securities into an unsponsored American depositary shares program established by theDepositary, upon such terms and conditions as the Depositary may deem reasonably appropriate, subject however, in eachcase, to satisfaction of the applicable registration requirements by the unsponsored American depositary shares programunder the Securities Act, and to receipt by the Depositary of payment of the applicable fees and charges of, andreimbursement of the applicable expenses incurred by, the Depositary. 34ARTICLE VII.MISCELLANEOUSSECTION 7.1 Counterparts. This Deposit Agreement may be executed in any number of counterparts, each ofwhich shall be deemed an original, and all of such counterparts together shall constitute one and the same agreement.Copies of this Deposit Agreement shall be maintained with the Depositary and shall be open to inspection by any Holderduring business hours.SECTION 7.2 No Third-Party Beneficiaries. This Deposit Agreement is for the exclusive benefit of the partieshereto (and their successors) and shall not be deemed to give any legal or equitable right, remedy or claim whatsoever toany other person, except to the extent specifically set forth in this Deposit Agreement. Nothing in this Deposit Agreementshall be deemed to give rise to a partnership or joint venture among the parties hereto nor establish a fiduciary or similarrelationship among the parties. The parties hereto acknowledge and agree that (i) the Depositary and its Affiliates may atany time have multiple banking relationships with the Company and its Affiliates, (ii) the Depositary and its Affiliates maybe engaged at any time in transactions in which parties adverse to the Company or the Holders or Beneficial Owners mayhave interests and (iii) nothing contained in this Agreement shall (a) preclude the Depositary or any of its Affiliates fromengaging in such transactions or establishing or maintaining such relationships, or (b) obligate the Depositary or any of itsAffiliates to disclose such transactions or relationships or to account for any profit made or payment received in suchtransactions or relationships.SECTION 7.3 Severability. In case any one or more of the provisions contained in this Deposit Agreement or inthe Receipts should be or become invalid, illegal or unenforceable in any respect, the validity, legality and enforceabilityof the remaining provisions contained herein or therein shall in no way be affected, prejudiced or disturbed thereby.SECTION 7.4 Holders and Beneficial Owners as Parties; Binding Effect. The Holders and Beneficial Ownersfrom time to time of American Depositary Shares shall be parties to the Deposit Agreement and shall be bound by all ofthe terms and conditions hereof and of any Receipt by acceptance hereof or any beneficial interest therein. SECTION 7.5 Notices. Any and all notices to be given to the Company shall be deemed to have been duly given ifpersonally delivered or sent by first-class mail, air courier or cable, telex, facsimile transmission or electronictransmission, confirmed by letter, addressed to CooTek (Cayman) Inc., Building 7, No. 2007 Hongmei Road, XuhuiDistrict, Shanghai, 201103, the People’s Republic of China, Attention: Chief Financial Officer or to any other addresswhich the Company may specify in writing to the Depositary or at which it may be effectively given such notice inaccordance with applicable law.Any and all notices to be given to the Depositary shall be deemed to have been duly given if personally delivered or sentby first-class mail, air courier or cable, telex, facsimile transmission or by electronic transmission (if agreed by theCompany and the Depositary), at the Company’s expense, unless otherwise agreed in writing between the Company andthe Depositary, confirmed by letter, addressed to Deutsche Bank Trust Company Americas, 60 Wall Street, New York,New York 10005, USA, Attention: ADR Department, telephone: +1 35212 250-9100, facsimile: + 1 212 797 0327 or to any other address which the Depositary may specify in writing to theCompany.Any and all notices to be given to any Holder shall be deemed to have been duly given if personally delivered or sent byfirst-class mail or cable, telex, facsimile transmission or by electronic transmission (if agreed by the Company and theDepositary), at the Company’s expense, unless otherwise agreed in writing between the Company and the Depositary,addressed to such Holder at the address of such Holder as it appears on the transfer books for Receipts of the Depositary,or, if such Holder shall have filed with the Depositary a written request that notices intended for such Holder be mailed tosome other address, at the address specified in such request. Notice to Holders shall be deemed to be notice to BeneficialOwners for all purposes of this Deposit Agreement.Delivery of a notice sent by mail, air courier or cable, telex, facsimile or electronic transmission shall be deemed to beeffective at the time when a duly addressed letter containing the same (or a confirmation thereof in the case of a cable,telex, facsimile or electronic transmission) is deposited, postage prepaid, in a post-office letter box or delivered to an aircourier service. The Depositary or the Company may, however, act upon any cable, telex, facsimile or electronictransmission received by it from the other or from any Holder, notwithstanding that such cable, telex, facsimile orelectronic transmission shall not subsequently be confirmed by letter as aforesaid, as the case may be.SECTION 7.6 Governing Law and Jurisdiction. This Deposit Agreement and the Receipts shall be interpreted in accordance with, and all rights hereunder and thereunder and provisions hereof and thereof shall be governed by, the laws of the State of New York without reference to the principles of choice of law thereof. Subject to the Depositary's rights under the third paragraph of this Section 7.6, the Company and the Depositary agree that the federal or state courts in the City of New York shall have exclusive jurisdiction to hear and determine any suit, action or proceeding and to settle any dispute between them that may arise out of or in connection with this Deposit Agreement and, for such purposes, each irrevocably submits to the exclusive jurisdiction of such courts. Notwithstanding the above, the parties hereto agree that any judgment and/or order from any such New York court can be enforced in any court having jurisdiction thereof. The Company hereby irrevocably designates, appoints and empowers Law Debenture Corporate Services Inc., (the “ProcessAgent”), now at 801 2nd Avenue, Suite 403, New York, NY 10017, as its authorized agent to receive and accept for andon its behalf, and on behalf of its properties, assets and revenues, service by mail of any and all legal process, summons,notices and documents that may be served in any suit, action or proceeding brought against the Company in any federal orstate court as described in the preceding sentence or in the next paragraph of this Section 7.6. If for any reason the ProcessAgent shall cease to be available to act as such, the Company agrees to designate a new agent in the City of New York onthe terms and for the purposes of this Section 7.6 reasonably satisfactory to the Depositary. The Company further herebyirrevocably consents and agrees to the service of any and all legal process, summons, notices and documents in any suit,action or proceeding against the Company, by service by mail of a copy thereof upon the Process Agent (whether or notthe appointment of such Process Agent shall for any reason prove to be ineffective or such Process Agent shall fail toaccept or acknowledge such service), with a copy mailed to the Company by registered or certified air mail, postageprepaid, to its address provided in Section 7.5 hereof. The Company agrees that the failure of the Process Agent to giveany notice of such service to it shall not impair or 36affect in any way the validity of such service or any judgment rendered in any action or proceeding based thereon.The Company irrevocably and unconditionally waives, to the fullest extent permitted by law, any objection that itmay now or hereafter have to the laying of venue of any actions, suits or proceedings brought in any court as provided inthis Section 7.6, and hereby further irrevocably and unconditionally waives and agrees not to plead or claim in any suchcourt that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum.The Company, the Depositary and by holding an American Depositary Share (or interest therein) Holders andBeneficial Owners each agree that, notwithstanding the foregoing, with regard to any claim or dispute or difference ofwhatever nature between or involving the parties hereto arising directly or indirectly from the relationship created by thisDeposit Agreement, the Depositary, in its sole discretion, shall be entitled to refer such dispute or difference for finalsettlement by arbitration (“Arbitration”) in accordance with the Commercial Arbitration Rules of the AmericanArbitration Association (the “Rules”) then in force. The arbitration shall be conducted by three arbitrators, one nominated by the Depositary, one nominated by the Company, and one nominated by the two party-appointed arbitrators within 30 calendar days of the confirmation of the nomination of the second arbitrator. If any arbitrator has not been nominated within the time limits specified herein and in the Rules, then such arbitrator shall be appointed by the American Arbitration Association in accordance with the Rules. Judgment upon the award rendered by the arbitrators may be enforced in any court having jurisdiction thereof. The seat and place of any reference to arbitration shall be New York City, New York, and the procedural law of such arbitration shall be New York law. The language to be used in the arbitration shall be English. The fees of the arbitrator and other costs incurred by the parties in connection with such Arbitration shall be paid by the party or parties that is (are) unsuccessful in such Arbitration. For the avoidance of doubt this paragraph does not preclude Holders and Beneficial Owners from pursuing claims under the Securities Act or the Exchange Act in federal courts.Holders and Beneficial Owners understand, and holding an American Depositary Share or an interest therein, such Holders and Beneficial Owners each irrevocably agree that any legal suit, action or proceeding against or involving the Company or the Depositary, arising out of or based upon the Deposit Agreement, American Depositary Shares, Receipts or the transactions contemplated hereby or thereby or by virtue of ownership thereof, may only be instituted in a state or federal court in New York, New York, and by holding an American Depositary Share or an interest therein each irrevocably waives any objection which it may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the exclusive jurisdiction of such courts in any such suit, action or proceeding. Holders and Beneficial Owners agree that the provisions of this paragraph shall survive such Holders’ and Beneficial Owners’ ownership of American Depositary Shares or interests therein.EACH PARTY TO THE DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT, EACHHOLDER AND BENEFICIAL OWNER AND/OR HOLDER OF INTERESTS IN ANY ADRs) HEREBYIRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHTIT MAY HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING AGAINST 37THE DEPOSITARY AND/OR THE COMPANY DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TOTHE SHARES OR OTHER DEPOSITED SECURITIES, THE ADSs OR THE ADRs, THE DEPOSIT AGREEMENTOR ANY TRANSACTION CONTEMPLATED HEREIN OR THEREIN, OR THE BREACH HEREOF OR THEREOF(WHETHER BASED ON CONTRACT, TORT, COMMON LAW OR ANY OTHER THEORY).The provisions of this Section 7.6 shall survive any termination of this Deposit Agreement, in whole or in part.SECTION 7.7 Assignment. Subject to the provisions and exceptions set forth in Section 5.4 hereof, this DepositAgreement may not be assigned by either the Company or the Depositary.SECTION 7.8 Agents. The Depositary shall be entitled, in its sole but reasonable discretion, to appoint one ormore agents (the “Agents”) of which it shall have control for the purpose, inter alia, of making distributions to theHolders or otherwise carrying out its obligations under this Agreement.SECTION 7.9 Affiliates etc. The Depositary reserves the right to utilize and retain a division or Affiliate(s) of theDepositary to direct, manage and/or execute any public and/or private sale of Shares, rights, securities, property or otherentitlements hereunder and to engage in the conversion of Foreign Currency hereunder. It is anticipated that such divisionand/or Affiliate(s) will charge the Depositary a fee and/or commission in connection with each such transaction, and seekreimbursement of its costs and expenses related thereto. Such fees/commissions, costs and expenses, shall be deductedfrom amounts distributed hereunder and shall not be deemed to be fees of the Depositary under Article (9) of the Receiptor otherwise. Persons are advised that in converting foreign currency into U.S. dollars the Depositary may utilizeDeutsche Bank AG or its affiliates (collectively, “DBAG”) to effect such conversion by seeking to enter into a foreignexchange (“FX”) transaction with DBAG. When converting currency, the Depositary is not acting as a fiduciary for theholders or beneficial owners of depositary receipts or any other person. Moreover, in executing FX transactions, DBAGwill be acting in a principal capacity, and not as agent, fiduciary or broker, and may hold positions for its own account thatare the same, similar, different or opposite to the positions of its customers, including the Depositary. When theDepositary seeks to execute an FX transaction to accomplish such conversion, customers should be aware that DBAG is aglobal dealer in FX for a full range of FX products and, as a result, the rate obtained in connection with any requestedforeign currency conversion may be impacted by DBAG executing FX transactions for its own account or with anothercustomer. In addition, in order to source liquidity for any FX transaction relating to any foreign currency conversion,DBAG may internally share economic terms relating to the relevant FX transaction with persons acting in a sales ortrading capacity for DBAG or one of its agents. DBAG may charge fees and/or commissions to the Depositary or add amark-up in connection with such conversions, which are reflected in the rate at which the foreign currency will beconverted into U.S. dollars. The Depositary, its Affiliates and their agents, on their own behalf, may own and deal in anyclass of securities of the Company and its Affiliates and in ADSs.SECTION 7.10 Exclusivity. The Company agrees not to appoint any other depositary for the issuance oradministration of depositary receipts evidencing any class of 38stock of the Company so long as Deutsche Bank Trust Company Americas is acting as Depositary hereunder.SECTION 7.11 Compliance with U.S. Securities Laws. Notwithstanding anything in this Deposit Agreement tothe contrary, the withdrawal or Delivery of Deposited Securities will not be suspended by the Company or the Depositaryexcept as would be permitted by Instruction I.A.(1) of the General Instructions to Form F-6 Registration Statement, asamended from time to time, under the Securities Act.SECTION 7.12 Titles. All references in this Deposit Agreement to exhibits, Articles, sections, subsections, and other subdivisions refer to the exhibits, Articles, sections, subsections and other subdivisions of this Deposit Agreement unless expressly provided otherwise. The words “this Deposit Agreement”, “herein”, “hereof”, “hereby”, “hereunder”, and words of similar import refer to the Deposit Agreement as a whole as in effect between the Company, the Depositary and the Holders and Beneficial Owners of ADSs and not to any particular subdivision unless expressly so limited. Pronouns in masculine, feminine and neuter gender shall be construed to include any other gender, and words in the singular form shall be construed to include the plural and vice versa unless the context otherwise requires. Titles to sections of this Deposit Agreement are included for convenience only and shall be disregarded in construing the language contained in this Deposit Agreement. [Signature Page to Deposit Agreement]IN WITNESS WHEREOF, CooTek (Cayman) Inc. and DEUTSCHE BANK TRUST COMPANY AMERICAS have dulyexecuted this Deposit Agreement as of the day and year first above set forth and all Holders and Beneficial Owners shallbecome parties hereto upon atjceptance by them of American Depositary Shares evidenced by Receipts issued inaccordance with the terms hereof.COOTEK (CAYMAN) INC.By:/s/ Karl Kan ZhangName:Karl Kan ZhangTitle:Chief Architect and Chairman of theBoard of DirectorsDEUTSCHE BANK TRUST COMPANY AMERICASBy:Name:Title:By:Name:Title: 39IN WITN ESS WHEREOF, CooTek (Cayman) Inc. and DEUTSCHE BANK TRUST COMPANY AMERICAS have dulyexecuted this Deposit Agreement as of the day and year first above set forth and all Holders and Beneficial Owners shallbecome parties hereto upon acceptance by them of American Depositary Shares evidenced by Recei pts issued inaccordance with the terms hereof.COOTEK (CAYMAN) INC.By:Name:Title:DEUTSCHE BANK TRUST COMPANY AMERICASBy:/s/ Michael FitzpatrickName:Michael FitzpatrickTitle:Vice PresidentBy:/s/ Jean Paul SimoesName:Jean Paul SimoesTitle:Vice President 40EXHIBIT ACUSIP________ISIN________American Depositary Shares (EachAmerican Depositary Sharerepresenting fiftyFully Paid Class AOrdinary Shares)[FORM OF FACE OF RECEIPT]AMERICAN DEPOSITARY RECEIPTforAMERICAN DEPOSITARY SHARESrepresentingDEPOSITED CLASS A ORDINARY SHARESofCOOTEK (CAYMAN) INC. (Incorporated under the laws of the Cayman Islands)DEUTSCHE BANK TRUST COMPANY AMERICAS, as depositary (herein called the “Depositary”), hereby certifiesthat ________________ is the owner of ______________ American Depositary Shares (hereinafter “ADS”), representingdeposited Class A ordinary shares, each of Par Value of U.S. $0.00001 including evidence of rights to receive such ClassA ordinary shares (the “Shares”) of CooTek (Cayman) Inc., a company incorporated under the laws of the Cayman Islands(the “Company”). As of the date of the Deposit Agreement (hereinafter referred to), each ADS represents fifty (50) Sharesdeposited under the Deposit Agreement with the Custodian which at the date of execution of the Deposit Agreement isDeutsche Bank AG, Hong Kong Branch (the “Custodian”). The ratio of Depositary Shares to shares of stock is subject tosubsequent amendment as provided in Article IV of the Deposit Agreement. The Depositary’s Corporate Trust Office islocated at 60 Wall Street, New York, New York 10005, U.S.A.(1)The Deposit Agreement. This American Depositary Receipt is one of an issue of American Depositary Receipts(“Receipts”), all issued or to be issued upon the terms and conditions set forth in the Deposit Agreement, dated as ofSeptember 27, 2018 (as amended from time to time, the “Deposit Agreement”), by and among the Company, theDepositary, and all Holders and Beneficial Owners from time to time of Receipts issued thereunder, each of whom byaccepting a Receipt agrees to become a party thereto and becomes bound by all the terms and conditions thereof. TheDeposit Agreement sets forth the rights and obligations 41of Holders and Beneficial Owners of Receipts and the rights and duties of the Depositary in respect of the Sharesdeposited thereunder and any and all other securities, property and cash from time to time, received in respect of suchShares and held thereunder (such Shares, other securities, property and cash are herein called “Deposited Securities”).Copies of the Deposit Agreement are on file at the Corporate Trust Office of the Depositary and the Custodian.Each owner and each Beneficial Owner, upon acceptance of any ADSs (or any interest therein) issued in accordance withthe terms and conditions of the Deposit Agreement, shall be deemed for all purposes to (a) be a party to and bound by theterms of the Deposit Agreement and applicable ADR(s), and (b) appoint the Depositary its attorney-in-fact, with fullpower to delegate, to act on its behalf and to take any and all actions contemplated in the Deposit Agreement and theapplicable ADR(s), to adopt any and all procedures necessary to comply with applicable law and to take such action as theDepositary in its sole discretion may deem necessary or appropriate to carry out the purposes of the Deposit Agreementand the applicable ADR(s) (the taking of such actions to be the conclusive determinant of the necessity andappropriateness thereof).The statements made on the face and reverse of this Receipt are summaries of certain provisions of the Deposit Agreementand the Memorandum and Articles of Association (as in effect on the date of the Deposit Agreement) and are qualified byand subject to the detailed provisions of the Deposit Agreement, to which reference is hereby made. All capitalized termsused herein which are not otherwise defined herein shall have the meanings ascribed thereto in the Deposit Agreement. Tothe extent there is any inconsistency between the terms of this Receipt and the terms of the Deposit Agreement, the termsof the Deposit Agreement shall prevail. Prospective and actual Holders and Beneficial Owners are encouraged to read theterms of the Deposit Agreement. The Depositary makes no representation or warranty as to the validity or worth of theDeposited Securities. The Depositary has made arrangements for the acceptance of the American Depositary Shares intoDTC. Each Beneficial Owner of American Depositary Shares held through DTC must rely on the procedures of DTC andthe DTC Participants to exercise and be entitled to any rights attributable to such American Depositary Shares. TheReceipt evidencing the American Depositary Shares held through DTC will be registered in the name of a nominee ofDTC. So long as the American Depositary Shares are held through DTC or unless otherwise required by law, ownershipof beneficial interests in the Receipt registered in the name of DTC (or its nominee) will be shown on, and transfers ofsuch ownership will be effected only through, records maintained by (i) DTC (or its nominee), or (ii) DTC Participants (ortheir nominees).