UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
☐
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2021.
OR
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
OR
☒
☐
☐
Date of event requiring this shell company report
Commission file number: 001-38313
iClick Interactive Asia Group Limited
(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)
15/F
Prosperity Millennia Plaza 663 King’s Road, Quarry Bay
Hong Kong S.A.R., People’s Republic of China Tel: +852 3700 9000
(Address of principal executive offices)
David Zhang, Chief Financial Officer
15/F
Prosperity Millennia Plaza
663 King’s Road, Quarry Bay
Hong Kong S.A.R., People’s Republic of China Tel: +852 3700 9000
E-mail: david.zhang@i-click.com
(Name, Telephone, E-mail 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
American Depositary Shares, two representing one Class A ordinary share, par value US$0.001 per share*
*Not for trading, but only in connection with the listing on the Nasdaq Global Market of American
depositary shares.
Securities registered or to be registered pursuant to Section 12(g) of the Act:
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
(Title of Class)
Trading Symbol
ICLK
None
None
(Title of Class)
Name of each exchange on which registered
NASDAQ Global Market
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 49,314,241 ordinary shares outstanding, par value $0.001 per share, being the sum of 44,279,814 Class A ordinary shares and 5,034,427 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.
If 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 ☐ No
☐ Yes ☒ No
Indicate 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 the preceding 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 past 90 days.
☒ Yes ☐ No
Indicate 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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” 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 use the extended transition period for complying with any new or revised financial accounting
standards†† provided pursuant to Section 13(a) of the Exchange Act. ☐
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 over financial 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 audit report. ☒
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 as issued
by the International Accounting Standards Board ☐
Other ☐
☒ Yes ☐ No
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.
If 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)
☐ Item 17 ☐ Item 18
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 of 1934 subsequent to the distribution of securities under a plan confirmed by a court.
☐ Yes ☒ No
Of the 44,279,814 Class A ordinary shares as of December 31, 2021, (i) 1,118,926.5 were held by Arda Holdings Limited underlying the options granted but not yet exercised (whether or not they are vested) and the options reserved for issuance under our 2018 Share
Incentive Plan, and (ii) 295,372.5 were held by JPMorgan Chase Bank N.A., our depositary, underlying the unvested restricted share units under our Post-IPO Plan.
The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
PART I
ITEM 1.
ITEM 2.
ITEM 3.
ITEM 4.
ITEM 4A
ITEM 5.
ITEM 6.
ITEM 7.
ITEM 8.
ITEM 9.
ITEM 10.
ITEM 11.
ITEM 12.
PART II
ITEM 13.
ITEM 14.
ITEM 15.
ITEM 16A.
ITEM 16B.
ITEM 16C.
ITEM 16D.
ITEM 16E.
ITEM 16F.
ITEM 16G.
ITEM 16H.
ITEM 16I.
PART III
ITEM 17.
ITEM 18.
ITEM 19.
TABLE OF CONTENTS
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
OFFER STATISTICS AND EXPECTED TIMETABLE
KEY INFORMATION
INFORMATION ON THE COMPANY
UNRESOLVED STAFF COMMENTS
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
FINANCIAL INFORMATION
THE OFFER AND LISTING
ADDITIONAL INFORMATION
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
CONTROLS AND PROCEDURES
AUDIT COMMITTEE FINANCIAL EXPERT
CODE OF ETHICS
PRINCIPAL ACCOUNTANT FEES AND SERVICES
EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
CORPORATE GOVERNANCE
MINE SAFETY DISCLOSURE
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
EXHIBITS
3
3
3
61
88
89
108
118
120
121
122
131
132
134
134
135
136
136
137
137
137
139
139
139
139
140
140
140
CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT
Unless otherwise indicated and except where the context otherwise requires, references in this annual report to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
“active profiled user” refers to a profiled user whom we are able to detect that he/she has online activities during a specific measurement period. A “profiled
user” refers to a user whom we have collected sufficient information from his/her online activities to establish a descriptive understanding of the person;
“ADSs” refers to our American depositary shares. Two ADSs represent one Class A ordinary share;
“China” or “PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan;
“direct marketer clients” refers to marketers that have direct contractual relationship with us;
“end marketers,” or “marketers” refers to marketers that we serve, either directly or through marketing agencies, regardless if they have direct contractual
relationship with us;
“HK$” or “Hong Kong dollars” refers to the legal currency of Hong Kong;
“independent online marketing technology platforms” refers to online marketing technology platforms (i) which are not owned by any group which owns
online publishing resources, or (ii) which do not own any online publishing resources;
“marketing solutions” refers to mobile marketing solutions and other marketing solutions;
mobile apps or websites “covered” refers to the mobile apps or websites from which we are able to receive data to build user profiles;
“multinational companies” refer to companies that own or control production of goods or provision of services in one or more countries other than their home
countries;
“online marketing technology platforms” refers to online marketing platforms which, through a combination of marketing strategies and technologies, assist
marketers in optimizing their marketing resources;
“ordinary shares” refer to our Class A and Class B ordinary shares, par value US$0.001 per share;
“our clients” refers to entities which enter into sales contracts with us and incur spending during the relevant period;
“RMB” or “Renminbi” refers to the legal currency of China;
“we,” “us,” “our company” and “our” refer to iClick Interactive Asia Group Limited;
“$,” “US$,” “dollars” or “U.S. dollars” refers to the legal currency of the United States; and
“WFOE” refers to wholly foreign owned enterprise under the laws of the People’s Republic of China.
Our financial statements are expressed in the U.S. dollar, which is our reporting currency. Certain of our financial data in this annual report on Form 20-F are
translated into U.S. dollars solely for the reader’s convenience. Unless otherwise noted, all convenience translations from Renminbi to U.S. dollars, and from Hong Kong
dollars to U.S. dollars, in this annual report on Form 20-F were made at a rate of RMB6.3726 to US$1.00, and HKD7.7996 to US$1.00, respectively, which were the
exchange rates set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System on December 30, 2021. We make no representation that any
Renminbi/ Hong Kong dollar or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi/ Hong Kong dollar, as the case may be, at any
particular rate, at the respective rate stated above, or at all. Any discrepancies in any table between the amounts identified as total amounts and the sum of the amounts listed
therein are due to rounding.
1
FORWARD-LOOKING STATEMENTS
This annual report on Form 20-F contains forward-looking statements that relate to our current expectations and views of future events. These statements involve
known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or
implied by the forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigations Reform Act of 1995.
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 fluctuations in growth;
our future business development, financial condition and results of operations;
our success in implementing our mobile and new retail strategies, including extending our solutions beyond our core online marketing business;
our success in implementing “SaaS+X” model;
our success in structuring a customer relationship management and marketing cloud platform;
relative percentage of our gross billing recognized as revenue under the gross and net models;
the expected growth of online marketing industry, including online marketing technology industry in China;
our expectations regarding demand for and market acceptance of our products and services, including marketing solutions and enterprise solutions;
our ability to retain existing clients or attract new ones;
our ability to integrate and realize synergies from acquisitions, investments or strategic partnerships;
our plans to invest in our platform, solutions, data analytics capabilities, technology and technology infrastructure;
our ability to collect and use data from various sources and the effectiveness of our algorithms and data engines;
our ability to retain content distribution channels and negotiate favorable contractual terms;
market competition, including from independent online marketing technology platforms as well as large and well-established internet companies;
fluctuations in foreign exchange rates;
general economic conditions and the regulatory landscape in China and other jurisdictions where we operate;
relevant government policies and regulations relating to our industry;
the duration of the COVID-19 outbreak, including various variants, and its potential impact on our business and financial performance; and
developments in U.S.-China relations, including the imposition of economic sanctions.
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 report completely and with the
understanding that our actual future results may be materially different from what we expect. Other sections of this annual report 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 all factors on our business or the extent to which any factor, or combination of factors, may cause
actual results to differ materially from those contained 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 annual report 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, we undertake no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of
unanticipated events.
2
PART I
ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not Applicable.
ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE
Not Applicable.
ITEM 3.KEY INFORMATION
Implications of Being a Foreign Private Issuer and a China-based Company
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions of the securities rules and
regulations in the United States that are applicable to U.S. domestic issuers. Moreover, the information we are required to file with or furnish to the Securities and Exchange
Commission (the “SEC”) will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. In addition, as a company
incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the
Nasdaq Global Market (“NASDAQ”) listing standards. These practices may afford less protection to shareholders than they would enjoy if we complied fully with the
NASDAQ listing standards.
We are exposed to legal and operational risks associated with our operations in China. We are subject to risks arising from China’s legal system, including the
uncertainty in the interpretation and the enforcement of the PRC laws and regulations. In addition, rules and regulations in China can change quickly with little advance
notice. Recently, Chinese regulators have announced regulatory actions targeting certain sectors of China’s economy, including the for-profit education sector and technology
platforms that have a quantitatively significant number of users located in China. We cannot guarantee that the Chinese government will not in the future take further
regulatory actions that materially adversely affect the business environment and financial markets in China as they relate to us, our ability to operate our business, our
liquidity and our access to capital.
The PRC government may also intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign
investment in China-based issuers, including us, at any time, substantial intervention and influence over the manner our operations, which could result in a material change
in our operations or the value of our ADSs. Any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas or foreign
investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such
securities to significantly decline or be worthless. Recently, the PRC government initiated a series of regulatory actions and statements to regulate business operations in
China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision over China-based companies listed overseas,
adopting new measures to extend the scope of cybersecurity reviews, adopting new laws and regulations related to data security, and expanding the efforts in anti-monopoly
enforcement. While we do not believe that these regulatory changes would have any material impact on us, we cannot assure you that the regulators will agree with us or will
not in the future adopt regulations that restrict our business operations or access to capital.
For example, on July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued
the Opinions on Severe and Lawful Crackdown on Illegal Securities Activities. These opinions emphasized the need to strengthen the administration over illegal securities
activities and the supervision on overseas listings by China-based companies. These opinions proposed to take effective measures, such as promoting the construction of
relevant regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection.
These opinions and any related implementation rules to be enacted may subject us to additional compliance requirement in the future.
Cybersecurity and data privacy and security issues are subject to increasing legislative and regulatory focus in China. For example, the State Council of the PRC
promulgated the Regulations on the Protection of the Security of Critical Information Infrastructure on July 30, 2021, which took effect on September 1, 2021. This
regulation requires, among others, certain competent authorities to identify critical information infrastructures. The Cybersecurity Administration of China (the “CAC”) and
a number of other departments under the State Council promulgated the Measures for Cybersecurity Review on December 28, 2021, which became effective on February 15,
2022. According to this regulation, critical information infrastructure operators purchasing network products or network platform operators carrying out data processing
activities, which affect or may affect national security, are required to conduct cybersecurity review. Pursuant to the Measures for Cybersecurity Review, enterprises shall
apply for the cybersecurity review under the following circumstances: (i) critical information infrastructure operators that intend to purchase network products and services;
or (ii) a network platform operator that processes the personal information of more than one million people intends to be listed overseas.
3
As for the definition of “critical information infrastructure operators”, on July 30, 2021, the State Council of the PRC published the Security Protection Regulations on
the Critical Information Infrastructure (the “CII Regulations”), which took effect on September 1, 2021. Pursuant to Article 2 of the CII Regulations, critical information
infrastructure refer to the important network facilities and information systems in important industries and fields such as public telecommunications, information services,
energy, transportation, water conservancy, finance, public services, e-government and national defense science, technology and industry, as well as other important network
facilities and information systems which, in case of destruction, loss of function or leak of data, may result in serious damage to national security, the national economy and
the people's livelihood and public interests. Pursuant to Article 10 of the CII Regulations, the identity of the critical information infrastructure operator shall be determined
by the PRC government authorities responsible for critical information infrastructure protection, and the identified critical information infrastructure operator shall be
notified by the competent PRC government authority. As of the date of this annual report, we have not received any notice or determination from competent PRC
government authorities identifying us as a critical information infrastructure operator.
As for the definition of “network platform operator”, on November 14, 2021, the CAC published the Regulations on the Administration of Network Data Security
(Draft for Comments) (the “Draft Data Security Regulations”). According to the Draft Data Security Regulations, “internet platform operators” refer to data processors who
provide users with internet platform services such as information release, social networking, transactions, payment, and audiovisual. With reference to this definition,
“platform operators” have the attributes of “platforms” and “provide specific services”. According to the Guidelines for the Classification and Grade of Network Platforms
(Draft for Comment) promulgated by the State Administration for Market Regulation “internet platforms” provide the connection of people, goods, services, information,
entertainment, capital, and computing power through network technology. This connection enables the platform to have various functions such as trading, social interaction,
entertainment, information, financing, and calculation. With reference to the Draft Data Security Regulations and the Guidelines for the Classification and Grade of Network
Platforms (Draft for Comment), given that the aforementioned regulations are still at the draft stage, we cannot conclude whether we will be identified as a network platform
operator.
As for the definition of “affects or may affect national security”, the Measures for Cybersecurity Review provides no further explanation or interpretation for “affects
or may affect national security”, and the PRC government authorities may have wide discretion in the interpretation of “affects or may affect national security”. According to
National Security Law of the PRC issued on July 1, 2015 and became effective on the same date, national security refers to a status in which the regime, sovereignty, unity,
territorial integrity, welfare of the people, sustainable economic and social development, and other major interests of the state are relatively not faced with any danger and
not threatened internally or externally and the capability to maintain a sustained security status. Given the uncertainty on the interpretation of the Cybersecurity Review
Measures, our PRC legal counsel, Jingtian & Gongcheng, cannot assure that we will not be deemed as “affect or may affect national security” in the future.
Our PRC legal counsel is of the opinion that we do not need to apply for cybersecurity reviews under the current regulatory regime because we have not received any
notice or determination from competent PRC government authorities identifying us as a critical information infrastructure operator as of the date of this annual report.
However, we cannot rule out the possibility that the competent PRC government authorities will not initiate cybersecurity reviews on us in the future.
On September 1, 2021, the PRC Data Security Law became effective, which imposes data security and privacy obligations on entities and individuals conducting data-
related activities, and introduces a data classification and hierarchical protection system. In addition, the Standing Committee of PRC National People’s Congress
promulgated the Personal Information Protection Law (the “PIPL”) on August 20, 2021, which took effect on November 1, 2021. The PIPL further emphasizes processors’
obligations and responsibilities for personal information protection and sets out the basic rules for processing personal information and the rules for cross-border transfer of
personal information. We cannot guarantee that the regulators will agree with us or will not in the future adopt new regulations that restrict our business operations.
Since these regulatory actions are relatively new, it is uncertain that how soon legislative or administrative regulation making bodies will respond and what existing or
new laws or regulations or detailed implementations and interpretations will be modified or promulgated, if any, or the potential impact of these modified or new laws and
regulations will have on our business operations, our deep learning, artificial intelligence and predictive analytics capabilities, our ability to introduce foreign investments
and make future offering on a U.S. stock exchange. PRC laws and their interpretations and enforcement are evolving and subject to change, and the PRC government may
adopt new rules and restrictions in the future.
Permissions Required from the PRC Authorities for Our Operations
We conduct our business primarily through our subsidiaries and consolidated affiliated entities in China. Our operations in China are governed by PRC laws and
regulations. As of the date of this annual report, our PRC subsidiaries, consolidated affiliated entities and their subsidiaries have obtained the requisite licenses and permits
from the PRC government authorities that are material for the business operations of our holding company, our consolidated affiliated entities in China, including, among
others, ICP license, value-
4
added telecommunication license, network culture business license, etc.. Given the uncertainties of interpretation and implementation of relevant laws and regulations and
the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of
our platform in the future, and may not be able to maintain or renew our current licenses, permits, filings or approvals.
Furthermore, under current PRC laws, regulations and regulatory rules, we, our PRC subsidiaries and our consolidated affiliated entities may be required to obtain
permissions from the China Securities Regulatory Commission, or the CSRC, and may be required to go through cybersecurity review by the Cyberspace Administration of
China, or the CAC, in connection with any future offering and listing in an overseas market. As of the date of this annual report, we have not been subject to any
cybersecurity review made by the CAC. If we fail to obtain the relevant approval or complete other review or filing procedures for any future offshore offering or listing, we
may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on our operations in China, limitations on our operating
privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, restrictions on or delays to our future financing
transactions offshore, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as
well as the trading price of our ADSs. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Recent
regulatory developments in China may subject us to additional regulatory review and disclosure requirements, expose us to government interference, or otherwise restrict or
completely hinder our ability to offer securities and raise capital outside China, which could adversely affect our business operations and cause the value of our securities to
significantly decline or become worthless.”
Risks Associated with the Holding Foreign Companies Accountable Act
Our financial statements contained in this annual report have been audited by PricewaterhouseCoopers, an independent registered public accounting firm. It is a firm
registered with the U.S. Public Company Accounting Oversight Board (the “PCAOB”), and is required by the laws of the U.S. to undergo regular inspections by the PCAOB
to assess its compliance with the laws of the U.S. and professional standards. According to Article 177 of the PRC Securities Law which became effective in March 2020, no
overseas securities regulator is allowed to directly conduct investigation or evidence collection activities within the territory of the PRC. Accordingly, without the consent of
the competent PRC securities regulators and relevant authorities, no organization or individual may provide the documents and materials relating to securities business
activities to overseas parties. The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states if the SEC
determines that a company has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive
years beginning in 2021, the SEC shall prohibit such ordinary shares from being traded on a national securities exchange or in the over the counter trading market in the U.S.
The SEC has adopted rules to implement the HFCAA and, pursuant to the HFCAA, the PCAOB has issued a report notifying the Securities and Exchange Commission of its
determination that it is currently unable to inspect or investigation completely accounting firms headquartered in mainland China or Hong Kong. Our auditor,
PricewaterhouseCoopers is subject to the determinations announced by the PCAOB on December 16, 2021. Further, the United States Senate has passed the Accelerating
Holding Foreign Companies Accountable Act, or the AHFCAA. In February, 2022, the U.S. House of Representatives passed the America Competes Act of 2022, which
includes the same amendments as the bill passed by the Senate. However, the America Competes Act includes a broader range of legislation not related to the HFCAA in
response to the U.S. Innovation and Competition Act passed by the Senate in 2021. It is unclear when the U.S. Senate and U.S. House of Representatives will resolve the
differences and this bill amending the HFCAA is approved by both houses of Congress and signed by the President. If AHFCAA is enacted, it would decrease the number of
“non-inspection years” from three years to two years, and thus, would reduce the time before our securities may be prohibited from trading or delisted. The delisting of our
ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections
deprives our investors with the benefits of such inspections.
Risks Associated with Our Corporate Structure
Our investors hold securities of iClick Interactive Asia Group Limited, which is not an operating company but a Cayman Islands holding company with operations
primarily conducted by its subsidiaries and through contractual arrangements with its variable interest entities, or VIEs, and their respective subsidiaries based in China. PRC
laws and regulations restrict and impose conditions on foreign investment in internet-based businesses, including holding of value-added telecommunication license by
Shanghai Myhayo Technology Co., Ltd., or Myhayo, a content distribution channel and a mobile content aggregator of articles and short videos in China. For more
information of Myhayo’s value-added telecommunication license, see “—D. Risk Factors—Risks Related to Our Business and Industry—If we fail to maintain or renew the
value-added telecommunication license, or fail to obtain other requisite license, or approvals or filings in China, the business carried out by certain consolidated entity may
be materially and adversely affected”. Accordingly, we operate these businesses in China through Beijing OptAim Network Technology Co., Ltd., or OptAim Network,
which we refer to as the VIE in this annual report, and its subsidiaries, and rely on contractual arrangements among our PRC subsidiary, the VIE and its nominee shareholder
to control the business operations of the VIE and its subsidiaries. We are the primary beneficiary of these the VIE and its subsidiaries for accounting purposes because of
these contractual arrangements. Accordingly, under U.S. GAAP, the financial statements of the VIE are consolidated as part of our financial statements. Although these VIE
agreements have been widely adopted by PRC companies seeking to list overseas, such agreements have not been tested in a court of law.
5
Our corporate structure is subject to risks associated with our contractual arrangements with the VIE. The company that investors will own may never have a direct
equity ownership interest in the businesses that are conducted by the VIE. If the PRC government disallow the VIE structure or deems that our contractual arrangements with
the VIE do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations
change or are interpreted differently in the future, we and the VIE could be subject to severe penalties or be forced to relinquish our interests in those operations. This would
result in the VIE being deconsolidated. Part of our assets, including the value-added telecommunication license, are held by the VIE. In 2018, OptAim Network contributed
0.7% to our gross billing and 1.8% of our net revenues. In 2019, OptAim Network contributed 3.6% to our gross billing and 11.5% of our net revenues. In 2020, OptAim
Network contributed 3.3% to our gross billing and 8.7% of our net revenues. In 2021, OptAim Network contributed 3.0% to our gross billing and 7.8% of our net revenues.
Our holding company, our PRC subsidiaries and VIE and its subsidiaries, and investors of our company face uncertainty about potential future actions by the PRC
government that could affect the enforceability of the contractual arrangements with the VIE and, consequently, significantly affect the financial performance of the VIE and
its subsidiaries and our company as a whole. Our ADSs may decline in value or become worthless, if we are unable to assert our contractual control rights over the assets of
the VIE that conduct some or all of our operations. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under
“Item 3.D. Key Information—Risk Factors—Risks Related to Our Corporate Structure”.
Cash Transfer between our Company, Subsidiaries and VIE and Its Subsidiaries
For the years ended December 31, 2019, 2020 and 2021, cash received by the VIE and its subsidiaries from other entities of our Group for online advertising service
and other marketing service were US$835, US$3,506 and US$1,315, respectively, while cash paid by the VIE and its subsidiaries to other entities of our Group for online
advertising service and SaaS services were US$2,335 and US$1,365 and US$543, respectively.
In addition, for the years ended December 31, 2019, 2020 and 2021, our WFOEs, VIE and its subsidiaries did not make any dividend or distribution to our Company.
Pursuant to the PRC Enterprise Income Tax Law, a withholding tax rate of 10% currently would apply to any dividends paid by a PRC “resident enterprise” to a foreign
enterprise investor, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China that provides for preferential tax treatment. Pursuant to the
Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation on Income, such withholding tax rate
may be lowered to 5% if a Hong Kong resident enterprise owns no less than 25% of a PRC enterprise. According to the Announcement of the State Administration of
Taxation on Issues concerning the “Beneficial Owner” in Tax Treaties, which became effective in April 2018, whether a resident enterprise is a “beneficial owner” that can
apply for a low tax rate under tax treaties depends on an overall assessment of several factors, which may bring uncertainties to the applicability of preferential tax treatment
under the tax treaties. Furthermore, the Administrative Measures for Non-Resident Enterprises to Enjoy Treatments under Treaties, which became effective in January 2020,
requires non-resident enterprises to determine whether they are qualified to enjoy the preferential tax treatment under the tax treaties and file relevant report and materials
with the tax authorities. There are also other conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. In the future we
intend to re-invest all earnings, if any, generated from our PRC subsidiaries for the operation and expansion of our business in China. Should our tax policy change to allow
for offshore distribution of our earnings, we would be subject to a significant withholding tax. We cannot assure you that our determination regarding our qualification to
enjoy the preferential tax treatment will not be challenged by the relevant tax authority or we will be able to complete the necessary filings with the relevant tax authority and
enjoy the preferential withholding tax rate of 5% under the arrangement with respect to dividends to be paid by our PRC subsidiaries to our Hong Kong subsidiary.
We have not made any dividend or distribution to any U.S. investor. As a holding company, our ability to pay dividends depends upon dividends paid by our PRC
subsidiaries. If our existing PRC subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their
ability to pay dividends to us. In addition, our wholly foreign-owned subsidiary in China is permitted to pay dividends to us only out of its retained earnings, if any, as
determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our subsidiaries, our consolidated VIE and its subsidiaries in China is
required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of its registered capital.
Furthermore, our subsidiaries, our consolidated VIE and its subsidiaries may allocate a portion of their after-tax profits based on PRC accounting standards to a discretionary
surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Our PRC subsidiaries have not paid dividends
and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds. We do not have any present plan to
declare or pay any dividends on our ordinary shares or ADSs in the foreseeable future. We intend to retain most, if not all, of our available funds and any future earnings to
operate and expand our business. We are not aware of any material regulatory restrictions limiting our non-PRC subsidiaries to make dividends to us. Subject to the passive
foreign investment company rules (discussed below in “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations—Passive Foreign
Investment Company Rules”), the gross amount of any distribution that we make to investors with respect to the ADSs or ordinary shares (including any amounts withheld
to reflect PRC withholding taxes) will be taxable as a dividend, to the extent paid out of our current or accumulated earnings and profits, as determined under United States
federal income tax principles. If we are considered
6
a PRC tax resident enterprise for tax purposes, any dividends we pay to our overseas shareholders may be regarded as PRC-source income and as a result may be subject to
PRC withholding tax.
The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. To the
extent that our income is received in Renminbi, shortages in foreign currencies may restrict our ability to pay dividends or other payments, or otherwise satisfy our foreign
currency denominated obligations, if any. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest
payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or
SAFE, as long as certain procedural requirements are met. Approval from appropriate government authorities is required if Renminbi is converted into foreign currency and
remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may, at its discretion, impose
restrictions on access to foreign currencies for current account transactions.
Condensed Consolidating Schedules
The following tables present the condensed consolidating schedule of financial information for the Company, its wholly owned subsidiary that is WFOE as primary
beneficiary, other subsidiaries, the VIE and VIE’s subsidiaries as of and for the years ended the dates presented.