(2)Surrender of Receipts and Withdrawal of Deposited Securities. Upon surrender, at the Corporate Trust Office ofthe Depositary, of ADSs evidenced by this Receipt for the purpose of withdrawal of the Deposited Securities representedthereby, and upon payment of (i) the fees and charges of the Depositary for the making of withdrawals of DepositedSecurities and cancellation of Receipts (as set forth in Section 5.9 of the Deposit Agreement and Article (9) hereof) and(ii) all fees, taxes and/or governmental charges payable in connection with such surrender and withdrawal, and, subject tothe terms and conditions of the Deposit Agreement, the Memorandum and Articles of Association, Section 7.10 of theDeposit Agreement, Article (22) hereof and the provisions of or governing the Deposited Securities and other applicablelaws, the Holder of the American Depositary Shares evidenced hereby is entitled to Delivery, to him or upon his order, ofthe Deposited Securities represented by the ADS so surrendered. ADS may be surrendered for the purpose of 42withdrawing Deposited Securities by Delivery of a Receipt evidencing such ADS (if held in registered form) or by book-entry delivery of such ADS to the Depositary.A Receipt surrendered for such purposes shall, if so required by the Depositary, be properly endorsed in blank oraccompanied by proper instruments of transfer in blank, and if the Depositary so requires, the Holder thereof shall executeand deliver to the Depositary a written order directing the Depositary to cause the Deposited Securities being withdrawn tobe Delivered to or upon the written order of a person or persons designated in such order. Thereupon, the Depositary shalldirect the Custodian to Deliver (without unreasonable delay) at the designated office of the Custodian or through a book-entry delivery of the Shares (in either case subject to the terms and conditions of the Deposit Agreement, to theMemorandum and Articles of Association, and to the provisions of or governing the Deposited Securities and applicablelaws, now or hereafter in effect), to or upon the written order of the person or persons designated in the order delivered tothe Depositary as provided above, the Deposited Securities represented by such ADSs, together with any certificate orother proper documents of or relating to title for the Deposited Securities or evidence of the electronic transfer thereof (ifavailable) as the case may be to or for the account of such person. Subject to Article (4) hereof, in the case of surrender ofa Receipt evidencing a number of ADSs representing other than a whole number of Shares, the Depositary shall causeownership of the appropriate whole number of Shares to be Delivered in accordance with the terms hereof, and shall, at thediscretion of the Depositary, either (i) issue and Deliver to the person surrendering such Receipt a new Receipt evidencingAmerican Depositary Shares representing any remaining fractional Share, or (ii) sell or cause to be sold the fractionalShares represented by the Receipt so surrendered and remit the proceeds thereof (net of (a) applicable fees and charges of,and expenses incurred by, the Depositary and/or a division or Affiliate(s) of the Depositary and (b) taxes and/orgovernmental charges) to the person surrendering the Receipt. At the request, risk and expense of any Holder sosurrendering a Receipt, and for the account of such Holder, the Depositary shall direct the Custodian to forward (to theextent permitted by law) any cash or other property (other than securities) held in respect of, and any certificate orcertificates and other proper documents of or relating to title to, the Deposited Securities represented by such Receipt tothe Depositary for Delivery at the Corporate Trust Office of the Depositary, and for further Delivery to such Holder. Suchdirection shall be given by letter or, at the request, risk and expense of such Holder, by cable, telex or facsimiletransmission. Upon receipt of such direction by the Depositary, the Depositary may make delivery to such person orpersons entitled thereto at the Corporate Trust Office of the Depositary of any dividends or cash distributions with respectto the Deposited Securities represented by such Receipt, or of any proceeds of sale of any dividends, distributions orrights, which may at the time be held by the Depositary.(3)Transfers, Split-Ups and Combinations of Receipts. Subject to the terms and conditions of the Deposit Agreement,the Registrar shall register transfers of Receipts on its books, upon surrender at the Corporate Trust Office of theDepositary of a Receipt by the Holder thereof in person or by duly authorized attorney, properly endorsed in the case of acertificated Receipt or accompanied by, or in the case of Receipts issued through any book-entry system, including,without limitation, DRS/Profile, receipt by the Depositary of proper instruments of transfer (including signatureguarantees in accordance with standard industry practice) and duly stamped as may be required by laws of the State ofNew York, of the United States, of the Cayman Islands and of any other applicable jurisdiction. Subject to the terms andconditions of the Deposit Agreement, including payment of the applicable fees and expenses incurred by, and charges of,the Depositary, the Depositary shall execute and 43Deliver a new Receipt(s) (and if necessary, cause the Registrar to countersign such Receipt(s)) and deliver same to or uponthe order of the person entitled to such Receipts evidencing the same aggregate number of ADSs as those evidenced by theReceipts surrendered. Upon surrender of a Receipt or Receipts for the purpose of effecting a split-up or combination ofsuch Receipt or Receipts upon payment of the applicable fees and charges of the Depositary, and subject to the terms andconditions of the Deposit Agreement, the Depositary shall execute and deliver a new Receipt or Receipts for anyauthorized number of ADSs requested, evidencing the same aggregate number of ADSs as the Receipt or Receiptssurrendered.(4)Pre-Conditions to Registration, Transfer, Etc. As a condition precedent to the execution and Delivery, registration,registration of transfer, split-up, subdivision, combination or surrender of any Receipt, the delivery of any distributionthereon (whether in cash or shares) or withdrawal of any Deposited Securities, the Depositary or the Custodian mayrequire (i) payment from the depositor of Shares or presenter of the Receipt of a sum sufficient to reimburse it for any taxor other governmental charge and any stock transfer or registration fee with respect thereto (including any such tax orcharge and fee with respect to Shares being deposited or withdrawn) and payment of any applicable fees and charges ofthe Depositary as provided in the Deposit Agreement and in this Receipt, (ii) the production of proof satisfactory to it as tothe identity and genuineness of any signature or any other matter and (iii) compliance with (A) any laws or governmentalregulations relating to the execution and Delivery of Receipts and ADSs or to the withdrawal of Deposited Securities and(B) such reasonable regulations of the Depositary or the Company consistent with the Deposit Agreement and applicablelaw.The issuance of ADSs against deposits of Shares generally or against deposits of particular Shares may be suspended, orthe issuance of ADSs against the deposit of particular Shares may be withheld, or the registration of transfer of Receipts inparticular instances may be refused, or the registration of transfer of Receipts generally may be suspended, during anyperiod when the transfer books of the Depositary are closed or if any such action is deemed necessary or advisable by theDepositary or the Company, in good faith, at any time or from time to time because of any requirement of law, anygovernment or governmental body or commission or any securities exchange upon which the Receipts or Share are listed,or under any provision of the Deposit Agreement or provisions of, or governing, the Deposited Securities or any meetingof shareholders of the Company or for any other reason, subject in all cases to Article (22) hereof.The Depositary shall not issue ADSs prior to the receipt of Shares or deliver Shares prior to the receipt and cancellation ofADSs.(5)Compliance With Information Requests. Notwithstanding any other provision of the Deposit Agreement or thisReceipt, each Holder and Beneficial Owner of the ADSs represented hereby agrees to comply with requests from theCompany pursuant to the laws of the Cayman Islands, the rules and requirements of the New York Stock Exchange andany other stock exchange on which the Shares are, or will be registered, traded or listed, the Memorandum and Articles ofAssociation, which are made to provide information as to the capacity in which such Holder or Beneficial Owner ownsADSs and regarding the identity of any other person interested in such ADSs and the nature of such interest and variousother matters whether or not they are Holders and/or Beneficial Owner at the time of such request. The Depositary agreesto use reasonable efforts to forward any such requests to the Holders 44and to forward to the Company any such responses to such requests received by the Depositary.(6)Liability of Holder for Taxes, Duties and Other Charges. If any tax or other governmental charge shall becomepayable by the Depositary or the Custodian with respect to any Receipt or any Deposited Securities or ADSs, such tax orother governmental charge shall be payable by the Holders and Beneficial Owners to the Depositary. The Company, theCustodian and/or the Depositary may withhold or deduct from any distributions made in respect of Deposited Securitiesand may sell for the account of the Holder and/or Beneficial Owner any or all of the Deposited Securities and apply suchdistributions and sale proceeds in payment of such taxes (including applicable interest and penalties) or charges, with theHolder and the Beneficial Owner hereof remaining fully liable for any deficiency. The Custodian may refuse the depositof Shares, and the Depositary may refuse to issue ADSs, to deliver Receipts, register the transfer, split-up or combinationof ADRs and (subject to Article (22) hereof) the withdrawal of Deposited Securities, until payment in full of such tax,charge, penalty or interest is received.The liability of Holders and Beneficial Owners under the Deposit Agreement shall survive any transfer of Receipts, anysurrender of Receipts and withdrawal of Deposited Securities or the termination of the Deposit Agreement.Holders understand that in converting Foreign Currency, amounts received on conversion are calculated at a rate whichmay exceed the number of decimal places used by the Depositary to report distribution rates (which in any case will not beless than two decimal places). Any excess amount may be retained by the Depositary as an additional cost of conversion,irrespective of any other fees and expenses payable or owing hereunder and shall not be subject to escheatment.(7)Representations and Warranties of Depositors. Each person depositing Shares under the Deposit Agreement shallbe deemed thereby to represent and warrant that (i) such Shares (and the certificates therefor) are duly authorized, validlyissued, fully paid, non-assessable and were legally obtained by such person, (ii) all preemptive (and similar) rights, if any,with respect to such Shares, have been validly waived or exercised, (iii) the person making such deposit is duly authorizedso to do, (iv) the Shares presented for deposit are free and clear of any lien, encumbrance, security interest, charge,mortgage or adverse claim, and are not, and the ADSs issuable upon such deposit will not be, Restricted Securities, (v) theShares presented for deposit have not been stripped of any rights or entitlements and (vi) the Shares are not subject to anylock-up agreement with the Company or other party, or the Shares are subject to a lock-up agreement but such lock-upagreement has terminated or the lock-up restrictions imposed thereunder have expired or been validly waived. Suchrepresentations and warranties shall survive the deposit and withdrawal of Shares and the issuance, cancellation andtransfer of ADSs. If any such representations or warranties are false in any way, the Company and Depositary shall beauthorized, at the cost and expense of the person depositing Shares, to take any and all actions necessary to correct theconsequences thereof.(8)Filing Proofs, Certificates and Other Information. Any person presenting Shares for deposit shall provide, anyHolder and any Beneficial Owner may be required to provide, subject as provided below and every Holder and BeneficialOwner agrees, subject as provided below, from time to time to provide to the Depositary such proof of citizenship orresidence, taxpayer status, payment of all applicable taxes and/or other governmental charges, exchange control approval,legal or beneficial ownership of ADSs and Deposited Securities, 45compliance with applicable laws and the terms of the Deposit Agreement and the provisions of, or governing, theDeposited Securities or other information as the Depositary deems necessary or proper or as the Company may reasonablyrequire by written request to the Depositary consistent with its obligations under the Deposit Agreement. Pursuant to theDeposit Agreement, the Depositary and the Registrar, as applicable, may withhold the execution or Delivery or registrationof transfer of any Receipt or the distribution or sale of any dividend or other distribution of rights or of the proceedsthereof, or to the extent not limited by the terms of Article (22) hereof or the terms of the Deposit Agreement, the Deliveryof any Deposited Securities until such proof or other information is filed or such certifications are executed, or suchrepresentations and warranties are made, or such other documentation or information provided, in each case to theDepositary’s and the Company’s satisfaction. The Depositary shall from time to time on the written request of theCompany advise the Company of the availability of any such proofs, certificates or other information and shall, at theCompany’s sole expense, provide or otherwise make available copies thereof to the Company upon written requesttherefor by the Company, unless such disclosure is prohibited by law. Each Holder and Beneficial Owner agrees to provideany information requested by the Company or the Depositary pursuant to this paragraph. Nothing herein shall obligate theDepositary to (i) obtain any information for the Company if not provided by the Holders or Beneficial Owners or (ii)verify or vouch for the accuracy of the information so provided by the Holders or Beneficial Owners.Every Holder and Beneficial Owner agrees to indemnify the Depositary, the Company, the Custodian, the Agents and eachof their respective directors, officers, employees, agents and Affiliates against, and to hold each of them harmless from,any Losses which any of them may incur or which may be made against any of them as a result of or in connection withany inaccuracy in or omission from any such proof, certificate, representation, warranty, information or documentfurnished by or on behalf of such Holder and/or Beneficial Owner or as a result of any such failure to furnish any of theforegoing.The obligations of Holders and Beneficial Owners under the Deposit Agreement shall survive any transfer of Receipts, anysurrender of Receipts and withdrawal of Deposited Securities or the termination of this Deposit Agreement.(9)Charges of Depositary. The Depositary reserves the right to charge the following fees for the services performedunder the terms of the Deposit Agreement, provided, however, that no fees shall be payable upon distribution of cashdividends so long as the charging of such fee is prohibited by the exchange, if any, upon which the ADSs are listed:(i)to any person to whom ADSs are issued or to any person to whom a distribution is made in respect of ADSdistributions pursuant to stock dividends or other free distributions of stock, bonus distributions, stock splits orother distributions (except where converted to cash), a fee not in excess of U.S. $ 5.00 per 100 ADSs (or fractionthereof) so issued under the terms of the Deposit Agreement to be determined by the Depositary;(ii)to any person surrendering ADSs for withdrawal of Deposited Securities or whose ADSs are cancelled orreduced for any other reason including, inter alia, cash distributions made pursuant to a cancellation or withdrawal,a fee not in excess of U.S. $ 5.00 per 100 ADSs reduced, cancelled or surrendered (as the case may be); 46(iii)to any holder of ADSs (including, without limitation, Holders), a fee not in excess of U.S. $ 5.00 per 100ADSs held for the distribution of cash dividends;(iv)to any holder of ADSs (including, without limitation, Holders), a fee not in excess of U.S. $ 5.00 per 100ADSs held for the distribution of cash entitlements (other than cash dividends) and/or cash proceeds, includingproceeds from the sale of rights, securities and other entitlements;(v)to any holder of ADSs (including, without limitation, Holders), a fee not in excess of U.S. $ 5.00 per 100ADSs (or portion thereof) issued upon the exercise of rights; and(vi)for the operation and maintenance costs in administering the ADSs an annual fee of U.S. $ 5.00 per 100ADSs, such fee to be assessed against Holders of record as of the date or dates set by the Depositary as it sees fitand collected at the sole discretion of the Depositary by billing such Holders for such fee or by deducting such feefrom one or more cash dividends or other cash distributions.In addition, Holders, Beneficial Owners, any person depositing Shares for deposit and any person surrendering ADSs forcancellation and withdrawal of Deposited Securities will be required to pay the following charges:(i)taxes (including applicable interest and penalties) and other governmental charges;(ii)such registration fees as may from time to time be in effect for the registration of Shares or other DepositedSecurities with the Foreign Registrar and applicable to transfers of Shares or other Deposited Securities to or fromthe name of the Custodian, the Depositary or any nominees upon the making of deposits and withdrawals,respectively;(iii)such cable, telex, facsimile and electronic transmission and delivery expenses as are expressly provided inthe Deposit Agreement to be at the expense of the depositor depositing or person withdrawing Shares or Holdersand Beneficial Owners of ADSs;(iv)the expenses and charges incurred by the Depositary and/or a division or Affiliate(s) of the Depositary inthe conversion of Foreign Currency;(v)such fees and expenses as are incurred by the Depositary in connection with compliance with exchangecontrol regulations and other regulatory requirements applicable to Shares, Deposited Securities, ADSs and ADRs;(vi)the fees and expenses incurred by the Depositary in connection with the delivery of Deposited Securities,including any fees of a central depository for securities in the local market, where applicable;(vii)any additional fees, charges, costs or expenses that may be incurred by the Depositary or a division orAffiliate(s) of the Depositary from time to time.Any other fees and charges of, and expenses incurred by, the Depositary or the Custodian under the Deposit Agreementshall be for the account of the Company unless otherwise 47agreed in writing between the Company and the Depositary from time to time. All fees and charges may, at any time andfrom time to time, be changed by agreement between the Depositary and Company but, in the case of fees and chargespayable by Holders or Beneficial Owners, only in the manner contemplated by Article (20) hereof.The Depositary may make payments to the Company and/or may share revenue with the Company derived from feescollected from Holders and Beneficial Owners, upon such terms and conditions as the Company and the Depositary mayagree from time to time.(10)Title to Receipts. It is a condition of this Receipt, and every successive Holder of this Receipt by accepting orholding the same consents and agrees, that title to this Receipt (and to each ADS evidenced hereby) is transferable bydelivery of the Receipt, provided it has been properly endorsed or accompanied by proper instruments of transfer, suchReceipt being a certificated security under the laws of the State of New York. Notwithstanding any notice to the contrary,the Depositary may deem and treat the Holder of this Receipt (that is, the person in whose name this Receipt is registeredon the books of the Depositary) as the absolute owner hereof for all purposes. The Depositary shall have no obligation orbe subject to any liability under the Deposit Agreement or this Receipt to any holder of this Receipt or any BeneficialOwner unless such holder is the Holder of this Receipt registered on the books of the Depositary or, in the case of aBeneficial Owner, such Beneficial Owner or the Beneficial Owner’s representative is the Holder registered on the books ofthe Depositary.