7
Selected Condensed Consolidated Balance Sheets Data (US$’000)
Assets
Cash and cash equivalents
Time deposits
Restricted cash
Short-term investments
Amount due from an equity investee
Amounts due from Group companies (3)
Accounts receivable, net
Rebates receivable
Prepaid media costs
Other current assets
Deferred tax assets
Property and equipment, net
Investment in an equity investee
Investments in subsidiaries, VIE and VIE’s
subsidiaries (2)
Other long-term investments
Intangible assets
Goodwill
Right-of-use assets
Other non-current assets
Total assets
Liabilities
Accounts payable
Deferred revenue
Accrued liabilities and other current
liabilities
Amounts due to Group companies (3)
Lease liabilities
Bank borrowing
Income tax payable
Deferred tax liabilities
Other liabilities
Total liabilities
Equity
Shareholders' equity (2)
Non-controlling interests
Total equity
Parent
789
—
3,657
—
—
—
—
—
—
549
254
—
354
285,824
510
—
—
—
—
291,937
—
—
7,126
—
—
—
—
—
459
7,585
284,352
—
284,352
Other
Subsidiaries
37,450
11,128
32,489
7,771
276
12,184
181,107
5,523
35,410
14,803
931
1,821
—
32,585
8,010
53,350
80,058
3,402
1,663
519,961
63,404
22,244
20,442
29,026
3,172
73,641
3,475
13,223
—
228,627
285,824
5,510
291,334
Total liabilities and equity
291,937
519,961
8
As of December 31, 2021
WFOE as
Primary
Beneficiary
VIE
and VIE’s
Subsidiaries
523
—
—
—
—
23,171
2,568
52
148
8,339
—
45
—
5,797
2,361
223
1,616
48
—
44,891
921
470
723
10,088
48
—
—
56
—
12,306
32,585
—
32,585
44,891
Eliminating
Adjustments
Consolidated
Totals
—
—
—
—
—
(41,234)
—
—
—
—
—
—
—
(324,206)
—
—
—
—
—
(365,440)
—
—
—
(41,234)
—
—
—
—
—
(41,234)
41,443
11,128
36,146
7,771
276
—
187,261
5,575
36,709
24,957
1,185
1,931
354
—
12,114
53,713
81,674
3,834
1,663
507,734
66,587
22,802
29,735
—
3,604
75,530
4,050
13,378
459
216,145
(324,206)
—
(324,206)
284,352
7,237
291,589
2,681
—
—
—
—
5,879
3,586
—
1,151
1,266
—
65
—
—
1,233
140
—
384
—
16,385
2,262
88
1,444
2,120
384
1,889
575
99
—
8,861
5,797
1,727
7,524
16,385
(365,440)
507,734
Selected Condensed Consolidated Balance Sheets Data (US$’000) (Continued)
Assets
Cash and cash equivalents
Time deposits
Restricted cash
Short-term investments
Amount due from an equity investee
Amounts due from Group companies (3)
Accounts receivable, net
Rebates receivable
Prepaid media costs
Other current assets
Deferred tax assets
Property and equipment, net
Investment in an equity investee
Investments in subsidiaries, VIE and VIE’s
subsidiaries (2)
Prepayments for long-term investments
Other long-term investments
Intangible assets
Goodwill
Right-of-use assets
Other non-current assets
Total assets
Liabilities
Accounts payable
Deferred revenue
Accrued liabilities and other current
liabilities
Amounts due to Group companies (3)
Lease liabilities
Bank borrowing
Income tax payable
Contingent consideration payable
Deferred tax liabilities
Other liabilities
Total liabilities
Equity
Shareholders' equity (2)
Non-controlling interests
Total equity
Parent
402
46
5,266
—
—
—
—
—
—
1,095
194
—
460
278,874
—
1,522
—
—
—
—
287,859
—
—
7,627
—
—
—
—
7,755
—
375
15,757
272,102
—
272,102
Other
Subsidiaries
40,273
43
36,879
23,172
218
23,295
31,022
10,964
25,470
11,705
759
915
—
37,470
2,924
7,129
56,095
74,419
2,809
452
386,013
13,100
27,555
5,701
12,571
2,713
18,245
3,699
—
14,010
4,521
102,115
278,874
5,024
283,898
As of December 31, 2020
WFOE as
Primary
Beneficiary
VIE
and VIE’s
Subsidiaries
9,444
—
—
548
—
12,571
110,400
—
7,471
326
—
116
—
8,381
—
—
—
—
128
103
149,488
29,669
—
14,484
28,060
131
37,338
—
—
—
—
109,682
39,806
—
39,806
2,113
—
—
—
—
6,643
1,720
—
1,587
1,012
—
82
—
—
—
—
336
—
484
12
13,989
371
644
1,519
1,878
484
457
483
—
146
—
5,982
6,045
1,962
8,007
Eliminating
Adjustments
Consolidated
Totals
—
—
—
—
—
(42,509)
—
—
—
—
—
—
—
(324,725)
—
—
—
—
—
—
(367,234)
—
—
—
(42,509)
—
—
—
—
—
—
(42,509)
52,232
89
42,145
23,720
218
—
143,142
10,964
34,528
14,138
953
1,113
460
—
2,924
8,651
56,431
74,419
3,421
567
470,115
43,140
28,199
29,331
—
3,328
56,040
4,182
7,755
14,156
4,896
191,027
(324,725)
—
(324,725)
272,102
6,986
279,088
Total liabilities and equity
287,859
386,013
149,488
13,989
(367,234)
470,115
9
Selected Condensed Consolidated Statements of Operations Data (US$’000)
Net revenue es
Third-party net revenues
Inter-company net revenues (1)
Cost of revenues
Third-party costs
Inter-company costs (1)
Gross profit
Operating expenses
Research and development expenses
Sales and marketing expenses (1)
General and administrative expenses
Total operating expenses
Share of profits/(losses) of subsidiaries, VIE
and VIE’s subsidiaries (2)
Finance costs, net
Other (losses)/gains, net
(Loss)/profit before share of loss from an
equity investee and income tax
(expense)/credit
Share of loss from an equity investee
Income tax (expense)/credit
Net (loss)/income
Net loss attributable to non-controlling
interests
Net (loss)/income attributable to iClick
Interactive Asia Group Limited’s ordinary
shareholders
For the year ended December 31, 2021
Parent
Other
Subsidiaries
WFOE as
Primary
Beneficiary (7)
VIE
and VIE’s
Subsidiaries
Eliminating
Adjustments
Consolidated
Totals
—
—
—
—
—
—
—
(17,574)
(17,574)
4,406
—
(242)
(13,410)
(107)
(114)
(13,631)
278,881
2,704
(177,282)
(23,074)
81,229
(8,037)
(45,788)
(17,245)
(71,070)
(2,162)
(3,265)
(476)
4,256
—
(2,527)
1,729
5,984
22,183
(22,885)
(2,675)
2,607
(430)
(2,211)
(4,238)
(6,879)
(610)
—
2,533
(2,349)
—
187
(2,162)
—
2,677
—
22,837
1,028
(18,382)
(49)
5,434
(1,060)
(4,990)
(586)
(6,636)
—
—
388
(814)
—
(86)
(900)
290
—
(25,915)
307,702
—
—
25,798
(117)
(218,549)
—
89,153
—
117
—
117
(9,527)
(52,872)
(39,643)
(102,042)
(1,634)
—
—
—
(3,265)
2,203
(1,634)
—
—
(1,634)
(13,951)
(107)
(2,540)
(16,598)
—
2,967
(13,631)
4,406
(2,162)
(610)
(1,634)
(13,631)
10
Selected Condensed Consolidated Statements of Operations Data (US$’000) (Continued)
Net revenues
Third-party net revenues
Inter-company net revenues (1)
Cost of revenues
Third-party costs
Inter-company costs (1)
Gross profit
Operating expenses
Research and development expenses
Sales and marketing expenses (1)
General and administrative expenses
Total operating expenses
Share of profits/(losses) of subsidiaries, VIE
and VIE’s subsidiaries (2)
Finance income/(costs), net
Other (losses)/gains, net
Fair value losses on derivative liabilities
Fair value losses on convertible notes
(Loss)/profit before share of loss from an
equity investee and income tax
(expense)/credit
Share of loss from an equity investee
Income tax (expense)/credit
Net (loss)/income
Net loss attributable to non-controlling interests
Net (loss)/income attributable to iClick
Interactive Asia Group Limited’s ordinary
shareholders
For the year ended December 31, 2020
Parent
Other
Subsidiaries
WFOE as
Primary
Beneficiary
VIE
and VIE’s
Subsidiaries
Eliminating
Adjustments
Consolidated
Totals
—
—
—
—
—
—
—
(13,598)
(13,598)
17,477
—
(409)
(11,466)
(4,433)
(12,429)
(111)
(78)
(12,618)
—
87,227
3,193
(41,841)
(3,375)
45,204
(2,055)
(28,358)
(5,865)
(36,278)
1,605
309
7,218
—
—
18,058
—
(2,008)
16,050
1,427
150,177
4,371
(122,603)
(7,954)
23,991
(1,915)
(5,103)
(11,875)
(18,893)
(1,317)
(1,662)
(1,349)
—
—
770
—
412
1,182
—
17,341
4,761
(17,038)
(996)
4,068
(1,379)
(4,567)
(310)
(6,256)
—
—
392
—
—
(1,796)
—
41
(1,755)
861
—
(12,325)
254,745
—
—
12,325
—
(181,482)
—
73,263
—
—
—
—
(17,765)
—
—
—
—
(17,765)
—
—
(17,765)
—
(5,349)
(38,028)
(31,648)
(75,025)
—
(1,353)
5,852
(11,466)
(4,433)
(13,162)
(111)
(1,633)
(14,906)
2,288
(12,618)
17,477
1,182
(894)
(17,765)
(12,618)
11
Selected Condensed Consolidated Statements of Operations Data (US$’000) (Continued)
Net revenues
Third-party net revenues
Inter-company net revenues (1)
Cost of revenues
Third-party costs
Inter-company costs (1)
Gross profit
Operating expenses
Research and development expenses
Sales and marketing expenses (1)
General and administrative expenses
Total operating expenses
Share of profits/(losses) of subsidiaries, VIE and
VIE’s subsidiaries (2)
Finance costs, net
Other gains, net
Fair value gains on convertible notes
(Loss)/profit before share of loss from an equity
investee and income tax (expense)/credit
Share of loss from an equity investee
Income tax (expense)/credit
Net (loss)/income
Net loss attributable to non-controlling interests
Net
(loss)/income
attributable
iClick
Interactive Asia Group Limited’s ordinary
shareholders
to
For the year ended December 31, 2019
VIE
and VIE’s
Subsidiaries
WFOE as
Primary
Beneficiary
Other
Subsidiaries
47,116
6,604
(17,431)
(7,688)
28,601
(3,465)
(25,509)
5,297
(23,677)
(3,211)
(376)
444
—
1,781
—
(91)
1,690
829
133,267
11,337
(118,690)
(7,699)
18,215
(1,864)
(7,693)
(12,180)
(21,737)
(54)
(999)
1,283
—
(3,292)
—
61
(3,231)
—
19,025
1,645
(6,582)
(4,023)
10,065
(245)
(9,942)
(1,357)
(11,544)
—
(3)
980
—
(502)
—
51
(451)
417
Parent
—
—
—
—
—
—
—
(12,064)
(12,064)
2,519
—
285
133
(9,127)
(408)
(68)
(9,603)
—
(9,603)
2,519
(3,231)
(34)
12
Eliminating
Adjustments
Consolidated
Totals
—
(19,586)
—
19,410
(176)
—
176
—
176
746
—
—
—
746
—
—
746
—
746
199,408
—
(142,703)
—
56,705
(5,574)
(42,968)
(20,304)
(68,846)
—
(1,378)
2,992
133
(10,394)
(408)
(47)
(10,849)
1,246
(9,603)
Selected Condensed Consolidated Cash Flows Data (US$’000)
Net operating cash (paid to)/received from Group
companies (4)
Net operating cash (paid to)/received from third
parties
Net cash used in operating activities
Capital contribution to subsidiaries (3)
Payments for advances to Group companies (3)
Receipts of repayments of advances from Group
companies (3)
Other investing activities
Net cash used in investing activities
Capital contribution from Group companies (3)
Receipts of advances from Group companies (3)
Repayments for advances from Group companies (3)
Other financing activities
Net cash provided by financing activities
Parent (6)
—
(3,217)
(3,217)
(53)
—
—
(4,936)
(4,989)
—
—
—
6,984
6,984
For the year ended December 31, 2021
VIE
and VIE’s
Subsidiaries
WFOE as
Primary
Beneficiary (7)
Other
Subsidiaries
7,436
(27,380)
(19,944)
—
—
—
(12,076)
(12,076)
—
36,310
(4,026)
—
32,284
772
(2,453)
(1,681)
—
—
—
(14)
(14)
—
1,588
(554)
1,161
2,195
(8,208)
13,377
5,169
—
(37,898)
4,580
(5,364)
(38,682)
53
—
—
16,598
16,651
13
Eliminating
Adjustments
Consolidated
Totals
—
—
—
53
37,898
(4,580)
—
33,371
(53)
(37,898)
4,580
—
(33,371)
—
(19,673)
(19,673)
—
—
—
(22,390)
(22,390)
—
—
—
24,743
24,743
Selected Condensed Consolidated Cash Flows Data (US$’000) (Continued)
Net operating cash received from/(paid to) Group
companies (4)
Net operating cash (paid to)/received from third
parties
Net cash (used in) provided by operating
activities (5)
Capital contribution to Group companies (3)
Payments for advances to Group companies (3)
Receipts of repayments of advances from Group
companies (3)
Other investing activities
Net cash (used in) provided by investing
activities (5)
Capital contribution from Group companies (3)
Receipts of advances from Group companies (3)
Repayments for advances from Group companies
(3)
Other financing activities
Net cash provided by (used in) financing
activities (5)
—
—
—
64,530
64,530
77,655
—
—
(5,781)
For the year ended December 31, 2020
VIE
and VIE’s
Subsidiaries
WFOE as
Primary
Beneficiary
Other
Subsidiaries
Parent (6)
—
3,722
(5,863)
2,141
(3,461)
(41,547)
27,485
(2,110)
(3,461)
(37,825)
21,622
(77,655)
—
—
(1,135)
—
(42,421)
80,141
(25,927)
(78,790)
11,793
—
—
—
(602)
(602)
—
42,421
(80,141)
20,777
71,874
(16,943)
14
Eliminating
Adjustments
Consolidated
Totals
—
—
—
77,655
42,421
(80,141)
—
—
(19,633)
(19,633)
—
—
—
(27,693)
39,935
(27,693)
(77,655)
(42,421)
80,141
—
(39,935)
—
—
—
79,983
79,983
31
—
—
—
(29)
(29)
—
—
—
457
457
Selected Condensed Consolidated Cash Flows Data (US$’000) (Continued)
For the year ended December 31, 2019
VIE
and VIE’s
Subsidiaries
WFOE as
Primary
Beneficiary
Other
Subsidiaries
Parent (6)
Eliminating
Adjustments
Consolidated
Totals
Net operating cash received from/(paid to) Group
companies (4)
Net operating cash (paid to)/received from third
parties
Net cash (used in) provided by operating
activities (5)
Capital contribution to subsidiaries (3)
Refund from subsidiaries of capital contribution (3)
Payments for advances to Group companies (3)
Receipts of repayments of advances from Group
companies (3)
Other investing activities
Net cash provided by (used in) investing
activities (5)
Capital contribution from Group companies (3)
Refund of capital contribution
to
the parent
—
4,428
(2,928)
(1,500)
(4,252)
(50,478)
(4,252)
(46,050)
(19,129)
33,127
—
—
(1,867)
12,131
—
—
(6,638)
18,047
26,129
37,538
23,078
20,150
—
—
(588)
588
(17,431)
(17,431)
1,358
(142)
—
—
—
—
(69)
(69)
—
—
—
19,129
(33,127)
7,226
(18,635)
—
(25,407)
—
19,129
—
—
(19,129)
company(3)
Receipts of advances from Group companies (3)
Repayments for advances from Group companies (3)
Other financing activities
Net cash provided by (used in) financing
activities (5)
—
—
—
13,378
13,378
(33,127)
—
—
21,960
—
6,638
(18,047)
9,466
7,962
(1,943)
—
588
(588)
—
—
33,127
(7,226)
18,635
—
25,407
15
—
(30,294)
(30,294)
—
—
—
—
6,762
6,762
—
—
—
—
44,804
44,804
Notes (US$’000):
(1)
It represents the elimination of intercompany transactions at the consolidation level.
Services from VIE and VIE’s subsidiaries to other group companies
The VIE and VIE’s subsidiaries provide online advertising service to other group companies. For the years ended December 31, 2019, 2020 and 2021,
the intercompany online advertising service revenues recognized by VIE and VIE’s subsidiaries were US$1,469, US$4,761 and US$911, respectively.
These transactions are eliminated at the consolidation level.
The VIE and VIE’s subsidiaries also provide other marketing services to other group companies. For the years ended December 31, 2019, 2020 and
2021, the intercompany other marketing service revenues recognized by VIE and VIE’s subsidiaries were US$176, nil and US$117, respectively.
These transactions are eliminated at the consolidation level.
Services from other group companies to VIE and VIE’s subsidiaries
WFOE as primary beneficiary and other subsidiaries of the Group provide online advertising service and SaaS services to VIE and VIE’s subsidiaries.
For the years ended December 31, 2019, 2020 and 2021, the intercompany online advertising and SaaS service revenues from VIE and VIE’s
subsidiaries recognized by WFOE as primary beneficiary and other subsidiaries of the Group were US$4,023, US$996 and US$49, respectively.
These transactions are eliminated at the consolidation level.
(2)
(3)
(4)
(5)
As of December 31, 2019, 2020, and 2021, there were no balances for management fees charged to VIEs.
It represents the elimination of the investments in subsidiaries, VIE and VIE’s subsidiaries by the Company.
It represents the elimination of intercompany balances among the Company, WFOE as primary beneficiary, other subsidiaries, VIE and VIE’s
subsidiaries. The Parent transfers cash to its wholly-owned subsidiaries by making capital contributions or interest-free advances to subsidiaries in
Hong Kong, and the subsidiaries in Hong Kong transfer cash to the WFOE which is the primary beneficiary of the VIE and other PRC subsidiaries by
making capital contributions or interest-free advances.
For the years ended December 31, 2019, 2020 and 2021, cash received by VIE and VIE’s subsidiaries from other entities of the Group for online
advertising service and other marketing service were US$835, US$3,506 and US$1,315, respectively.
For the years ended December 31, 2019, 2020 and 2021, cash paid by VIE and VIE’s subsidiaries to other entities of the Group for online advertising
service and SaaS services were US$2,335 and US$1,365 and US$543, respectively.
The “net cash used in operating activities” and “net cash provided by/used in investing activities” of the Parent for the years ended December 31,
2019 and 2020, and “investments in subsidiaries, VIE and VIE’s subsidiaries” as of December 31, 2020 have been revised from amounts previously
disclosed in the notes to the consolidated financial statements of the Group. See Note 29 to our consolidated financial statements.
(6)
See Note 29 of Consolidated Financial Statements for more details of the gross investing activities and financing activities of the Parent.
16
(7)
As a result of an internal restructuring within the Group in 2021 to move the VIE structure from the pre-existing WFOE as primary beneficiary (the
"Original WFOE PB") to another wholly-owned WFOE of the Company (the "New WFOE PB"), on November 1, 2021, the VIE contractual
agreements were amended and restated whereby the New WFOE PB became the primary beneficiary of the VIE. Amounts of "WFOE as Primary
Beneficiary" presented in the above tables (i) as of and for the year ended December 31, 2021, and (ii) as of and for each of the two years ended
December 31, 2020 represent the financial information of (i) the New WFOE PB and (ii) the Original WFOE PB, respectively.
17
A.
[Reserved]
B.
Capitalization and Indebtedness
Not Applicable.
C. Reasons for the Offer and Use of Proceeds
Not Applicable.
D. Risk Factors
Our business, financial condition and results of operations are subject to various changing business, competitive, economic, political and social conditions. In addition
to the factors discussed elsewhere in this annual report, the following are some of the important factors that could adversely affect our operating results, financial condition
and business prospects, and cause our actual results to differ materially from those projected in any forward-looking statements.
Summary of Risk Factors
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
We have experienced fluctuations in growth in recent periods, and our historical growth rates may not be indicative of our future growth.
We face intense competition for our marketing solutions and enterprise solutions, and if we fail to maintain and enhance our mobile capabilities, our results of
operations could be materially and adversely affected.
We have incurred net losses in the past and may not achieve or sustain profitability in the future.
Our newly launched businesses, including our enterprise solutions, may not be successful, and we may not successfully integrate our new solutions with existing
solutions.
Our sales cycle may become more time-consuming and expensive under enterprise solutions, we may encounter pricing pressure and implementation and
configuration challenges, and we may have to delay revenue recognition for some complex transactions, all of which could harm our business and operating
results.
Our net revenues, net revenues as a percentage of gross billing, gross profit margin and the comparability of our financial results may be affected by our revenue
models.
Failure to retain existing clients or attract new ones could adversely impact our business and results of operations.
Loss of any marketing agency client may materially and adversely affect our business and results of operations.
Loss of any content distribution channel and changes in the contract terms with any content distribution channel may materially and adversely affect our business
and results of operations.
We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations. In particular, we could continue
to be materially and adversely affected by the COVID-19 pandemic.
The independent online marketing technology market is highly fragmented and intensely competitive. Independent online marketing technology platforms also
face competitive pressure from well-established internet companies, marketing agencies and traditional media. In addition, as we continue to expand into the
enterprise solution market, we also face increasingly intensified competition.
Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to us.
We are subject to many of the economic and political risks associated with emerging markets due to our operations in China and Hong Kong. Adverse changes in
China or Hong Kong’s economic, political and social conditions as well as government policies could adversely affect our business and prospects.
Developments in U.S.-China relations, including any escalation of political or trade tensions, could negatively affect our business and the market for our ADSs.
Recent litigation and negative publicity surrounding China-based companies listed in the U.S. may result in increased regulatory scrutiny of us and negatively
impact the trading price of the ADSs and could have an adverse effect upon our business, including our results of operations, financial condition, cash flows and
prospects.
18
•
•
•
The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to
conduct inspections over our auditor 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 the HFCAA, in 2024 if the PCAOB is
unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the threat of
their being delisted, may materially and adversely affect the value of your investment.
Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any
change of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
Risks Related to Our Business and Industry
We have experienced fluctuations in growth in recent periods, and our historical growth rates may not be indicative of our future growth.
We have experienced fluctuations in growth in recent periods. We may not be able to sustain our historical growth rates, or at all. You should not consider our
historical growth in gross billing and net revenues as indicative of our future performance. Our growth was mainly driven by our strategic focus shift to capture more market
demand in our relatively new enterprise solutions, as well as mobile channels. Given China’s entire advertising sector has experienced a contraction due to the changing
regulatory environment and heightened macroeconomic uncertainties, we have started and will continue to strategically reduce marketing solution business, which will cause
the reduction of revenue from marketing solutions. In addition, in future periods, our gross billing and net revenues could decline or grow more slowly than we expect and
the client base optimization may not achieve the benefits as we expected. We believe our business, prospects and results of operations depend on a number of factors, some
of which are described in more details in this section, including our ability to:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
successfully execute our mobile strategy in the increasingly competitive mobile online marketing segment;
successfully integrate our core marketing solutions with enterprise solutions;
successfully launch and execute our “SaaS+X” model;
retain existing clients while continuing to optimize our client base;
attract new clients and further diversify our client base;
maintain the breadth and depth of our cooperation with content distribution channels, including publishers, ad exchanges, and ad networks, and attract new ones
in order to increase the volume and breadth of content distribution opportunities available to us;
adapt our solutions and service offerings to meet evolving business needs, including to address market trends such as the migration of consumers from PCs to
mobile devices;
leverage our data assets and experience and expertise in online marketing to extend our solutions beyond online marketing and achieve market acceptance;
maintain the proper functioning of our technology architecture as our business continues to grow;
maintain and grow our data assets in order to help marketers identify, engage and convert their audience;
maintain a high level of customer satisfaction;
adapt to a changing regulatory landscape governing privacy matters;
acquire or invest in businesses, products and technologies and to integrate and realize synergies from acquisitions and strategic investments;
increase awareness of our brand among marketers on a global basis in a cost-effective manner; and
attract and retain employees.
We cannot assure you that we will be able to successfully accomplish any of these objectives.
19
We face intense competition for our marketing solutions and enterprise solutions, and if we fail to maintain and enhance our mobile capabilities, our results of
operations could be materially and adversely affected.
Our recent growth was primarily driven by our expansion since 2014 into mobile channels to identify, engage and convert mobile marketing, as well as our expansion
into enterprise solutions since 2018. We have experienced and expect to continue to face intense competition in respect of our mobile marketing solutions and enterprise
solutions. To deliver, maintain and enhance our mobile capabilities, it is important that we further integrate with a wider range of mobile technologies, systems, networks and
standards that we do not control. We may not be successful in developing solutions that operate effectively with these technologies, systems, networks or standards. Any of
these could have a material adverse effect on our business, prospects and results of operations.
In light of the rising demand for marketing via mobile apps, mobile app publishers, especially popular mobile app publishers, tend to command stronger bargaining
power compared to their non-mobile app publisher counterparts. All of these have resulted in a downward pricing pressure on, and increased media costs for, our mobile
marketing solutions. In addition, the gross margin for our mobile marketing solutions may fluctuate in future. As we continue to prioritize the execution of our mobile
strategy and face increasing competition and pricing pressure for our mobile marketing solutions, our profit margin could be materially and adversely affected.
We have incurred net losses in the past and may not achieve or sustain profitability in the future.
We incurred net losses of US$10.8 million in 2019, US$14.9 million in 2020 and US$16.6 million in 2021. As of December 31, 2021, we had an accumulated deficit
of US$221.2 million. We will need to generate increased revenue or gross profit levels in future periods to become profitable, and, even if we do, we may not be able to
improve our profitability as we intend to continue to expend significant funds to grow our marketing and sales operations, develop and enhance our data analytic capabilities,
scale our data center infrastructure and services capabilities and expand into new market segments. Our efforts to grow our business may be more costly than we expect, and
we may not be able to increase our revenue or gross profit enough to offset our operating expenses. We may incur significant losses in the future for a number of reasons,
including the other risks described in this annual report, and unforeseen expenses, difficulties, complications and delays and other unknown events. If we are unable to
achieve or sustain profitability, the market price of our ADSs may significantly decrease.
Our newly launched businesses, including our enterprise solutions, may not be successful, and we may not successfully integrate our new solutions with existing
solutions.
We have been leveraging our data assets and experience and expertise to extend our solutions beyond our core online marketing business. For example, in May 2018,
we started to offer enterprise solutions and in January 2019, we made a controlling investment in Changyi (Shanghai) Information Technology Co., Ltd., or Changyi, which
further enhances our enterprise solution capabilities. In March 2022, we entered into an agreement to acquire the remaining equity interest of Changyi. We may not be
successful in our newly launched businesses, including enterprise solutions. For example, our data assets and experience and expertise in online marketing may not prove
successful for enterprise solutions, and there can be no assurance that we will successfully integrate, utilize and leverage Changyi’s enterprise solution capabilities. In
addition, in May 2020, we made a controlling investment in Optimal Power Limited, a subsidiary wholly owned by Creative Big Limited. As part of the transaction, Creative
Big Limited injected certain premium media licensing assets into Optimal Power Limited covering a number of jurisdictions in the Asia-Pacific. Moreover, in October 2020,
we acquired CMRS Group Holding Limited, or CMRS, a leading marketing automation solution provider in China. The acquisition will allow us to further enhance our full
product offerings, leveraging CMRS’s marketing automation capabilities, in particular, for cross-border customers’ marketing into China. Furthermore, in July 2021, we
acquired Parllay, a leading personalized marketing platform with deep expertise in WeChat-based CRM, e-commerce and marketing SaaS solutions in China, which further
enhance our product offerings, enlarge our potential clients base, and accelerate sales of our enterprise solutions. We have been making efforts to promote our enterprise
solutions to clients in various industries, including through cross-selling or upselling to existing clients and referral from existing clients. We cannot potential clients base,
and accelerate sales of our enterprise solutions. Although these investments have broadened our content distribution channels and enrich offerings, we cannot assure you that
this strategy will continue to be successful or that our financial performance would be improved. If we are unable to successfully, fully integrate any business, product or
technology we acquire, our business, financial condition and results of operations may suffer.
Our enterprise solutions are primarily initiated and established on our cooperation with Tencent Holdings Limited, or Tencent. For example, we help our clients put in
place data-management platforms which are currently built primarily on Tencent Cloud and Enterprise WeChat Work. As a result, we rely on the functionality and stability
of Tencent’s cloud and WeChat’s infrastructure in providing our enterprise solutions. In addition, we rely on Tencent’s proprietary API connections to gather and analyze
customer data and create consumer profiles. Any disruption or termination of this cooperative relationship, including due to regulatory reasons or changes, could deteriorate
our ability to operate our enterprise solutions, which could negatively affect our business, financial condition and results of operations. See “—Developments in U.S.-China
relations, including the imposition of economic sanctions, could negatively affect our business and adversely affect our shareholders and the market for our ADSs.” for more
information.
20
In addition, we may face increased competition as we expand into the market of enterprise solutions. We may face competitions from local companies that are working
on enterprise solutions, new cloud computing, artificial intelligence, business intelligence and digitalization service. We may also face potential competition from
international SaaS companies, which have longer operating histories, greater financial, technical, marketing, distribution, professional services or other resources and greater
name recognition. If we fail to upgrade our technologies and differentiate our enterprise solutions to effectively identify and address clients’ needs, our business, results of
operations and prospects could be materially and adversely affected.