(11)Validity of Receipt. This Receipt shall not be entitled to any benefits under the Deposit Agreement or be valid orenforceable for any purpose, unless this Receipt has been (i) dated, (ii) signed by the manual or facsimile signature of aduly authorized signatory of the Depositary, (iii) if a Registrar for the Receipts shall have been appointed, countersignedby the manual or facsimile signature of a duly authorized signatory of the Registrar and (iv) registered in the booksmaintained by the Depositary or the Registrar, as applicable, for the issuance and transfer of Receipts. Receipts bearingthe facsimile signature of a duly-authorized signatory of the Depositary or the Registrar, who at the time of signature was aduly-authorized signatory of the Depositary or the Registrar, as the case may be, shall bind the Depositary,notwithstanding the fact that such signatory has ceased to be so authorized prior to the execution and delivery of suchReceipt by the Depositary or did not hold such office on the date of issuance of such Receipts.(12)Available Information; Reports; Inspection of Transfer Books. The Company is subject to the periodic reportingrequirements of the Exchange Act applicable to foreign private issuers (as defined in Rule 405 of the Securities Act) andaccordingly files certain information with the Commission. These reports and documents can be inspected and copied atthe public reference facilities maintained by the Commission located at 100 F Street, N.E., Washington D.C. 20549,U.S.A. The Depositary shall make available during normal business hours on any Business Day for inspection by Holdersat its Corporate Trust Office any reports and communications, including any proxy soliciting materials, received from theCompany which are both (a) received by the Depositary, the Custodian, or the nominee of either of them as the holder ofthe Deposited Securities and (b) made generally available to the holders of such Deposited Securities by the Company.The Depositary or the Registrar, as applicable, shall keep books for the registration of Receipts and transfers of Receiptswhich at all reasonable times shall be open for inspection by the Company and by the Holders of such Receipts, providedthat such inspection shall not be, to the Depositary’s or the Registrar’s knowledge, for the purpose of communicating with 48Holders of such Receipts in the interest of a business or object other than the business of the Company or other than amatter related to the Deposit Agreement or the Receipts.The Depositary or the Registrar, as applicable, may close the transfer books with respect to the Receipts, at any time orfrom time to time, when deemed necessary or advisable by it in good faith in connection with the performance of its dutieshereunder, or at the reasonable written request of the Company subject, in all cases, to Article (22) hereof.Dated:DEUTSCHE BANK TRUSTCOMPANY AMERICAS, as DepositaryBy:By:The address of the Corporate Trust Office of the Depositary is 60 Wall Street, New York, New York 10005, U.S.A. 49EXHIBIT B[FORM OF REVERSE OF RECEIPT]SUMMARY OF CERTAIN ADDITIONAL PROVISIONS OF THE DEPOSIT AGREEMENT(13) Dividends and Distributions in Cash, Shares, etc. Whenever the Depositary receives confirmation from the Custodianof receipt of any cash dividend or other cash distribution on any Deposited Securities, or receives proceeds from the saleof any Shares, rights securities or other entitlements under the Deposit Agreement, the Depositary will, if at the time ofreceipt thereof any amounts received in a Foreign Currency can, in the judgment of the Depositary (upon the terms of theDeposit Agreement), be converted on a practicable basis, into Dollars transferable to the United States, promptly convertor cause to be converted such dividend, distribution or proceeds into Dollars and will distribute promptly the amount thusreceived (net of applicable fees and charges of, and expenses incurred by, the Depositary and/or a division or Affiliate(s)of the Depositary and taxes and/or governmental charges) to the Holders of record as of the ADS Record Date inproportion to the number of ADSs representing such Deposited Securities held by such Holders respectively as of the ADSRecord Date. The Depositary shall distribute only such amount, however, as can be distributed without attributing to anyHolder a fraction of one cent. Any such fractional amounts shall be rounded down to the nearest whole cent and sodistributed to Holders entitled thereto. Holders and Beneficial Owners understand that in converting Foreign Currency,amounts received on conversion are calculated at a rate which exceeds the number of decimal places used by theDepositary to report distribution rates. The excess amount may be retained by the Depositary as an additional cost ofconversion, irrespective of any other fees and expenses payable or owing hereunder and shall not be subject toescheatment. If the Company, the Custodian or the Depositary is required to withhold and does withhold from any cashdividend or other cash distribution in respect of any Deposited Securities an amount on account of taxes, duties or othergovernmental charges, the amount distributed to Holders on the ADSs representing such Deposited Securities shall bereduced accordingly. Such withheld amounts shall be forwarded by the Company, the Custodian or the Depositary to therelevant governmental authority. Evidence of payment thereof by the Company shall be forwarded by the Company to theDepositary upon request. The Depositary shall forward to the Company or its agent such information from its records asthe Company may reasonably request to enable the Company or its agent to file with governmental agencies such reportsas are necessary to obtain benefits under the applicable tax treaties for the Holders and Beneficial Owners of Receipts.If any distribution upon any Deposited Securities consists of a dividend in, or free distribution of, Shares, the Companyshall cause such Shares to be deposited with the Custodian and registered, as the case may be, in the name of theDepositary, the Custodian or their nominees. Upon receipt of confirmation of such deposit, the Depositary shall, subject toand in accordance with the Deposit Agreement, establish the ADS Record Date and either (i) distribute to the Holders asof the ADS Record Date in proportion to the number of ADSs held by such Holders as of the ADS Record Date, additionalADSs, which represent in aggregate the number of Shares received as such dividend, or free distribution, subject to theterms of the Deposit Agreement (including, without limitation, the applicable fees and charges of, and expenses incurredby, the Depositary, and taxes and/or governmental charges), or (ii) if additional ADSs are not so distributed, each ADSissued and outstanding after the ADS Record Date shall, to the extent permissible by law, thenceforth also represent 50rights and interests in the additional Shares distributed upon the Deposited Securities represented thereby (net of theapplicable fees and charges of, and the expenses incurred by, the Depositary, and taxes and/or governmental charges). Inlieu of delivering fractional ADSs, the Depositary shall sell the number of Shares represented by the aggregate of suchfractions and distribute the proceeds upon the terms set forth in the Deposit Agreement.In the event that (x) the Depositary determines that any distribution in property (including Shares) is subject to any tax orother governmental charges which the Depositary is obligated to withhold, or, (y) if the Company, in the fulfillment of itsobligations under the Deposit Agreement, has either (a) furnished an opinion of U.S. counsel determining that Shares mustbe registered under the Securities Act or other laws in order to be distributed to Holders (and no such registrationstatement has been declared effective), or (b) fails to timely deliver the documentation contemplated in the DepositAgreement, the Depositary may dispose of all or a portion of such property (including Shares and rights to subscribetherefor) in such amounts and in such manner, including by public or private sale, as the Depositary deems necessary andpracticable, and the Depositary shall distribute the net proceeds of any such sale (after deduction of taxes and/orgovernmental charges, and fees and charges of, and expenses incurred by, the Depositary and/or a division or Affiliate(s)of the Depositary) to Holders entitled thereto upon the terms of the Deposit Agreement. The Depositary shall hold and/ordistribute any unsold balance of such property in accordance with the provisions of the Deposit Agreement.Upon timely receipt of a notice indicating that the Company wishes an elective distribution to be made available toHolders upon the terms described in the Deposit Agreement, the Depositary shall, upon provision of all documentationrequired under the Deposit Agreement, (including, without limitation, any legal opinions the Depositary may request underthe Deposit Agreement) determine whether such distribution is lawful and reasonably practicable. If so, the Depositaryshall, subject to the terms and conditions of the Deposit Agreement, establish an ADS Record Date according to Article(14) hereof and establish procedures to enable the Holder hereof to elect to receive the proposed distribution in cash or inadditional ADSs. If a Holder elects to receive the distribution in cash, the dividend shall be distributed as in the case of adistribution in cash. If the Holder hereof elects to receive the distribution in additional ADSs, the distribution shall bedistributed as in the case of a distribution in Shares upon the terms described in the Deposit Agreement. If such electivedistribution is not lawful or reasonably practicable or if the Depositary did not receive satisfactory documentation set forthin the Deposit Agreement, the Depositary shall, to the extent permitted by law, distribute to Holders, on the basis of thesame determination as is made in the Cayman Islands, in respect of the Shares for which no election is made, either (x)cash or (y) additional ADSs representing such additional Shares, in each case, upon the terms described in the DepositAgreement. Nothing herein shall obligate the Depositary to make available to the Holder hereof a method to receive theelective dividend in Shares (rather than ADSs). There can be no assurance that the Holder hereof will be given theopportunity to receive elective distributions on the same terms and conditions as the holders of Shares.Whenever the Company intends to distribute to the holders of the Deposited Securities rights to subscribe for additionalShares, the Company shall give notice thereof to the Depositary at least 60 days prior to the proposed distribution statingwhether or not it wishes such rights to be made available to Holders of ADSs. Upon timely receipt by the Depositary of anotice indicating that the Company wishes such rights to be made available to Holders of ADSs, the 51Company shall determine whether it is lawful and reasonably practicable to make such rights available to the Holders. TheDepositary shall make such rights available to any Holders only if the Company shall have timely requested that suchrights be made available to Holders, the Depositary shall have received the documentation required by the DepositAgreement, and the Depositary shall have determined that such distribution of rights is lawful and reasonably practicable. If such conditions are not satisfied, the Depositary shall sell the rights as described below. In the event all conditions setforth above are satisfied, the Depositary shall establish an ADS Record Date and establish procedures (x) to distribute suchrights (by means of warrants or otherwise) and (y) to enable the Holders to exercise the rights (upon payment of theapplicable fees and charges of, and expenses incurred by, the Depositary and/or a division or Affiliate(s) of the Depositaryand taxes and/or governmental charges). Nothing herein or in the Deposit Agreement shall obligate the Depositary tomake available to the Holders a method to exercise such rights to subscribe for Shares (rather than ADSs). If (i) theCompany does not timely request the Depositary to make the rights available to Holders or if the Company requests thatthe rights not be made available to Holders, (ii) the Depositary fails to receive the documentation required by the DepositAgreement or determines it is not lawful or reasonably practicable to make the rights available to Holders, or (iii) anyrights made available are not exercised and appear to be about to lapse, the Depositary shall determine whether it is lawfuland reasonably practicable to sell such rights, and if it so determines that it is lawful and reasonably practicable, endeavourto sell such rights in a riskless principal capacity or otherwise, at such place and upon such terms (including public and/orprivate sale) as it may deem proper. The Depositary shall, upon such sale, convert and distribute proceeds of such sale (netof applicable fees and charges of, and expenses incurred by, the Depositary and/or a division or Affiliate(s) of theDepositary and taxes and/or governmental charges) upon the terms hereof and in the Deposit Agreement. If theDepositary is unable to make any rights available to Holders or to arrange for the sale of the rights upon the termsdescribed above, the Depositary shall allow such rights to lapse. The Depositary shall not be responsible for (i) any failureto determine that it may be lawful or practicable to make such rights available to Holders in general or any Holders inparticular, (ii) any foreign exchange exposure or loss incurred in connection with such sale, or exercise, or (iii) the contentof any materials forwarded to the Holders on behalf of the Company in connection with the rights distribution.Notwithstanding anything herein to the contrary, if registration (under the Securities Act and/or any other applicable law)of the rights or the securities to which any rights relate may be required in order for the Company to offer such rights orsuch securities to Holders and to sell the securities represented by such rights, the Depositary will not distribute such rightsto the Holders (i) unless and until a registration statement under the Securities Act covering such offering is in effect or (ii)unless the Company furnishes to the Depositary opinion(s) of counsel for the Company in the United States and counsel tothe Company in any other applicable country in which rights would be distributed, in each case satisfactorily to theDepositary, to the effect that the offering and sale of such securities to Holders and Beneficial Owners are exempt from, ordo not require registration under, the provisions of the Securities Act or any other applicable laws. In the event that theCompany, the Depositary or the Custodian shall be required to withhold and does withhold from any distribution ofproperty (including rights) an amount on account of taxes and/or other governmental charges, the amount distributed to theHolders shall be reduced accordingly. In the event that the Depositary determines that any distribution in property(including Shares and rights to subscribe therefor) is subject to any tax or other governmental charges which theDepositary is obligated to withhold, the Depositary may dispose of all or a portion of such property 52(including Shares and rights to subscribe therefor) in such amounts and in such manner, including by public or private sale,as the Depositary deems necessary and practicable to pay any such taxes and/or charges.There can be no assurance that Holders generally, or any Holder in particular, will be given the opportunity to exerciserights on the same terms and conditions as the holders of Shares or to exercise such rights. Nothing herein shall obligatethe Company to file any registration statement in respect of any rights or Shares or other securities to be acquired upon theexercise of such rights or otherwise to register or qualify the offer or sale of such rights or securities under the applicablelaw of any other jurisdiction for any purpose.Upon receipt of a notice regarding property other than cash, Shares or rights to purchase additional Shares, to be made toHolders of ADSs, the Depositary shall determine, after consultation with the Company, whether such distribution toHolders is lawful and reasonably practicable. The Depositary shall not make such distribution unless (i) the Companyshall have timely requested the Depositary to make such distribution to Holders, (ii) the Depositary shall have received thedocumentation required by the Deposit Agreement, and (iii) the Depositary shall have determined that such distribution islawful and reasonably practicable. Upon satisfaction of such conditions, the Depositary shall distribute the property soreceived to the Holders of record as of the ADS Record Date, in proportion to the number of ADSs held by such Holdersrespectively and in such manner as the Depositary may deem practicable for accomplishing such distribution (i) uponreceipt of payment or net of the applicable fees and charges of, and expenses incurred by, the Depositary, and (ii) net ofany taxes and/or governmental charges. The Depositary may dispose of all or a portion of the property so distributed anddeposited, in such amounts and in such manner (including public or private sale) as the Depositary may deem practicableor necessary to satisfy any taxes (including applicable interest and penalties) or other governmental charges applicable tothe distribution.If the conditions above are not satisfied, the Depositary shall sell or cause such property to be sold in a public or privatesale, at such place or places and upon such terms as it may deem proper and shall distribute the proceeds of such salereceived by the Depositary (net of (a) applicable fees and charges of, and expenses incurred by, the Depositary and/or adivision or Affiliate(s) of the Depositary and (b) taxes and/or governmental charges) to the Holders upon the terms hereofand of the Deposit Agreement. If the Depositary is unable to sell such property, the Depositary may dispose of suchproperty in any way it deems reasonably practicable under the circumstances.(14)Fixing of Record Date. Whenever necessary in connection with any distribution (whether in cash, Shares, rights orother distribution), or whenever for any reason the Depositary causes a change in the number of Shares that arerepresented by each ADS, or whenever the Depositary shall receive notice of any meeting of or solicitation of holders ofShares or other Deposited Securities, or whenever the Depositary shall find it necessary or convenient in connection withthe giving of any notice, or any other matter, the Depositary shall fix a record date (the “ADS Record Date”), as close aspracticable to the record date fixed by the Company with respect to the Shares (if applicable), for the determination of theHolders who shall be entitled to receive such distribution, to give instructions for the exercise of voting rights at any suchmeeting, or to give or withhold such consent, or to receive such notice or solicitation or to otherwise take action, or toexercise the rights of Holders with respect to such changed number of Shares represented by each ADS or for any otherreason. Subject to applicable law and the terms and conditions of this Receipt and the Deposit 53Agreement, only the Holders of record at the close of business in New York on such ADS Record Date shall be entitled toreceive such distributions, to give such voting instructions, to receive such notice or solicitation, or otherwise take action.(15)Voting of Deposited Securities. Subject to the next sentence, as soon as practicable after receipt of notice of anymeeting at which the holders of Deposited Securities are entitled to vote, or of solicitation of consents or proxies fromholders of Deposited Securities, the Depositary shall fix the ADS Record Date in respect of such meeting or suchsolicitation of consents or proxies. The Depositary shall, if requested by the Company in writing in a timely manner (theDepositary having no obligation to take any further action if the request shall not have been received by the Depositary atleast 30 Business Days prior to the date of such vote or meeting) and at the Company’s expense, and provided no U.S.legal prohibitions exist, mail by regular, ordinary mail delivery (or by electronic mail or as otherwise may be agreedbetween the Company and the Depositary in writing from time to time) or otherwise distribute as soon as practicable afterreceipt thereof to Holders as of the ADS Record Date: (a) such notice of meeting or solicitation of consent or proxy; (b) astatement that the Holders at the close of business on the ADS Record Date will be entitled, subject to any applicable law,the provisions of this Deposit Agreement, the Company’s Memorandum and Articles of Association and the provisions ofor governing the Deposited Securities (which provisions, if any, shall be summarized in pertinent part by the Company), toinstruct the Depositary as to the exercise of the voting rights, if any, pertaining to the Deposited Securities represented bysuch Holder’s American Depositary Shares; and (c) a brief statement as to the manner in which such voting instructionsmay be given to the Depositary, or in which instructions may be deemed to have been given in accordance with this Article(15), including an express indication that instructions may be given (or be deemed to have been given in accordance withthe immediately following paragraph of this section if no instruction is received) to the Depositary to give a discretionaryproxy to a person or persons designated by the Company. Voting instructions may be given only in respect of a number ofAmerican Depositary Shares representing an integral number of Deposited Securities. Upon the timely receipt of votinginstructions of a Holder on the ADS Record Date in the manner specified by the Depositary, the Depositary shall endeavor,insofar as practicable and permitted under applicable law, the provisions of this Deposit Agreement, the Company’sMemorandum and Articles of Association and the provisions of or governing the Deposited Securities, to vote or cause theCustodian to vote the Deposited Securities (in person or by proxy) represented by American Depositary Shares evidencedby such Receipt in accordance with such voting instructions.In the event that (i) the Depositary timely receives voting instructions from a Holder which fail to specify the manner inwhich the Depositary is to vote the Deposited Securities represented by such Holder’s ADSs or (ii) no timely instructionsare received by the Depositary from a Holder with respect to any of the Deposited Securities represented by the ADSs heldby such Holder on the ADS Record Date, the Depositary shall (unless otherwise specified in the notice distributed toHolders) deem such Holder to have instructed the Depositary to give a discretionary proxy to a person designated by theCompany with respect to such Deposited Securities and the Depositary shall give a discretionary proxy to a persondesignated by the Company to vote such Deposited Securities, provided, however, that no such instruction shall be deemedto have been given and no such discretionary proxy shall be given with respect to any matter as to which the Companyinforms the Depositary (and the Company agrees to provide such information as promptly as practicable in writing, ifapplicable) that (x) the Company does not wish to give such proxy, (y) the Company is aware or should reasonably beaware that substantial opposition exists from Holders against the 54outcome for which the person designated by the Company would otherwise vote or (z) the outcome for which the persondesignated by the Company would otherwise vote would materially and adversely affect the rights of holders of DepositedSecurities, provided, further, that the Company will have no liability to any Holder or Beneficial Owner resulting fromsuch notification.In the event that voting on any resolution or matter is conducted on a show of hands basis in accordance with theMemorandum and Articles of Association, the Depositary will refrain from voting and the voting instructions (or thedeemed voting instructions, as set out above) received by the Depositary from Holders shall lapse. The Depositary willhave no obligation to demand voting on a poll basis with respect to any resolution and shall have no liability to any Holderor Beneficial Owner for not having demanded voting on a poll basis.Neither the Depositary nor the Custodian shall, under any circumstances exercise any discretion as to voting, and neitherthe Depositary nor the Custodian shall vote, attempt to exercise the right to vote, or in any way make use of for purposesof establishing a quorum or otherwise, Deposited Securities represented by ADSs except pursuant to and in accordancewith such written instructions from Holders, including the deemed instruction to the Depositary to give a discretionaryproxy to a person designated by the Company. Deposited Securities represented by ADSs for which (i) no timely votinginstructions are received by the Depositary from the Holder, or (ii) timely voting instructions are received by theDepositary from the Holder but such voting instructions fail to specify the manner in which the Depositary is to vote theDeposited Securities represented by such Holder’s ADSs, shall be voted in the manner provided in this Article (15). Notwithstanding anything else contained herein, and subject to applicable law, regulation and the Memorandum andArticles of Association, the Depositary shall, if so requested in writing by the Company, represent all Deposited Securities(whether or not voting instructions have been received in respect of such Deposited Securities from Holders as of the ADSRecord Date) for the purpose of establishing quorum at a meeting of shareholders.There can be no assurance that Holders or Beneficial Owners generally or any Holder or Beneficial Owner in particularwill receive the notice described above with sufficient time to enable the Holder to return voting instructions to theDepositary in a timely manner.Notwithstanding the above, save for applicable provisions of the law of the Cayman Islands, and in accordance with theterms of Section 5.3 of the Deposit Agreement, the Depositary shall not be liable for any failure to carry out anyinstructions to vote any of the Deposited Securities or the manner in which such vote is cast or the effect of such vote.(16)Changes Affecting Deposited Securities. Upon any change in par value, split-up, subdivision, cancellation,consolidation or any other reclassification of Deposited Securities, or upon any recapitalization, reorganization, merger,amalgamation or consolidation or sale of assets affecting the Company or to which it otherwise is a party, any securitieswhich shall be received by the Depositary or a Custodian in exchange for, or in conversion of or replacement or otherwisein respect of, such Deposited Securities shall, to the extent permitted by law, be treated as new Deposited Securities underthe Deposit Agreement, and the Receipts shall, subject to the provisions of the Deposit Agreement and applicable law,evidence ADSs representing the right to receive such additional securities. Alternatively, the Depositary may, with theCompany’s approval, and shall, if the Company shall so requests, subject to the terms of the Deposit Agreement andreceipt of satisfactory documentation contemplated by the Deposit Agreement, execute and deliver additional Receipts asin the 55case of a stock dividend on the Shares, or call for the surrender of outstanding Receipts to be exchanged for new Receipts,in either case, as well as in the event of newly deposited Shares, with necessary modifications to this form of Receiptspecifically describing such new Deposited Securities and/or corporate change. Notwithstanding the foregoing, in theevent that any security so received may not be lawfully distributed to some or all Holders, the Depositary may, with theCompany’s approval, and shall if the Company requests, subject to receipt of satisfactory legal documentationcontemplated in the Deposit Agreement, sell such securities at public or private sale, at such place or places and upon suchterms as it may deem proper and may allocate the net proceeds of such sales (net of fees and charges of, and expensesincurred by, the Depositary and/or a division or Affiliate(s) of the Depositary and taxes and/or governmental charges) forthe account of the Holders otherwise entitled to such securities and distribute the net proceeds so allocated to the extentpracticable as in the case of a distribution received in cash pursuant to the Deposit Agreement. The Depositary shall not beresponsible for (i) any failure to determine that it may be lawful or feasible to make such securities available to Holders ingeneral or any Holder in particular, (ii) any foreign exchange exposure or loss incurred in connection with such sale, or(iii) any liability to the purchaser of such securities.(17)Exoneration. None of the Depositary, the Custodian or the Company shall be obligated to do or perform any actwhich is inconsistent with the provisions of the Deposit Agreement or shall incur any liability to Holders, BeneficialOwners or any third parties (i) if the Depositary, the Custodian or the Company or their respective controlling persons oragents shall be prevented or forbidden from, or subjected to any civil or criminal penalty or restraint on account of, ordelayed in, doing or performing any act or thing required by the terms of the Deposit Agreement and this Receipt, byreason of any provision of any present or future law or regulation of the United States, the Cayman Islands or any othercountry, or of any other governmental authority or regulatory authority or stock exchange, or by reason of any provision,present or future of the Memorandum and Articles of Association or any provision of or governing any DepositedSecurities, or by reason of any act of God or war or other circumstances beyond its control, (including, without limitation,nationalization, expropriation, currency restrictions, work stoppage, strikes, civil unrest, revolutions, rebellions, explosionsand computer failure), (ii) by reason of any exercise of, or failure to exercise, any discretion provided for in the DepositAgreement or in the Memorandum and Articles of Association or provisions of or governing Deposited Securities, (iii) forany action or inaction of the Depositary, the Custodian or the Company or their respective controlling persons or agents inreliance upon the advice of or information from legal counsel, accountants, any person presenting Shares for deposit, anyHolder, any Beneficial Owner or authorized representative thereof, or any other person believed by it in good faith to becompetent to give such advice or information, (iv) for any inability by a Holder or Beneficial Owner to benefit from anydistribution, offering, right or other benefit which is made available to holders of Deposited Securities but is not, under theterms of the Deposit Agreement, made available to Holders of ADS or (v) for any special, consequential, indirect orpunitive damages for any breach of the terms of the Deposit Agreement or otherwise. The Depositary, its controllingpersons, its agents (including without limitation, the Agents), any Custodian and the Company, its controlling persons andits agents may rely and shall be protected in acting upon any written notice, request, opinion or other document believedby it to be genuine and to have been signed or presented by the proper party or parties. No disclaimer of liability under theSecurities Act or the Exchange Act is intended by any provision of the Deposit Agreement. 56(18)Standard of Care. The Company and the Depositary and their respective directors, officers, Affiliates, employeesand agents (including without limitation, the Agents) assume no obligation and shall not be subject to any liability underthe Deposit Agreement or the Receipts to Holders or Beneficial Owners or other persons, except in accordance withSection 5.8 of the Deposit Agreement, provided, that the Company and the Depositary and their respective directors,officers, Affiliates, employees and agents (including without limitation, the Agents) agree to perform their respectiveobligations specifically set forth in the Deposit Agreement without gross negligence or wilful misconduct. The Depositaryand its directors, officers, Affiliates, employees and agents (including without limitation, the Agents) shall not be liable forany failure to carry out any instructions to vote any of the Deposited Securities, or for the manner in which any vote is castor the effect of any vote. The Depositary shall not incur any liability for any failure to determine that any distribution oraction may be lawful or reasonably practicable, for the content of any information submitted to it by the Company fordistribution to the Holders or for any inaccuracy of any translation thereof, for any investment risk associated withacquiring an interest in the Deposited Securities, for the validity or worth of the Deposited Securities or for any taxconsequences that may result from the ownership of ADSs, Shares or Deposited Securities, for the credit-worthiness ofany third party, for allowing any rights to lapse upon the terms of the Deposit Agreement or for the failure or timeliness ofany notice from the Company or for any action or non action by it in reliance upon the opinion, advice of or informationfrom legal counsel, accountants, any person presenting Shares for deposit, any Holder or any other person believed by it ingood faith to be competent to give such advice or information. The Depositary and its agents (including without limitation,the Agents) shall not be liable for any acts or omissions made by a successor depositary whether in connection with aprevious act or omission of the Depositary or in connection with any matter arising wholly after the removal or resignationof the Depositary, provided that in connection with the issue out of which such potential liability arises the Depositaryperformed its obligations without gross negligence or willful misconduct while it acted as Depositary.(19)Resignation and Removal of the Depositary; Appointment of Successor Depositary. The Depositary may at anytime resign as Depositary under the Deposit Agreement by written notice of resignation delivered to the Company, suchresignation to be effective on the earlier of (i) the 90th day after delivery thereof to the Company (whereupon theDepositary shall, in the event no successor depositary has been appointed by the Company, be entitled to take the actionscontemplated in the Deposit Agreement), or (ii) the appointment of a successor depositary and its acceptance of suchappointment as provided in the Deposit Agreement, save that, any amounts, fees, costs or expenses owed to the Depositaryunder the Deposit Agreement or in accordance with any other agreements otherwise agreed in writing between theCompany and the Depositary from time to time shall be paid to the Depositary prior to such resignation. The Companyshall use reasonable efforts to appoint such successor depositary, and give notice to the Depositary of such appointment,not more than 90 days after delivery by the Depositary of written notice of resignation as provided in the DepositAgreement. The Depositary may at any time be removed by the Company by written notice of such removal which noticeshall be effective on the later of (i) the 90th day after delivery thereof to the Depositary (whereupon the Depositary shallbe entitled to take the actions contemplated in the Deposit Agreement if a successor depositary has not been appointed), or(ii) the appointment of a successor depositary and its acceptance of such appointment as provided in the DepositAgreement save that, any amounts, fees, costs or expenses owed to the Depositary under the Deposit Agreement or inaccordance with any other agreements otherwise agreed in writing between the Company and the Depositary from 57time to time shall be paid to the Depositary prior to such removal. In case at any time the Depositary acting hereunder shallresign or be removed, the Company shall use its best efforts to appoint a successor depositary which shall be a bank ortrust company having an office in the Borough of Manhattan, the City of New York and if it shall have not appointed asuccessor depositary the provisions referred to in Article (21) hereof and correspondingly in the Deposit Agreement shallapply. Every successor depositary shall be required by the Company to execute and deliver to its predecessor and to theCompany an instrument in writing accepting its appointment hereunder, and thereupon such successor depositary, withoutany further act or deed, shall become fully vested with all the rights, powers, duties and obligations of its predecessor. Thepredecessor depositary, upon payment of all sums due to it and on the written request of the Company, shall (i) executeand deliver an instrument transferring to such successor all rights and powers of such predecessor hereunder (other than ascontemplated in the Deposit Agreement), (ii) duly assign, transfer and deliver all right, title and interest to the DepositedSecurities to such successor, and (iii) deliver to such successor a list of the Holders of all outstanding Receipts and suchother information relating to Receipts and Holders thereof as the successor may reasonably request. Any such successordepositary shall promptly mail notice of its appointment to such Holders. Any corporation into or with which theDepositary may be merged or consolidated shall be the successor of the Depositary without the execution or filing of anydocument or any further act and, notwithstanding anything to the contrary in the Deposit Agreement, the Depositary mayassign or otherwise transfer all or any of its rights and benefits under the Deposit Agreement (including any cause ofaction arising in connection with it) to Deutsche Bank AG or any branch thereof or any entity which is a direct or indirectsubsidiary or other affiliate of Deutsche Bank AG..(20)Amendment/Supplement. Subject to the terms and conditions of this Article (20), and applicable law, this Receiptand any provisions of the Deposit Agreement may at any time and from time to time be amended or supplemented bywritten agreement between the Company and the Depositary in any respect which they may deem necessary or desirablewithout the consent of the Holders or Beneficial Owners. Any amendment or supplement which shall impose or increaseany fees or charges (other than the charges of the Depositary in connection with foreign exchange control regulations, andtaxes and/or other governmental charges, delivery and other such expenses), or which shall otherwise materially prejudiceany substantial existing right of Holders or Beneficial Owners, shall not, however, become effective as to outstandingReceipts until 30 days after notice of such amendment or supplement shall have been given to the Holders of outstandingReceipts. Notice of any amendment to the Deposit Agreement or form of Receipts shall not need to describe in detail thespecific amendments effectuated thereby, and failure to describe the specific amendments in any such notice shall notrender such notice invalid, provided, however, that, in each such case, the notice given to the Holders identifies a meansfor Holders and Beneficial Owners to retrieve or receive the text of such amendment (i.e., upon retrieval from theCommission's, the Depositary's or the Company's website or upon request from the Depositary). The parties hereto agreethat any amendments or supplements which (i) are reasonably necessary (as agreed by the Company and the Depositary) inorder for (a) the ADSs to be registered on Form F-6 under the Securities Act or (b) the ADSs or Shares to be traded solelyin electronic book-entry form and (ii) do not in either such case impose or increase any fees or charges to be borne byHolders, shall be deemed not to materially prejudice any substantial rights of Holders or Beneficial Owners. Every Holderand Beneficial Owner at the time any amendment or supplement so becomes effective shall be deemed, by continuing tohold such ADS, to consent and agree to such amendment or supplement and to be bound by the Deposit Agreement asamended or supplemented thereby. In no event shall any amendment or 58supplement impair the right of the Holder to surrender such Receipt and receive therefor the Deposited Securitiesrepresented thereby, except in order to comply with mandatory provisions of applicable law. Notwithstanding theforegoing, if any governmental body should adopt new laws, rules or regulations which would require amendment orsupplement of the Deposit Agreement to ensure compliance therewith, the Company and the Depositary may amend orsupplement the Deposit Agreement and the Receipt at any time in accordance with such changed laws, rules orregulations. Such amendment or supplement to the Deposit Agreement in such circumstances may become effective beforea notice of such amendment or supplement is given to Holders or within any other period of time as required forcompliance with such laws, or rules or regulations.