We have been making efforts to promote our enterprise solutions to clients in various industries, including through cross-selling or upselling to existing clients and
referral from existing clients. We cannot assure you that these promotion and marketing efforts will be successful. As a result, the success of our enterprise solutions depends
on the continued growth of these sectors. In addition, to the extent businesses do not find our enterprise solutions an effective or efficient way of customer management and
to the extent there are any potential new developments in their sectors, our enterprise solutions may be less attractive to clients, and our results of operations and business
growth prospects may be adversely affected.
We have been executing “SaaS+X” model in our enterprise solutions business. The development of this new business depends on our ability to generate and maintain
ongoing, profitable client demand for our SaaS products and related operational services, including through the adaptation and expansion of our services in response to the
ongoing technology changes. As a result, a significant reduction in such demand or an inability to deliver services in the evolving technological environment could
materially affect our results of operations. In addition, since the margin of providing services is generally lower than providing pure SaaS products, our overall margin could
be lower along with the ramp up of our “SaaS+X” model.
We may also face unexpected new risks as we continue to launch new businesses. As a result, we cannot assure you that we will be successful in our new businesses. If
we cannot successfully address new challenges and compete effectively, we may not be able to develop a sufficient client base, recover costs incurred for developing and
marketing our new businesses, and eventually achieve profitability from our new businesses, and, consequently, our future results of operations and growth prospects may be
materially and adversely affected.
Our sales cycle may become more time-consuming and expensive under enterprise solutions, we may encounter pricing pressure and implementation and configuration
challenges, and we may have to delay revenue recognition for some complex transactions, all of which could harm our business and operating results.
As the development cycle on enterprise solutions is subject to the complexity of the clients’ needs and requirements, industries, scale of operation, etc., we may face
greater costs, longer sales cycles and less predictability in completing some of our sales. In this market segment, clients’ decision to use our services may be an enterprise-
wide decision and, if so, these types of sales would require us to provide greater levels of education regarding the use and benefits of our services, as well as education
regarding privacy and data protection laws and regulations to prospective clients with international operations. As a result of these factors, these sales opportunities may
require us to devote greater development, sales support and professional services resources to individual clients, driving up costs and time required to complete the
transactions, while potentially requiring us to delay revenue recognition on some of these transactions until the technical or implementation requirements have been met.
Our net revenues, net revenues as a percentage of gross billing, gross profit margin and the comparability of our financial results may be affected by our revenue
models.
We derive revenue primarily from four sources and report them on either the net or gross basis. For our marketing solutions, we derive revenue from (i) incentives
earned from the website publishers, for which we act as a sales agent for their content distribution opportunities, or the sales agency arrangement, which is reported on a net
basis, (ii) performing cost-plus marketing campaigns, which is reported on a net basis, (iii) performing specified actions marketing campaigns (i.e., a CPM, CPC, CPA, CPS,
CPL or ROI basis), which is reported on a gross basis. For our enterprise solutions, we derive revenue from the offering of SaaS products and services, which is reported on
a gross basis and a net basis. Please see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Key Components of Results of Operations—Net
Revenues” for more details.
The gross profit margins for our sales agency arrangement and cost-plus marketing campaigns are higher than that for our specified action marketing campaigns as
cost of revenues for our sales agency arrangement and cost-plus marketing campaigns does not include media cost. Consequently, an increase in the percentage of gross
billing recognized as net revenues from performing specified actions marketing campaigns will have a positive impact on our net revenues and a negative impact on our
gross profit margin. On the other hand, an increase in the percentage of gross billing recognized as net revenues from our sales agency arrangement and from performing
cost- plus marketing campaigns will have a negative impact on our net revenues and a positive impact on gross profit margin. As the relative percentage of gross billing from
incentives earned from the website publisher under our sales agency arrangement and from performing cost-plus marketing campaigns, on the one hand, and from
performing specified actions marketing campaigns on the other hand, changes from time to time, the relative proportions of gross billing recognized as net revenues on a
gross basis and a net basis also fluctuate, which would consequently impact our net revenues and gross profit margin.
21
Our marketing solutions and enterprise solutions each represent a mixture of revenue recognized on a gross basis and on a net basis and the proportion of each
fluctuates from period to period. Therefore, our net revenues, net revenues as a percentage of gross billing, gross profit margin and the comparability of our financial results
in one period to another may be affected by the relative percentage of gross billing recognized as net revenues on the gross basis and net basis. The relative proportions of
gross billing recognized as net revenues on a gross basis and a net basis, are affected by a variety of factors, in particular, the terms of the arrangements with our clients,
including whether to conduct their marketing campaigns on a specified-action (i.e., gross) or cost-plus (i.e., net) basis in a particular period, which depends on clients’ needs
and goals.
Failure to retain existing clients or attract new ones could adversely impact our business and results of operations.
We do not have long-term contracts with clients, and a majority of our contracts are for a term of one year or shorter. Our clients, are not obligated to use our platform
on an exclusive basis and they generally use multiple providers to manage their marketing spend. Accordingly, we must convince our clients to use our platform, increase
their usage and spend a larger share of their online marketing budgets with us, and do so on an on-going basis.
Our ability to achieve renewals or contracts and new sales depends on many factors, some of which are out of our control, including:
•
•
•
•
•
•
•
•
customer satisfaction with our solutions, including any new solutions that we may develop,
the competitiveness of our pricing and payment terms for our clients, which may, in turn, be constrained by our capital and financial resources,
customer satisfaction with our account managing services,
our ability to customize and tailor our solution offerings and delivery and pricing models in accordance with the evolving needs of our clients and end marketers,
our ability to expand our data base and solutions to serve marketers in a wider range of industries and geographic regions,
our ability to integrate with a wider range of new mobile technologies, systems, networks and standards,
mergers, acquisitions or other consolidation among clients, and
the effects of global economic conditions on spending levels of marketers generally.
Therefore, we cannot assure you that clients that have generated marketing spend on our platform in the past will continue to spend at similar levels or that they will
continue to use our platform at all. We may not be able to replace clients which reduce or cease their usage of our platform with new clients that spend similarly on our
platform. We have relied on a limited number of clients to generate a significant portion of our revenues. For example, while we did not have any client that contributed to
more than 10% of our net revenues in 2019, 2020 and 2021.
In addition, we have started a comprehensive review of the client base since 2016 to focus on profitability and liquidity. The total number of our marketers decreased
by 8% from 3,481 in 2019 to 3,215 in 2020, and increased by 7% from 3,215 in 2020 to 3,442 in 2021.
If our existing clients do not continue to use or increase their use of our platform, or if we are unable to attract sufficient marketing spend on our platform from new
clients, our business and results of operations could be materially and adversely affected.
Loss of any marketing agency client may materially and adversely affect our business and results of operations.
We engage third-party marketing agencies to help source and serve some of our marketers. In 2021, we had 3,442 marketers. Among these marketers, 1,838 were
represented by our marketing agency clients, which contributed a significant portion of our gross billing and net revenues. We do not have exclusive business arrangement
with these marketing agencies. If we lose any marketing agency, we risk losing business from end marketers represented by that agency. In addition, some marketing
agencies have their own business arrangements with content distribution channels and can directly connect marketers with such channels. Our business may suffer to the
extent that marketing agencies and content distribution channels purchase and sell content distribution opportunities directly from one another or through intermediaries
other than us. Loss of marketing agencies as our clients could materially and adversely affect our business and results of operations.
Furthermore, our contractual arrangements with marketing agency clients do not provide us with control or oversight over their day-to-day business activities. If any of
our marketing agency clients engage in activities that violate laws and regulations, our reputation could be harmed and our business and results of operations could be
materially and adversely affected.
22
Loss of any content distribution channel and changes in the contract terms with any content distribution channel may materially and adversely affect our business and
results of operations.
Our consistent access to attractive content distribution opportunities is crucial to our business. We primarily rely on third-party content distribution channels to access
content distribution opportunities. Our content distribution channels are concentrated and primarily include online and mobile publishers, major search engines and ad
exchanges, including those owned or operated by Tencent, Baidu, Google and Alibaba. Media costs for content distribution opportunities on Tencent, Baidu, Google and
Alibaba channels in aggregate accounted for 87.4%, 75.9% and 55.5% of our media costs in 2019, 2020 and 2021, respectively. Media costs for content distribution
opportunities on our largest and second largest channel partners accounted for 53.1% and 12.2% of our media costs in 2021, respectively. In addition, our contracts with
content distribution channels are generally for a period of one year and do not impose long-term obligations requiring them to make their content distribution opportunities
available to us on reasonable terms or at all. The loss of access to content distribution opportunities from one of those companies would negatively impact our ability to help
marketers reach their audience.
Our ability to source content distribution opportunities from content distribution channels depends in part on our ability to continuously generate sufficient marketing
spend from our clients on these channels. If our content distribution channels terminate or choose not to renew their contracts with us, due to a variety of factors, including
regulatory reasons or changes, our business and results of operations will be materially and adversely affected.
In addition, we may not be able to negotiate favorable or acceptable terms once the contracts expire. There is no assurance that we will be able to execute these
contracts with terms favorable or acceptable to us or at all, which could have a material adverse impact on our financial condition and results of operations.
Furthermore, our contracts with content distribution channels generally provide for certain rebates or incentives, generally calculated as a percentage of marketing
spend, that we are entitled to should the market spending during the terms exceed the specified thresholds. Under some of our contracts, content distribution channels offer
staggered levels of rebates or incentives to us depending on the amount of marketing spend we achieve during the period.
We face risks related to natural disasters, health epidemics and other outbreaks, which could significantly disrupt our operations. In particular, we could continue to be
materially and adversely affected by the COVID-19 pandemic.
We are vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist
attacks or similar events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or
corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide solutions and services on our platform. Our business could also
be adversely affected by the effects of a novel strain of coronavirus, or COVID-19, Ebola virus disease, Zika virus disease, H1N1 flu, H7N9 flu, avian flu, Severe Acute
Respiratory Syndrome, or SARS, or other epidemics.
Most of our system hardware and back-up systems are hosted in leased facilities in Hong Kong, Shanghai, Beijing and Guangzhou, and most of our directors, senior
management and employees are based in Hong Kong, Shanghai and Beijing. Therefore, if any of the above-mentioned natural disasters, health epidemics or other outbreaks
were to occur in these regions, our operations may experience material disruptions, such as temporary closure of our offices and suspension of services, which may
materially and adversely affect our business and results of operations. Our business, results of operations, financial condition and prospects could be materially and adversely
affected directly, as well as to the extent that the coronavirus or any other epidemic harms the Chinese economy in general. For example, there has been an outbreak of
COVID-19 in China and around the world and its resurgences for over two years. COVID-19 is considered be highly contagious and poses a serious public health threat. In
March 2020, the World Health Organization declared the COVID-19 a pandemic, given its threat beyond a public health emergency of international concern that the
organization had declared on January 30, 2020. Furthermore, certain variants have proven to be more severe and more infectious, especially the pandemic’s recent
emergence of the Delta and Omicron variants, which have resulted in an increase in cases globally. These or future variants of COVID-19 could also prove to be more
resistant to vaccines. The pandemic has resulted in quarantines, travel restrictions, home office policies, and the temporary closure of stores and facilities in China, Hong
Kong and many other jurisdictions. These measures have slowed down the development of the Chinese economy and adversely affected the global economic conditions and
financial markets. Substantially all of our revenues and our workforce are based in China and Hong Kong. Our operations have been, and may continue to be, materially and
adversely affected by potential delays in or reductions of business activities and commercial transactions and by general uncertainties surrounding the duration of the
government’s extended business and travel restrictions. For example, we experienced significant delays in solution delivery due to the resurgence of COVID-19 in the first
quarter of 2022 in Shanghai and other regions in China. The travel restrictions and lockdowns materially reduced the efficiency of communication between our employees
and customers, delayed our working process and delivery, which had an adverse impact on our revenue. In addition, our business operations could be disrupted if any of our
employees is suspected of contracting the coronavirus or any other infectious disease, since it could require our employees to be quarantined and/or our offices to be
disinfected.
23
The outlook for the pandemic remains fluid, and the full and long-term implications from COVID-19 on our business and results of operations remain uncertain. Any
significant resurgence of COVID-19 may have an adverse effect on our results of operations, financial condition, business and prospects. Any potential impact on our results
will depend on, to a large extent, future developments and new information that may emerge regarding the duration of COVID-19 and the actions taken by governmental
authorities and other entities to contain COVID-19 or treat its impact, which are mostly beyond our control. We are closely monitoring the pandemic and its impact on us.
Additionally, to the extent the COVID-19 adversely affects our business, results of operations, cash flows, financial condition and/or prospects, it may also have the effect of
heightening many of the other risks described herein.
The independent online marketing technology market is highly fragmented and intensely competitive. Independent online marketing technology platforms also face
competitive pressure from well-established internet companies, marketing agencies and traditional media. In addition, as we continue to expand into the enterprise
solution market, we also face increasingly intensified competition.
China’s independent online marketing technology market is highly competitive, fragmented and rapidly changing. With the introduction of new technologies and the
influx of new entrants, we expect competition to continue and intensify, which could harm our ability to increase revenue and attain or sustain profitability. We believe the
principal competitive factors in this industry include:
•
•
•
•
•
•
•
•
•
ability to deliver return on marketing expenditure at scale;
customer trust and loyalty;
geographic reach;
breadth and depth of cooperation with publishers, ad exchanges, ad networks and other participants in the online marketing ecosystem;
comprehensiveness of solutions and service offerings;
pricing structure and competitiveness;
cross-channel capabilities;
accessibility and user-friendliness of solutions; and
brand awareness.
In addition, independent online marketing technology platforms face competitive pressure from large and well-established internet companies, such as Alibaba, Baidu,
Tencent and Google, which have established stronger and broader presence across the online marketing ecosystem and have significantly more financial, technical,
marketing and other resources, more extensive client base, and longer operating histories and greater brand recognition than we do. These companies have access to user
information by virtue of their popular consumer-oriented websites and mobile apps, and have the technology designed for use in conjunction with the types of user
information collected from their websites and mobile apps. These companies may also leverage their positions to make changes to their systems, platforms, exchanges,
networks or other products or services that could be harmful to our business and results of operations. While we believe that we do not directly compete with these large and
well-established internet companies as we promote their content distribution opportunities or purchase their content distribution opportunities in the ordinary course of our
business in connection with our execution of marketing campaigns, and these companies generally do not provide integrated marketing solutions the way we do, we face
indirect competition from these major players in the online marketing technology industry as they provide online marketing technology and offer services and offer solutions
that help marketers achieve one or more aspects of their marketing goals in one or more phases of their online marketing cycle. These large and well-established companies
control content distribution channels and may also directly compete with us to the extent we expand our solutions and footprints vertically along the online marketing
technology value chain. Further, some of these companies are, or may also become, our content distribution channels and may enter into other types of strategic
arrangements with us. For example, we generally enter into annual framework agreements with content distribution channel partners, including Baidu and Tencent, to
purchase or promote their content distribution opportunities. See “Item 4. Information on the Company—B. Business Overview—Our Content Distribution Channels”.
Competitive pressure may incentivize them to cease their partnership with us. Online marketing technology platforms also face competition from marketing agencies, who
may have their own relationships with content distribution channels and can directly connect marketers with such channels. Furthermore, online marketing technology
platforms continue to compete with traditional media including direct marketing, television, radio, cable and print advertising companies.
New technologies and methods of online marketing present an evolving competitive challenge, as market participants upgrade or expand their service offerings to
capture more marketing spend from marketers. In addition to existing competitors and their existing service offerings, we expect to face competition from new entrants to the
online marketing technology industry and new service offerings from existing competitors. If existing or new companies develop, market or resell competitive high-value
marketing technology solutions, acquire one of our competitors or strategic partners, form a strategic alliance or enter into exclusivity arrangement with one
24
of our competitors or strategic partners, our ability to compete effectively could be significantly compromised and our business, results of operations and prospects could be
materially and adversely affected.
In May 2018, we launched our SaaS-based enterprise solutions. We anticipate competition in this relatively new and evolving area in China and such competition to
increase based on businesses’ demands for this type of products or solutions. We may face competitions from local companies that are working on enterprise solutions, new
cloud computing, artificial intelligence, business intelligence and digitalization. We may also face potential competition from international SaaS companies, which have
longer operating histories, greater financial, technical, marketing, distribution, professional services or other resources and greater name recognition. In addition, many of our
prospective competitors may have close relationship with our existing and new clients and bear an extensive knowledge of this industry. As a result, they may be able to
respond more quickly to new or emerging technologies and changes in clients’ requirements, or devote greater resources to the development, promotion and sale of their
products. If we fail to upgrade our technologies and differentiate our enterprise solutions to effectively identify and address clients’ needs, our business, results of operations
and prospects could be materially and adversely affected.
If online marketing technology solutions and enterprise solutions do not achieve widespread market acceptance, our business, growth prospects and results of
operations would be materially and adversely affected.
The market for online marketing technology solutions and enterprise solutions such as ours is evolving in China and these solutions may not achieve or sustain high
levels of demand and market acceptance as we expect. While marketing via search engines or display channels has been established for several years, marketing via new
digital channels such as mobile and social media is less established. The future growth of our business could be constrained by both the level of acceptance and expansion of
emerging online marketing channels, as well as the continued use and growth of existing channels. Even if these channels become widely adopted, marketers and agencies
may not be familiar with and make significant investments in, solutions such as ours that help them manage their online marketing across channels and devices. In addition,
some of our solutions are delivered as software-as-a-service, or SaaS, offerings, which are less mature or common in China, and the pace of transition to SaaS business may
be slower among marketers with heightened data security concerns or general demand for highly customizable application software. The acceptance of our solutions
delivered as SaaS offerings will depend, to a substantial extent, on the education of our clients on the SaaS offerings and the widespread adoption of SaaS solutions in
general, and we cannot be certain that the trend of adoption of such solutions will continue in the future. Therefore, it is difficult to predict the demand for our platform or the
future growth rate and size of the market for online marketing technology solutions.
Expansion of the market for online marketing technology solutions depends on a number of factors, including the growth of new digital channels such as mobile and
social media and the cost, as well as the performance and perceived value associated with online marketing technology solutions. If online marketing technology solutions
do not achieve widespread acceptance, or there is a reduction in demand for online marketing caused by weakening economic conditions, decreases in corporate spending,
technological challenges, data security or privacy concerns, governmental regulation, competing technologies and solutions or otherwise, our business, growth prospects and
results of operations will be materially and adversely affected.
In late 2021, we started to strategically reduce lower margin and higher risk businesses in our more capital-intensive marketing solution segment in order to focus on
the higher growth potential of enterprise solutions. We cannot assure you that this strategy shift would bring more favorable operation results. If China’s advertising sector
recover, or capital market in favor of China-based companies to raise capital, we cannot assure you that our advertising business, or client base could recover immediately or
in the short term. Therefore our business, growth prospects and results of operations will be materially and adversely affected.
The enterprise solution is a relatively new data technology market in PRC. The expansion of our enterprise solutions depends on the clients’ interest and market
acceptance. If we fail to obtain a widespread acceptance, the number of our clients may decrease. We may also incur additional spending to further enhance our brand
recognition and promotion, which could adversely impact our profitability. If our enterprise solutions fail to gain a widespread acceptance, our business, growth prospects
and results of operations will also be materially and adversely affected.
If our algorithms and data engines for assessing and predicting potential audience behaviors are flawed or ineffective, or if our platform fails to otherwise function
properly, our reputation and market share would be materially and adversely affected.
Our ability to attract marketers to, and build trust in, our platform is significantly dependent on our ability to effectively assess and predict audience interest in, and
therefore interaction with, relevant marketing content. In addition, our ability to attract businesses to use our enterprise solutions is significantly dependent on our ability to
effectively identify and address their needs on customer relationship management, or CRM, and data analytics (e.g. sales data, customer data, product data, etc.). We utilize
our proprietary algorithms and data engines to track, process and analyze internet user data, forecast probability and nature of internet users’ potential engagement with a
given marketing message, create and tailor the marketing message to specific user interest, and execute marketing campaigns based on parameters specified by our clients.
Our proprietary algorithms and data engines take into account multiple kinds
25
and sources of data, including data on users’ interest, intent, E-commerce and social data, demographic data and campaign performance data, which we track using our
proprietary tracking tools, from our marketers, publishers and ad exchanges in connection with marketing campaigns, and from collaboration with selected third-party data
partners. The data we collect may not be relevant to all industries, and for certain industries, we may not have sufficient user data to ensure that our algorithms and data
engines would work effectively. Furthermore, we generally do not verify the data we gather, which may be subject to fraud or are otherwise inaccurate. Even if such data are
accurate, they may become irrelevant or outdated and thus may not reflect a user’s genuine interest or accurately predict his or her interaction with a given marketing
message. For example, following the date we obtain the relevant data, a user’s interest and behavior pattern may change or he or she may have already completed a
transaction and is no longer interested in the marketing message.
In addition, we expect to experience significant growth in the amount of data we process as we continue to develop new solutions and features to meet evolving and
growing marketer demands. As the amount of data and variables we process increases, the calculations that our algorithms and data engines must process become
increasingly complex and the likelihood of any defect or error increases. To the extent our proprietary algorithms and data engines fail to accurately assess or predict a user’s
interest in and interaction with, the relevant marketing content, or experience significant errors or defects, marketers may not achieve their marketing goals in a cost-effective
manner or at all, which could make our platform less attractive to them, result in damages to our reputation and a decline of our market share and adversely affect our
business and results of operations.
Our ability to collect and use data from various sources could be restricted.
The optimal performance of our algorithms and data engines depends on the data that we collect from multiple sources, which we use to build user profiles, develop
and refine our algorithms and data engines. Our ability to collect and use these types of data is limited by a number of factors, some of which are described in further details
elsewhere in this section, including:
•
•
•
•
•
•
•
•
consumer choices, including the blocking or deletion of cookies or modifications to privacy settings;
decisions by marketers, content distribution channels, or selected third party that we have data collaboration arrangement with, to restrict our ability to collect
data from them, to refuse to implement mechanisms that we request to ensure compliance with our legal obligations;
changes in browser or device functionality and settings, and other new technologies, which could make it easier for users to prevent the placement of cookies or
other tracking technologies;
new developments in law, regulations and industry standards on privacy and data protection regimes, including increased visibility of consent mechanisms as a
result of these legal, regulatory or industry developments;
the failure of our network or software systems, or the network or software systems of marketers;
our inability to grow client base in new industries and geographic markets in order to obtain the critical mass of data necessary for our algorithms and data
engines to perform optimally in these new industries and geographies;
our relationship with our data partners or certain key data sources, including major internet companies in China, which may stop providing or be unable to
provide us data on terms acceptable to us; and
interruptions, failures or defects in our data collection, mining, analysis and storage systems.
Any of the above described limitations on our ability to successfully collect and use data could materially impair the optimal performance of our algorithms and data
engines as well as the efficiency of our solutions, which could make our platform less attractive to marketers and result in damages to our reputation, a decline of our market
share and adversely affect our business and results of operations.
Blocking or deletion of cookies or other modifications to privacy settings on PCs and mobile devices could impair our data collection and effectiveness of our solutions.
Cookies that we place are generally regarded as “third party cookies” because we place them through internet browsers on an internet user when an internet user visit
our website or a website owned by our marketers or other party that has given us permission to place cookies. Our cookies generally record non-personally identifiable
information, including when a user views or clicks on a marketing message, where a user is located, how many marketing messages a user has seen, and browser or device
information. We use data from cookies to help build user profiles that assess audience interest and predict audience potential interaction with a given marketing message.
Cookies may easily be deleted or blocked by internet users. Commonly used internet browsers (Chrome, Firefox, Internet Explorer, and Safari) allow internet users to
modify their browser settings to prevent cookies from being accepted by their browsers. Most browsers also now support temporary privacy modes that allow the user to
suspend, with a single click, the placement of new cookies or reading or updates of existing cookies. Internet users can also delete cookies from their computers at any time.
Some internet users also download free or paid “ad blocking” software that prevents certain cookies from being stored on a user’s computer. Further, certain web browsers,
such as Safari, currently block or are planning to block some or all third-party cookies by default, as do
26
Apple’s iPad and iPhones devices. Mobile devices based upon the Android operating system use cookies only in their web browser applications, so that cookies do not track
Android users while they are using other applications on the device. If web browsers block, or internet users reject or delete, cookies, fewer of our cookies or our marketers’
cookies may be set in browsers or accessible in mobile devices, which could adversely affect our data collection and hence the optimal performance of our algorithms and
data engines and effectiveness of our solutions.
Aside from blocking or deleting of cookies, other modifications to privacy settings on the PCs and mobile devices could limit or restrict our ability to collect and
analyze data. For example, certain search engines, such as Google, provide an encrypted search function. Although we may still be able to see the amount of traffic brought
to marketers’ website through the search engine, we will not be able to see the keywords that generate the traffic as the keywords are encrypted. This makes it more difficult
for us to evaluate the effectiveness of keywords, and hence the effectiveness of our solutions may be compromised, which would result in client departure and reputation
damages, and materially and adversely affect our business and results of operations.
If we fail to maintain or renew the value-added telecommunication license, or fail to obtain other requisite license, or approvals or filings in China, the business carried
out by certain consolidated entity may be materially and adversely affected.
In November 2018, we, through OptAim Network, our variable interest entity, or the VIE, acquired Shanghai Myhayo Technology Co., Ltd., or Myhayo, a content
distribution channel and a mobile content aggregator of articles and short videos in China. Myhayo presents customized feeds to users via its mobile application and allows
users to earn points from their daily access to the app, which could be used to redeem cash rewards. Under the relevant PRC laws, commercial operators of value-added
telecommunication services, which refer to providers of telecommunications and information services through public network infrastructures that provide information or
services to internet users with a charge, shall obtain a value-added telecommunications business operation license. See “Item 4. Information on the Company—B. Business
Overview—Regulations—Regulations on Value-added Telecommunication Services” and “—Regulations on Internet Content Providers.” It is unclear whether Myhayo’s
business model would render it a commercial operator of value-added telecommunication service provider under the relevant PRC laws.
In August 2019, Myhayo obtained the value-added telecommunication license that has a validity term of five years from the relevant local counterpart of the Ministry
of Industry and Information Technology, or MIIT. We are subject to ongoing obligations and continued regulatory review. If we fail to maintain or renew the value-added
telecommunication license, or fail to obtain any additional licenses and permits or make any records or filings required by new laws, regulations or executive orders in a
timely manner or at all, we could be subject to liabilities or penalties, and we may have to change our business models, and our operations could be adversely affected. In
addition, new laws and regulations may be adopted from time to time to address new issues that come to the authorities’ attention, which may require us to obtain new
license and permits, or take certain actions that may adversely affect our business operations. We may not timely obtain or maintain all the required licenses or approvals or
make all the necessary filings. Nor can we assure you that we will be able to timely address all the change in policy, failure of which may subject us to liabilities or penalties,
and our operations could be adversely affected.
Content displayed on our platform and the mobile application may be found objectionable by PRC regulatory authorities and may subject us to penalties and other
administrative actions.
We are subject to PRC regulations governing internet access and other forms of information over the internet. Under these regulations, internet content providers are
prohibited from posting over the internet any content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest,
or is obscene, superstitious, frightening, gruesome, offensive, fraudulent or defamatory. Failure to comply with these requirements may result in monetary penalties,
revocation of licenses to provide internet content or other licenses, suspension of the concerned platforms and reputational harm. In addition, these laws and regulations are
subject to interpretation by the relevant authorities, and it may not be possible to determine in all cases the types of content that could cause us to be held liable as a content
distribution channel and a mobile content aggregator of articles and short videos in China, which presents customized feeds to users via its mobile application. For a detailed
discussion, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Internet Content Providers.”
Internet platform operators may also be held liable for the content displayed on or linked to their platforms that is subject to certain restrictions. Our users may browse
professional or user-generated content, such as articles and other content formats. Although we have adopted internal procedures to monitor the content displayed on our
mobile application, due to the significant amount of content, we may not be able to identify all the content that may be illegal or otherwise objectionable. In addition, we
may not be able to timely update our internal procedures to reflect the latest changes in the PRC government’s requirements for content display. Failure to identify and
prevent illegal or inappropriate content from being displayed on our platform and the mobile application may subject us to liability, government sanctions or loss of licenses
and/or permits.
Regulatory, legislative or self-regulatory developments for online businesses, including privacy and data protection regimes, are expansive, not clearly defined and
rapidly evolving. These laws and regulations could create unexpected costs, subject us to threats
27
of lawsuits, enforcement actions for compliance failures, result in declines in user growth or engagement, restrict portions of our business or cause us to change our
technology platform or business model.
Governments around the world, including the PRC, Hong Kong, U.S. and European Union governments, have enacted or are considering legislation related to online
businesses. There may be an increase in legislation and regulation related to online marketing, the use of geo-location data to inform marketing, the collection and use of
internet user data and unique device identifiers, such as IP address or mobile unique device identifiers, and other data protection and privacy regulation. These laws and
regulations could adversely affect the demand for or effectiveness and value of our solutions, force us to incur substantial costs or require us to change our business practices
in a manner that could adversely affect our business and results of operations or compromise our ability to effectively pursue our growth strategies.
We primarily target Chinese language internet users in China for our marketers from all over the world. Through our enterprise solutions, we also access and gather
data of users outside China as clients adopt our enterprise solutions. As a result, we may be directly or indirectly subject to the laws and regulations on online marketing,
including data and privacy laws, of multiple jurisdictions.
In recent years, the PRC government has enacted legislation on internet use to protect personal information from any unauthorized disclosure. For example, on
February 1, 2013, China’s first set of personal data protection guidelines, the Guidelines for Personal Information Protection in Information Security Technology Public and
Commercial Service Systems, came into effect, which set forth detailed personal information protection requirements on data collection, data processing, data transfer and
data creation. Although these guidelines are voluntary and non-binding, we believe that growing regulatory oversight of data privacy in China is inevitable. In addition,
Amendment 9 to the PRC Criminal Law prohibits institutions, companies and their employees in the telecommunications and other industries from selling or otherwise
illegally disclosing a citizen’s personal information or obtaining such information through theft or other illegal ways, and further stipulates that persons who sell or otherwise
illegally disclose a citizen’s personal information obtained during the course of performing duties or providing services shall be subject to a heavier sentence. On November
7, 2016, the Standing Committee of the PRC National People’s Congress issued the Cyber Security Law of the PRC, which became effective on June 1, 2017. Pursuant to
the Cyber Security Law of the PRC, providers of network products and services shall provide security maintenance for their products and services and shall comply with
provisions regarding the protection of personal information as stipulated under the relevant laws and regulations. Moreover, the Provisions on Protection of Personal
Information of Telecommunication and Internet Users is the specific regulation governing the collection, use, disclosure and security of personal information. Complying
with these PRC laws and regulations may cause us to incur substantial costs or require us to change our business practices. Furthermore, the Personal Information Security
Specification, last revised on March 6, 2020, or the China Specification, came into force on October 1, 2020. Although the China Specification is not a mandatory regulation,
it nonetheless has a key implementing role in relation to China’s Cyber Security Law in respect of protecting personal information in China. It is likely that the China
Specification will be relied on by Chinese government agencies as a standard to determine whether businesses have abided by China’s data protection rules. The China
Specification has broadened the scope of personal sensitive information, or PSI, including but not limited to phone number, transaction record and purchase history, bank
account, browse history, and e-ID info such as system account, email address and corresponding password, and thus, the application of explicit consent under the China
Specification is more far reaching. Furthermore, under the China Specification, the data controller must provide the purpose of collecting and using subject personal
information, as well as business functions of such purpose, and the China Specification requires the data controller to distinguish its core function from additional functions
to ensure the data controller will only collect personal information as needed. Our failure to comply with the China Specification could result in governmental enforcement
actions, litigation, fines and penalties, which could have a material adverse effect on our business, results of operations, financial condition and prospects. On November 28,
2019, the CAC, or the MIIT, the Ministry of Public Security, and the State Administration for Market Regulation of the PRC jointly formulated the Method for Identifying
the Illegal Collection and Use of Personal Information by Applications, which explicitly sets out the specific methods of identifying six types of illegal behaviors of
collecting and using personal information through applications. If we are unable to respond to changing laws, regulations, policies and guidelines related to privacy or cyber
security, our business, financial condition, results of operations and prospects may be materially and adversely affected.
In Hong Kong, the Hong Kong Personal Data Ordinance prohibits an internet company collecting information about its users, analyzing the information for a profile of
the user’s interests or selling or transmitting the profiles to third parties for direct marketing purposes unless it has obtained the user’s consent.
In the 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 prompt disclosure and notification
to affected users and regulatory authorities. In addition to the data breach notification laws, some states have also enacted statutes and rules requiring businesses to
reasonably protect certain types of personal information they hold or to otherwise comply with certain specified data security requirements for personal information.
Additionally, the U.S. government has announced that it is reviewing the need for greater regulation of the collection of consumer information, including regulation aimed at
restricting some targeted advertising practices.
28
In the European Union, or EU, to the extent it is applicable to the processing operations carried out in the course of our activities, the General Data Protection
Regulation, or the GDPR, which became applicable on May 25, 2018, has a broad territorial scope affecting the processing of personal data by companies outside of the EU
offering goods and services to, or monitoring the behavior of, individuals in the EU. The GDPR introduces new obligations for subject companies in the area of privacy and
data protection. The GDPR implements more stringent legal and operational requirements for both 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, new rights for data subjects with respect to their data
(including by enabling them to exercise rights to erasure and data portability), mandatory data breach notification requirements, and higher standards for data controllers 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 processing activities, which could further limit our ability to use and share
personal data and could require localized changes to our operating model. Under the GDPR, fines of up to €20 million or up to 4% of the total worldwide annual turnover of
the preceding financial year, whichever is higher, may be imposed in certain cases of non-compliance. To the extent the GDPR is applicable, the implementation of the
GDPR may require amendments to our procedures and policies or the agreements we have with our service providers and clients, and these changes could impact our
business by increasing its operational and compliance costs. The EU has also released a proposed Regulation on Privacy and Electronic Communications, or the e-Privacy
Regulation, to replace the EU’s current Privacy and Electronic Communications Directive, or the e-Privacy Directive, to, among other things, achieve a greater
harmonization among EU member states and better align the rules governing electronic communications (e.g., in relation to the use of cookies and other tracking
technologies and protection against spam) with the requirements of the GDPR. While the ePrivacy Regulation was originally intended to be adopted on May 25, 2018
(alongside the GDPR), it is still going through the European legislative process, and commentators now expect it to be adopted in 2023. The current draft of the ePrivacy
Regulation imposes strict opt-in e-marketing rules with limited exceptions to business to business communications and significantly increases fining powers to the same
levels as GDPR. Regulations of cookies and web beacons may lead to broader restrictions on our online activities, including efforts to understand followers’ internet usage
and promote ourselves to them. Since the implementation of the GDPR in 2018, we have made tremendous efforts to comply and constantly adapt to the fast-evolving
regulatory framework; for example, we have already revised our Data Processing Addendum (after invalidation of the Privacy Shield by the European Court of Justice, with
the adoption of the new Standard contractual clauses by the European Union, and the recent adoption of the new UK standard contractual clauses by the United Kingdom).
We are always actively working with our clients and partners towards ensuring up to date compliance.
Outside of the U.S. and the EU, many jurisdictions have adopted or are adopting new data privacy and data protection laws that may impose further onerous
compliance requirements, such as data localization, which prohibits companies from storing outside the jurisdiction data relating to resident individuals in data centers
outside the jurisdiction. The proliferation of such laws within the jurisdictions and countries in which we operate may result in conflicting and contradictory requirements,
particularly in relation to evolving technologies such as cloud computing. Any failure to successfully navigate the changing regulatory landscape could result in legal
liability or impairment to our reputation in the marketplace, which could have a material adverse effect on our business and operations.
While we strive to comply with all applicable laws and regulations relating to privacy and data collection, processing, use, and disclosure applicable to us, it is possible
that our practices are and will continue to be, inconsistent with certain regulatory requirements. These laws and regulations are continually evolving, are not always clear,
and are not always consistent across the jurisdictions in which we do business, and the measures we take to comply with these laws, regulations and industry standards may
not always be effective. We may be subject to litigation or enforcement action or reduced demand for our solutions if we or our marketers fail to abide by applicable data
protection and privacy laws or to provide adequate notice and/or obtain consent from end users. In addition, some of our content distribution channels require us to
indemnify and hold them harmless from the costs or consequences of litigation resulting from using their networks. Any proceeding, claims or lawsuits initiated by
governmental bodies, customers or other third parties, whether meritorious or not, or perception of concerns relating to our collection, use, disclosure, and retention of data,
including our security measures applicable to the data we collect, whether or not valid, could harm our reputation, force us to spend significant amounts and time on defense
of these proceedings, give rise to significant fines, liabilities and damage awards, distract our management, change our business practices, increase our costs of doing
business, inhibit the use of our solutions, harm our ability to keep existing customers or attract new customers, or otherwise materially and adversely affect our business,
results of operations and prospects.
We are subject to, and may expend significant resources in defending against, government actions and civil claims in connection with false, fraudulent, misleading or
otherwise illegal marketing content for which we provide design, production or agency services.
Under PRC Advertising Law, where an advertising operator provides advertising design, production or agency services with respect to an advertisement when it knows
or should have known that the advertisement is false, fraudulent, misleading or otherwise illegal, the competent PRC authority may confiscate the advertising operator’s
advertising revenue from such services, impose penalties, order it to cease dissemination of such false, fraudulent, misleading or otherwise illegal advertisement or correct
such advertisement, or suspend or revoke its business licenses under certain serious circumstances.
29
Under the PRC Advertising Law, “advertising operators” include any natural person, legal person or other organization that provides advertising design, production or
agency services to advertisers for their advertising activities. Since our solutions involve provision of agency services to marketers, including helping them identify, engage
and convert audience, and create content catering to their potential clients across different content distribution channels, we are deemed as an “advertising operator” under
the PRC Advertising Law. Therefore, we are required to examine advertising content for which we provide agency services for compliance with applicable laws,
notwithstanding the fact that the advertising content may have been previously published, and that the advertisers also bear liabilities for the content in their advertisements.
In addition, for advertising content related to certain types of products and services, such as alcohol, cosmetics, pharmaceuticals and medical procedures, we are expected to
confirm that the advertisers have obtained requisite government approvals, including operating qualifications, proof of quality inspection for the advertised products,
government pre-approval of the content of the advertisements and filings with the local authorities. Although we have established internal policies to review and vet
advertising content before it is placed on a content distribution channel to ensure compliance with applicable laws, we cannot ensure that each advertisement for which we
provide agency services complies with all PRC laws and regulations relevant to advertising activities, that supporting documentation provided by our clients is authentic or
complete, or that we are able to identify and rectify all non-compliances in a timely manner.
Moreover, civil claims may be filed against us for fraud, defamation, subversion, negligence, copyright or trademark infringement or other violations due to the nature
and content of the information for which we provide design, production or agency services. For example, we generally represent and warrant in our contracts with content
distribution channels as to the truthfulness of the advertising content that we place on these channels, and agree to indemnify the content distribution channels for any losses
resulting from false, fraudulent, misleading or otherwise illegal advertising content that we place on these content distribution channels. On the other hand, not all our
marketing campaign contracts contain a back-to-back representation and warranty as to the truthfulness of the advertising content or an indemnity provision where the clients
undertake to hold us harmless in case we incur losses arising out of any false, fraudulent, misleading or otherwise illegal advertising content. In the event we are subject to
government actions or civil claims in connection with false, fraudulent, misleading or otherwise illegal marketing content for which we provide agency services, our
reputation, business and results of operations may be materially and adversely affected.
If we are not able to grow efficiently to meet our clients’ increasing needs, our operating results could be harmed.
As usage of our solutions grows, we will need to devote additional resources to improving our system infrastructure. In addition, we will need to appropriately scale
our internal business systems and our services organization, including account servicing staff, to serve marketers’ growing demands. We cannot assure you these
improvements and expansions to our infrastructure and staff will be fully or effectively implemented on a timely basis, if at all. Even if we are able to upgrade our systems
and expand our staff, such expansion may be expensive and complex and require our management’s time and attention. We could also face inefficiencies or operational
failures as a result of our efforts to scale our infrastructure and expand our staff. Any of these could impair the performance of our platform, reduce customer satisfaction and
lead to client departure, which could harm our reputation and adversely affect our business and results of operations.
If we fail to offer high-quality account services, our business and reputation may suffer.
Our success in marketing and sale of our solutions and retention and expansion of client base depends on our ability to maintain a consistently high level of customer
services, client education and technical support, which requires that our account servicing personnel have specific marketing domain knowledge and expertise. If we are
unable to hire and train a sufficient number of support staff to provide effective and timely support to our clients, our clients’ appreciation of, or satisfaction with, our
solutions may be adversely affected, resulting in reduced client spending or departure and adversely affect our reputation and materially and adversely affect our business
and results of operations.
If we fail to offer high-quality technical support services under enterprise solutions, our relationships with our clients and our financial results may be adversely
affected.
Clients of our enterprise solutions will depend on our support to resolve technical issues relating to our applications. We may be unable to respond quickly enough to
accommodate short-term increases in their demand for support services. Increased demand for these services, without corresponding revenues, could increase costs and
adversely affect our operating results. In addition, our sales growth can be highly dependent on our applications and business reputation and on positive recommendations
from clients. Any failure to maintain high-quality technical support, or a market perception that we do not maintain high-quality support, could adversely affect our
reputation, our ability to sell our service offerings to existing and prospective customers, and our business, operating results and financial position.
30
If we fail to innovate, adapt and respond timely and effectively to rapidly changing technologies and new trends, our solutions may become less competitive or obsolete.
Our future success will depend on our ability to continuously innovate, enhance and broaden our solutions to meet evolving needs for online marketing, data and
intelligent enterprise solutions, and address technological advancements and new trends in these areas, in particular the growing popularity of online marketing via mobile
channel. We may not be able to timely identify and respond to these new trends. The design of mobile devices and operating systems is controlled by third parties with which
we do not have any formal relationship. These parties frequently introduce new devices, and from time to time they may introduce new operating systems or modify existing
ones. Network carriers may also restrict our ability to access specific content on mobile devices. If we fail to innovate or adapt our technologies and solutions so that they are
compatible with these devices or operating systems, which in turn require that we maintain adequate research and development personnel and resources, our solutions may
become less competitive or obsolete. In addition, any new solution that we develop may not receive wide acceptance as we anticipated. Any of these events could materially
and adversely affect our business, results of operations and prospects.
If we are unable to protect our proprietary information or other intellectual property, our business could be adversely affected.
As of December 31, 2021, we held two patents and 141 computer software copyrights in China, and 33 registered trademarks in China, Hong Kong and Singapore. We
rely on a combination of trademark and trade secret laws, and contractual restrictions, including through confidentiality, non-disclosure and assignment of invention
assignment agreements with our key employees, consultants and third parties with whom we do business, to establish, maintain and protect our proprietary information and
other intellectual property. Policing any misappropriation, unauthorized use or reverse engineering our proprietary information and other intellectual property is difficult and
costly and the steps we have taken may be inadequate. For example, contractual restrictions may be breached, and we may not succeed in enforcing our rights or have
adequate remedies for any breach of laws or contractual restrictions. In addition, we may not be able to enter into agreements or arrangements with everyone who has access
to our proprietary information or contributes to the development of our intellectual property. Moreover, our trade secrets may be disclosed to or otherwise become known or
be independently developed by competitors, and in these situations we may have no or limited rights to stop others’ use of our information.
Furthermore, to the extent that our employees, consultants or other third parties with whom we do business use intellectual property owned by others in their work for
us, disputes may arise as to the rights to such intellectual property. If, for any of the above reasons, our intellectual property is disclosed or misappropriated, it would have an
adverse effect on our business, financial condition and results of operations.
Our business may suffer if it is alleged or determined that our technologies or any other aspects of our business infringe on the intellectual property rights of others.
As we continue to expand and as litigation or other similar proceedings become more common in resolving commercial disputes, we face a higher risk of being subject
to intellectual property infringement claims. Companies in the internet, technology and media industries are increasingly bringing and becoming subject to suits alleging
infringement of proprietary rights. The validity, enforceability and scope of protection of intellectual property rights in internet-related industries are uncertain and evolving.
In particular, our registered or unregistered trademarks or trade names may be challenged, infringed, circumvented, declared generic or determined to be infringing on other
marks. We cannot be certain that our operations or any aspects of our business do not or will not infringe upon or otherwise violate patents, copyrights or other intellectual
property rights held by third parties. This is also the case as our sales and marketing activities may use photos or video clips that contain portraits of individuals and shows
performed by others, such as product live-streaming promotions held by our cooperating key opinion leaders (“KOLs”). At times, third parties may adopt trade names or
trademarks similar to those of ours, thereby impeding our ability to build brand identity and possibly leading to market confusion. In addition, there could be potential trade
name or trademark infringement claims brought by owners of other registered or unregistered trademarks that are similar to our registered or unregistered trademarks or trade
names. If a third party has been using in commerce any mark that is confusingly similar to our trade names or trademarks, or has registered any such marks, prior to our use
or registration of our trade names or trademarks, such third party could potentially bring infringement claims against us depending on the territory of the use or registration.
Any such claim would require us to incur significant costs to defend, and if we are unsuccessful, we may be subject to an injunction and/or required to pay significant
damages or spend significant time and resources to rebrand any relevant products or services.
We have received in the past, and expect to receive in the future, notices that claim we have infringed, misappropriated or misused other parties’ trademark and other
intellectual property rights. For example, in January 2015, iClick, Inc., a company incorporated in the state of Washington in the United States and the owner of a U.S.
registered trademark for the term “iClick” filed an action in the United States District Court for the District of Colorado against one of our subsidiaries in Hong Kong, iClick
Interactive Asia Limited, alleging trademark and trade name infringement and unfair competition, among others. The basis of iClick Inc.’s claims arose from iClick
Interactive Asia Limited’s use of the name iClick in the United States. We believe these claims lacked merit, primarily because the parties offer different goods and services,
and therefore any chance of consumer confusion is remote. However, to avoid the costs and uncertainty of litigation, we settled the lawsuit in January 2016. Furthermore, we
have not conducted any trademark clearance searches in the United States nor have we obtained any registrations or filed any applications for the registration of our trade
names or
31
trademarks in the United States. Although common law and federal law in the United States provide unregistered mark in use in the United States with protection against
infringement, such protection is only limited to the geographic areas where such mark is in use. Therefore, we may not be able to effectively enforce and protect our trade
names or trademark throughout the United States. Any litigation or other proceedings on intellectual property rights could be costly, time-consuming, divert management
resources, and may impede our ability to use existing or develop new technologies or expand into new markets, any of which could have a material adverse effect upon our
business and results of operations.
Past and future acquisitions, strategic investments, partnership or alliance could be difficult to integrate, divert the attention of key management personnel, disrupt our
business, dilute shareholder value and adversely affect our results of operations and financial condition.
We have expanded our business and offerings through organic growth as well as acquisitions and strategic investments. For example, in July 2015, we acquired
OptAim, a mobile marketing business. Since the acquisition, we have substantially expanded our mobile marketing business, with OptAim’s complementary mobile
analytics, attribution technologies, and content distribution channel partners that allow marketers to track and optimize marketing campaigns on mobile channels.
In January 2019, we made a controlling investment in Changyi, as we seek to extend our client solutions beyond the core online marketing business, addressing
enterprise needs in China, particularly in the emerging area of Smart Retail—an expanding and innovative market involving the combination of online and offline solutions.
In October 2020 and December 2020, we further increased our equity stake in Changyi. In March 2022, we entered into an agreement to acquire the remaining equity interest
in Changyi. We have since made additional investments and acquisition to expand our enterprise solution offerings.
In May 2020, we made a controlling investment in Optimal Power Limited to acquire certain premium media licensing assets covering a number of jurisdictions in the
Asia-Pacific.
In October 2020, we acquired CMRS, a leading marketing automation solution provider in China. The acquisition will allow us to further enhance our full product
offerings, leveraging CMRS’s marketing automation capabilities, in particular, for cross-border customers’ marketing into China.
In January 2021, we issued certain Class B ordinary shares to Baozun, a leading brand e-commerce service partner that helps brands execute their e-commerce
strategies in China and entered into a strategic cooperation framework agreement with it. Pursuant to the strategic cooperation framework agreement, we and Baozun will
collaborate in developing a full-cycle, closed-loop e-commerce service model, covering areas such as system development, IT services, digital marketing, store operation,
customer services and warehousing and fulfillment services to better serve potential brand partners.
In July 2021, we completed the acquisition of Parllay, a leading personalized marketing platform with deep expertise in WeChat-based CRM, e-commerce and
marketing SaaS solutions in China. We anticipate that the utilization of Parllay's rich expertise will further enhance our product offerings, enlarge our potential clients base,
and accelerate sales of our enterprise solutions.
Past and future acquisitions, strategic investments, partnerships or alliances could be difficult to integrate, divert the attention of key management personnel, disrupt
our business, dilute shareholder value and adversely affect our business and results of operations. We have limited experience in acquiring and integrating businesses,
products and technologies. If we identify an appropriate acquisition candidate, we may not be successful in negotiating the terms and/or financing of the acquisition, and our
due diligence may fail to identify all of the problems, liabilities or other shortcomings or challenges of an acquired business, product or technology, including issues related
to intellectual property, product quality or architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or client issues. Any
acquisition or investment may require us to use significant amounts of cash, issue potentially dilutive equity securities or incur debt. In addition, acquisitions, including our
acquisitions of OptAim, CMRS, and Changyi, our strategic investment in Optimal Power Limited, involve numerous risks, any of which could harm our business, including:
•
•
•
•
•
•
•
•
difficulties in integrating the operations, technologies, services and personnel of acquired businesses, especially if those businesses operate outside of our core
competency;
cultural challenges associated with integrating employees from the acquired company into our organization;
reputation and perception risks associated with the acquired product or technology by the general public;
ineffectiveness or incompatibility of acquired technologies or solutions;
potential loss of key employees of acquired businesses;
inability to maintain the key business relationships and the reputations of acquired businesses;
diversion of management’s attention from other business concerns;
litigation for activities of the acquired company, including claims from terminated employees, clients, former shareholders or other third parties;
32
•
•
•
•
•
failure to identify all of the problems, liabilities or other shortcomings or challenges of an acquired company, technology, or solution, including issues related to
intellectual property, solution quality or architecture, regulatory compliance practices, revenue recognition or other accounting practices or employee or client
issues;
in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency,
political and regulatory risks associated with specific countries;
costs necessary to establish and maintain effective internal controls for acquired businesses;
failure to successfully further develop the acquired technology in order to recoup our investment; and
increased fixed costs.
If we are unable to successfully fully integrate any future business, product or technology we acquire, our business, financial condition and results of operations may
suffer.
We may be required to record significant impairment charges as a result of our acquisitions and long-term investments.
Our acquisitions and long-term investments could result in the use of substantial amounts of cash, issuance of equity securities, impairment losses related to goodwill
or amortization expenses related to intangible assets, and exposure to undisclosed or potential liabilities of acquired companies and investees. Companies that we invested in
could be affected by the COVID-19 outbreak and may lead to impairment charges.
As of December 31, 2021, we had goodwill of US$81.7 million, which represented approximately 16.1% of our total assets, the majority of which was related to (i)
OptAim and its subsidiaries, its VIE and the VIE’s subsidiary, (ii) Changyi, of which we acquired the controlling interest in 2019, and (iii) CMRS Group Holding Limited, or
CMRS, of which we acquired in 2020. Goodwill is measured on the date of acquisition and is not amortized, but is reviewed for impairment at least annually or more
frequently if impairment indicators arise. In evaluating the potential for impairment of goodwill, we make assumptions regarding future operating performance, business
trends, and market and economic conditions. Such analyzes further require us to make judgmental assumptions about sales, operating margins, growth rates, and discount
rates.
As of December 31, 2021, we had other long-term investments of US$12.1 million, which represented approximately 2.4% of our total assets. These equity
investments without readily determinable fair value and does not qualify for the existing practical expedient in ASC 820 to estimate fair value using the net asset value per
share (or its equivalent) of the investments, we elect to use the measurement alternative to measure its equity investments at cost, less any impairment, plus or minus changes
resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer, if any. Management makes a qualitative assessment as
to whether the investment is impaired at each reporting date. If a qualitative assessment indicates that the investment is impaired, management estimates the investment’s fair
value in accordance with the principles of ASC 820. If the fair value is less than the investment’s carrying value, the Company recognizes an impairment loss in net loss
equal to the difference between the carrying value and fair value. Management applies judgment in (i) determining whether the investment is impaired, (ii) estimating the
impairment amount if an impairment exists, and (iii) determining valuation methods and key valuation assumptions and data used in estimating the impairment amounts.
These judgments consider various factors and events including a) adverse performance of investees; b) adverse industry developments affecting investees; and c) adverse
regulatory, social, economic or other developments affecting investees. These judgements include the selection of valuation methods in estimating fair value and the
determination of key valuation assumptions used, comprising selection of comparable companies and multiples, and discount for lack of marketability.
There are inherent uncertainties related to these factors and to management’s judgment in applying these factors to the assessment of goodwill recoverability and other
long-term investments’ indications of impairment. Any possible changes in our judgmental assumptions would cause a change in the recoverable amounts of goodwill and
determination of investment’s impairment. In addition, we could be required to evaluate the recoverability of goodwill and investment’s impairment prior to the annual
assessment if there are any impairment indicators, including experiencing disruptions to the business, unexpected significant declines in operating results, divestiture of a
significant component of our business or market capitalization declines, any of which could be caused by our failure to manage OptAim or other entities in which we have
controlling investment, or to successfully integrate their operations with our other operations. Impairment charges could negatively affect our reported earnings and financial
ratios in the periods of such charges and limit our ability to obtain financing in the future. See “Item 5. Operating and Financial Review and Prospects—A. Operating Results
—Critical Accounting Estimates—Impairment Assessment of Goodwill” for more information.
If we do not appropriately maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, we may be
unable to accurately report our financial results and the market price of our ADSs may be adversely affected.
As a public company in the United States, we are subject to Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, which requires that we include
a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ended
December 31, 2018 and requires our auditor to attest to, and report on, the assessment made by our management.
33
Our management has concluded that our internal control over financial reporting was not effective as of December 31, 2021. We and our independent registered public
accounting firm identified two material weaknesses in our internal control over financial reporting. These two material weaknesses identified relate to (1) the lack of
sufficient accounting personnel with appropriate understanding of U.S. GAAP and SEC reporting requirements, and (2) the lack of an up-to-date manual of accounting
policies and procedures to facilitate preparation of U.S. GAAP financial statements, which could result in adjustments to U.S. GAAP not identified in a timely and complete
manner, causing material misstatements in the Company's financial reporting. To remediate these two weaknesses, we have adopted the following measures to improve our
internal control over financial reporting:
•
•
•
•
•
We hired additional personnel with managerial positions in our finance department with an appropriate understanding of and work experience involving U.S.
GAAP and SEC reporting requirements. We will continue to put effort in hiring additional personnel with an appropriate understanding of and work experience
involving U.S. GAAP and SEC reporting requirements to ensure there are sufficient resources in the financial reporting functions.
Besides, we established clear roles and responsibilities for financial reporting and accounting personnel to address complex accounting and financial reporting
issues.
Furthermore, we sponsored our existing financial reporting and accounting personnel to complete external courses relating to U.S. GAAP and SEC reporting
such that the financial reporting and accounting personnel can earn the necessary credentials to be qualified as certified public accountants in the U.S.