(21)Termination. The Depositary shall, at any time at the written direction of the Company, terminate the DepositAgreement by mailing notice of such termination to the Holders of all Receipts then outstanding at least 90 days prior tothe date fixed in such notice for such termination provided that, the Depositary shall be reimbursed for any amounts, fees,costs or expenses owed to it in accordance with the terms of the Deposit Agreement and in accordance with any otheragreements as otherwise agreed in writing between the Company and the Depositary from time to time, prior to suchtermination shall take effect. If 90 days shall have expired after (i) the Depositary shall have delivered to the Company awritten notice of its election to resign, or (ii) the Company shall have delivered to the Depositary a written notice of theremoval of the Depositary, and in either case a successor depositary shall not have been appointed and accepted itsappointment as provided herein and in the Deposit Agreement, the Depositary may terminate the Deposit Agreement bymailing notice of such termination to the Holders of all Receipts then outstanding at least 30 days prior to the date fixedfor such termination. On and after the date of termination of the Deposit Agreement, each Holder will, upon surrender ofsuch Holder’s Receipt at the Corporate Trust Office of the Depositary, upon the payment of the charges of the Depositaryfor the surrender of Receipts referred to in Article (2) hereof and in the Deposit Agreement and subject to the conditionsand restrictions therein set forth, and upon payment of any applicable taxes and/or governmental charges, be entitled todelivery, to him or upon his order, of the amount of Deposited Securities represented by such Receipt. If any Receipts shallremain outstanding after the date of termination of the Deposit Agreement, the Registrar thereafter shall discontinue theregistration of transfers of Receipts, and the Depositary shall suspend the distribution of dividends to the Holders thereof,and shall not give any further notices or perform any further acts under the Deposit Agreement, except that the Depositaryshall continue to collect dividends and other distributions pertaining to Deposited Securities, shall sell rights or otherproperty as provided in the Deposit Agreement, and shall continue to deliver Deposited Securities, subject to theconditions and restrictions set forth in the Deposit Agreement, together with any dividends or other distributions receivedwith respect thereto and the net proceeds of the sale of any rights or other property, in exchange for Receipts surrenderedto the Depositary (after deducting, or charging, as the case may be, in each case the charges of the Depositary for thesurrender of a Receipt, any expenses for the account of the Holder in accordance with the terms and conditions of theDeposit Agreement and any applicable taxes and/or governmental charges or assessments). At any time after theexpiration of six months from the date of termination of the Deposit Agreement, the Depositary may sell the DepositedSecurities then held hereunder and may thereafter hold uninvested the net proceeds of any such sale, together with anyother cash then held by it hereunder, in an unsegregated account, without liability for interest for the pro rata benefit of theHolders of Receipts whose Receipts have not theretofore been surrendered. After making such sale, the Depositary shallbe discharged from all obligations under the Deposit 59Agreement with respect to the Receipts and the Shares, Deposited Securities and ADSs, except to account for such netproceeds and other cash (after deducting, or charging, as the case may be, in each case the charges of the Depositary forthe surrender of a Receipt, any expenses for the account of the Holder in accordance with the terms and conditions of theDeposit Agreement and any applicable taxes and/or governmental charges or assessments) and except as set forth in theDeposit Agreement. Upon the termination of the Deposit Agreement, the Company shall be discharged from allobligations under the Deposit Agreement except as set forth in the Deposit Agreement. The obligations under the terms ofthe Deposit Agreement and Receipts of Holders and Beneficial Owners of ADSs outstanding as of the effective date ofany termination shall survive such effective date of termination and shall be discharged only when the applicable ADSsare presented by their Holders to the Depositary for cancellation under the terms of the Deposit Agreement and theHolders have each satisfied any and all of their obligations hereunder (including, but not limited to, any payment and/orreimbursement obligations which relate to prior to the effective date of termination but which payment and/orreimbursement is claimed after such effective date of termination).Notwithstanding anything contained in the Deposit Agreement or any ADR, in connection with the termination of theDeposit Agreement, the Depositary may, independently and without the need for any action by the Company, makeavailable to Holders of ADSs a means to withdraw the Deposited Securities represented by their ADSs and to direct thedeposit of such Deposited Securities into an unsponsored American depositary shares program established by theDepositary, upon such terms and conditions as the Depositary may deem reasonably appropriate, subject however, in eachcase, to satisfaction of the applicable registration requirements by the unsponsored American depositary shares programunder the Securities Act, and to receipt by the Depositary of payment of the applicable fees and charges of, andreimbursement of the applicable expenses incurred by, the Depositary.(22)Compliance with U.S. Securities Laws; Regulatory Compliance. Notwithstanding any provisions in this Receipt orthe Deposit Agreement to the contrary, the withdrawal or Delivery of Deposited Securities will not be suspended by theCompany or the Depositary except as would be permitted by Section I.A.(1) of the General Instructions to Form F-6Registration Statement, as amended from time to time, under the Securities Act.(23)Certain Rights of the Depositary. The Depositary, its Affiliates and their agents, on their own behalf, may own anddeal in any class of securities of the Company and its Affiliates and in ADSs. The Depositary may issue ADSs againstevidence of rights to receive Shares from the Company, any agent of the Company or any custodian, registrar, transferagent, clearing agency or other entity involved in ownership or transaction records in respect of the Shares.(24)Ownership Restrictions. Owners and Beneficial Owners shall comply with any limitations on ownership of Sharesunder the Memorandum and Articles of Association or applicable Cayman Islands law as if they held the number ofShares their American Depositary Shares represent. The Company shall inform the Owners, Beneficial Owners and theDepositary of any such ownership restrictions in place from time to time.(25)Waiver. EACH PARTY TO THE DEPOSIT AGREEMENT (INCLUDING, FOR AVOIDANCE OF DOUBT,EACH HOLDER AND BENEFICIAL OWNER AND/OR HOLDER OF INTERESTS IN ANY ADRs) HEREBYIRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT ITMAY 60HAVE TO A TRIAL BY JURY IN ANY SUIT, ACTION OR PROCEEDING AGAINST THE DEPOSITARY AND/ORTHE COMPANY DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THE SHARES OR OTHERDEPOSITED SECURITIES, THE ADSs OR THE ADRs, THE DEPOSIT AGREEMENT OR ANY TRANSACTIONCONTEMPLATED HEREIN OR THEREIN, OR THE BREACH HEREOF OR THEREOF (WHETHER BASED ONCONTRACT, TORT, COMMON LAW OR ANY OTHERTHEORY). 61(ASSIGNMENT AND TRANSFER SIGNATURE LINES)FOR VALUE RECEIVED, the undersigned Holder hereby sell(s), assign(s) and transfer(s)unto whose taxpayer identification number is and whoseaddress including postal zip code is , the within Receipt and all rights thereunder, herebyirrevocably constituting and appointing attorney-in-fact to transfer said Receipt on thebooks of the Depositary with full power of substitution in the premises.Dated:Name:By:Title:NOTICE: The signature of the Holder to thisassignment must correspond with the name as writtenupon the face of the within instrument in everyparticular, without alteration or enlargement or anychange whatsoever.If the endorsement be executed by an attorney,executor, administrator, trustee or guardian, theperson executing the endorsement must give his/herfull title in such capacity and proper evidence ofauthority to act in such capacity, if not on file withthe Depositary, must be forwarded with this Receipt.SIGNATURE GUARANTEED________________________ 62ARTICLE I.DEFINITIONS1SECTION 1.1“Affiliate”1SECTION 1.2“Agent”2SECTION 1.3“American Depositary Share(s)” and “ADS(s)”2SECTION 1.4“Article”2SECTION 1.5“Articles of Association”2SECTION 1.6“ADS Record Date”2SECTION 1.7“Beneficial Owner”2SECTION 1.8“Business Day”2SECTION 1.9“Commission”2SECTION 1.10“Company”2SECTION 1.11“Corporate Trust Office”2SECTION 1.12“Custodian”2SECTION 1.13“Deliver” and “Delivery”3SECTION 1.14“Deposit Agreement”3SECTION 1.15“Depositary”3SECTION 1.16“Deposited Securities”3SECTION 1.17“Dollars” and “$”3SECTION 1.18“DRS/Profile”3SECTION 1.19“DTC”3SECTION 1.20“Exchange Act”3SECTION 1.21“Foreign Currency”3SECTION 1.22“Foreign Registrar”3SECTION 1.23“Holder”4SECTION 1.24“Indemnified Person” and “Indemnifying Person”4SECTION 1.25“Losses”4SECTION 1.26“Memorandum”4SECTION 1.27“Opinion of Counsel”4SECTION 1.28“Receipt(s); “American Depositary Receipt(s)”; and “ADR(s)”4SECTION 1.29“Registrar”4SECTION 1.30“Restricted Securities”4SECTION 1.31“Securities Act”4SECTION 1.32“Share(s)”4SECTION 1.33“United States” or “U.S.”5ARTICLE II.APPOINTMENT OF DEPOSITARY; FORM OF RECEIPT; DEPOSIT OF SHARES; EXECUTIONAND DELIVERY, TRANSFER AND SURRENDER OF RECEIPTS5SECTION 2.1Appointment of Depositary5SECTION 2.2Form and Transferability of Receipts5SECTION 2.3Deposits6SECTION 2.4Execution and Delivery of Receipts8SECTION 2.5Transfer of Receipts; Combination and Split-up of Receipts8SECTION 2.6Surrender of Receipts and Withdrawal of Deposited Securities9SECTION 2.7Limitations on Execution and Delivery, Transfer, etc. of Receipts;Suspension of Delivery, Transfer, etc.10SECTION 2.8Lost Receipts, etc.11 63SECTION 2.9Cancellation and Destruction of Surrendered Receipts; Maintenance ofRecords11SECTION 2.10Maintenance of Records11ARTICLE III.CERTAIN OBLIGATIONS OF HOLDERS AND BENEFICIAL OWNERS OF RECEIPTS11SECTION 3.1Proofs, Certificates and Other Information11SECTION 3.2Liability for Taxes and Other Charges12SECTION 3.3Representations and Warranties on Deposit of Shares13SECTION 3.4Compliance with Information Requests13ARTICLE IVTHE DEPOSITED SECURITIES.14SECTION 4.1Cash Distributions14SECTION 4.2Distribution in Shares14SECTION 4.3Elective Distributions in Cash or Shares15SECTION 4.4Distribution of Rights to Purchase Shares16SECTION 4.5Distributions Other Than Cash, Shares or Rights to Purchase Shares17SECTION 4.6Conversion of Foreign Currency18SECTION 4.7Fixing of Record Date19SECTION 4.8Voting of Deposited Securities19SECTION 4.9Changes Affecting Deposited Securities21SECTION 4.10Available Information21SECTION 4.11Reports22SECTION 4.12List of Holders22SECTION 4.13Taxation; Withholding22ARTICLE V.THE DEPOSITARY, THE CUSTODIAN AND THE COMPANY23SECTION 5.1Maintenance of Office and Transfer Books by the Registrar23SECTION 5.2Exoneration24SECTION 5.3Standard of Care25SECTION 5.4Resignation and Removal of the Depositary; Appointment of SuccessorDepositary25SECTION 5.5The Custodian27SECTION 5.6Notices and Reports27SECTION 5.7Issuance of Additional Shares, ADSs etc.28SECTION 5.8Indemnification29SECTION 5.9Fees and Charges of Depositary30SECTION 5.10Restricted Securities Owners/Ownership Restrictions31ARTICLE VI.AMENDMENT AND TERMINATION31SECTION 6.1Amendment/Supplement31SECTION 6.2Termination32ARTICLE VII.MISCELLANEOUS34SECTION 7.1Counterparts34SECTION 7.2No Third-Party Beneficiaries34SECTION 7.3Severability34SECTION 7.4Holders and Beneficial Owners as Parties; Binding Effect34SECTION 7.5Notices34SECTION 7.6Governing Law and Jurisdiction35 64SECTION 7.7Assignment37SECTION 7.8Agents37SECTION 7.9Affiliates etc37SECTION 7.10Exclusivity37SECTION 7.11Compliance with U.S. Securities Laws38SECTION 7.12Titles38EXHIBIT A40EXHIBIT B49 1Exhibit 2.5Description of rights of each class of securitiesregistered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”)Our Class A ordinary shares, par value $0.00001 per share, of CooTek (Cayman) Inc. (“we,” “our,” “our company,” or “us”) are registeredunder Section 12(b) of the Exchange Act, and our American depositary shares (“ADSs”), each representing 50 Class A ordinary shares, are listedand traded on the New York Stock Exchange under the symbol “CTK”. The US$10,000,000 aggregate principal amount of convertible note with anannual interest rate of 5% issued by our company due January 19, 2022 (the “January 2021 Note”) are registered under the U.S. Securities Act of1933. The US$20,000,000 convertible note with an annual interest rate of 5% issued by our company due March 19, 2022 (the “March 2021 Note”)are registered under the U.S. Securities Act of 1933. The March 2021 Note was amended and restated so as to, among others, extend the maturitydate to August 31, 2022 (the “Rescheduled March 2021 Note”).This exhibit contains a description of the rights of (i) the holders of shares and (ii) ADS holders. Shares underlying the ADSs are held byDeutsche Bank Trust Company Americas, as depositary, and holders of ADSs will not be treated as holders of the shares.Description of Class A Ordinary SharesThe following is a summary of material provisions of our currently effective seventh amended and restated memorandum and articles ofassociation (the “Memorandum and Articles of Association”), as well as the Companies Act (As Revised) of the Cayman Islands (the “CompaniesAct”) insofar as they relate to the material terms of our ordinary shares. Notwithstanding this, because it is a summary, it may not contain all theinformation that you may otherwise deem important. For more complete information, you should read our Memorandum and Articles ofAssociation, which has been filed with the SEC as an exhibit to our Registration Statement on Form F-1 (File No. 333-226867).Type and Class of Securities (Item 9.A.5 of Form 20-F)Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares, each par value $0.00001 per share. Therespective number of Class A ordinary shares and Class B ordinary shares issued and outstanding as of the last day of our respective fiscal year isprovided on the cover of the annual report on Form 20-F (the “Form 20-F”) of our company. Certificates representing the ordinary shares are issuedin registered form. Our ordinary shares may be held in either certificated or uncertificated form.Preemptive Rights (Item 9.A.3 of Form 20-F)Our shareholders do not have preemptive rights.Limitations or Qualifications (Item 9.A.6 of Form 20-F)We keep and intend to maintain a dual-class voting structure. Holders of Class A ordinary shares are entitled to one vote per share, whileholders of Class B ordinary shares are entitled, on a poll, to twenty-five (25) votes per share on all matters subject to vote at general meetings ofour company.Due to the disparate voting powers attached to these two classes of ordinary shares, the holders of our Class B ordinary shares will havedecisive influence over matters requiring shareholders’ approval, including election of directors and significant corporate transactions, such as amerger or sale of our company. This concentrated control will limit the ability to influence corporate matters and could discourage others frompursuing any potential merger, takeover or other change of control transactions that holders of Class A ordinary shares and ADSs may view asbeneficial. 2Other Rights (Item 9.A.7 of Form 20-F)Not applicable.Rights of the Class A Ordinary Shares (Item 10.B.3 of Form 20-F)Ordinary Shares. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of our Class Aordinary shares and Class B ordinary shares will have the same rights except for voting and conversion rights. Our ordinary shares are issued inregistered form. Our shareholders who are non-residents of the Cayman Islands may freely hold and vote their shares.Conversion. Each Class B ordinary share is convertible into one Class A ordinary share at any time at the option of the holder thereof.Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment ordisposition of any Class B ordinary shares by a holder thereof to any person other than holders of Class B ordinary shares or their affiliates or upona change of ultimate beneficial ownership of any Class B ordinary shares to any person who is not an affiliate of the holder thereof, such Class Bordinary shares shall be automatically and immediately converted into the same number of Class A ordinary shares.Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. OurMemorandum and Articles of Association provide our directors may, before recommending or declaring any dividend, set aside out of the fundslegally available for distribution such sums as they think proper as a reserve or reserves which shall, in the absolute discretion of our directors, beapplicable for meeting contingencies or for equalizing dividends or for any other purpose to which those funds may be properly applied. Under thelaws of the Cayman Islands, our company may pay a dividend out of either profit or share premium account, provided that in no circumstances maya dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.Voting Rights. In respect of all matters subject to a shareholders’ vote, each holder of Class A ordinary shares is entitled to one vote pershare and each holder of Class B ordinary shares is entitled, on a poll, to twenty-five votes per share on all matters subject to vote at our generalmeetings. Our Class A ordinary shares and Class B ordinary shares vote together as a single class on all matters submitted to a vote of ourshareholders, except as may otherwise be required by law. Voting at any shareholders’ meeting is by show of hands unless a poll is demanded. Apoll may be demanded by the chairman of such meeting or any shareholder present in person or by proxy.A quorum required for a meeting of shareholders consists of one or more shareholders present or representing by proxy and holding shareswhich represent, in aggregate, not less than one-third of all votes attaching to the issued and outstanding voting shares entitled to vote at generalmeetings. Shareholders may be present in person or by proxy or, if the shareholder is a corporation or other non-natural person, by its dulyauthorized representative. Shareholders’ meetings may be convened by our board of directors on its own initiative or upon a request to the directorsby shareholders holding, at the date of deposit of the requisition, shares which represent, in aggregate, no less than one-third of all votes attachingto all our issued and outstanding shares, in which case the directors are obliged to call such meeting and to put the resolutions so requisitioned to avote at such meeting; however, our Memorandum and Articles of Association do not provide our shareholders with any right to put any proposalsbefore annual general meetings or extraordinary general meetings not called by such shareholders. Advance notice of at least ten (10) calendar daysis required for the convening of our annual general shareholders’ meeting and any other general shareholders’ meeting.An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votesattaching to the ordinary shares cast by those shareholders entitled to vote who are present in person or by proxy at a general meeting, while aspecial resolution requires the affirmative vote of no less than two-thirds of the votes attaching to the ordinary shares cast by those shareholdersentitled to vote who are present in person or by proxy at a general meeting. Both ordinary resolutions and special resolutions may also be passed bya unanimous written resolution signed by all the shareholders of our company, as permitted by the Companies Act and our Memorandum andArticles of Association. A special resolution will be required for important matters such as a change of our name or making changes to ourMemorandum and Articles of 3Association. Holders of the ordinary shares may, among other things, consolidate or subdivide their shares by ordinary resolution.Transfer of Ordinary Shares. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her ordinaryshares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or onwhich we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:▪the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such otherevidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;▪the instrument of transfer is in respect of only one class of ordinary shares;▪the instrument of transfer is properly stamped, if required;▪in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceedfour; and▪a fee of such maximum sum as the New York Stock Exchange may determine to be payable or such lesser sum as our directors mayfrom time to time require is paid to us in respect thereof.If our directors refuse to register a transfer they shall, within three calendar months after the date on which the instrument of transfer waslodged, send to each of the transferor and the transferee notice of such refusal.The registration of transfers may, after compliance with any notice required of the New York Stock Exchange, be suspended and theregister closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that theregistration of transfers shall not be suspended nor the register closed for more than 30 calendar days in any calendar year as our board maydetermine from time to time.Liquidation. On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more thansufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholdersin proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares inrespect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distributionare insufficient to repay all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders in proportion to thepar value of the shares held by them.Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any amountsunpaid on their shares in a notice served to such shareholders at least 14 calendar days prior to the specified time of payment. The shares that havebeen called upon and remain unpaid are subject to forfeiture.Redemption, Repurchase and Surrender of Shares. We may issue shares on terms that such shares are subject to redemption, at our optionor at the option of the holders of these shares, on such terms and in such manner as may be determined by our board of directors. Our companymay also repurchase any of our shares on such terms and in such manner as have been approved by our board of directors or by an ordinaryresolution of our shareholders. Under the Companies Act, the redemption or repurchase of any share may be paid out of our company’s profits orout of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premiumaccount and capital redemption reserve) if our company can, immediately following such payment, pay its debts as they fall due in the ordinarycourse of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a) unless it is fully paid up, (b) if such 4redemption or repurchase would result in there being no shares outstanding or (c) if the company has commenced liquidation. In addition, ourcompany may accept the surrender of any fully paid share for no consideration.Requirements to Change the Rights of Holders of Class A Ordinary Shares (Item 10.B.4 of Form 20-F)Variations of Rights of Shares. If at any time, our share capital is divided into different classes of shares, the rights attached to any suchclass (unless otherwise provided by the terms of issue of the shares of that class), may be materially adversely varied with the consent in writing ofthe holders of two-thirds of the issued shares of that class or with the sanction of a resolution passed at a separate meeting of the holders of theshares of that class by the holders of two-thirds of the issued shares of that class. The rights conferred upon the holders of the shares of any classissued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation orissue of further shares ranking pari passu with such existing class of shares or subsequent to them or the redemption or purchase of any shares ofany class by our company. The rights of the holders of shares shall not be deemed to be materially adversely varied by the creation or issue ofshares with preferred or other rights including, without limitation, the creation of shares with enhanced or weighted voting rights.Limitations on the Rights to Own Shares (Item 10.B.6 of Form 20-F)There are no limitations imposed by our Memorandum and Articles of Association on the rights of non-resident or foreign shareholders tohold or exercise voting rights on our Class A Ordinary shares.Provisions Affecting Any Change of Control (Item 10.B.7 of Form 20-F)Anti-Takeover Provisions. Some provisions of our Memorandum and Articles of Association may discourage, delay or prevent a change ofcontrol of our company or management that shareholders may consider favorable, including provisions that:▪authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences,privileges and restrictions of such preference shares without any further vote or action by our shareholders; and▪limit the ability of shareholders to requisition and convene general meetings of shareholders.However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our Memorandum andArticles of Association for a proper purpose and for what they believe in good faith to be in the best interests of our company.Ownership Threshold (Item 10.B.8 of Form 20-F)There are no provisions in the Companies Act applicable to the Company and our Memorandum and Articles of Association that requireour company to disclose shareholder ownership above any particular ownership threshold.Differences Between the Law of Different Jurisdictions (Item 10.B.9 of Form 20-F)The Companies Act is modeled after that of England but does not follow recent English statutory enactments and differs from lawsapplicable to U.S. corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of theCompanies Act applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.Mergers and Similar Arrangements. The Companies Act permits mergers and consolidations between Cayman Islands companies andbetween Cayman Islands companies and non-Cayman Islands companies. For these purposes, (a) “merger” means the merging of two or moreconstituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (b) a“consolidation” 5means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property andliabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituentcompany must approve a written plan of merger or consolidation, which must then be authorized by (a) a special resolution of the shareholders ofeach constituent company, and (b) such other authorization, if any, as may be specified in such constituent company’s articles of association. Theplan must be filed with the Registrar of Companies of the Cayman Islands together with a declaration as to the solvency of the consolidated orsurviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger orconsolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will bepublished in the Cayman Islands Gazette. Court approval is not required for a merger or consolidation which is effected in compliance with thesestatutory procedures.A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution ofshareholders of that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unlessthat member agrees otherwise. For this purpose, a company is a “parent” of a subsidiary if it holds issued shares that together represent at leastninety percent (90%) of the votes at a general meeting of the subsidiary.The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waivedby a court in the Cayman Islands.Save in certain limited circumstances, a shareholder of a Cayman constituent company who dissents from the merger or consolidation isentitled to payment of the fair value of his shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) upondissenting to the merger or consolidation, provide the dissenting shareholder complies strictly with the procedures set out in the Companies Act.The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which he or she might otherwise beentitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.Separate from the statutory provisions relating to mergers and consolidations, the Companies Act also contains statutory provisions thatfacilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by amajority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at ameeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by theGrand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to beapproved, the court can be expected to approve the arrangement if it determines that:▪the statutory provisions as to the required majority vote have been met;▪the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide withoutcoercion of the minority to promote interests adverse to those of the class;▪the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of hisinterest; and▪the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.The Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentientminority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90% of the shares affected within four months,the offeror may, within a two-month period commencing on the expiration of such four-month period, require the holders of the remaining shares totransfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is 6unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.If an arrangement and reconstruction is thus approved, or if a tender offer is made and accepted, a dissenting shareholder would have norights comparable to appraisal rights, save that objectors to a takeover offer may apply to the Grand Court of the Cayman Islands for various ordersthat the Grand Court of the Cayman Islands has a broad discretion to make, which would otherwise ordinarily be available to dissentingshareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.Shareholders’ Suits. In principle, we will normally be the proper plaintiff and as a general rule a derivative action may not be brought by aminority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, thereare exceptions to the foregoing principle, including when:▪a company acts or proposes to act illegally or ultra vires;▪the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that hasnot been obtained; and▪those who control the company are perpetrating a (cid:0)fraud on the minority.Indemnification of Directors and Executive Officers and Limitation of Liability. Cayman Islands law does not limit the extent to which acompany’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any suchprovision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or theconsequences of committing a crime. Our Memorandum and Articles of Association provides that every director and officer (but not including thecompany's auditors) from time to time of the company shall be indemnified and secured harmless against all actions, proceedings, costs, charges,expenses, losses, damages or liabilities incurred or sustained by such person, other than by reason of such person's own dishonesty, willful defaultor fraud, in or about the conduct of the company's business or affairs (including as a result of any mistake of judgment) or in the execution ordischarge of his duties, powers, authorities or discretions, including without prejudice to the generality of the foregoing, any costs, expenses, lossesor liabilities incurred by such person in defending (whether successfully or otherwise) any civil proceedings concerning the company or its affairsin any court whether in the Cayman Islands or elsewhere. This standard of conduct is generally the same as permitted under the Delaware GeneralCorporation Law for a Delaware corporation.In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons withadditional indemnification beyond that provided in our currently effective seventh Memorandum and Articles of Association.Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controllingus under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressedin the Securities Act and is therefore unenforceable.Directors’ Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporationand its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in goodfaith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himselfof, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that adirector act in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personalgain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders takeprecedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general,actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in thebest interests of the corporation. However, this presumption may be rebutted by evidence of a 7breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove theprocedural fairness of the transaction, and that the transaction was of fair value to the corporation.As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the companyand therefore it is considered that he owes the following duties to the company—a duty to act bona fide in the best interests of the company, a dutynot to make a profit based on his position as director (unless the company permits him to do so) and a duty not to put himself in a position wherethe interests of the company conflict with his personal interest or his duty to a third party. A director of a Cayman Islands company owes to thecompany a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his duties a greaterdegree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courtshave moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the CaymanIslands.Shareholder Action by Written Consent. Under the Delaware General Corporation Law, a corporation may eliminate the right ofshareholders to act by written consent by amendment to its certificate of incorporation. Cayman Islands law and our Memorandum and Articles ofAssociation provide that shareholders may approve corporate matters by way of a unanimous written resolution signed by or on behalf of eachshareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held.Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annualmeeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the boardof directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.The Companies Act provide shareholders with only limited rights to requisition a general meeting, and does not provide shareholders withany right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. OurMemorandum and Articles of Association allow our shareholders holding in aggregate not less than one-third of all votes attaching to the issuedand outstanding shares of our company entitled to vote at general meetings to requisition an extraordinary general meeting of our shareholders, inwhich case our board is obliged to convene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at such meeting.Other than this right to requisition a shareholders’ meeting, our Memorandum and Articles of Association do not provide our shareholders with anyother right to put proposals before annual general meetings or extraordinary general meetings. As a Cayman Islands exempted company, we are notobliged by law to call shareholders’ annual general meetings.Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable toDelaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificateof incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the datethat such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15%or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to makea two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to thedate on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or thetransaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation tonegotiate the terms of any acquisition transaction with the target’s board of directors.Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delawarebusiness combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significantshareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and not with the effect ofconstituting a fraud on the minority shareholders. 8Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve,dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by theboard of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation toinclude in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolutionof its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority toorder winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under theCompanies Act and our Memorandum and Articles of Association, our company may be dissolved, liquidated or wound up by a special resolutionof our shareholders.Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares withthe approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under ourMemorandum and Articles of Association, if our share capital is divided into more than one class of shares, we may materially adversely vary therights attached to any class with the written consent of the holders of two-thirds of the issued shares of that class or with the sanction of a resolutionpassed at a separate general meeting of the holders of the shares of that class by the holders of two-thirds of the issued shares of that class.Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may beamended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Aspermitted by Cayman Islands law and our Memorandum and Articles of Association, our Memorandum and Articles of Association may only beamended with a special resolution of our shareholders.Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our Memorandum and Articles of Association on therights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in ourMemorandum and Articles of Association which require our company to disclose shareholder ownership above any particular ownership threshold.Exempted Company. We are incorporated as an exempted company with limited liability under the Companies Act. The Companies Actdistinguishes between ordinary resident companies and exempted companies. Any company that is incorporated in the Cayman Islands butconducts business mainly outside of the Cayman Islands may apply to be incorporated as an exempted company. The requirements for an exemptedcompany are essentially the same as for an ordinary company except that an exempted company:▪does not have to file an annual return of its shareholders with the Registrar of Companies;▪is not required to open its register of members for inspection;▪does not have to hold an annual general meeting;▪may issue negotiable or bearer shares or shares with no par value;▪may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the firstinstance);▪may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;▪may register as a limited duration company; and▪may register as a segregated portfolio company. 9 “Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).Changes in Capital (Item 10.B.10 of Form 20-F)Our shareholders may from time to time by ordinary resolution:▪increase our share capital by new shares of such amount as it thinks expedient;▪consolidate and divide all or any of our share capital into shares of a larger amount than our existing shares;▪sub-divide our shares, or any of them into shares of a smaller than that fixed by the Memorandum, provided that in the subdivisionthe proportion between the amount paid and the amount, if any, unpaid on each reduced share shall be the same as it was in case ofthe share from which the reduced share is derived; or▪cancel any shares which, at the date of the passing of the resolution, have not been taken or agreed to be taken by any person anddiminish the amount of our share capital by the amount of the shares so canceled.Our shareholders may by special resolution, subject to confirmation by the Grand Court of the Cayman Islands on an application by ourcompany for an order confirming such reduction, reduce our share capital or any capital redemption reserve in any manner permitted by law.Debt Securities (Item 12.A of Form 20-F)Not applicable.Warrants and Rights (Item 12.B of Form 20-F)Not applicable.Other Securities (Item 12.C of Form 20-F)Not applicable.American Depositary Shares (Items 12.D.1 and 12.D.2 of Form 20-F)The name of the depositary is Deutsche Bank Trust Company Americas. The depositary’s office is located at 60 Wall Street, New York,NY 10005, USA.Each ADS represents ownership of 50 Class A ordinary shares, deposited with Deutsche Bank AG, Hong Kong Branch, as custodian forthe depositary. Each ADS will also represent ownership of any other securities, cash or other property which may be held by the depositary.We will not treat ADS holders as our shareholders and accordingly, you, as an ADS holder, will not have shareholder rights. CaymanIslands law governs shareholder rights. The depositary will be the holder of the Class A ordinary shares underlying your ADSs. As a holder ofADSs, you will have ADS holder rights. A deposit agreement among us, the depositary and you, as an ADS holder, and the beneficial owners ofADSs sets out ADS holder rights as well as the rights and obligations of the depositary. The laws of the State of New York govern the depositagreement and the ADSs. See “—Jurisdiction and Arbitration.” 10The following is a summary of the material provisions of the deposit agreement. For more complete information, you should read theentire deposit agreement and the form of American Depositary Receipt. This summary does not purport to be complete and is subject to andqualified in its entirety by our Form F-6 filed on September 19, 2018 (Commission file No. 333-227412), which is incorporated herein byreference, including the exhibits thereto. For directions on how to obtain copies of those documents, see “Item 10.H. Additional Information—Documents on Display” of the Form 20-F.Dividends and Other DistributionsHow will you receive dividends and other distributions on the shares?The depositary has agreed to pay to you the cash dividends or other distributions it or the custodian receives on Class A ordinary shares orother deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class Aordinary shares your ADSs represent as of the record date (which will be as close as practicable to the record date for our Class A ordinary shares)set by the depositary with respect to the ADSs.▪Cash. The depositary will convert or cause to be converted any cash dividend or other cash distribution we pay on the Class Aordinary shares or any net proceeds from the sale of any Class A ordinary shares, rights, securities or other entitlements under theterms of the deposit agreement into U.S. dollars if it can do so on a practicable basis, and can transfer the U.S. dollars to the UnitedStates and will distribute promptly the amount thus received. If the depositary shall determine in its judgment that such conversionsor transfers are not practical or lawful or if any government approval or license is needed and cannot be obtained at a reasonable costwithin a reasonable period or otherwise sought, the deposit agreement allows the depositary to distribute the foreign currency only tothose ADS holders to whom it is possible to do so. It will hold or cause the custodian to hold the foreign currency it cannot convertfor the account of the ADS holders who have not been paid and such funds will be held for the respective accounts of the ADSholders. It will not invest the foreign currency and it will not be liable for any interest for the respective accounts of the ADS holders.Before making a distribution, any taxes or other governmental charges, together with fees and expenses of the depositary, that must bepaid, will be deducted. See “Taxation.” It will distribute only whole U.S. dollars and cents and will round down fractional cents to thenearest whole cent. If the exchange rates fluctuate during a time when the depositary cannot convert the foreign currency, you maylose some or all of the value of the distribution.▪Shares. For any Class A ordinary shares we distribute as a dividend or free distribution, either (1) the depositary will distributeadditional ADSs representing such Class A ordinary shares or (2) existing ADSs as of the applicable record date will represent rightsand interests in the additional Class A ordinary shares distributed, to the extent reasonably practicable and permissible under law, ineither case, net of applicable fees, charges and expenses incurred by the depositary and taxes and/or other governmental charges. Thedepositary will only distribute whole ADSs. It will try to sell Class A ordinary shares which would require it to deliver a fractionalADS and distribute the net proceeds in the same way as it does with cash. The depositary may sell a portion of the distributed Class Aordinary shares sufficient to pay its fees and expenses, and any taxes and governmental charges, in connection with that distribution.