We are also establishing an ongoing program to provide sufficient and additional appropriate training to our financial reporting and accounting staff, especially
trainings related to U.S. GAAP and SEC financial reporting requirements. For instance, we continue to require our existing financial reporting and accounting
personnel to regularly attend U.S. GAAP and SEC reporting requirement training and workshops hosted by external organizations at least on an annual basis.
In addition, we have formalized the procedures and controls regarding the financial reporting process and developed and implemented a comprehensive set of
U.S. GAAP policies and standardized financial reporting procedures, including a manual of accounting policies and financial reporting checklists, to allow early
detection, prevention and resolution of potential misstatements. However, we are in the process of hiring additional financial reporting and accounting personnel
to timely update the manual of accounting policies, and properly prepare and review financial statements and related footnote /disclosures based on U.S. GAAP
and SEC reporting requirements.
See “Item 15. Controls and Procedures.” We cannot assure you, however, that these measures may fully address these deficiencies in our internal control over financial
reporting or that we may conclude that they have been fully remedied. Our failure to correct these control deficiencies or our failure to discover and address any other control
deficiencies could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related
regulatory filings on a timely basis. In addition, our independent registered public accounting firm has issued an attestation report as of December 31, 2021. See “Item 15.
Controls and Procedures— Attestation Report of the Independent Registered Public Accounting Firm.” However, if we fail to maintain effective internal control over
financial reporting in the future, our management and our independent registered public accounting firm may not be able to conclude that we have effective internal control
over financial reporting. This could in turn result in the loss of investor confidence in the reliability of our financial statements. As a result of these, our business, financial
condition, results of operations and prospects, as well as the trading price of our ADSs, may be materially and adversely affected. Moreover, ineffective internal control over
financial reporting significantly hinders our ability to prevent fraud. Furthermore, we have incurred and may need to incur additional costs and use additional management
and other resources in an effort to comply with Section 404 of the Sarbanes-Oxley Act and other requirements going forward.
In addition, our internal controls over financial reporting will not prevent or detect all errors or fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control system’s objectives will be met.
34
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or
that all control issues and instances of fraud will be detected.
Failures or disruption in any systems, software or hardware infrastructure supporting our platform and solutions could significantly disrupt our operation and cause us
to lose clients or partners.
The optimal performance of our solutions relies on the continued and uninterrupted performance of our systems, software and hardware infrastructure, and security and
integrity of our data. They are vulnerable to damages from a variety of sources, some of which are out of our control, including telecommunication failures, power outages,
cyber-attacks, or other malicious human acts and natural disasters. Any steps we take to increase the reliability and redundancy of our systems, software and hardware
infrastructure supporting our platform and solutions and to improve the security of our data assets may be expensive and may not be successful in preventing system failures
or disruption. For example, techniques used to obtain unauthorized access to or sabotage our data or otherwise hack our systems change frequently and generally are not
recognized until launched against a target. As a result, we may be unable to anticipate these techniques or to implement adequate preventative measures. Sustained or
repeated failures or disruption in our systems, including from security breaches, whether actual or perceived, could significantly reduce the attractiveness of our solutions,
harm our reputation, result in our liabilities and have a material adverse effect on our business and results of operations.
In addition, our business may be negatively affected by interruptions or delays in services provided by third-party system or infrastructure providers that we rely upon.
We currently lease data centers and utilize related equipment and services from third-party data center providers. All of our data gathering and analytics are conducted on,
and the marketing content we deliver are processed through, our servers located in these data centers and their cloud. We also rely on bandwidth providers and internet
information service providers to deliver marketing content. While we have disaster recovery arrangements in place, our testing in actual disasters or similar events is limited
and any damage to, or failure of, the systems or facilities of our third-party providers, including as a result of any occurrence of a natural disaster, an act of terrorism,
vandalism or sabotage, a decision to close any data center or the facilities of any other third-party provider without adequate notice, or other unanticipated problems at these
facilities, could adversely impact our ability to deliver our solution to marketers and have a material adverse effect on our business and results of operations.
Our inability to use software licensed from third parties, including open source software could negatively affect our ability to sell our solutions and subject us to possible
litigation.
Our technology platform incorporates software licensed from third parties, including open source software, which we use without charge. Although we monitor our use
of open source software, the terms of many open source licenses to which we are subject have not been interpreted by courts, and there is a risk that such licenses could be
construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide our solution to our clients. In addition, the terms of open source software
licenses may require us to provide software that we develop using such software to others on unfavorable license terms. For example, certain open source licenses may
require us to offer the components of our platform that incorporate the open source software for free, to make available source code for modifications or derivative works we
create based upon, incorporating or using the open source software, and to license such modifications or derivative works under the terms of the particular open source
license.
In the future, we could be required to seek licenses from third parties in order to continue offering our solution, in which case licenses may not be available on terms
that are acceptable to us, or at all. Alternatively, we may need to re-engineer our solutions or discontinue use of portions of the functionality provided by our solutions. Our
inability to use third-party software could result in disruptions to our business, or delays in the development of future offerings or enhancements of our existing platform,
which could materially and adversely affect our business and results of operations.
If we fail to detect fraud or serve marketers’ marketing content on undesirable websites, our reputation will suffer, which would harm our brand and negatively impact
our business and results of operations.
Our business depends in part on providing marketers with solutions that they can trust, and we have contractual commitments to take reasonable measures to prevent
marketer’s marketing content from appearing on undesirable websites. We use proprietary technologies and third party services to detect click fraud and block inventory on
websites with inappropriate content. However, technologies utilized by bad actors are constantly evolving. Preventing and combating fraud and inappropriate content
requires constant vigilance and investment of time and resources. We may not always be successful in our efforts to do so. If we serve marketing content on websites that are
objectionable to marketers, or inadvertently purchase content distribution opportunities for marketers that proves to be unacceptable for their marketing campaigns, such as
fraudulent bot generated impressions, we may lose business and incur damages to our brand and reputation. In addition, we may be exposed to liabilities or the need to
provide credits or refunds to our clients, and our business and results of operations may be harmed.
35
Any negative publicity with respect to us, the online marketing industry in general or our partners may materially and adversely affect our reputation, business and
results of operations.
Complaints, litigation, regulatory actions or other negative publicity that arise about the online marketing industry in general or our company in particular, including on
the quality, effectiveness and reliability of marketing solutions, privacy and security practices, and online marketing content, even if inaccurate, could adversely affect our
reputation and client confidence in, and the use of, our solutions. Harm to our reputation and client confidence can also arise for many other reasons, including employee
misconduct, misconduct of our data and content distribution channel partners, data center providers or other counterparties, failure by these persons or entities to meet
minimum quality standards or otherwise fulfill their contractual obligations or to comply with applicable laws and regulations. Additionally, negative publicity with respect
to our data or content distribution channel partners could also affect our business and results of operation to the extent that we rely on these partners or if marketers or
marketing agencies associate our company with such partners. For example, we collaborate with third-party data service providers who supplement our dataset. We maintain
a strict vetting process before engaging with these third-party data service providers to ensure the integrity and quality of data they provided, but we cannot assure you that
these providers have accessed and processed data in a proper and legal manners. Any non-compliance on their part may cause potential liabilities to us and disrupt our
operations.
If we fail to promote or maintain our brand in a cost-efficient manner, our business and results of operations may be harmed.
We believe that developing and maintaining awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our solutions, and is an
important element in attracting new clients and partners. Furthermore, we believe that the importance of brand recognition will increase as competition in our market
increases. Successful promotion of our brand will depend largely on our ability to deliver value propositions to marketers and on the effectiveness of our marketing efforts.
In the past, our efforts to build our brand have involved significant expenses and promotion of our brand may be subject to restrictions and challenges. For example, as part
of the settlement of the trademark infringement lawsuit brought by iClick, Inc. in January 2015, although we are free to use the term “iClick” in connection with our business
in the United States, we are subject to ongoing obligations and restrictions to certain types of marketing and promotion that contain that term. In addition, our brand
promotion activities may not yield increased revenue, and even if they do, any increased revenue may not offset the expenses we incurred in building our brand. If we fail to
successfully promote and maintain our brand, or incur substantial expenses in an unsuccessful attempt to promote and maintain our brand, we may fail to attract enough new
clients or retain our existing clients and our business and results of operations can be materially and adversely affected.
Misconduct, errors and failure to function by our employees could harm our business and reputation.
We are exposed to many types of operational risks, including the risk of misconduct and errors by our employees. Our business depends on our employees to process a
large number of marketing campaigns orders, which involve the use of audience data and marketers’ business information. We could be materially adversely affected if such
data or information was disclosed to unintended recipients or if we experience an operational breakdown or failure in the processing of a marketing campaign whether as a
result of human error, a purposeful sabotage or a fraudulent manipulation of our operations or systems. We could also be materially adversely affected if our employees
absconded with our proprietary data or used our know-how to compete with us. Although employees have left our company in the past and may have violated the non-
compete and non-solicitation clauses in their employment agreements with little impact on our business, future violations of these clauses could have a material adverse
effect on our business. Any of these occurrences could result in our diminished ability to operate our business, potential liability to our clients, inability to attract future
clients, reputational damage, regulatory intervention and financial harm, which could negatively impact our business and results of operations.
We may not be able to obtain additional capital when desired, on favorable terms or at all.
We intend to continue to make investments to support our business growth and may require additional funds, to respond to business challenges, including to better
support and serve our clients and provide better terms for our clients to capture more market share, develop new features or enhance our platform and solutions, improve our
operating and technology infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in public or private equity, equity-
linked or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing shareholders
could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our ordinary shares.
Some of our credit agreements include a financial covenant that requires us to meet certain minimum monthly adjusted quick ratio and minimum quarterly EBITDA. As of
December 31, 2021, we had violated certain financial covenants with respect to our bank borrowings extended by a bank, however, we have obtained the necessary waiver
letter such that the bank would not demand immediate repayment. In addition, any debt financing that we secure in the future could involve additional restrictive covenants
relating to our capital raising activities and other financial and operational matters, including the ability to pay dividends. These restrictions may make it more difficult for us
to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us,
if at all. If we are unable to obtain adequate financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and respond to
business challenges could be significantly impaired, and our business and prospects could be adversely affected.
36
If we do not retain our senior management team and key employees, or attract additional technology and sales talents, we may not be able to sustain our growth or
achieve our business objectives.
Our future success is substantially dependent on the continued service of our senior management team and key employees. Our management team is currently spread
across multiple physical locations and geographies, which can strain the organization and make coordinated management more challenging. Our future success also depends
on our ability to continue to attract, retain and motivate highly skilled employees, particularly employees with technical skills that enable us to deliver effective marketing
solutions, and sales and marketing, and publisher development and support personnel with experience in online marketing. Competition for these employees in our industry
is intense. As a result, we may be unable to attract or retain these management, technical, sales and marketing and publisher development and support personnel who are
critical to our success, resulting in harm to our key marketer and publisher relationships, loss of key information, expertise or proprietary knowledge and unanticipated
recruitment and training costs. The loss of the services of our senior management or other key employees could make it more difficult to successfully operate our business
and pursue our business goals.
Increases in labor costs in the PRC may adversely affect our business and results of operations. Most of our employees are based in China. Chinese economy has
experienced increases in inflation and labor costs in recent years. As a result, average wages in the PRC are expected to continue to increase. In addition, we are required by
PRC laws and regulations to pay various statutory employee benefits, including pension, housing fund, medical insurance, work-related injury insurance, unemployment
insurance and maternity insurance to designated government agencies for the benefit of our employees. We expect that our labor costs, including wages and employee
benefits, will continue to increase. Unless we are able to control our labor costs or pass on these increased labor costs to our users by increasing the fees of our services, our
financial condition and results of operations may be adversely affected.
Negative publicity about our KOLs may adversely affect our reputation, our business and our results of operations.
Our brand and reputation is perceived to be connected with the reputation of the KOLs we collaborate with. Therefore, our brand image and reputation could be
harmed by negative publicity about the KOLs we collaborate with. Negative publicity about them could occur in many circumstances that are beyond our control. For
example, the KOLs we collaborate with may post unlawful, false, offensive or controversial content on their social media pages, notwithstanding any terms of use of the
social media platforms and our guidelines, which may result in negative comments and complaints or even cause their accounts to be closed by social media platforms.
Although we have requested the KOLs we collaborate with to observe certain behavioral covenants and to refrain from conduct that is detrimental to our reputation and
brand image, we cannot assure you that they will strictly follow those requirements. In addition, they may also receive negative publicity if they are involved in any illegal
activities, scandals or rumors. Any of these negative publicity, regardless of veracity, could hurt our reputation and may result in costs incurred to offset such reputation
damage and have a negative impact on our business, results of operations and financial condition.
We do not have any business insurance coverage in China.
Insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies in more developed economies in China.
Currently, we do not have any business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for these risks and the
difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Any uninsured business
disruptions may result in our incurring substantial costs and the diversion of resources, which could have an adverse effect on our business and results of operations.
A downturn in global economy could reduce the demand for our solutions, which could materially and adversely affect our business and results of operations.
The global financial markets have experienced significant disruptions since 2008 and the United States, Europe and other economies have experienced periods of
recession. The recovery from the lows of 2008 and 2009 has been uneven and is facing new challenges, including the escalation of the European sovereign debt crisis from
2011.
37
Furthermore, the government of the United Kingdom held an in-or-out referendum on its membership in the European Union on June 23, 2016. The referendum
resulted in a vote in favor of the exit of the United Kingdom from the European Union, or “Brexit.” On January 31, 2020, the United Kingdom ceased to be a member of the
European Union. The effects of Brexit remain uncertain. Brexit could negatively impact the economies and market conditions of the European Union and/or worldwide, and
could continue to contribute to instability in the global financial markets. To the extent we may seek to expand our business in the European market, the uncertainty
surrounding the terms of the Brexit and its consequences could adversely impact our clients’ spending budget on our solutions, which could harm our results of operations.
Furthermore, eruptions of regional tensions, such as the ongoing military conflict involving Ukraine and Russia, and the related sanctions against Russia have resulted in
major economic shocks worldwide and substantial volatility across global financial markets. It is unclear whether these challenges and uncertainties will be contained or
resolved, and what effects they may have on the global political and economic conditions in the long term.
There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies adopted by the central banks and financial authorities of
some of the world’s leading economies, including the United States, China and Europe. The stock markets around the world have experienced extreme volatility, in reaction
to the COVID-19 pandemic and governments’ responses thereto, including the recent rate reductions by the Federal Reserve. It is unclear whether these challenges and
uncertainties will be contained or resolved, and what effects they may have on the global political and economic conditions in the long term. Economic conditions in China
are sensitive to global economic conditions. Any prolonged slowdown in the global economy may reduce the demand for our solutions and have a negative impact on our
business, results of operations and financial condition. Additionally, continued turbulence in the international markets may adversely affect our ability to access the capital
markets to meet liquidity needs.
Risks Related to Our Corporate Structure
We are a Cayman Islands holding company with no equity ownership in the VIE and we conduct our operations in China through (i) our PRC subsidiaries and (ii) VIE
and its subsidiaries with which we have maintained contractual arrangements.
We are a Cayman Islands holding company with no equity ownership in the VIE and we conduct our operations in China through (i) our PRC subsidiaries and (ii) the
VIE and its subsidiaries with which we have maintained contractual arrangements. Investors in our ADSs thus are not purchasing equity interest in the VIE and its
subsidiaries in China but instead are purchasing equity interest in a Cayman Islands holding company. If the PRC government deems that our contractual arrangements with
the VIE do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations
change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company in the Cayman Islands, the
VIE, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the validity and enforceability of the contractual
arrangements with the VIE and, consequently, significantly affect the financial performance of the VIE and our company as a group.
We rely on the contractual arrangements that establish the structure for certain of our operations in China.
Foreign ownership in advertising business used to be subject to certain restrictions under the PRC laws and regulations. For example, according to the Administrative
Provisions on Foreign-Invested Advertising Enterprises, which were abolished in June 2015, foreign investors were required to meet several conditions in order to invest in
PRC advertising business, such as a minimum number of years of advertising-related experience and an approval from the relevant PRC regulatory authority. OptAim, which
we acquired in July 2015, is a Cayman Islands company and iClick Data Technology (Beijing) Limited, or iClick Beijing, its PRC subsidiary, is considered a foreign
invested enterprise, or FIE. To comply with the then-effective PRC laws and regulations, including the Administrative Provisions on Foreign-Invested Advertising
Enterprises, OptAim Beijing, later replaced by iClick Beijing entered into a set of contractual arrangements with OptAim Network and its shareholder. For a detailed
description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with OptAim Network.”
As a result of these contractual arrangements, we exert control over OptAim Network and its subsidiaries, and consolidate their operating results in our financial statements
under U.S. GAAP.
After the abolishment of the foreign ownership restriction in advertising business, we had been transferring the advertising business previously operated by the VIE,
OptAim Network, primarily consisting of our mobile marketing solution business, to our wholly-owned subsidiaries. As of December 31, 2018, our wholly-owned
subsidiaries had replaced OptAim Network as contracting party for all our mobile marketing solution business. In November 2018, OptAim Network acquired Myhayo, a
content distribution channel and a mobile content aggregator of articles and short videos in the PRC, which presents customized feeds to users via its mobile application. The
mobile application operated by Myhayo allows users to earn points from their daily access, which could be used to redeem cash rewards. It is unclear whether Myhayo’s
business model would render it a commercial operator of value-added telecommunication services under the relevant PRC laws, in which case Myhayo would be required to
hold a value-added telecommunication license. In August 2019, Myhayo obtained the value-added telecommunication license that has a validity term of five years. See “—
Risk Related to Our Business and Industry—If we fail to maintain or renew the value-added telecommunication license, or fail to obtain other requisite license, or approvals
or filings in China, the business carried out by certain consolidated entity may be materially and adversely affected.” Current PRC laws and regulations impose certain
restriction on foreign investment in value-added telecommunication services. See “—Regulations—Regulations on Foreign Direct Investment in Value-Added
Telecommunications Companies.” As a result, we acquired Myhayo through OptAim Network, the VIE. In 2018, OptAim Network contributed 0.7% to our gross billing and
1.8% of our net revenues. In 2019, OptAim Network contributed 3.6% to our gross billing and 11.5% of our net revenues. In 2020, OptAim Network contributed 3.3% to our
gross billing and 8.7% of our net revenues. In 2021,
38
OptAim Network contributed 3.0% to our gross billing and 7.8% of our net revenues. We conduct our operations in China through our PRC subsidiaries and the VIE and its
subsidiaries, with which we maintained these contractual arrangements. Investors in our ordinary shares or the ADSs are not purchasing equity interest in the VIE in China
but instead are purchasing equity interest in a Cayman Islands holding company with no equity ownership of the VIE.
Under the Measures on the Administration of Foreign-related Surveys, or the Foreign-related Surveys Measures, promulgated by the National Bureau of Statistics of
China on October 13, 2004, no individual or organization may conduct any foreign-related survey without a license for foreign-related survey granted by the National
Bureau of Statistics in China or its local counterparts.
Under the Catalogue for the Guidance of Foreign Investment Industries, or Foreign Investment Catalog, promulgated by the Ministry of Commerce and National
Development and Reform Commission on June 28, 2017, only a domestic enterprise or a sino-foreign enterprise which meets the several requirements stipulated in the
Foreign-related Surveys Measures can apply for a license for the foreign-related survey. On September 18, 2021, the Ministry of Commerce (“MOFCOM”) and the National
Development and Reform Commission, or the NDRC, jointly promulgated the Special Administrative Measures (Negative List 2021) for Foreign Investment Access, or the
Special Administrative Measures, which replaced the negative list attached to the Foreign Investment Catalog in 2020. Industries that are not listed in the Special
Administrative Measures are permitted areas for foreign investments, and are generally open to foreign investment unless specifically restricted by other PRC regulations.
We do not believe our collection and use of multiple kinds of data from multiple sources in China to improve the cost-effectiveness of marketing campaigns for marketers in
and outside China fall within the scope of “foreign-related survey” under the Foreign-related Survey Measures listed under the Special Administrative Measures. However,
there are uncertainties under the PRC Laws whether such activities may be deemed as “foreign-related survey,” which would require a foreign-related survey license from
the National Bureau of Statistics in China or its local counterparts. If the PRC regulatory authorities disagree with our interpretation of what would constitute foreign-related
survey and enforcement practices on foreign-related survey licensing requirement or if we expand our business scope to engage in activities falling within the scope of
foreign-related survey, we will need to continue to rely on iClick Data Technology (Beijing) Limited’s contractual arrangements with OptAim Network and its shareholder to
conduct certain of our operations in China, including to transfer such operations to the VIE to the extent they are deemed foreign-related survey.
In the opinion of our PRC counsel, Jingtian & Gongcheng, our current ownership structure, the ownership structure of our PRC subsidiaries, our consolidated variable
interest entity and its subsidiary, and the contractual arrangements among iClick Beijing, OptAim Network and the shareholder of OptAim Network are not in violation of
existing PRC laws, rules and regulations; and these contractual arrangements are valid, binding and enforceable in accordance with their terms and applicable PRC laws and
regulations currently in effect. However, Jingtian & Gongcheng has also advised us that there are substantial uncertainties regarding the interpretation and application of
current or future PRC laws and regulations and there can be no assurance that the PRC government will ultimately take a view that is consistent with the opinion of our PRC
counsel.
It is uncertain whether any new PRC laws, rules or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide.
Please see “—Substantial uncertainties exist with respect to the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate
structure, corporate governance and business operations.” for more information. If the ownership structure, contractual arrangements and business of our company, our PRC
subsidiaries or our consolidated variable interest entity and its subsidiary are found to be in violation of any existing or future PRC laws or regulations, or we fail to obtain or
maintain any of the required permits or approvals, the relevant governmental authorities would have broad discretion in dealing with such violation, including levying fines,
confiscating our income or the income of our PRC subsidiaries, consolidated variable interest entity or its subsidiary, revoking the business licenses or operating licenses of
our PRC subsidiaries, consolidated variable interest entity or its subsidiary, shutting down our servers or blocking our online platform, discontinuing or placing restrictions or
onerous conditions on our operations, requiring us to undergo a costly and disruptive restructuring, restricting or prohibiting our use of proceeds from our offerings and
equity issuances to finance our business and operations in China, and taking other regulatory or enforcement actions that could be harmful to our business. Any of these
actions could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business
and results of operations. If any of these occurrences results in our inability to direct the activities of our consolidated variable interest entity and its subsidiary, and/or our
failure to receive economic benefits from our consolidated variable interest entity and its subsidiary, we may not be able to consolidate their results into our consolidated
financial statements in accordance with U.S. GAAP.
We rely on contractual arrangements with our variable interest entity and its shareholder for certain of our business operations, which may not be as effective as direct
ownership in providing operational control.
We have relied and expect to continue to rely on contractual arrangements with our variable interest entity, OptAim Network, and its shareholder for part of our online
marketing business on mobile channels in China, as well as certain other complementary businesses, and to the extent our operations are deemed as foreign-related survey.
For a description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with OptAim
Network.” These contractual arrangements may not be as effective as direct ownership in providing us with control over our consolidated variable interest entity and its
subsidiary.
39
If we had direct ownership of OptAim Network and its subsidiaries, we would be able to exercise our rights as a shareholder to effect changes in the board of directors
of OptAim Network and its subsidiaries, which in turn could implement changes, subject to any applicable fiduciary obligations, at the management and operational level.
However, under the current contractual arrangements, we rely on the performance by OptAim Network and the shareholder of OptAim Network of his obligations under the
contracts to exercise control over our consolidated variable interest entity and its subsidiaries. The shareholder of our consolidated variable interest entity may not act in the
best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate our business
through the contractual arrangements with OptAim Network and its shareholder. In addition, if any third party claims any interest in such shareholder’s equity interests in
OptAim Network, our ability to exercise shareholder’s rights or foreclose the share pledge according to the contractual arrangements may be impaired. Therefore, our
contractual arrangements with our consolidated variable interest entity may not be as effective in ensuring our control over the relevant portion of our business operations as
direct ownership would be.
Any failure by our variable interest entity or its shareholder to perform their obligations under our contractual arrangements with them would have a material adverse
effect on our business.
If our consolidated variable interest entity or its shareholder fails to perform their respective obligations under the contractual arrangements, we may have to incur
substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC laws, including seeking specific
performance or injunctive relief, and claiming damages, which we cannot assure you will be effective under PRC laws. For example, if the shareholder of OptAim Network
was to refuse to transfer their equity interest in OptAim Network to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if
they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations. In addition, if any third
parties claim any interest in such shareholder’s equity interests in OptAim Network, our ability to exercise shareholder’s rights or foreclose the share pledge according to the
contractual arrangements may be impaired.
All the agreements under our contractual arrangements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly,
these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. Such disputes do not
include claims arising under the United States federal securities laws and therefore these arbitration provision do not prevent you from pursuing claims under the United
States federal securities law. The legal system in the PRC is different from some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal
system could limit our ability to enforce these contractual arrangements. Meanwhile, there are very few precedents and little formal guidance as to how contractual
arrangements in the context of a consolidated variable interest entity should be interpreted or enforced under PRC laws. There remain significant uncertainties regarding the
ultimate outcome of such arbitration should legal action become necessary. In addition, under PRC laws, rulings by arbitrators are final and parties cannot appeal arbitration
results in court unless such rulings are revoked or determined unenforceable by a competent court. If the losing parties fail to carry out the arbitration awards within a
prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require
additional expenses and delay. In the event that we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of
enforcing these contractual arrangements, we may not be able to exert effective control over our consolidated variable interest entity and its subsidiary, and our ability to
conduct our business may be negatively affected.
The shareholder of our variable interest entity, may have potential conflicts of interest with us, which may materially and adversely affect our business and financial
condition.
The equity interests of OptAim Network are held by Mr. Jian Tang, who is our chairman of the board, chief executive officer and co-founder. His interest may differ
from the interests of our company as a whole. The shareholder may breach, or cause our consolidated variable interest entity to breach, or refuse to renew the existing
contractual arrangements we have with his and our consolidated variable interest entity, which would have a material adverse effect on our ability to effectively control our
consolidated variable interest entity and receive economic benefits from him. For example, the shareholder may be able to cause our agreements with OptAim Network to be
performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. We cannot assure you
that when conflicts of interest arise, any or all of the shareholder will act in the best interests of our company or such conflicts will be resolved in our favor.
Currently, we do not have any arrangements to address potential conflicts of interest between the shareholder and our company, except that we could exercise our
purchase option under the third amended and restated exclusive option agreement with the shareholder to request him to transfer all of his equity interests in OptAim
Network to a PRC entity or individual designated by us, to the extent permitted by PRC laws. If we cannot resolve any conflict of interest or dispute between us and the
shareholder of OptAim Network, we would have to rely on legal proceedings, which could result in the disruption of our business and subject us to substantial uncertainty as
to the outcome of any such legal proceedings.
40
Contractual arrangements in relation to our variable interest entity may be subject to scrutiny by the PRC tax authorities and they may determine that we or our PRC
variable interest entity owe additional taxes, which could negatively affect our results of operations and the value of your investment.
Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities
within ten years after the taxable year when the transactions are conducted. The PRC Enterprise Income Tax law requires every enterprise in China to submit its annual
enterprise income tax return together with a report on transactions with its related parties to the relevant tax authorities. The tax authorities may impose reasonable
adjustments on taxation if they have identified any related party transactions that are inconsistent with arm’s length principles. We may face material and adverse tax
consequences if the PRC tax authorities determine that the contractual arrangements between our wholly-owned subsidiary iClick Beijing, our variable interest entity
OptAim Network and the shareholder of OptAim Network were not entered into on an arm’s length basis in such a way as to result in an impermissible reduction in taxes
under applicable PRC laws, rules and regulations, and adjust OptAim Network’s income in the form of a transfer pricing adjustment. A transfer pricing adjustment could,
among other things, result in a reduction of expense deductions recorded by OptAim Network for PRC tax purposes, which could in turn increase their tax liabilities without
reducing iClick Beijing’s tax expenses. In addition, if iClick Beijing requests the shareholder of OptAim Network to transfer his equity interests in OptAim Network at
nominal or no value pursuant to these contractual arrangements, such transfer could be viewed as a gift and subject iClick Beijing to PRC income tax. Furthermore, the PRC
tax authorities may impose late payment fees and other penalties on OptAim Network for the adjusted but unpaid taxes according to the applicable regulations. Our results of
operations could be materially and adversely affected if OptAim Network’s tax liabilities increase or if they are required to pay late payment fees and other penalties.
Substantial uncertainties exist with respect to the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure,
corporate governance and business operations.
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which came into effect on January 1, 2020 and replaced the trio of existing
laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and
the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The Foreign Investment Law embodies an expected PRC
regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal
requirements for both foreign and domestic investments. On December 26, 2019, the State Council adopted the Implementing Rules for the Foreign Investment Law of the
People’s Republic of China, which took effect on January 1, 2020, to interpret and implement the Foreign Investment Law. However, uncertainties still exist in relation to the
nature of “variable interest entity” structure. As a result, the Foreign Investment Law may materially impact the viability of our current corporate structure, corporate
governance and business operations in many aspects.
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 the Foreign Investment Law does not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that
foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition. In addition, the definition
contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods
prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council to provide for
contractual arrangements as a form of foreign investment.
Our holding company in the Cayman Islands, VIE, and investors of our company face uncertainty about potential future actions by the PRC government that could
affect the enforceability of the contractual arrangements with VIE and, consequently, the business, financial condition, and results of operations of VIE and our company as a
group. If our contractual arrangements is considered a form of foreign investment, then we may be required to complete the MOC market entry clearance, and we face
uncertainties as to whether such clearance can be timely obtained, or at all. If we are not able to obtain such clearance when required, VIE structure may be regarded as
invalid and illegal. As a result, we would not be able to (i) continue our business in China through our contractual arrangements with the VIE and shareholder of the VIE, (ii)
exert control over the VIE, (iii) receive the economic benefits of the VIE under such contractual arrangements, or (iv) consolidate the financial results of the VIE. Were this
to occur, our results of operations and financial condition would be materially and adversely affected and the market price of our ADSs may decline. Furthermore, if future
laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual
arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures
to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and
business operations.
If we exercise the option to acquire equity ownership of OptAim Network, the ownership transfer may subject us to certain limitation and substantial costs.
Pursuant to the contractual arrangements, iClick Beijing has the exclusive right to purchase all or any part of the equity interests in OptAim Network from OptAim
Network’s shareholder for a nominal price, unless the relevant government authorities or then
41
applicable PRC laws request that a minimum price amount be used as the purchase price, in such case the purchase price shall be the lowest amount under such request. The
shareholder of OptAim Network will be subject to PRC individual income tax on the difference between the equity transfer price and the then current registered capital of
our consolidated variable interest entity. Additionally, if such a transfer takes place, the competent tax authority may require iClick Beijing to pay enterprise income tax for
ownership transfer income with reference to the market value, in which case the amount of tax could be substantial.
Risks Related to Doing Business in China
Uncertainties in China’s legal system, including the interpretation and enforcement of PRC laws and regulations, could limit the legal protections available to us.
It is especially difficult for us to accurately predict the potential impact to us of new legal requirements in China because the PRC legal system is based on written
statutes. Unlike common law legal systems, prior court decisions may be cited for reference but have limited precedential value. The PRC legal system evolves rapidly, and
the interpretations of many laws, regulations and rules may contain inconsistencies and enforcement of these laws, regulations and rules involves uncertainties.
From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities
have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court
proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and
internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these
policies and rules until sometime after the violation. Furthermore, rules and regulations in China can change quickly with little advance notice. Recently, Chinese regulators
have announced regulatory actions aimed at providing the Chinese government with greater oversight over certain sectors of China’s economy, including the for-profit
education sector and technology platforms that have a quantitatively significant number of users located in China. Although the online marketing technology industry does
not appear to be the focus of these regulatory actions, we cannot guarantee that the Chinese government will not in the future take regulatory actions that materially
adversely affect the business environment and financial markets in China as they relate to us, our ability to operate our business, our liquidity and our access to capital. Such
uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, could materially and
adversely affect our business and impede our ability to continue our operations. Litigation in China may be protracted and result in substantial costs and diversion of
resources and management attention. Uncertainties with respect to the PRC legal system could adversely affect us.
We conduct our business primarily through our subsidiaries and VIE and its subsidiaries in China. Our operations in China are governed by PRC laws and regulations.
Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China. The PRC legal system is based on written statutes. Prior court
decisions may be cited for reference but have limited precedential value.
PRC government has significant oversight over and discretion over the conduct of our business and may intervene or influence our operations as the government
deems appropriate to further regulatory, political and societal goals. Furthermore, recent statements made by the Chinese government have indicated an intent to increase the
government’s oversight and control over offerings of companies with significant operations in China that are to be conducted in foreign markets, as well as foreign
investment in China-based issuers like us. Any such action could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and
cause the value of such securities to significantly decline or be worthless.
PRC laws and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China for the past decades. However, China
has not developed a fully integrated legal system, and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in China. In
particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, the interpretation and
enforcement of these laws and regulations involve uncertainties. Furthermore, the PRC legal system is based in part on government policies and internal rules, some of
which are not published on a timely basis or at all, which may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until
sometime after the violation. In addition, any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and
management attention.
Recent regulatory developments in China may subject us to additional regulatory review and disclosure requirements, expose us to government interference, or
otherwise restrict or completely hinder our ability to offer securities and raise capital outside China, which could adversely affect our business operations and cause the
value of our securities to significantly decline or become worthless.
As our primary business is conducted in China, we are exposed to legal and other risks associated with our operations in China. The PRC government has significant
authority to exert influence on the ability of a company with operations in China, including us, to conduct its business, and may exert substantial intervention and influence
over the manner our operations. Any actions by the PRC government to exert more oversight and control over offerings that are conducted overseas or foreign investment in
companies having operations in China, including us, could significantly limit or completely hinder our ability to offer or continue to offer securities to
42
investors, and cause the value of our securities to significantly decline or become worthless. Recently, the PRC government initiated a series of regulatory actions and
statements to regulate business operations in China with little advance notice, including cracking down on illegal activities in the securities market, enhancing supervision
over China-based companies listed overseas, adopting new measures to extend the scope of cybersecurity reviews and new laws and regulations related to data security, and
expanding the efforts in anti-monopoly enforcement. While we do not believe that these regulatory changes would have any material impact on us, we cannot guarantee that
the authorities will agree with us or will not promulgate new regulations that restrict our business operations or access to capital.
On July 6, 2021, the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council jointly issued the Opinions
on Severe and Lawful Crackdown on Illegal Securities Activities. These opinions emphasized the need to strengthen the administration over illegal securities activities and
the supervision on overseas listings by China-based companies. These opinions proposed to take effective measures, such as promoting the construction of relevant
regulatory systems, to deal with the risks and incidents facing China-based overseas-listed companies and the demand for cybersecurity and data privacy protection. These
opinions and any related implementation rules to be enacted may subject us to additional compliance requirement in the future. As these opinions were recently issued,
official guidance and interpretation of the opinions remain unclear in several respects at this time. Therefore, we cannot assure you that we will remain fully compliant with
all new regulatory requirements of these opinions or any future implementation rules on a timely basis, or at all.
Cybersecurity and data privacy and security issues are legislative and regulatory focus in China. On July 30, 2021, the State Council of the PRC promulgated the
Regulations on the Protection of the Security of Critical Information Infrastructure, which took effect on September 1, 2021. This regulation requires, among others, certain
competent authorities to identify critical information infrastructures. If any critical information infrastructure is identified, the relevant authorities shall promptly notify the
relevant operator and the Ministry of Public Security. The CAC and a number of other departments under the State Council promulgated the Measures for Cybersecurity
Review on December 28, 2021, which became effective on February 15, 2022. According to this regulation, critical information infrastructure operators purchasing network
products and services and network platform operators carrying out data processing activities, which affect or may affect national security, are required to conduct
cybersecurity review. As advised by our PRC counsel, Jingtian & Gongcheng, we believe that we do not need to apply for cybersecurity reviews under the current regulatory
regime, because we have not received any notice or determination from competent PRC government authorities identifying us as a critical information infrastructure operator
as of the date of this annual report. However, we cannot rule out the possibility that the competent PRC government authorities will not initiate cybersecurity reviews on us
in the future. As of the date hereof, we have not been involved in any investigations on cybersecurity review made by the CAC, and we have not received any inquiry, notice,
warning, or sanctions in such respect. However, as these are new regulations that are evolving, there remains uncertainties as to how they will be interpreted or implemented
in the context of an overseas offering.
We may be 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. These PRC laws apply not only to third-party transactions, but also to transfers of information between us and our wholly foreign-owned
enterprises in China, and other parties with which we have commercial relations. For example, on September 1, 2021, the PRC Data Security Law became effective, which
imposes data security and privacy obligations on entities and individuals conducting data-related activities, and introduces a data classification and hierarchical protection
system based on the importance of data in economic and social development, as well as the degree of harm it will cause to national security, public interests, or legitimate
rights and interests of individuals or organizations when such data is tampered with, destroyed, leaked, or illegally acquired or used. In addition, the Standing Committee of
PRC National People’s Congress promulgated the Personal Information Protection Law (the “PIPL”) on August 20, 2021, which took effect on November 1, 2021. The PIPL
further emphasizes processors’ obligations and responsibilities for personal information protection and sets out the basic rules for processing personal information and the
rules for cross-border transfer of personal information. As of the date hereof, we have not been involved in any investigations on data security or privacy compliance issues
in connection with the PRC Data Security Law or the PIPL, and we have not received any inquiry, notice, warning, or sanctions in such respect. In addition, we do not expect
to have significant data security or privacy issues given that the nature of our business does not involving collecting and use of vast personal data. However, we cannot
guarantee that the regulators will agree with us or will not in the future adopt new regulations that restrict our business operations.
On December 24, 2021, the CSRC published consultation drafts on the State Council Regulations on the Overseas Issuance and Listing of Securities by Domestic
Enterprises and the Filing Management Rules on the Overseas Issuance and Listing of Securities by Domestic Enterprises. These regulations apply to various types of
overseas equity offerings and listings, including secondary or dual primary listings, listing through special purchase acquisition companies, issuance of equity incentive
awards, issuance of equity securities or securities convertible into or exchangeable for equity securities. Issuers conducting these transactions will need to make filings with
the CSRC. According to the CSRC's answer to reporters’ questions on the two drafts on December 24, 2021, the regulations will adhere to the principle of non-retroactivity
of laws, and will go through the filing procedures as required for companies planning to go public and overseas listed companies that have refinancing activities; The filing
of listed companies will be arranged separately, and a sufficient transition period will be given. Since these are drafts, it is unclear the extent the CSRC will conduct review
of our future overseas equity offerings or listings. Separately, one of the preconditions for the CSRC filings is for the issuers complete the cybersecurity review by the CAC
to the extent applicable. While we do not believe that, given the nature of our business, we will be required to conduct cybersecurity review, we cannot assure you that the
relevant authorities including the CAC will agree with us. In
43
addition, these new regulations and their future developments could potentially complicate our future equity offerings and require us to incur significant compliance costs.
In addition, on February 7, 2021, the Anti-monopoly Committee of the State Council published the Guideline on Anti-monopoly of Platform Economy Sector, or the
Guideline, which became effective on the same day, aiming at enhancing anti-monopoly administration on businesses that operate under the platform model and the overall
platform economy. The Guideline intends to regulate abuse of a dominant position and other anticompetitive practices by online platform operators and the related merchants
and service providers on online platforms, i.e. unfairly locking in exclusive agreements with merchants and targeting specific customers with unreasonable big-data driven
tailored pricing through their online behavior to eliminate or limit market competition. As of the date of this document, we have not been subject to any regulatory actions or
investigations in connection with anti-monopoly. However, as the Guideline is newly enacted, there remains uncertainties as to how the Guideline will be implemented, and
we cannot assure you that the governmental authorities will not take an opposite opinion. Any failure or perceived failure by us to comply with the Guideline and other anti-
monopoly laws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on our
business, financial condition and results of operations.
Since these statements and regulatory actions are new, and some regulations are still at the stage of consultation for comments, it is highly uncertain how soon
legislative or administrative regulation making bodies will respond and what existing or new laws or regulations or detailed implementations and interpretations will be
modified or promulgated, if any, or the potential impact such modified or new laws and regulations will have on our daily business operation, our ability to accept foreign
investments and listing on a U.S. or other foreign exchanges. PRC laws and their interpretations and enforcement continue to develop and are subject to change, and the PRC
government may adopt other rules and restrictions in the future.
We are subject to many of the economic and political risks associated with emerging markets due to our operations in China and Hong Kong. Adverse changes in China
or Hong Kong’s economic, political and social conditions as well as government policies could adversely affect our business and prospects.
Our primary operations are based in, and a substantial percentage of our revenue is generated from China, one of the world’s largest emerging markets. In light of our
operations in an emerging market, we may be subject to risks and uncertainties including fluctuations in GDP, unfavorable or unpredictable treatment in relation to tax
matters, expropriation of private assets, exchange controls, restrictions affecting our ability to make cross-border transfer of funds, regulatory proceedings, inflation,
currency fluctuations or the absence of, or unexpected changes in, regulations and unforeseeable operational risks. In addition, our business, prospects, financial condition
and results of operations may be significantly influenced by political, economic and social conditions in China generally and by continued economic growth in China as a
whole.
The Chinese economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of
development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures that focus on taking into
account market forces to effect economic reform aimed at reducing the state ownership of productive assets and the establishing improved corporate governance in business
enterprises, a substantial portion of China’s productive assets are still owned by the government. In addition, the PRC government continues to play a significant role in
regulating development through industrial, economic and business policies. The PRC government also exercises significant control over China’s economic growth through
its allocation of resources, control of payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment for particular
industries or companies. The PRC government also exercises significant control over China’s economic growth through its allocation of resources, control of payment of
foreign currency-denominated obligations, monetary policy, and preferential treatment for particular industries or companies. Any such action, once taken by the Chinese
government, could significantly limit or completely hinder our ability to offer or continue to offer ADSs and ordinary shares to our investors, and could cause the value of
our ADSs and ordinary shares to significantly decline or become worthless.
While the Chinese economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the
economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures, which
may benefit the overall Chinese economy, may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by
government control over capital investments or changes in tax regulations. In addition, the PRC government has from time to time implemented certain measures, including
interest rate changes, to control the pace of economic growth. These measures may cause decreased economic activity in China, and since 2012, the Chinese economy has
slowed down. Any prolonged slowdown in the Chinese economy may reduce the demand for our services and materially and adversely affect our business and results of
operations. There have also been concerns about the relationships among China and other Asian countries, the relationship between China and the United States, as well as
the relationship between the United States and certain Asian countries such as North Korea, which may result in or intensify potential conflicts in relation to territorial,
regional security and trade disputes. Any adverse changes in economic conditions in China, in the policies of the Chinese government or in the laws and regulations in China
could have a material adverse effect on the overall economic growth of China. Such developments could adversely affect our business and operating results, leading to
reduction in demand for our services and solutions and adversely affect our competitive position. An economic downturn, whether actual or perceived, a
44
further decrease in economic growth rates or an otherwise uncertain economic outlook in China could have a material adverse effect on business and consumer spending and,
as a result, adversely affect our business, financial condition and results of operations.
Developments in U.S.-China relations, including any escalation of political or trade tensions, could negatively affect our business and the market for our ADSs.
Our principal executive offices are in Hong Kong, and we derive a substantial percentage of our revenue from China. We also continuously seek to expand our
international footprint. Accordingly, international trade or political tensions, especially those affecting China and Hong Kong’s relations with the United States, could affect
us.
In recent years, political tensions between the United States and China have escalated due to factors including the COVID-19 outbreak and related issues, China’s
enactment of national security legislation for Hong Kong, the United States’ enactment of the Hong Kong Autonomy Act, U.S. sanctions imposed on certain Chinese and
Hong Kong officials, the U.S. executive order of November 2020 prohibiting U.S. persons from buying securities of certain “Chinese Military-Industrial Complex
Companies”, the United States’ imposition of import bans on certain companies and products based on “forced labor” allegations, a January 2021 U.S. executive order
authorizing restrictions on dealings with persons who develop or control certain China-connected software applications companies, and United States’ imposition of
licensing requirement for exports or transfers of items on lists of controlled items maintained by the U.S. government. We could also be affected by U.S. actions targeting
specific Chinese companies we do business with, such as the August 2020 U.S. executive orders prohibiting certain transactions with ByteDance Ltd., Tencent Holdings Ltd.
and their respective subsidiaries. China has responded to some of the U.S. actions listed above in actions generally perceived as retaliations, including imposing sanctions on
certain U.S. officials and lawmakers, the adoption of China’s Unreliable Entity List, and China’ s tightening of export rules for sensitive technology under its Export Control
Law, which came into effect in December 2020.
The types of government actions described in the paragraph above are in practice discretionary and highly political. In a relationship as broad and complex as that
between the United States and China, it is difficult to predict the full impact of these laws, executive orders and regulations on either us or the overall bilateral relationship.
We partner and have business with some of the companies referred to in these executive orders, including Tencent, with which we do substantial business. If a broad
prohibition against transactions with Tencent or other companies that we partner or have business with were to be implemented, our business and results of operations could
be materially and adversely affected. We cannot assure you that there will not be additional laws, regulations or executive orders or that existing laws regulations or
executive orders will be interpreted in ways that impact us. Furthermore, developments in U.S.-China relations could cause investor uncertainty, and the market price of our
ADSs could be adversely affected.
In addition, the SEC has issued statements primarily focused on companies with significant China-based operations, such as us. For example, on July 30, 2021, Gary
Gensler, Chairman of the SEC, issued a Statement on Investor Protection Related to Recent Developments in China, pursuant to which Chairman Gensler stated that he has
asked the SEC staff to engage in targeted additional reviews of filings for companies with significant China-based operations. The statement also addressed risks inherent in
companies with VIE structures. It is possible that our periodic reports and other filings with the SEC may be subject to enhanced review by the SEC and this additional
scrutiny could affect our ability to effectively raise capital in the United States. Consistent with that directive, on December 20, 2021, the SEC posted an illustrative
letter containing sample comments to companies with the majority of their operations in the PRC or Hong Kong. The statement and sample comment letter also addressed
risks inherent in companies with a variable interest entity, or a VIE, structure, which are used by some companies in China that operate in sectors that are subject to foreign
ownership limitations. In response to the SEC’s July 30 statement, the CSRC announced on August 1, 2021, that the CSRC will continue to collaborate “closely with
different stakeholders including investors, companies, and relevant authorities to further promote transparency and certainty of policies and implementing measures.” There
is no assurance that the tension between the two nations will ease soon. If any new legislation, executive orders, tariffs, laws and/or regulations are implemented, if existing
trade agreements are renegotiated or if the U.S. or Chinese governments take retaliatory actions due to the U.S.-China tension, such changes could have an adverse effect on
our business, financial condition and results of operations, our ability to raise capital and the price of our ADSs.
In addition to political tensions, international trade disputes could result in tariffs and other protectionist measures that could adversely affect our business and investor
sentiment. The U.S. initiated certain trade actions, primarily higher tariffs, against China beginning in early 2018 and China took certain actions in retaliation. Although the
two countries reached the so-called “Phase One” trade deal in January 2020, the long-term stability of their trade relationship remains uncertain. Higher tariffs could increase
the cost of goods and services, which could affect our customers’ marketing budget or lead to generally lower levels of economic activity. As we are expanding our business
internationally, any unfavorable government policies on international trade, such as capital controls or tariffs, could also affect the demand for our products and services,
impact our competitive position, or prevent us from being able to conduct business in certain countries. If any new tariffs, legislation or regulations are implemented or if
existing trade agreements are renegotiated, including in relation to political developments in the relationship, such changes could have an adverse effect on our business,
financial condition and results of operations. In addition, any escalation in existing trade tensions or the advent of a trade war or related news or rumors, could affect
consumer confidence and have a material adverse effect on our business, results of operations and, ultimately, the trading price of the ADSs.
45
We rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on
the ability of our PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.
We are a Cayman Islands exempted limited liability company, used as a holding company, and we rely on dividends and other distributions on equity from our PRC
subsidiaries for our cash requirements, including payment of dividends and other cash distributions to holders of our ordinary shares and services of any debt we may incur.
If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions
to us. Under PRC laws and regulations, our PRC subsidiaries, as wholly foreign-owned enterprises in China, may pay dividends only out of their respective accumulated
after-tax profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least
10% of its accumulated after-tax profits each year, if any, to fund certain statutory reserve funds, until the aggregate amount of such funds reaches 50% of its registered
capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus
funds. These reserve funds and staff welfare and bonus funds are not distributable as cash dividends.
In addition, the PRC tax authorities may require our PRC subsidiaries to adjust its taxable income under the contractual arrangements it currently has in place with our
consolidated variable interest entity in a manner that would materially and adversely affect their ability to pay dividends and other distributions to us. Furthermore, the
failure of our beneficial owners who are PRC residents to register or comply with the registration procedures set forth in SAFE Circular 37 and subsequent implementation
rules, may also limit our PRC subsidiaries’ ability to distribute dividends to us. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China
—PRC regulations relating to investments in offshore special purposes companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries
to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase their registered capital or distribute
profits.”
Any limitation on the ability of our PRC subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make
investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.
PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent
us from using the proceeds of our offshore fundraisings to make loans to or make additional capital contributions to our PRC subsidiaries, which could materially and
adversely affect our liquidity and our ability to fund and expand our business.
Any funds we transfer to our PRC subsidiaries, either as a shareholder loan or as an increase in registered capital, are subject to approval by, registration or record
filing with relevant governmental authorities in China. According to the relevant PRC regulations on foreign-invested enterprises in China, capital contributions to our PRC
subsidiaries are subject to the requirement of making necessary filings in the Foreign Investment Comprehensive Management Information System, or FICMIS, and
registration with other governmental authorities in China. In addition, (i) any foreign loan procured by our PRC subsidiaries is required to be registered with the State
Administration of Foreign Exchange, or SAFE, or its local branches, and (ii) except as otherwise regulated by laws or regulations each of our PRC subsidiaries may procure
loans which do not exceed the difference between its registered capital and its total investment amount as recorded in FICMIS, or as an alternative, do not exceed the upper
limit as specified in the Notice of the People’s Bank of China on Matters concerning the Macro-Prudential Management of Full-Covered Cross-Border Financing as
promulgated by People’s Bank of China, or the PBOC, on January 11, 2017. Any medium or long term loan to be provided by us to our variable interest entity must be
recorded and registered by the NDRC and SAFE or its local branches. We may not complete such recording or registrations on a timely basis, if at all, with respect to future
capital contributions or foreign loans by us to our PRC subsidiaries. If we fail to complete such recording or registration, our ability to use the proceeds of our offering and to
capitalize our PRC operations may be negatively affected, which could adversely affect our liquidity and our ability to fund and expand our business.
In 2008, SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of
Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, which used to regulate the conversion by foreign-invested enterprises of foreign currency
into Renminbi by restricting the usage of converted Renminbi. On March 30, 2015, SAFE promulgated the Circular on Reforming the Management Approach Regarding the
Foreign Exchange Capital Settlement of Foreign-Invested Enterprises, or SAFE Circular 19. SAFE Circular 19 took effect as of June 1, 2015 and superseded SAFE Circular
142 on the same date. SAFE Circular 19 launched a nationwide reform of the administration of the settlement of the foreign exchange capitals of foreign-invested enterprises
and allows foreign-invested enterprises to settle their foreign exchange capital at their discretion, but continues to prohibit foreign-invested enterprises from using the
Renminbi fund converted from their foreign exchange capitals for expenditure beyond their business scopes, investment in security market, offering of entrustment loans or
purchase of any investment properties. On June 9, 2016, the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Administrative
Provisions on Capital Account Foreign Exchange Settlement, or SAFE Circular 16, was promulgated. In addition to restating the general principles of SAFE Circular 19,
SAFE Circular 16 explicitly stipulates that foreign debts and repatriated funds raised through overseas listings as foreign exchange receipts can be settled discretionally.
SAFE Circular 16 continues to prohibit foreign-invested enterprises from using the Renminbi funds converted from their foreign exchange capitals for expenditures beyond
their business scopes, investments in security market, offerings of entrustment loans or purchases of any
46
investment properties. Although SAFE Circular 16 further relaxes the control over foreign exchange settlement of capital accounts, in practice, there are still several specific
requirements that limit the abilities of PRC enterprises to access the offshore financing capitals, which may adversely affect our business, financial condition and operating
results.
Fluctuations in exchange rates could have a material adverse effect on our results of operations and the price of our ADSs.
The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the PBOC. The Renminbi has fluctuated against the U.S. dollar, at
times significantly and unpredictably. The value of the Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and economic
conditions and by China’s foreign exchange policies, among other things. We cannot assure you that the Renminbi will not appreciate or depreciate significantly in value
against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between the Renminbi and
the U.S. dollar in the future.
A substantial portion of our revenues and costs are denominated in Renminbi, whereas our reporting currency is the U.S. dollar. Any significant appreciation or
depreciation of the Renminbi may materially and adversely affect our revenues, earnings and financial position as reported in U.S. dollars. To the extent that we need to
convert U.S. dollars we receive from our offshore fundraisings into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse
effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making
payments for dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have an adverse effect on
the U.S. dollar amount available to us.
We estimate that a 10% depreciation of the Renminbi against the U.S. dollar based on the foreign exchange rate on December 31, 2019 would result in a decrease of
US$19.6 million and US$15.9 million in our net revenues and cost of revenues in 2019, respectively; and a 10% depreciation of the Renminbi against the U.S. dollar based
on the foreign exchange rate on December 31, 2020 would result in a decrease of US$22.7 million and US$18.7 million in our net revenues and cost of revenues in 2020,
respectively; and a 10% depreciation of the Renminbi against the U.S. dollar based on the foreign exchange rate on December 31, 2021 would result in a decrease of
US$29.4 million and US$24.8 million in our net revenues and cost of revenues in 2021, respectively.
Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in
an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of
these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC
exchange control regulations that restrict our ability to convert Renminbi into foreign currency.
Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.
The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We
receive a substantial portion of our revenues in Renminbi. Under our current corporate structure, our company in the Cayman Islands relies on dividend payments from our
PRC subsidiaries and HK subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current
account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE
by complying with certain procedural requirements. Therefore, our PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE,
subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the
overseas investment registrations by the beneficial owners of our company who are PRC residents. However, approval from or registration with appropriate government
authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans
denominated in foreign currencies, as enterprises shall duly file the cross- border financing contracts according to the Circular of the PBOC on Matters relating to the Macro-
prudential Management of Full-covered Cross-border Financing for the Issuance of Foreign Debts by Enterprise, or Circular on Management of Cross-border Financing,
effective on January 11, 2017, and any medium or long term loan to be provided by foreign entities to domestic enterprises must be recorded and registered by the National
Development and Reform Committee, or the NDRC, according to the Circular on Promoting the Administrative Reform of the Record-filing and Registration System for the
Issuance of Foreign Debts by Enterprises, or Circular on Promoting the Administrative Reform, by the NDRC on September 14, 2015.
47
In light of the flood of capital outflows of China in 2016 due to the weakening Renminbi, the PRC government has imposed more restrictive foreign exchange policies
and stepped up scrutiny of major outbound capital movement. More restrictions and substantial vetting process are put in place by SAFE to regulate cross-border
transactions falling under the capital account. The PRC government may at its discretion further restrict access in the future to foreign currencies for current account
transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to
pay dividends in foreign currencies to our shareholders, including holders of our ADSs.
PRC regulations relating to investments in offshore special purposes companies by PRC residents may subject our PRC-resident beneficial owners or our PRC
subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase their registered capital
or distribute profits.
SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip
Investment through Special Purpose Vehicles, or SAFE Circular 37, on July 4, 2014. SAFE Circular 37 requires PRC residents to register with the local SAFE branches in
connection with their direct establishment or indirect control of any offshore entity, referred to in SAFE Circular 37 as a “special purpose vehicle,” for the purpose of
overseas investment and financing with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests. SAFE Circular 37
requires further registrations in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC
individuals, share transfer or exchange, merger, division or other material events. In the event that a PRC shareholder holding interests in a special purpose vehicle fails to
fulfill this required SAFE registration, the PRC subsidiaries of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and
from carrying out subsequent cross-border foreign exchange activities, and it may be restricted from contributing additional capital into its PRC subsidiaries. Moreover,
failure to comply with the various SAFE registration requirements described above could result in liabilities under PRC law for evasion of foreign exchange controls.
According to the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015 by
SAFE, local banks shall examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment
registration under SAFE Circular 37 since June 1, 2015. Beneficial owners of the special purpose vehicle who are PRC citizens are also required to make annual filing with
the local banks regarding their overseas direct investment status.
Moreover, we do not have control over our beneficial owners and may not be aware of the identities of all of our beneficial owners. We cannot assure you that all of
our PRC-resident beneficial owners comply with SAFE Circular 37 and subsequent implementation rules. The failure of our beneficial owners who are PRC residents to
register or amend their foreign exchange registrations in a timely manner pursuant to SAFE Circular 37 and subsequent implementation rules, or the failure of future
beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in SAFE Circular 37 and subsequent implementation rules,
may subject such beneficial owners or our PRC subsidiaries to fines and legal sanctions. Failure to register or comply with relevant requirements may also limit our ability to
contribute capital to our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute dividends to us. These risks may have a material adverse effect on our
business, financial condition and results of operations.
The M&A rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it
more difficult for us to pursue growth through acquisitions in China.
Among other things, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A rules, established additional procedures
and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things,
that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise or a foreign company
with substantial PRC operations, if certain thresholds under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, issued by the State
Council in 2008, were triggered.
Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress of the PRC, which became effective in 2008 requires
that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by MOFCOM before they can be completed. In
addition, the Notice of the General Office of the State Council on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign
Investors which became effective in March 2011 requires acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are
crucial to national security be subject to security review before consummation of any such acquisition. We may pursue potential strategic acquisitions that are
complementary to our business and operations. Complying with the requirements of these regulations to complete such transactions could be time-consuming, and any
required approval processes, including obtaining approval or clearance from MOFCOM, may delay or inhibit our ability to complete such transactions, which could affect
our ability to expand our business or maintain our market share.
48
Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject 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 may submit applications to SAFE or
its local branches for the foreign exchange registration with respect to offshore special purpose companies. In the meantime, our directors, executive officers and other
employees who are PRC citizens or who are non-PRC residents residing in the PRC for a continuous period of not less than one year, subject to limited exceptions, and who
have been granted incentive share awards by us, may follow the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating
in Stock Incentive Plan of Overseas Publicly-Listed Company, promulgated by SAFE in 2012, or the 2012 SAFE Notices. Pursuant to the 2012 SAFE Notices, PRC citizens
and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed
company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas listed
company, and complete certain other procedures. In addition, an overseas entrusted institution must be retained to handle matters in connection with the exercise or sale of
stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a
continuous period of not less than one year and who have been granted options are subject to these regulations. Failure to complete SAFE registrations may subject them to
fines, and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries and limit our PRC subsidiaries’ ability to distribute
dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees
under PRC law. See “Item 4. Information On the Company—B. Business Overview—Regulation—Regulations on Foreign Exchange—Equity Incentive Plans.”
The State Administration of Taxation, or the SAT, has issued certain circulars concerning employee share options and restricted shares. Under these circulars, our
employees working in China who exercise share options or are granted restricted shares will be subject to PRC individual income tax. Our PRC subsidiaries have obligations
to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who
exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and regulations, we may face sanctions imposed
by the tax authorities or other PRC governmental authorities. See “Item 4. Information On the Company—B. Business Overview—Regulation—Regulations on Foreign
Exchange—Equity Incentive Plans.”
Failure to make adequate contributions to various employee benefit plans as required by PRC regulations may subject us to penalties.
Companies operating in China are required to participate in various government sponsored employee benefit plans, including certain social insurance, housing funds
and other welfare-oriented payment obligations, and contribute to the plans in amounts equal to certain percentages of salaries, including bonuses and allowances, of our
employees up to a maximum amount specified by the local government from time to time at locations where we operate our businesses. The requirement of employee benefit
plans has not been implemented consistently by the local governments in China given the different levels of economic development in different locations. We have not made
adequate employee benefit payments. We may be required to make up the contributions for these plans as well as to pay late fees and fines. If we are subject to late fees or
fines in relation to the underpaid employee benefits, our financial condition and results of operations may be adversely affected.
If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC
shareholders or ADS holders.
Under the PRC Enterprise Income Tax Law, or the EIT law, and its implementation rules, an enterprise established outside of the PRC with a “de facto management
body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules
define the term “de facto management body” as the body that exercises full and substantial control over and overall management of the business, productions, personnel,
accounts and properties of an enterprise. In April 2009, the SAT issued the Notice Regarding the Determination of Chinese-Controlled Offshore Incorporated Enterprises as
PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, as amended on December 29, 2017, known as Circular 82, which provides certain specific
criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular
applies only to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners like us, the criteria set
forth in the circular may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all
offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax
resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following
conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource
matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and
board and shareholder resolutions, are located or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.
49
We believe none of our entities outside of China is a PRC resident enterprise for PRC tax purposes. See “Item 10. Additional Information—E. Taxation—People’s
Republic of China Taxation.” However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to
the interpretation of the term “de facto management body”. As a majority of our management members are based in China, it remains unclear how the tax residency rule will
apply to our case. If the PRC tax authorities determine that iClick Interactive Asia Group Limited or any of our subsidiaries outside of China is a PRC resident enterprise for
PRC enterprise income tax purposes, then iClick Interactive Asia Group Limited or such subsidiary could be subject to PRC tax at a rate of 25% on its world-wide income,
which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations. Furthermore, income and any gains
realized in respect to our ordinary shares or ADSs may be deemed by the PRC tax authorities as income or gain, as the case may be, arising from sources within the PRC, as
described immediately below.
You may be subject to PRC income tax on dividends from us or on any gain realized on the transfer of our ordinary shares.
Under the EIT Law and its implementation rules, subject to any applicable tax treaty or similar arrangement between the PRC and our shareholders’ jurisdictions of
residence that provide for a different income tax arrangement, PRC withholding tax at the rate of 10% is generally applicable to dividends from PRC sources paid to
shareholders that are non-PRC resident enterprises, which do not have an establishment or place of business in the PRC, or which have such establishment or place of
business but the relevant income is not effectively connected with the establishment or place of business. Any gain realized on the transfer of shares by such shareholders is
subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC unless a treaty or similar arrangement otherwise provides. Under the
PRC Individual Income Tax Law and its implementation rules, dividends from sources within the PRC paid to foreign individual investors who are not PRC residents are
generally subject to a PRC withholding tax at a rate of 20% and gains from PRC sources realized by such investors on the transfer of shares are generally subject to 20%
PRC income tax, in each case, subject to any reduction or exemption set forth in applicable tax treaties and PRC laws.
As described in the preceding risk factor, there is a risk that we will be treated by the PRC tax authorities as a PRC tax resident enterprise. In that case, dividend
income and gains from sales of our shares or ADSs may be treated as PRC source income or gains subject to the PRC taxes described above.
If PRC income tax is imposed on gains realized on the transfer of our ordinary shares or ADSs or on dividends paid to our non-resident shareholders or ADS holders,
the value of your investment in our ordinary shares or ADSs may be materially and adversely affected. Furthermore, our shareholders or ADS holders whose jurisdictions of
residence have tax treaties or arrangements with China may not qualify for benefits under such tax treaties or arrangements.
We may not be able to obtain certain benefits under relevant tax treaty on dividends paid by our PRC subsidiaries to us through our Hong Kong subsidiaries.
We are an exempted limited liability company, used as holding company, incorporated under the laws of the Cayman Islands and as such rely on dividends and other
distributions on equity from our PRC subsidiaries, as paid to us through our Hong Kong subsidiaries, to satisfy part of our liquidity requirements. Pursuant to the PRC EIT
Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC “resident enterprise” to a foreign enterprise investor, unless any such foreign investor’s
jurisdiction of incorporation has a tax treaty with China that provides for preferential tax treatment. Pursuant to the Arrangement between the Mainland China and the Hong
Kong Special Administrative Region for the Avoidance of Double Taxation and Tax Evasion on Income, or the Double Tax Avoidance Arrangement, and Circular 81 issued
by the SAT, such withholding tax rate may be lowered to 5% if the PRC enterprise is at least 25% held by a Hong Kong enterprise throughout the 12 months prior to
distribution of the dividends and is determined by the relevant PRC tax authority to have satisfied other requirements. Furthermore, under the Administrative Measures for
Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, which became effective in January 1, 2020, the non-resident enterprises shall determine whether they are
qualified for preferential tax treatment under the tax treaties and file relevant reports and materials with the tax authorities. There are also other conditions for benefiting
from the reduced withholding tax rate according to other relevant tax rules and regulations. See “Item 10. Additional Information—E. Taxation—People’s Republic of China
Taxation.” We cannot assure you that our determination regarding our Hong Kong subsidiaries’ qualification to benefit from the preferential tax treatment will not be
challenged by the relevant PRC tax authority or that we will be able to complete the necessary filings with the relevant PRC tax authority and benefit from the preferential
withholding tax rate of 5% under the Double Taxation Avoidance Arrangement with respect to dividends to be paid by our PRC subsidiaries to our Hong Kong subsidiaries.
50
We face uncertainties with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.
Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued
by the SAT in 2009 with retroactive effect from January 1, 2008, where a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by
disposition of the equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i) has an
effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the non-resident enterprise, being the transferor, shall report to the competent tax
authority of the PRC resident enterprise this Indirect Transfer.
On February 3, 2015, the SAT issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Resident Enterprises,
or SAT Public Notice 7. SAT Public Notice 7 supersedes the rules with respect to the Indirect Transfer under SAT Circular 698, but does not touch upon the other provisions
of SAT Circular 698, which remain in force. SAT Public Notice 7 has introduced a new tax regime that is significantly different from the previous one under SAT Circular
698 (Article V and Article VI). SAT Public Notice 7 extends its tax jurisdiction to not only Indirect Transfers set forth under SAT Circular 698 but also transactions
involving transfer of other taxable assets through offshore transfer of a foreign intermediate holding company. In addition, SAT Public Notice 7 provides clearer criteria than
SAT Circular 698 for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity
through a public securities market. SAT Public Notice 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the
transfer) of taxable assets. Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company (other than
by way of sale of equity securities traded on a public market), which is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity
that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may
disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring
PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the applicable taxes will be withheld from payments to the
transferor, currently at a rate of 10%. Both the transferor and the PRC entity that directly owns the taxable assets, or the withhold agent, may be subject to penalties under
PRC tax laws if the withhold agent fails to withhold the taxes and the transferor fails to pay the taxes.
On October 17, 2017, SAT issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or SAT Circular 37,
effective in December 2017, which supersedes SAT Circular 698 as a whole and partially amended some provisions in SAT Circular 7. SAT Circular 37 further reduces the
burden of withholding obligator, such as revocation of contract filing requirements and tax liquidation procedures, strengthens the cooperation of tax authorities in different
places, and clarifies the calculation of tax payable and conversion of foreign exchange.
We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore
restructuring, sale of the shares in our offshore subsidiaries or investments. Our company may be subject to filing obligations or taxed or subject to withholding obligations
in such transactions, under SAT Public Notice 7 and SAT Circular 37. For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC
subsidiaries may be requested to assist in the filing under SAT Public Notice 7 and SAT Circular 37. As a result, we may be required to expend valuable resources to comply
with SAT Public Notice 7 and SAT Circular 37 or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish
that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.
Recent litigation and negative publicity surrounding China-based companies listed in the U.S. may result in increased regulatory scrutiny of us and negatively impact
the trading price of the ADSs and could have an adverse effect upon our business, including our results of operations, financial condition, cash flows and prospects.
We believe that litigation and negative publicity surrounding companies with operations in China that are listed in the U.S. have negatively impacted stock prices for
these companies. Various equity-based research organizations have published reports on China-based companies after examining their corporate governance practices,
related party transactions, sales practices and financial statements, and these reports have led to special investigations and listing suspensions on U.S. national exchanges.
Any similar scrutiny of us, regardless of its lack of merit, could result in a diversion of management resources and energy, potential costs to defend ourselves against rumors,
decreases and volatility in the ADS trading price, and increased directors and officers insurance premiums and could have an adverse effect upon our business, including our
results of operations, financial condition, cash flows and prospects.
The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct
inspections over our auditor 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 an auditor of companies that are
traded publicly in the United States and a firm registered with the Public Company Accounting
51
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 its compliance
with the applicable professional standards. Since our auditor is located in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the
approval of the Chinese authorities, our auditor is not currently inspected by the PCAOB.
As a result, we and investors in our ADSs are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in
China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared
to auditors outside of China that are subject to the PCAOB inspections, which could cause investors and potential investors 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 2024 if the PCAOB is unable
to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting 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 the SEC determines that we have
filed audit reports issued by a registered public accounting firm that has not been subject to inspection for the PCAOB for three consecutive years beginning in 2021, the
SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 2,
2021, the SEC adopted final amendments implementing the disclosure and submission requirements of the HFCAA, pursuant to which the SEC will identify an issuer as a
“Commission Identified Issuer” if the issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has
determined it is unable to inspect or investigate completely, and will then impose a trading prohibition on an issuer after it is identified as a Commission-Identified Issuer for
three consecutive years. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB is unable to inspect or investigate
completely registered public accounting firms headquartered in mainland China and Hong Kong. The PCAOB identified our auditor as one of the registered public
accounting firms that the PCAOB is unable to inspect or investigate completely. Therefore, we expect to be identified as a “Commission Identified Issuer” shortly after the
filing of this annual report on Form 20-F.
Whether the PCAOB will be able to conduct inspections of our auditor before the issuance of our financial statements on Form 20-F for the 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 of factors 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 we will 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 would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty
associated with delisting would have a negative impact on the price of our ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms
acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects.
On June 22, 2021, the U.S. Senate passed a bill which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the
HFCAA from three years to two. On February 4, 2022, the U.S. House of Representatives passed a bill which contained, among other things, an identical provision. If this
provision is enacted into law and the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA is reduced from three years to
two, then our shares and ADSs could be prohibited from trading in the United States in 2023.
Proceedings instituted by the SEC against the Big Four PRC-based accounting firms, including our independent registered public accounting firm, could result in
financial statements being determined to not be in compliance with the requirements of the Exchange Act.
In December 2012, the SEC instituted administrative proceedings against the Big Four PRC-based accounting firms in China, including our independent PCAOB-
registered public accounting firm, alleging that these firms had violated U.S. securities laws and the SEC’s rules and regulations thereunder by failing to provide to the SEC
the firms’ audit work papers with respect to certain other PRC-based companies that are publicly traded in the United States.
On January 22, 2014, the initial administrative law judge presiding over the matter rendered an initial decision that each of the firms had violated the SEC’s rules of
practice by failing to produce audit papers and other documents to the SEC. The initial decision censured each of the firms and barred them from practicing before the SEC
for a period of six months.
On February 6, 2015, each of the four PRC-based accounting firms agreed to a censure and to pay a fine to the SEC to settle the dispute and avoid suspension of their
ability to practice before the SEC and to audit US-listed companies. The settlement required the firms to follow detailed procedures and to seek to provide the SEC with
access to Chinese firms’ audit documents via the CSRC. Under the terms of the settlement, the underlying proceeding against the four PRC-based accounting firms was
deemed dismissed with
52
prejudice four years after entry of the settlement. The four-year mark occurred on February 6, 2019. While we cannot predict if the SEC will further challenge the four PRC-
based accounting firms’ compliance with U.S. law in connection with U.S. regulatory requests for audit work papers or if the results of such a challenge would result in the
SEC imposing penalties such as suspensions, if the accounting firms are subject to additional remedial measures, our ability to file our financial statements in compliance
with SEC requirements could be affected. A determination that we have not timely filed financial statements in compliance with SEC requirements could ultimately lead to
our delisting from the Nasdaq Global Market, deregistration from the SEC, or both, which would substantially reduce or effectively terminate the trading of our ADSs in the
United States.
In the event that the SEC restarts the administrative proceedings described above, depending upon the final outcome, listed companies in the United States with major
China-based operations may find it difficult or impossible to retain auditors in respect of their operations in China, which could result in financial statements being
determined not to be in compliance with the requirements of the Exchange Act, including possible delisting. Moreover, any negative news about any such future proceedings
against these audit firms may cause investor uncertainty regarding China-based, U.S.-listed companies and the market price of our ADSs may be adversely affected.
If our independent registered public accounting firm was denied, even temporarily, the ability to practice before the SEC and we were unable to timely find another
registered public accounting firm to audit and issue an opinion on our financial statements, our financial statements could be determined to be not in compliance with the
requirements of the Exchange Act. Such a determination could ultimately lead to the delisting of the ADSs or deregistration from the SEC, or both, which would
substantially reduce or effectively terminate the trading of the ADSs in the United States.
Risks Related to Our American Depositary Shares
The market price for our ADSs may be volatile.
Since our ADSs became listed on NASDAQ Global Market on December 21, 2017, the trading price of our ADSs has ranged from US$0.77 to US$19.10 per ADS.
The trading prices of our ADSs are volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like
the performance and fluctuation in the market prices or the underperformance or deteriorating financial results of other listed internet or other companies based in China that
have listed their securities in the United States in recent years. The securities of some of these companies have experienced significant volatility since their initial public
offerings, including, in some cases, substantial price declines in their trading prices. The trading performances of other Chinese companies’ securities after their offerings
may affect the attitudes of investors toward Chinese companies listed in the United States, which consequently may impact the trading performance of our ADSs, regardless
of our actual operating performance. Furthermore, as a result of the narrow band of our ADSs publicly available for trading, small trades can cause significant percentage
changes in valuation in a short time period. Such volatility may affect the attitude of investors towards our securities, which consequently may impact the trading
performance of our ADSs, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or
fraudulent accounting, corporate structure or other matters of other Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in
general, including us, regardless of whether we have conducted any inappropriate activities. Furthermore, securities markets may from time to time experience significant
price and volume fluctuations that are not related to our operating performance, such as the large decline in share prices in the United States, China and other jurisdictions in
late 2008, early 2009 and the second half of 2011, which may have a material adverse effect on the market price of our ADSs.
In addition to the above factors, the price and trading volume of our ADSs may be highly volatile due to multiple other factors, including the following:
•
•
•
•
•
•
•
•
regulatory developments affecting us, our clients and end marketers, or our industry;
conditions in the online marketing industry;
fluctuation of our results of operations from quarter to quarter due to seasonality in online marketing business, which may be affected by the online spending
cycles of consumers and marketers’ practices in marketing budget allocation;
announcements of studies and reports relating to the quality of our solutions and service offerings or those of our competitors;
changes in the economic performance or market valuations of other providers of marketing solutions;
actual or anticipated fluctuations in our quarterly results of operations and changes in or revisions to our expected results;
changes in financial estimates by securities research analysts;
announcements by us or our competitors of new product and service offerings, acquisitions, strategic relationships, joint ventures or capital commitments;
53
•
•
•
•
•
•
•
additions to or departures of our senior management;
detrimental negative publicity about us, our management or our industry;
fluctuations of exchange rates between Renminbi and the U.S. dollar;
release or expiry of lock-up or other transfer restrictions on our outstanding ordinary shares or ADSs;
sales or perceived potential sales of additional ordinary shares or ADSs;
any share repurchase program; and
potential litigation or regulatory investing actions.
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 of instability 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’s attention and other resources from our business
and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not
successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay
significant damages, which could have a material adverse effect on our financial condition and results of operations.
In addition, the stock market in general, and the market prices for internet-related companies and companies with operations in China in particular, have experienced
volatility that often has been unrelated to the operating performance of such companies. The securities of some China-based companies that have listed their securities in the
United States have experienced significant volatility since their initial public offerings in recent years, including substantial declines in the trading prices of their securities.
The trading performances of these companies’ securities after their offerings may affect the attitudes of investors towards Chinese companies listed in the United States in
general, which consequently may impact the trading performance of our ADSs, regardless of our actual operating performance. In addition, any negative publicity of other
Chinese companies may also negatively affect the attitudes of investors towards Chinese companies in general, including us, regardless of whether we have engaged in any
inappropriate activities. In particular, the global financial crisis, the ensuing economic recessions and deterioration in the credit market in many countries have contributed
and may continue to contribute to extreme volatility in the global stock markets. These broad market and industry fluctuations may adversely affect the market price of our
ADSs. Volatility or a lack of positive performance in our ADS price may also adversely affect our ability to retain key employees, most of whom have been granted options
or other equity incentives.
Our ADSs may not comply with the minimum listing requirements of the NASDAQ.
Our ADSs are currently listed on the NASDAQ Global Market. In order to maintain listing on the NASDAQ, we must satisfy minimum financial and other continued
listing requirements and standards, including maintaining a minimum average closing price of $1.00 per ADS over a period of 30 consecutive business days. As of the date
of this annual report, we have not received a notice from the NASDAQ notifying that we are currently not in compliance with the minimum bid price requirement. However,
if we were not able to maintain compliance with this requirement or any other applicable listing standard of the NASDAQ, our ADSs would be subject to delisting. In the
event that our ADSs are delisted from the NASDAQ and are not eligible for quotation or listing on another market or exchange, trading of our ADSs could be conducted
only in the over-the-counter market established for unlisted securities such as OTC markets. In such event, it could become more difficult to dispose of, or obtain accurate
price quotations for our ADSs, which could cause the price of our ADSs to decline further. As a result, our ability to obtain adequate financing for the continuation of our
operations would be substantially impaired, which could have a material adverse effect on our financial condition and results of operations.
We cannot guarantee that any share repurchase program will be fully consummated or that any share repurchase program will enhance long-term shareholder value,
and share repurchases could increase the volatility of the trading price of the ADSs and could diminish our cash reserves.
We announced share repurchase programs in November 2018 (the “2018 Share Repurchase Program”), January 2020 (the “January 2020 Share Repurchase Program”),
December 2020 (the “December 2020 Share Repurchase Program”), and December 2021 (the “December 2021 Share Repurchase Program”) to purchase up to US$10
million, US$10 million, US$15 million, and US$20 million of the ADSs respectively. In August 2021, we upsized the “December 2020 Share Purchase Program” by US$10
million to US$25 million. Although our board of directors has authorized these programs, we are not obligated to purchase any specific dollar amount or to acquire any
specific number of shares. We expect to effect the proposed share repurchase on the open market at prevailing market prices, in negotiated transactions off the market, and/or
in other legally permissible means from time to time as market conditions warrant in compliance with applicable requirements of Rule 10b5-1 and/or Rule 10b-18 under the
U.S. Securities Exchange Act of 1934, as amended, at times and in such amounts as we deem appropriate. As of December 31, 2021, we repurchased approximately US$21
million of the ADSs under the share repurchase programs. Our share repurchase program could affect the price of the ADSs and
54
increase volatility and may be suspended or terminated at any time, which may result in a decrease in the trading price of the ADSs. For example, the existence of a share
repurchase program could cause the price of the ADSs to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for
the ADSs. Additionally, our share repurchase program could diminish our cash reserves, which may impact our ability to finance future growth and to pursue possible future
strategic opportunities. There can be no assurance that any share repurchases will enhance shareholder value because the market price of the ADSs or our ordinary shares
may decline below the levels at which we determine to repurchase the ADSs or our ordinary shares. Although our share repurchase program is intended to enhance long-
term shareholder value, there is no assurance that it will do so and short-term share price fluctuations could reduce the program’s effectiveness.
Our dual-class share structure with different voting rights will limit your ability to influence corporate matters and could discourage others from pursuing any change
of control transactions that holders of our Class A ordinary shares and ADSs may view as beneficial.
We have a dual-class share structure such that our ordinary shares consist of Class A ordinary shares and Class B ordinary shares. In respect of matters requiring the
votes of shareholders, holders of Class A ordinary shares are entitled to one vote per share, while holders of Class B ordinary shares are entitled to 20 votes per share based
on our dual-class share structure. Two ADSs represent one Class A ordinary shares. Each Class B ordinary share is convertible into one Class A ordinary share at any time
by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares
by a holder thereof to any person or entity which is not an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the
equal number of Class A ordinary shares.
As of the date of this annual report, Mr. Sammy Hsieh, our director and co-founder, Mr. Jian Tang, our chairman of the board, chief executive officer and co-founder,
beneficially own an aggregate of 4,385,078 Class B ordinary shares. Due to the disparate voting powers associated with our dual-class share structure, Mr. Hsieh and Mr.
Tang, collectively beneficially owned approximately 61.4% of the aggregate voting power of our company as of March 31, 2022. See “Item 6. Directors, Senior
Management and Employees—E. Share Ownership.” In January 2021, we issued 649,349 Class B ordinary shares to Baozun Inc., or Baozun. In addition, Baozun entered
into a share purchase agreement with an existing shareholder of us, pursuant to which Baozun purchased from such existing iClick shareholder 2,471,468 ADSs. After the
closing of the above transactions, Baozun beneficially owned approximately 4% of our total outstanding shares, representing approximately 10% of our total voting equity.
As a result of the dual-class share structure and the concentration of ownership, Mr. Hsieh, Mr. Tang and Baozun will have considerable influence over matters such as
decisions regarding change of directors, mergers, change of control transactions and other significant corporate actions. They may take actions that are not in the best interest
of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in control of our company, which could have the effect of
depriving our other shareholders of the opportunity 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 control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of
control transactions that holders of Class A ordinary shares and ADSs may view as beneficial.
Our directors, officers and principal shareholders have substantial influence over our company and their interests may not be aligned with the interests of our other
shareholders.
Our directors and officers collectively owned an aggregate of 61.5% of the total voting power of our outstanding ordinary shares as of March 31,2022. See “Item 6.
Directors, Senior Management and Employees—E. Share Ownership.” As a result, they have substantial influence over our business, including significant corporate actions
such as change of directors, mergers, change of control transactions and other significant corporate actions.
They may take actions that are not in the best interest of us or our other shareholders. This concentration of ownership may discourage, delay or prevent a change in
control of our company, which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and may reduce the
price of the ADSs. These actions may be taken even if they are opposed by our other shareholders, including ADS holders. In addition, the significant concentration of share
ownership may adversely affect the trading price of the ADSs due to investors’ perception that conflicts of interest may exist or arise.
We have granted, and may continue to grant, share incentives, which may result in increased share based compensation expenses.