▪Elective Distributions in Cash or Shares. If we offer holders of our Class A ordinary shares the option to receive dividends in eithercash or shares, the depositary, after consultation with us and having received timely notice as described in the deposit agreement ofsuch elective distribution by us, has discretion to determine to what extent such elective distribution will be made available to you asa holder of the ADSs. We must timely first instruct the depositary to make such elective distribution available to you and furnish itwith satisfactory evidence that it is legal to do so. The depositary could decide it is not legal or reasonably practicable to make suchelective distribution available to you. In such case, the depositary shall, on the basis of the same determination as is made in respectof the Class A ordinary shares for which no election is made, distribute either cash in the same way as it does 11in a cash distribution, or additional ADSs representing Class A ordinary shares in the same way as it does in a share distribution. Thedepositary is not obligated to make available to you a method to receive the elective dividend in shares rather than in ADSs. Therecan be no assurance that you will be given the opportunity to receive elective distributions on the same terms and conditions as theholders of Class A ordinary shares.▪Rights to Purchase Additional Shares. If we offer holders of our Class A ordinary shares any rights to subscribe for additional shares,the depositary shall having received timely notice as described in the deposit agreement of such distribution by us, consult with us,and we must determine whether it is lawful and reasonably practicable to make these rights available to you. We must first instruct thedepositary to make such rights available to you and furnish the depositary with satisfactory evidence that it is legal to do so. If thedepositary decides it is not legal or reasonably practicable to make the rights available but that it is lawful and reasonably practicableto sell the rights, the depositary will endeavor to sell the rights and in a riskless principal capacity or otherwise, at such place andupon such terms (including public or private sale) as it may deem proper distribute the net proceeds in the same way as it does withcash. The depositary will allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them.▪If the depositary makes rights available to you, it will establish procedures to distribute such rights and enable you to exercise therights upon your payment of applicable fees, charges and expenses incurred by the depositary and taxes and/or othergovernmental charges. The Depositary shall not be obliged to make available to you a method to exercise such rights to subscribefor Class A ordinary shares (rather than ADSs).▪U.S. securities laws may restrict transfers and cancellation of the ADSs represented by shares purchased upon exercise of rights.For example, you may not be able to trade these ADSs freely in the United States. In this case, the depositary may deliverrestricted depositary shares that have the same terms as the ADSs described in this section except for changes needed to put thenecessary restrictions in place.▪There can be no assurance that you will be given the opportunity to exercise rights on the same terms and conditions as theholders of Class A ordinary shares or be able to exercise such rights.▪Other Distributions. Subject to receipt of timely notice, as described in the deposit agreement, from us with the request to make anysuch distribution available to you, and provided the depositary has determined such distribution is lawful and reasonably practicableand feasible and in accordance with the terms of the deposit agreement, the depositary will distribute to you anything else wedistribute on deposited securities by any means it may deem practicable, upon your payment of applicable fees, charges and expensesincurred by the depositary and taxes and/or other governmental charges. If any of the conditions above are not met, the depositarywill endeavor to sell, or cause to be sold, what we distributed and distribute the net proceeds in the same way as it does with cash; or,if it is unable to sell such property, the depositary may dispose of such property in any way it deems reasonably practicable under thecircumstances for nominal or no consideration, such that you may have no rights to or arising from such property.The depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADS holders. Wehave no obligation to register ADSs, shares, rights or other securities under the Securities Act. We also have no obligation to take any other actionto permit the distribution of ADSs, shares, rights or anything else to ADS holders. This means that you may not receive the distributions we makeon our shares or any value for them if we and/or the depositary determines that it is illegal or not practicable for us or the depositary to make themavailable to you. 12Deposit, Withdrawal and CancellationHow are ADSs issued?The depositary will deliver ADSs if you or your broker deposit Class A ordinary shares or evidence of rights to receive Class A ordinaryshares with the custodian. Upon payment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees,the depositary will register the appropriate number of ADSs in the names you request and will deliver the ADSs to or upon the order of the personor persons entitled thereto.How do ADS holders cancel an American Depositary Share?You may turn in your ADSs at the depositary’s corporate trust office or by providing appropriate instructions to your broker. Uponpayment of its fees and expenses and of any taxes or charges, such as stamp taxes or stock transfer taxes or fees, the depositary will deliver theClass A ordinary shares and any other deposited securities underlying the ADSs to you or a person you designate at the office of the custodian. Or,at your request, risk and expense, the depositary will deliver the deposited securities at its corporate trust office, to the extent permitted by law.How do ADS holders interchange between Certificated ADSs and Uncertificated ADSs?You may surrender your ADR to the depositary for the purpose of exchanging your ADR for uncertificated ADSs. The depositary willcancel that ADR and will send you a statement confirming that you are the owner of uncertificated ADSs. Alternatively, upon receipt by thedepositary of a proper instruction from a holder of uncertificated ADSs requesting the exchange of uncertificated ADSs for certificated ADSs, thedepositary will execute and deliver to you an ADR evidencing those ADSs.Voting RightsHow do you vote?You may instruct the depositary to vote the Class A ordinary shares or other deposited securities underlying your ADSs at any meeting atwhich you are entitled to vote pursuant to any applicable law, the provisions of our Memorandum and Articles of Association, and the provisions ofor governing the deposited securities. Otherwise, you could exercise your right to vote directly if you withdraw the Class A ordinary shares.However, you may not know about the meeting sufficiently enough in advance to withdraw the Class A ordinary shares.If we ask for your instructions and upon timely notice from us by regular, ordinary mail delivery, or by electronic transmission, asdescribed in the deposit agreement, the depositary will notify you of the upcoming meeting at which you are entitled to vote pursuant to anyapplicable law, the provisions of our Memorandum and Articles of Association, and the provisions of or governing the deposited securities, andarrange to deliver our voting materials to you. The materials will include or reproduce (a) such notice of meeting or solicitation of consents orproxies; (b) a statement that the ADS holders at the close of business on the ADS record date will be entitled, subject to any applicable law, theprovisions of our Memorandum and Articles of Association, and the provisions of or governing the deposited securities, to instruct the depositaryas to the exercise of the voting rights, if any, pertaining to the Class A ordinary shares or other deposited securities represented by such holder’sADSs; and (c) a brief statement as to the manner in which such instructions may be given or deemed given in accordance with the third to lastsentence of this paragraph if no instruction is received, to the depositary to give a discretionary proxy to a person designated by us. Votinginstructions may be given only in respect of a number of ADSs representing an integral number of Class A ordinary shares or other depositedsecurities. For instructions to be valid, the depositary must receive them in writing on or before the date specified. The depositary will try, as far aspractical, subject to applicable law and the provisions of our Memorandum and Articles of Association, to vote or to have its agents vote the ClassA ordinary shares or other deposited securities (in person or by proxy) as you instruct. The depositary will only vote or attempt to vote as youinstruct. If we timely requested the depositary to solicit your instructions but no instructions are received by the depositary from an owner withrespect to any of the deposited securities represented 13by the ADSs of that owner on or before the date established by the depositary for such purpose, the depositary shall deem that owner to haveinstructed the depositary to give a discretionary proxy to a person designated by us with respect to such deposited securities, and the depositaryshall give a discretionary proxy to a person designated by us to vote such deposited securities. However, no such instruction shall be deemed givenand no such discretionary proxy shall be given with respect to any matter if we inform the depositary we do not wish such proxy given, substantialopposition exists or the matter materially and adversely affects the rights of holders of the Class A ordinary shares.We cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote the Class Aordinary shares underlying your ADSs. In addition, there can be no assurance that ADS holders and beneficial owners generally, or any holder orbeneficial owner in particular, will be given the opportunity to vote or cause the custodian to vote on the same terms and conditions as the holdersof our Class A ordinary shares.The depositary and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out votinginstructions. This means that you may not be able to exercise your right to vote and you may have no recourse if the Class A ordinary sharesunderlying your ADSs are not voted as you requested.In order to give you a reasonable opportunity to instruct the depositary as to the exercise of voting rights relating to deposited securities, ifwe request the depositary to act, we will give the depositary notice of any such meeting and details concerning the matters to be voted at least 30business days in advance of the meeting date.Compliance with RegulationsInformation RequestsEach ADS holder and beneficial owner shall (a) provide such information as we or the depositary may request pursuant to law, including,without limitation, relevant Cayman Islands law, any applicable law of the United States of America, our Memorandum and Articles ofAssociation, any resolutions of our Board of Directors adopted pursuant to such Memorandum and Articles of Association, the requirements of anymarkets or exchanges upon which the Class A ordinary shares, ADSs or ADRs are listed or traded, or to any requirements of any electronic book-entry system by which the ADSs or ADRs may be transferred, regarding the capacity in which they own or owned ADRs, the identity of any otherpersons then or previously interested in such ADRs and the nature of such interest, and any other applicable matters, and (b) be bound by andsubject to applicable provisions of the laws of Cayman Islands, our Memorandum and Articles of Association, and the requirements of any marketsor exchanges upon which the ADSs, ADRs or Class A ordinary shares are listed or traded, or pursuant to any requirements of any electronic book-entry system by which the ADSs, ADRs or Class A ordinary shares may be transferred, to the same extent as if such ADS holder or beneficialowner held Class A ordinary shares directly, in each case irrespective of whether or not they are ADS holders or beneficial owners at the time suchrequest is made.Disclosure of InterestsEach ADS holder and beneficial owner shall comply with our requests pursuant to Cayman Islands law, the rules and requirements of theNew York Stock Exchange and any other stock exchange on which the Class A ordinary shares are, or will be, registered, traded or listed or ourMemorandum and Articles of Association, which requests are made to provide information, inter alia, as to the capacity in which such ADS holderor beneficial owner owns ADS and regarding the identity of any other person interested in such ADS and the nature of such interest and variousother matters, whether or not they are ADS holders or beneficial owners at the time of such requests.Payment of TaxesYou will be responsible for any taxes or other governmental charges payable, or which become payable, on your ADSs or on the depositedsecurities represented by any of your ADSs. The depositary may refuse to register or transfer your ADSs or allow you to withdraw the depositedsecurities represented by your ADSs until such taxes or other charges are paid. It may apply payments owed to you or sell deposited securitiesrepresented by your ADSs to 14pay any taxes owed and you will remain liable for any deficiency. If the depositary sells deposited securities, it will, if appropriate, reduce thenumber of ADSs to reflect the sale and pay to you any net proceeds, or send to you any property, remaining after it has paid the taxes. You agree toindemnify us, the depositary, the custodian and each of our and their respective agents, directors, employees and affiliates for, and hold each ofthem harmless from, any claims with respect to taxes (including applicable interest and penalties thereon) arising from any refund of taxes, reducedrate of withholding at source or other tax benefit obtained for you. Your obligations under this paragraph shall survive any transfer of ADRs, anysurrender of ADRs and withdrawal of deposited securities or the termination of the deposit agreement. 15Reclassifications, Recapitalizations and MergersIf we:Then:Change the nominal or par value of our Class A ordinary sharesThe cash, shares or other securities received by the depositarywill become deposited securities.Reclassify, split up or consolidate any of the deposited securitiesEach ADS will automatically represent its equal share of thenew deposited securitiesDistribute securities on the Class A ordinary shares that are not distributed toyou, or Recapitalize, reorganize, merge, liquidate, sell all or substantially allof our assets, or take any similar actionThe depositary may distribute some or all of the cash, shares orother securities it received. It may also deliver new ADSs or askyou to surrender your outstanding ADRs in exchange for newADRs identifying the new deposited securities.Amendment and TerminationHow may the deposit agreement be amended?We may agree with the depositary to amend the deposit agreement and the form of ADR without your consent for any reason. If anamendment adds or increases fees or charges, except for taxes and other governmental charges or expenses of the depositary for registration fees,facsimile costs, delivery charges or similar items, including expenses incurred in connection with foreign exchange control regulations and othercharges specifically payable by ADS holders under the deposit agreement, or materially prejudices a substantial existing right of ADS holders, itwill not become effective for outstanding ADSs until 30 days after the depositary notifies ADS holders of the amendment. At the time anamendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the ADRs andthe deposit agreement as amended. If any new laws are adopted which would require the deposit agreement to be amended in order to complytherewith, we and the depositary may amend the deposit agreement in accordance with such laws and such amendment may become effectivebefore notice thereof is given to ADS holders.How may the deposit agreement be terminated?The depositary will terminate the deposit agreement if we ask it to do so, in which case the depositary will give notice to you at least 90days prior to termination. The depositary may also terminate the deposit agreement if the depositary has told us that it would like to resign, or if wehave removed the depositary, and in either case we have not appointed a new depositary within 90 days. In either such case, the depositary mustnotify you at least 30 days before termination.After termination, the depositary and its agents will do the following under the deposit agreement but nothing else: collect distributions onthe deposited securities, sell rights and other property and deliver Class A ordinary shares and other deposited securities upon cancellation of ADSsafter payment of any fees, charges, taxes or other governmental charges. Six months or more after the date of termination, the depositary may sellany remaining deposited securities by public or private sale. After that, the depositary will hold the money it received on the sale, as well as anyother cash it is holding under the deposit agreement, for the pro rata benefit of the ADS holders that have not surrendered their ADSs. It will notinvest the money and has no liability for interest. After such sale, the depositary’s only obligations will be to account for the money and other cash.After termination, we shall be discharged from all obligations under the deposit agreement except for our obligations to the depositary thereunder. 16Books of DepositaryThe depositary will maintain ADS holder records at its depositary office. You may inspect such records at such office during regularbusiness hours but solely for the purpose of communicating with other holders in the interest of business matters relating to the company, the ADRsand the deposit agreement.The depositary will maintain facilities in the Borough of Manhattan, The City of New York to record and process the issuance,cancellation, combination, split-up and transfer of ADRs.These facilities may be closed at any time or from time to time when such action is deemed necessary or advisable by the depositary inconnection with the performance of its duties under the deposit agreement or at our reasonable written request.Limitations on Obligations and LiabilityLimits on our Obligations and the Obligations of the Depositary and the Custodian; Limits on Liability to Holders of ADSsThe deposit agreement expressly limits our obligations and the obligations of the depositary and the custodian. It also limits our liabilityand the liability of the depositary. The depositary and the custodian:▪are only obligated to take the actions specifically set forth in the deposit agreement without gross negligence or willful misconduct;▪are not liable if any of us or our respective controlling persons or agents are prevented or forbidden from, or subjected to any civil orcriminal penalty or restraint on account of, or delayed in, doing or performing any act or thing required by the terms of the depositagreement and any ADR, by reason of any provision of any present or future law or regulation of the United States or any statethereof, Cayman Islands or any other country, or of any other governmental authority or regulatory authority or stock exchange, or onaccount of the possible criminal or civil penalties or restraint, or by reason of any provision, present or future, of our Memorandumand Articles of Association or any provision of or governing any deposited securities, or by reason of any act of God or war or othercircumstances beyond its control (including, without limitation, nationalization, expropriation, currency restrictions, work stoppage,strikes, civil unrest, revolutions, rebellions, explosions and computer failure);▪are not liable by reason of any exercise of, or failure to exercise, any discretion provided for in the deposit agreement or in ourMemorandum and Articles of Association or provisions of or governing deposited securities;▪are not liable for any action or inaction of the depositary, the custodian or us or their or our respective controlling persons or agents inreliance upon the advice of or information from legal counsel, any person presenting Class A ordinary shares for deposit or any otherperson believed by it in good faith to be competent to give such advice or information;▪are not liable for the inability of any holder of ADSs to benefit from any distribution on deposited securities that is not made availableto holders of ADSs under the terms of the deposit agreement;▪are not liable for any special, consequential, indirect or punitive damages for any breach of the terms of the deposit agreement, orotherwise;▪may rely upon any documents we believe in good faith to be genuine and to have been signed or presented by the proper party;▪disclaim any liability for any action or inaction or inaction of any of us or our respective controlling persons or agents in relianceupon the advice of or information from legal counsel, accountants, any 17person presenting Class A ordinary shares for deposit, holders and beneficial owners (or authorized representatives) of ADSs, or anyperson believed in good faith to be competent to give such advice or information; and▪disclaim any liability for inability of any holder to benefit from any distribution, offering, right or other benefit made available toholders of deposited securities but not made available to holders of ADS.The depositary and any of its agents also disclaim any liability (i) for any failure to carry out any instructions to vote, the manner in whichany vote is cast or the effect of any vote or failure to determine that any distribution or action may be lawful or reasonably practicable or forallowing any rights to lapse in accordance with the provisions of the deposit agreement, (ii) the failure or timeliness of any notice from us, thecontent of any information submitted to it by us for distribution to you or for any inaccuracy of any translation thereof, (iii) any investment riskassociated with the acquisition of an interest in the deposited securities, the validity or worth of the deposited securities, the credit-worthiness ofany third party, (iv) for any tax consequences that may result from ownership of ADSs, Class A ordinary shares or deposited securities, or (v) forany acts or omissions made by a successor depositary whether in connection with a previous act or omission of the depositary or in connection withany matter arising wholly after the removal or resignation of the depositary, provided that in connection with the issue out of which such potentialliability arises the depositary performed its obligations without gross negligence or willful misconduct while it acted as depositary.In the deposit agreement, we and the depositary agree to indemnify each other under certain circumstances.Jurisdiction and ArbitrationThe laws of the State of New York govern the deposit agreement and the ADSs and we have agreed with the depositary that the federal orstate courts in the City of New York shall have exclusive jurisdiction to hear and determine any dispute arising from or in connection with thedeposit agreement and that the depositary will have the right to refer any claim or dispute arising from the relationship created by the depositagreement to arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association.Jury Trial WaiverThe deposit agreement provides that, to the extent permitted by law, ADS holders waive the right to a jury trial of any claim they mayhave against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S.federal securities laws. If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver wasenforceable in the facts and circumstances of that case in accordance with applicable case law.Requirements for Depositary ActionsBefore the depositary will issue, deliver or register a transfer of an ADS, split-up, subdivide or combine ADSs, make a distribution on anADS, or permit withdrawal of Class A ordinary shares, the depositary may require:▪payment of stock transfer or other taxes or other governmental charges and transfer or registration fees charged by third parties for thetransfer of any Class A ordinary shares or other deposited securities and payment of the applicable fees, expenses and charges of thedepositary;▪satisfactory proof of the identity and genuineness of any signature or any other matters contemplated in the deposit agreement; and▪compliance with (A) any laws or governmental regulations relating to the execution and delivery of ADRs or ADSs or to thewithdrawal or delivery of deposited securities and (B) such reasonable regulations and procedures as the depositary may establish,from time to time, consistent with the deposit agreement and applicable laws, including presentation of transfer documents. 18The depositary may refuse to issue and deliver ADSs or register transfers of ADSs generally when the register of the depositary or ourtransfer books are closed or at any time if the depositary or we determine that it is necessary or advisable to do so.Your Right to Receive the Shares Underlying Your ADSsYou have the right to cancel your ADSs and withdraw the underlying Class A ordinary shares at any time except:▪when temporary delays arise because: (1) the depositary has closed its transfer books or we have closed our transfer books; (2) thetransfer of Class A ordinary shares is blocked to permit voting at a shareholders(cid:0) meeting; or (3) we are paying a dividend on ourClass A ordinary shares;▪when you owe money to pay fees, taxes and similar charges;▪when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to ADSs or tothe withdrawal of Class A ordinary shares or other deposited securities, or▪other circumstances specifically contemplated by Section I.A.(l) of the General Instructions to Form F-6 (as such General Instructionsmay be amended from time to time); or▪for any other reason if the depositary or we determine, in good faith, that it is necessary or advisable to prohibit withdrawals.The depositary shall not knowingly accept for deposit under the deposit agreement any Class A ordinary shares or other depositedsecurities required to be registered under the provisions of the Securities Act, unless a registration statement is in effect as to such Class A ordinaryshares.This right of withdrawal may not be limited by any other provision of the deposit agreement.Direct Registration SystemIn the deposit agreement, all parties to the deposit agreement acknowledge that the DRS and Profile Modification System, or Profile, willapply to uncertificated ADSs upon acceptance thereof to DRS by DTC. DRS is the system administered by DTC pursuant to which the depositarymay register the ownership of uncertificated ADSs, which ownership shall be evidenced by periodic statements issued by the depositary to theADS holders entitled thereto. Profile is a required feature of DRS which allows a DTC participant, claiming to act on behalf of an ADS holder, todirect the depositary to register a transfer of those ADSs to DTC or its nominee and to deliver those ADSs to the DTC account of that DTCparticipant without receipt by the depositary of prior authorization from the ADS holder to register such transfer.Description of Notes (Item 12.A of Form 20-F)The following description is only a summary of the material terms of the January 2021 Note and Rescheduled March 2021 Note and doesnot purport to be complete.On January 19, 2021, we issued the January 2021 Note to YA II PN, Ltd, a Cayman Islands exempt limited partnership. The January 2021Note has a conversion price of the lower of (1) US$4.20 per ADS, or (2) 88% of the lowest daily VWAP, being the dollar volume-weighted averageprice for ADSs on the New York Stock Exchange, during the ten consecutive trading days immediately preceding the conversion date or other dateof determination, but not lower than the floor price as prescribed in the January 2021 Note (the “Conversion Price of January 2021 Note”). TheConversion Price of January 2021 Note is subject to adjustment in the case of a subdivision, combination or re-classification. The principal and theinterest payable under the January 2021 Note will mature on January 19, 2022, unless earlier converted or redeemed by us. At any time beforeJanuary 19, 2022, YA II PN, Ltd 19may convert the January 2021 Note at their option into our Class A ordinary shares represented by ADSs at the Conversion Price of January 2021Note. Pursuant to the January 2021 Note, YA II PN, Ltd shall not sell such number of ADSs in any calendar month that would result in grossproceeds received by it in excess of the greater of (1) 30% of the dollar trading volume during such calendar month or (2) US$1,700,000, whichshall not apply with respect to any sales of the ADSs at prices greater than or equal to US$4.20 per ADS. YA II PN, Ltd has also agreed under thesecurities purchase agreement that it shall not directly or indirectly, engage in any short sales involving our securities during the periodcommencing on the date thereof and ending when no convertible note remains outstanding. As of the date of this annual report, the January 2021Note has been converted to 3,933,317 ADSs with the average conversion price of US$2.54 per ADS.On January 25, 2021, we entered into a Standby Equity Distribution Agreement (the “SEDA”) with YA II PN, Ltd. for the offer and sale of up to US$20,000,000 of the ADSs. We will be able to sell up to US$20,000,000 of our ADSs at our request any time during the 36 months following the date of the SEDA. The ADSs would be purchased pursuant to the SEDA at 90% of the Market Price, being the lowest daily VWAP (as defined below) of the ADSs during the five consecutive trading days commencing on the trading day following the date we submit an advance notice to Investor. The purchase would be subject to certain limitations, including that Investor could not purchase any ADSs that would result in it and its affiliates owning more than 4.99% of our then outstanding share capital. The YA II PN, Ltd. has agreed that, during the term of the SEDA, neither YA II PN, Ltd. nor its affiliates will engage in any short sales or hedging transactions with respect to our Class A ordinary shares or ADSs. “VWAP” means, for any trading day, the daily volume weighted average price of the ADSs for such date on the New York Stock Exchange as reported by Bloomberg L.P. during regular trading hours.On March 19, 2021, we issued the March 2021 Note to YA II PN, Ltd. On October 29, 2021, we entered into a letter agreement with YA IIPN, Ltd. to amend and restate the March 2021 Note so as to, among others, extend the maturity date to August 31, 2022 (the “Rescheduled March2021 Note”). The Rescheduled March 2021 Note has a fixed conversion price of US$3.00 per ADS (the “Fixed Conversion Price”). The FixedConversion Price is not subject to adjustment except in the case of a subdivision, combination or re-classification. The principal and the interestpayable under the Rescheduled March 2021 Note will mature on August 31, 2022, unless earlier converted or redeemed by us. At any time beforeAugust 31, 2022, YA II PN, Ltd. may convert the Rescheduled March 2021 Note at their option into our Class A ordinary shares represented byADSs at the Fixed Conversion Price. Beginning on June 1, 2021 and continuing on the first day of each calendar month thereafter through August1, 2022, the principal amount of the Rescheduled March 2021 Note plus an 8% redemption premium (“Payment Premium”) and plus accrued andunpaid interest will be subject to monthly redemption (“Monthly Redemption”). Under Monthly Redemption, we shall redeem an applicableredemption amount in accordance with the redemption schedule provided in the Rescheduled March 2021 Note, which is subject to pro rataadjustment to reflect the conversion or redemption otherwise effected pursuant to the Rescheduled March 2021 Note contemporaneous with orprior to the scheduled redemption date, in cash, ADSs through conversion of the Rescheduled March 2021 Note (at any time after the applicableredemption date), or a combination of both at our option. With respect to each Monthly Redemption all or partially in ADSs, the conversion priceshall be the lower of (1) the Fixed Conversion Price, or (2) 100% of the lowest daily VWAP (the dollar volume-weighted average price for ADSson the New York Stock Exchange) during the ten consecutive trading days immediately preceding the date of conversion (the “Variable ConversionPrice”). In addition, the holder of Rescheduled March 2021 Note may, at its option, convert an additional amount per month equal to US$1,000,000of principal, plus accrued and unpaid interests thereon, plus the applicable Payment Premium, at a conversion price based on the VariableConversion Price if the Variable Conversion Price for such conversions are US$2.00 or greater. In the event that the daily VWAP on each of thefive consecutive trading days immediately prior to the scheduled redemption date exceeds a price equal to 108% of the Fixed Conversion Price,then no cash redemption shall be due on such scheduled redemption date. We also have the right, but not the obligation, to redeem (“OptionalRedemption”) a portion or all amounts outstanding under the Rescheduled March 2021 Note prior to August 31, 2022 at a cash redemption priceequal to the outstanding principal balance to be redeemed, plus a 15% redemption premium and plus accrued and unpaid interest, if any; providedthat the trading price of the ADSs is less than Fixed Conversion Price, and we provide the holder of the Rescheduled March 2021 Note at least tenbusiness days’ prior written notice of its desire to exercise an Optional Redemption. The holder shall have ten business days to elect to convert allor any part of the Rescheduled March 2021 Note after receiving a redemption notice, in which case the redemption amount shall be reduced by theamount so converted. Pursuant to the Rescheduled March 2021 Note, YA II PN, Ltd. shall not sell such number of ADSs in any calendar monththat would result in gross proceeds received by it in excess of the greater of (1) 30% of the 20dollar trading volume during such calendar month or (2) US$3,290,000, which shall not apply with respect to any sales of the ADSs at pricesgreater than or equal to US$3.00 per ADS. YA II PN, Ltd. has also agreed under the securities purchase agreement that it shall not directly orindirectly, engage in any short sales involving our securities during the period commencing on the date thereof and ending when no convertiblenote remains outstanding. Exhibit 8.1List of Principal Subsidiaries and Variable Interest Entities of the Registrant*Subsidiary Place of IncorporationNova (Cayman) Inc.Cayman IslandsTouchPal HK Co., LimitedHong KongCooTek Hong Kong LimitedHong KongTouchPal, IncUnited StatesSmillage Inc.United StatesShanghai Chule (CooTek) Information Technology Co., Ltd.People's Republic of ChinaYingsun Information Technology (Ningbo) Co., Ltd.People's Republic of ChinaShanghai Qianqi Technology Co.,LtdPeople's Republic of ChinaVariable Interest Entity Place of IncorporationShanghai Chubao (CooTek) Information Technology Co., LtdPeople's Republic of ChinaMolihong (Shenzhen) Internet Technology Co., Ltd.People's Republic of ChinaShanghai Qiaohan Technology Co., Ltd.People's Republic of ChinaShanghai Dengyong Information Technology Co., Ltd.People's Republic of ChinaShanghai Qinglin Network Technology Co., Ltd (4)People's Republic of China*Other entities of CooTek (Cayman) Inc. have been omitted from this list since, considered in the aggregate as a single entity, they would notconstitute a significant subsidiary. Exhibit 12.1Certification by the Principal Executive OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Karl Kan Zhang, certify that:1.I have reviewed this annual report on Form 20-F of CooTek (Cayman) Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the periodcovered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control overfinancial reporting; and5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’sinternal control over financial reporting.Date: April 29, 2022By:/s/ Karl Kan ZhangName:Karl Kan ZhangTitle:Chairman of the Board of Directors and ChiefTechnology Officer Exhibit 12.2Certification by the Chief Financial OfficerPursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Robert Yi Cui, certify that:1.I have reviewed this annual report on Form 20-F of CooTek (Cayman) Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessaryto make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the periodcovered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;4.The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f)and 15d-15(f)) for the company and have:(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us byothers within those entities, particularly during the period in which this report is being prepared;(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;(c)Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on suchevaluation; and(d)Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the periodcovered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control overfinancial reporting; and5.The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting whichare reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’sinternal control over financial reporting.Date: April 29, 2022By:/s/ Robert Yi CuiName:Robert Yi CuiTitle:Chief Financial Officer Exhibit 13.1Certification by the Principal Executive OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the Annual Report of CooTek (Cayman) Inc. (the “Company”) on Form 20-F for the fiscal year ended December 31,2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Karl Kan Zhang, Principal Executive Officer ofthe Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that tomy knowledge:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operationsof the Company.Date: April 29, 2022By:/s/ Karl Kan ZhangName:Karl Kan ZhangTitle:Chairman of the Board of Directors and ChiefTechnology Officer Exhibit 13.2Certification by the Chief Financial OfficerPursuant to Section 906 of the Sarbanes-Oxley Act of 2002In connection with the Annual Report of CooTek (Cayman) Inc. (the “Company”) on Form 20-F for the fiscal year ended December 31,2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Robert Yi Cui, Chief Financial Officer of theCompany, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to myknowledge:(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operationsof the Company.Date: April 29, 2022By:/s/ Robert Yi CuiName:Robert Yi CuiTitle:Chief Financial Officer Exhibit 15.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements No. 333-229171 on Form S-8 and No. 333-251355 on Form F-3 of ourreport dated April 29, 2022, relating to the consolidated financial statements and financial statement schedule of CooTek (Cayman) Inc. and itssubsidiaries, appearing in this Annual Report on Form 20-F of CooTek (Cayman) Inc. for the year ended December 31, 2021./s/ Deloitte Touche Tohmatsu Certified Public Accountants LLPDeloitte Touche Tohmatsu Certified Public Accountants LLPShanghai, ChinaApril 29, 2022 Exhibit 15.2Beijing Head Office Tel: (86-10) 8519-1300 Fax: (86-10) 8519-1350Shanghai Office Tel: (86-21) 5298-5488 Fax: (86-21) 5298-5492Guangzhou Office Tel: (86-20) 2805-9088 Fax: (86-20) 2805-9099Shenzhen Office Tel: (86-755) 2587-0765 Fax: (86-755) 2587-0780Hangzhou Office Tel: (86-571) 2689-8188 Fax: (86-571) 2689-8199Chengdu Office Tel: (86-28) 6739-8000 Fax: (86-28) 6739-8001Qingdao Office Tel: (86-532) 6869-5000 Fax: (86-532) 6869-5010Dalian Office Tel: (86-411) 8250-7578 Fax: (86-411) 8250-7579Haikou Office Tel: (86-898) 6851-2544 Fax: (86-898) 6851-3514Tianjin Office Tel: (86-22) 5990-1301 Fax: (86-22) 5990-1302Hong Kong Office Tel: (852) 2167-0000 Fax: (852) 2167-0050New York Office Tel: (1-212) 703-8702 Fax: (1-212) 703-8720Silicon Valley Office Tel: (1-888) 886-8168 Fax: (1-888) 808-2168www.junhe.com26/F, HKRI Centre One, HKRI Taikoo Hui288 Shimen Road （No.1）Shanghai 200041, P. R. ChinaT: (86-21) 5298-5488F: (86-21) 5298-5492April 29, 2022CooTek (Cayman) Inc. 9-11F, T2, No.16, Lane 399, Xinlong RoadMinhang DistrictShanghai People's Republic of ChinaDear Sir/Madam:We hereby consent to the reference of our name under the headings "Item 3. Key Information—D. Risk Factors—Risks Related to Our CorporateStructure" and "Item 4. Information on the Company—C. Organizational Structure" in CooTek (Cayman) Inc.'s Annual Report on Form 20-F forthe year ended December 31, 2021 (the "Annual Report"), which will be filed with the Securities and Exchange Commission (the "SEC") on thedate hereof, and further consent to the incorporation by reference of the summary of our opinion under this heading into the Company’s registrationstatements on Form S-8 (File No. 333-229171) that was filed on January 9, 2019 and Form F-3 (No. 333-251355) that was filed on December 15,2020. We also consent to the filing of this consent letter with the SEC as an exhibit to the Annual Report.In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of theSecurities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.Very truly yours,/s/ JunHe LLPJunHe LLP Exhibit 15.3Our refVSL/675748-000005/21894065v1CooTek (Cayman) Inc. 9-11F, T2, No. 16, Lane 399, Xinlong Road Minhang District, Shanghai, 201101 People’s Republic of China29 April 2022Dear SirsCooTek (Cayman) Inc.We have acted as legal advisers as to the laws of the Cayman Islands to CooTek (Cayman) Inc., an exempted company incorporated in the CaymanIslands with limited liability (the “Company”), in connection with the filing by the Company with the United States Securities and ExchangeCommission (the “SEC”) of an annual report on Form 20-F for the year ended 31 December 2021 (the “Annual Report”).We hereby consent to the reference to our firm under the heading “Item 10. Additional Information—E. Taxation—Cayman Islands Taxation” inthe Annual Report, and further consent to the incorporation by reference of the summary of our opinion under this heading into the Company'sregistration statements on Form S-8 (File No. 333-229171) that was filed on 9 January 2019.We consent to the filing with the SEC of this consent letter as an exhibit to the Annual Report. In giving such consent, we do not thereby admit thatwe come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or under the Securities ExchangeAct of 1934, in each case, as amended, or the regulations promulgated thereunder.Yours faithfully/s/ Maples and Calder (Hong Kong) LLPMaples and Calder (Hong Kong) LLP

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