We adopted a stock option plan in 2010, or the 2010 Plan. We adopted another share incentive plan in 2017, or the 2017 Plan, which was renamed as the Post-IPO
Share Incentive Plan in May 2018, or the Post-IPO Plan. We also adopted the 2018 Share Incentive Plan in May 2018, or the 2018 Plan, which replaces and reproduces the
2010 Plan in its entirety and assumes all awards granted under the 2010 Plan and the 2010 Plan was terminated as a result. The purpose of these plans is to grant share-based
compensation awards to employees, directors and advisors to incentivize their performance and align their interests with ours. In addition, in December 2016, our board of
directors and shareholders authorized the issuance of 1,068,114 restricted Class A ordinary shares to Mr. Jian Tang and certain other employees in China upon the fulfillment
of certain performance conditions in 2017, and the issuance of 801,086 restricted
55
Class A ordinary shares to Mr. Jian Tang and certain other employees in China upon the fulfillment of certain performance conditions in 2018. Since the performance
conditions were not fulfilled in 2017 and 2018, the 1,068,114 and 801,086 restricted Class A ordinary shares were not issued to Mr. Jian Tang and certain other employees.
We account for compensation costs for all share incentives using a fair-value based method and recognize expenses in our consolidated statements of comprehensive loss in
accordance with U.S. GAAP.
Under our 2018 Plan, the maximum aggregate number of Class A ordinary shares which may be issued pursuant to all awards under the plan is 2,398,137. As of March
31, 2022, options to purchase 288,973 Class A ordinary shares were outstanding under our 2018 Plan, and they were vested and unexercised options.
On September 22, 2018, August 31, 2020, February 26, 2021 and December 31, 2021, our board of directors approved an increase of 1,500,000 Class A ordinary
shares,1,000,000 Class A ordinary shares, 1,000,000 Class A ordinary shares, and 1,500,000 Class A ordinary shares, respectively, to the award pool under the Post-IPO
Plan. As a result, the maximum number of ordinary shares which may be issued pursuant to all awards under the Post-IPO Plan will initially be 6,000,000 Class A ordinary
shares, plus an annual increase on the first day of each of our fiscal year during the term of the Post-IPO Plan commencing with the fiscal year beginning January 1, 2018, by
an amount equal to the least of (i) 0.5% of the total number of Class A ordinary shares issued and outstanding on the last day of the immediately preceding fiscal year; (ii)
150,000 Class A ordinary shares or (iii) such number of Class A ordinary shares as may be determined by our board of directors. As of March 31, 2022, the award pool
under the Post-IPO Plan is 6,641,374 Class A ordinary shares. As of March 31,2022, 697,397 Class A ordinary shares are outstanding under our Post-IPO Plan, representing
the shares underlying the unvested 697,397 restricted Class A ordinary shares units.
We account for shared-based compensation for these share incentive awards using a fair value based method and recognize expenses in our consolidated statements of
comprehensive loss in accordance with U.S. GAAP. We will incur additional share based compensation expenses in the future as we continue to grant share incentives using
the ordinary shares reserved for this platform. See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Share
Incentive Plans.” We believe the granting of share-based compensation is of significant importance to our ability to attract and retain key personnel and employees, and we
will continue to grant share based compensation to them in the future. As a result, our expenses associated with share-based compensation may increase, which may have an
adverse effect on our results of operations.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for our ADSs and trading
volume could decline.
The trading market for our ADSs will depend in part on the research and reports that securities or industry analysts publish about us or our business. If research
analysts do not establish and maintain adequate research coverage or if one or more of the analysts who cover us downgrade our ADSs or publish inaccurate or unfavorable
research about our business, the market price for our ADSs would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on
us regularly, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ADSs to decline.
The sale or availability for sale of substantial amounts of our ADSs could adversely affect their market price.
Sales of substantial amounts of our ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of our ADSs and
could materially impair our ability to raise capital through equity offerings in the future. Certain holders of our ordinary shares have rights, subject to certain conditions, to
require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other shareholders. We
have also registered all ordinary shares that we may issue under our equity compensation plans. These shares can be freely sold in the public market subject to volume
limitations applicable to affiliates. If any of these additional shares are sold, or if it is perceived that they will be sold, in the public market, the market price of our ADSs
could decline.
We cannot predict what effect, if any, market sales of securities held by our significant shareholders, including potential sales of our securities upon the conversion of
our convertible notes, or any other shareholder or the availability of these securities for future sale 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 your investment.
We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not
expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in our ADSs as a source for any future dividend income.
Our board of directors has discretion as to whether to distribute dividends, subject to certain restrictions under Cayman Islands law, namely that our company may only
pay dividends out of profits or share premium, and provided always that in no circumstances
56
may a 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. In addition, our shareholders may
by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Even if our board of directors decides to declare
and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital
requirements and surplus, the amount of distributions, if any, received by us from our subsidiaries, our financial condition, contractual restrictions and other factors deemed
relevant by our board of directors. Accordingly, the return on your investment in our ADSs will likely depend entirely upon any future price appreciation of our ADSs. There
is no guarantee that our ADSs will appreciate in value 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 may even lose your entire investment in our ADSs.
Our memorandum and articles of association that contain anti-takeover provisions that could discourage a third party from acquiring us and adversely affect the rights
of holders of our Class A ordinary shares and ADSs.
Our memorandum and articles of association contain certain provisions that could limit the ability of others to acquire control of our company, including a dual-class
share structure that gives greater voting power to the Class B ordinary shares beneficially owned by Mr. Sammy Hsieh, Mr. Jian Tang and Baozun, and a provision that
grants authority to our board of directors to establish and issue from time to time one or more series of preferred shares without action by our shareholders and to determine,
with respect to any series of preferred shares, the terms and rights of that series. These provisions could have the effect of depriving our shareholders and ADSs holders of
the opportunity to sell their shares or ADSs at a premium over the prevailing market price by discouraging third parties from seeking to obtain control of our company in a
tender offer or similar transactions.
As a company incorporated in the Cayman Islands, we have adopted certain home country practices in relation to corporate governance matters that differ significantly
from the NASDAQ corporate governance requirements; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the
NASDAQ corporate governance requirements.
As a Cayman Islands company listed on the NASDAQ Global Market, we are subject to the NASDAQ corporate governance requirements. However, NASDAQ
Global Market 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 NASDAQ corporate governance requirements. We follow our home country practices and rely
on certain exemptions provided by the Nasdaq Stock Market Rules to a foreign private issuer, including exemptions from the requirements to have:
•
•
•
•
shareholder approval for certain events, including the establishment or amendment of certain equity based compensation plans and arrangements and certain
transactions involving issuances of 20% or more interest in our company;
majority of independent directors on our board of directors;
only independent directors being involved in the selection of director nominees and determination of executive officer compensation; and
regularly scheduled executive sessions of independent directors.
As a result of our reliance on the corporate governance exemptions available to foreign private issuers, you will not have the same protection afforded to shareholders
of companies that are subject to all of Nasdaq’s corporate governance requirements.
You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under
Cayman Islands law.
We are an exempted limited liability company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles
of association, the Companies Act (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 of our directors to us under Cayman Islands law are to a large extent governed by the common law of the
Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the
common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and
the fiduciary duties of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the
United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.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 corporate records or to obtain copies of lists
of shareholders of these companies. Our directors will have discretion under our current
57
memorandum and articles of association, to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not
obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a
shareholder resolution 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 by management, members of
the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States.
You may experience difficulties in effecting service of legal process and enforcing judgments obtained against us, our directors or our officers, and the ability of U.S.
authorities to bring actions against us, our directors or our officers in China may also be limited.
We are an exempted limited liability company incorporated under the laws of the Cayman Islands. We conduct substantially all of our operations in China and
substantially all of our assets are located in China. In addition, a majority of our directors and executive officers reside within China, and most of the assets of these persons
are located within China. As a result, it may be difficult or impossible for you to effect service of process within the United States upon these individuals, or to bring an
action against us or against these individuals in the United States in the event that you believe your rights 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 laws of the Cayman Islands and of the PRC may render you unable to enforce a judgment against
our assets or the assets of our directors and officers. In addition, due to jurisdictional limitations, matters of comity and various other factors, the SEC, Department of Justice
(“DOJ”) and other U.S. authorities may be limited in their ability to take enforcement actions, including in instances of fraud, against us or our directors and officers in
China. In addition, shareholder claims that are common in the United States, including class action securities law and fraud claims, are generally uncommon in China.
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 vote your Class A ordinary
shares.
As a holder of our ADSs, you will only be able to exercise the voting rights with respect to the underlying Class A ordinary shares in accordance with the provisions of
the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. If we ask for your instructions, then upon receipt of your
voting instructions, the depositary will try to vote the underlying Class A ordinary shares in accordance with these instructions. If we do not instruct the depositary to ask for
your instructions, the depositary may still vote in accordance with instructions you give, but it is not required to do so. You will not be able to directly exercise your right to
vote with respect to the underlying shares unless you withdraw the shares. When a general meeting is convened, you may not receive sufficient advance notice to withdraw
the shares underlying your ADSs to allow you to vote with respect to any specific matter. If we ask for your instructions, the depositary will notify you of the upcoming vote
and will arrange to deliver our voting materials to you. We have agreed to give the depositary at least 30 days’ prior notice of shareholder meetings.
Nevertheless, we cannot assure you that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your shares. In addition, the
depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may
not be able to exercise your right to vote and you may have no legal remedy if the shares underlying your ADSs are not voted as you requested.
Except in limited circumstances, the depositary for our ADSs will give us a discretionary proxy to vote the Class A ordinary shares underlying your ADSs if you do not
vote at shareholders’ meetings, which could adversely affect your interests.
Under the deposit agreement for our ADSs, to the extent we have provided the depositary with at least 40 days’ notice of a proposed meeting, if voting instructions are
not timely received by the depositary from you, you shall be deemed to have instructed the depositary to give a discretionary proxy to a person designated by us to vote the
shares represented by you ADSs as desired.
However, no such instruction shall be deemed given and no discretionary proxy shall be given (a) if we inform the depositary in writing that (i) we do not wish such
proxy to be given, (ii) substantial opposition exists with respect to any agenda item for which the proxy would be given or (iii) the agenda item in question, if approved,
would materially or adversely affect the rights of holders of shares and (b) unless we have provided the depositary with an opinion of our counsel to the effect that (i) the
granting of such discretionary proxy does not subject the depositary to any reporting obligations in the Cayman Islands, (ii) the granting of such proxy will not result in a
violation of any applicable law, public rule or regulation in force in the Cayman Islands and (iii) the courts of the Cayman Islands will give effect to the voting arrangement
and deemed instruction as contemplated in the proxy under Cayman Islands law.
The effect of this discretionary proxy is that, if you fail to give voting instructions to the depositary as to how to vote the Class A ordinary shares underlying your
ADSs at any particular shareholders’ meeting, you cannot prevent our Class A ordinary shares
58
underlying your ADSs from being voted at that meeting, absent the situations described above, and it may make it more difficult for shareholders to influence our
management. Holders of our Class A ordinary shares are not subject to this discretionary proxy.
Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement and the deposit agreement may be amended or
terminated without your consent.
Under the deposit agreement, any action or proceeding against or involving the depositary, arising out of or based upon the deposit agreement 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 such proceeding, and irrevocably submitted to the exclusive jurisdiction of such courts
in any such action or proceeding. However, the depositary may, in its sole discretion, require that any dispute or difference arising from the relationship created by the
deposit agreement be referred to and finally settled by an arbitration conducted under the terms described in the deposit agreement. Also, we may amend or terminate the
deposit agreement without your consent. If you continue to hold your ADSs after an amendment to the deposit agreement, you agree to be bound by the deposit agreement as
amended.
Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.
We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make such rights available to you in the
United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is
available. Under the deposit agreement, the depositary will not make rights available to you unless both the rights and the underlying securities to be distributed to ADS
holders are either registered under the Securities Act or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with
respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective and we may not be able to establish a necessary
exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings in the future and may experience dilution in your
holdings.
In addition, on December 9, 2019, we issued warrants to purchase up to 4,651,162 ADSs (“Warrants”) to an external consultant in exchange for its financial advisory
services in our successful issuance of the convertible notes issued in November 2019. The exercise period of the Warrants commenced on December 16, 2020 at an exercise
price of US$4.3 per ADS and will expire on December 16, 2022. We cannot assure you the timing and amount that our external consultant would exercise the Warrants,
which may dilute your holdings. Further, the exercise of the Warrants could increase the volatility of the trading price of our ADSs.
You may not receive dividends or other distributions on our Class A ordinary shares and you may not receive any value for them, if it is illegal or impractical to make
them available to you.
The depositary of our ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on Class A ordinary shares or other deposited
securities underlying our ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary shares your ADSs
represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it
would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered
or distributed under an applicable exemption from registration. The depositary may also determine that it is not feasible to distribute certain property through the mail.
Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We
have no obligation to register under U.S. securities laws any ADSs, Class A ordinary shares, rights or other securities received through such distributions. We also have no
obligation to take any other action to permit the distribution of ADSs, Class A ordinary shares, rights or anything else to holders of ADSs. This means that you may not
receive distributions we make on our Class A ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may
cause a material decline in the value of our ADSs.
You 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 transfer books at any time or from time to time when it deems
expedient in connection with the performance of its duties. In addition, the depositary may refuse to deliver, transfer or register transfers of ADSs generally when our books
or the books of the depositary are closed, or at any time if we or the depositary deems it advisable to do so because of any requirement of law or of any government or
governmental body, or under any provision of the deposit agreement, or for any other reason.
59
We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic
public companies.
Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United
States that are applicable to U.S. domestic issuers, including:
•
•
•
•
the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;
the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;
the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from
trades made in a short period of time; and
the selective disclosure rules by issuers of material nonpublic information under Regulation FD.
We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly
basis as press releases, distributed pursuant to the rules and regulations of the NASDAQ Global Market. Press releases relating to financial results and material events will
also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be 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 be afforded the same protections or information that would be made available to you
were you investing in a U.S. domestic issuer.
We may lose our foreign private issuer status in the future, which could result in significant additional cost and expense.
The determination of our status as a foreign private issuer is made annually on the last business day of our most recently completed second fiscal quarter. If we were to
lose our foreign private issuer status, the regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly higher. We may also
be required to modify certain of our policies to comply with corporate governance practices associated with U.S. domestic issuers, which would involve additional costs.
We have incurred increased costs as a result of being a public company, and our compliance costs may continue to increase in the future.
We have incurred additional legal, accounting and other expenses as a public reporting company. For example, we are required to comply with additional requirements
of the rules and regulations of the SEC and requirements of the NASDAQ Global Market, including applicable corporate governance practices. In addition, we are required
to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. We expect that compliance with these requirements will increase our
legal and financial compliance costs and will make some activities more time-consuming and costly. We also expect that our management and other personnel will need to
divert attention from operational and other business matters to devote substantial time to these public company requirements. We cannot predict or estimate the amount of
additional costs we may incur as a result of becoming a public company or the timing of such costs.
In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing
legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many
cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This
could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to
invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion of
management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new laws, regulations and standards differ from
the activities intended by regulatory or governing bodies due to ambiguities related to their application and practice, regulatory authorities may also initiate legal proceedings
against us and our business may be adversely affected.
There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which
could subject United States investors in our ADSs or ordinary shares to significant adverse United States income tax consequences.
A non-U.S. corporation will be a “passive foreign investment company,” or “PFIC,” if, in any particular taxable year, either (a) 75% or more of its gross income for
such year consists of certain types of “passive” income or (b) 50% or more of the average quarterly value of its assets (as determined on the basis of fair market value)
during such year produce or are held for the production of passive income (the “asset test”). We expect to derive sufficient active revenues and to have sufficient active
assets, so that we will not be classified as a PFIC for the current taxable year or in the foreseeable future. However, because the PFIC tests must be applied each year, and the
composition of our income and assets and value of our assets (which may be determined by reference to the market value
60
of our ADSs) may change, and because the treatment of VIE for U.S. federal income tax purposes is not entirely clear, it is possible that we may become a PFIC in the
current or a future year.
In particular, because the value of our assets for purposes of the asset test may be determined by reference to the market price of our ADSs, fluctuations in the market
price of our ADSs may cause us to become a PFIC for the current or subsequent taxable years. The determination of whether we are a PFIC also depends, in part, on the
composition of our income and assets, which may be affected by how, and how quickly, we use our liquid assets. If we do not deploy significant amounts of cash for active
purposes, our risk of being a PFIC may substantially increase.
If we are a PFIC in any taxable year, a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations”)
may incur significantly increased United States income tax on gain recognized on the sale or other disposition of the ADSs or ordinary shares and on the receipt of
distributions on the ADSs or ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the United States federal income tax rules, and
such holder may be subject to burdensome reporting requirements. Further, if we are a PFIC for any year during which a U.S. Holder holds our ADSs or ordinary shares,
such U.S. Holder generally will be required to continue to treat us as a PFIC for all succeeding years during which such U.S. Holder holds our ADSs or ordinary shares. For
more information, see “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.”
ITEM 4.INFORMATION ON THE COMPANY
A. History and Development of the Company
We commenced our online marketing business in 2009. In February 2010, we restructured our holding structuring by incorporating Optimix Media Asia Limited in the
Cayman Islands as the holding company of Optimix HK to facilitate financing and offshore listing. In March 2017, we changed our name from Optimix Media Asia Limited
to iClick Interactive Asia Group Limited.
In November 2014, we enhanced our data analytics capabilities by acquiring Buzzinate Company Limited, or Buzzinate, a company incorporated in Hong Kong.
Buzzinate is an online marketing platform with strong data analytics capabilities and deep understanding of behavior of internet users in China.
In July 2015, we acquired all shares in OptAim Ltd., or OptAim, and substantially expanded our online marketing business into mobile channels to identify, engage
and convert mobile marketing.
On December 21, 2017, our ADSs commenced trading on Nasdaq Global Market under the symbol “ICLK.” We raised from our initial public offering approximately
$23,325,000 in net proceeds after deducting underwriting commissions and the offering expenses payable by us.
In May 2018, we launched a strategic growth initiative beyond our core online marketing operation to provide SaaS-based enterprise solutions. Our enterprise
solutions help enterprise optimize their capabilities to leverage various types of data, and help them reduce costs and allow for easy integration with other platforms and
applications. Our enterprise solutions help us foster closer relationship with our clients beyond digital marketing. Enterprises can make better and more informed choices
during their decision- making process through our enterprise solutions.
In November 2018, we acquired Myhayo, a content distribution channel and a mobile content aggregator of articles and short videos in the PRC, which presents
customized feeds to users via its mobile application. The acquisition may further increase our market shares in the PRC online marketing segment, particularly in relation to
mobile platform.
In January 2019, we made a controlling investment in Changyi, a leading independent software vendor based in Shanghai which provides intelligent retail and CRM
solutions, through which we expect to further enhance our data-driven enterprise solutions business. In October 2020 and December 2020, we further increased our equity
stake in Changyi. In March 2022, we entered into an agreement to acquire the remaining equity interest in Changyi.
61
In May 2019, we formed a joint venture with VGI Global Media Plc, or VGI, in Thailand to expand the geographic reach of our marketing solutions. Through VGI, we
offer a suite of mobile and new media solutions to help Southeast Asian consumer brands understand the purchasing behaviors of and penetrate Chinese consumers traveling
in Thailand.
In May 2020, we acquired an 80% equity interest in Optimal Power Limited, a subsidiary wholly owned by Creative Big Limited, for US$28 million paid through the
issuance of ADSs calculated at US$3.9 per ADS. As part of the transaction, Creative Big Limited injected certain premium media licensing assets into Optimal Power
Limited covering a number of jurisdictions in the Asia-Pacific. In December 2020, we acquired the remaining 20% equity interest of Optimal Power Limited from the non-
controlling interest shareholder at a cash consideration of US$7 million, our equity interests in Optimal Power Limited increased to 100%.
In October 2020, we acquired CMRS Group Holding Limited, or CMRS, a leading marketing automation solution provider in China. The acquisition will allow us to
further enhance our full product offerings, leveraging CMRS’s marketing automation capabilities, in particular, for cross-border customers marketing into China.
In January 2021, we issued certain Class B ordinary shares to Baozun, a leading brand e-commerce service partner that helps brands execute their e-commerce
strategies in China and entered into a strategic cooperation framework agreement with it. Pursuant to the strategic cooperation framework agreement, we and Baozun will
collaborate in developing a full-cycle, closed-loop e-commerce service model, covering areas such as system development, IT services, digital marketing, store operation,
customer services and warehousing and fulfillment services to better serve potential brand partners.
In January 2021, we released iSCRM, a powerful off-the-shelf SaaS enterprise management platform for daily operations and social customer relationship
management. iSCRM leverages the updated features of WeCom, Tencent's communication platform for enterprises, to effectively attract new users and intelligently manage
brands’ private domain traffic through integration of the various functions on WeChat Mini Program, WeCom and WeChat.
In July 2021, we completed the acquisition of Parllay, a leading personalized marketing platform with deep expertise in WeChat-based CRM, e-commerce and
marketing SaaS solutions in China. We anticipate that the utilization of Parllay's rich expertise will further enhance our product offerings, enlarge our potential clients base,
and accelerate sales of our enterprise solutions.
Our principal executive offices are located at 15/F, Prosperity Millennia Plaza, 663 King’s Road, Quarry Bay, Hong Kong S.A.R. Our telephone number at this address
is (852) 3700 9000. Our registered office in the Cayman Islands is located at Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104,
Cayman Islands. Our internet address is www.i-click.com. The SEC also maintains an internet site at www.sec.gov that contains reports, proxy and information statements,
and other information regarding registrants that make electronic filings with the SEC.
B.
Business Overview
We are a leading enterprise and marketing cloud Platform in China. We offer a consumer full lifecycle solution that addresses our clients’ needs from traffic
acquisition, customer relations management and business decisions optimization driven by data analytics in today’s smart retail era. With our industry-leading marketing
solutions as our entry point, we support enterprises on digital operations to drive customer retention and loyalty and growing customer lifetime value with our intelligent data
enterprise solutions.
Our marketing solutions serve as an integrated cross-channel gateway that provides marketers with innovative and cost-effective ways to optimize their online
advertising efforts throughout their marketing cycle and achieve their branding and performance-based advertising goals. Our integrated data-driven marketing solutions help
marketers engage and activate potential customers, monitor and measure the results of marketing campaigns, and create content catering to potential customers across
different content distribution channels through both PC and mobile devices. Our marketing solutions appeal to marketers by offering omni-channel reach to the Chinese
audience. We provide our clients with one-stop access to a wide variety of cross-channel content distribution opportunities, including those from leading online publishers in
China. We work closely with our content distribution partners to facilitate innovative and effective audience engagement.
Leveraging our data analytics and experience and expertise in online marketing, we launched our SaaS-based enterprise solutions in May 2018. We keep enriching our
data-driven enterprise solutions with technological innovation, and currently it is developed in the form of “SaaS + X” model. This model is supported by (i) self-developed
software or Tencent cloud and leverage Tencent’s proprietary API connection and mini programs in Tencent’s WeChat ecosystem, (ii) our operational services for
enterprises’ digitalization. Through the enterprise solutions, we are able to foster deeper relationship with clients beyond online marketing. As an increasing number of
clients adopt our enterprise solutions, we expect to be able to continue to enhance the quantity, quality, and diversity of our data assets
62
and refine our product and service offerings to improve customer experience. Our ability to develop tailored enterprise solutions to our key account clients foster strong
relationships with them.
Our solutions are enabled and supported by our extensive data set, sophisticated data analytics capabilities and cutting-edge technologies. We collect data from a wide
variety of channels, including through our proprietary tracking tools, from our marketers, publishers and ad exchanges when managing marketing campaigns, and to a lesser
extent, from third-party strategic partners. From our large volume of unstructured data, we construct context-rich user profiles, utilizing our proprietary audience profiling
and segmentation technologies. These user profiles, which are updated and refined on a continuous basis, typically include information on a user’s attributes, such as his or
her demographics, geographic location, device preference, spending history, personal interests and other online or offline behavioral patterns. As of March 31, 2022, we had
analyzed approximately 1,364.6 million active profiled users or devices in terms of number of cookies that we place through internet browsers. Leveraging our sophisticated
automation and deep learning technologies, we continually refine our big data analytics and update our user profiles to address the evolving needs of our clients, optimize the
effectiveness of our solutions, and increase our operational efficiency while ensuring the stability of our data and platform as we scale up operations.
We take a flexible approach to delivering our solutions in order to cater to the preferences and levels of internal resources and expertise of our clients. Our clients may
choose to access our solutions through (i) self-service, under which they have the flexibility to utilize our solutions “a la carte” to complement their existing marketing
resources, including through our software, under which they can use personalized, extensive and secured systems with various functions for advertising, data operation and
social retail, and (ii) managed service, under which our account management team provides in-depth services utilizing our solutions that suit the clients’ specified objectives
and budgets on marketing and digital operation.
The success of our solutions is evidenced by our strong, diverse and recurring client base from a broad range of industry verticals, including but not limited to
entertainment and media, E-commerce, travel and hospitality, automobile and petroleum, and banking and finance. Our clients primarily include large enterprises, from
different geographic regions in and outside China, including approximately 300 multinational companies in 2021.
For our marketing solutions, we generate revenues primarily from clients’ marketing spend through our platform as they utilize our solutions in cost-plus and specified
action marketing campaigns, and to a less extent from incentives granted by the publisher under our sales agency arrangement. In 2019, 2020 and 2021, our revenue from
marketing solutions amounted to US$189.0 million, US$225.9 million and US$242.6 million, respectively.
For our enterprise solutions, we generate revenue primarily from the upfront, on-going subscription and service fees our clients pay. We saw significant growth in
revenue from enterprise solutions from US$28.9 million in 2020 to US$65.1 million in 2021.
Our Solutions
We are a leading enterprise and marketing cloud platform in China. We offer a consumer full lifecycle solution that addresses our clients’ needs from traffic
acquisition, customer relations management and business decisions optimization driven by data analytics in today’s new smart retail era. With marketing solutions as our
entry point, we drive customer retention and loyalty with our data enterprise solutions and growing customer lifetime value with our intelligent enterprise solutions.
Through our suite of end-to-end solutions, enabled and supported by our extensive data set, sophisticated data analytics capabilities and cutting-edge technologies, we
deliver highly integrated customer experience and address clients’ needs to:
•
•
•
•
•
•
•
•
•
identify their potential customers;
engage and activate potential customers;
monitor and measure the results of online marketing campaigns;
create content catering to their potential customers;
build and operate personalized storefronts on social media platforms;
develop SaaS-based tools;
provide operational services and support;
utilize data analytics to advise business decisions; and
marketing automation
63
Enterprise Solutions
Leveraging our data analytics expertise and experience in online marketing, we have launched our enterprise solutions from May 2018 to help clients collect
information from different consumer touchpoints, and integrate them into a single data management platform to drive sales and marketing decisions. Our enterprise solutions
were initially established on WeChat, a widely used social platform in China that is owned and operated by Tencent Holdings Limited. We also further enrich and diversify
our offering through self-developed software and provide operational services for digitalization on other third-party platforms, resulted in our “SaaS+X” model.
The “SaaS+X” component in our enterprise solutions include (i) data analytics SaaS tools and services; (ii) intelligent enterprise CRM SaaS tools and services; (iii)
establishment and operation of client private domains; iv) smart retail tools and services. We continue to broaden our data sources, develop and upgrade SaaS modules and
enhance the data functionality of these products so as to help clients better in business digitalization.
iAudience
iAudience is our market intelligence platform empowered by our proprietary data and cutting-edge marketing technology, to provide real-time insights of the target
audiences and competitive landscapes in China, that allows enterprises to explore potential market opportunities and drive long-term business growth. Our clients can
uncover target audiences by simply typing in a list of keywords, such as brand names, products of interest or competitors brand names and products, and iAudience will
automatically suggest other keywords usually associated with, or used in, the relevant contexts, and then search our database of user profiles to identify the most relevant
user profiles to target. In addition, iAudience’s market module provides 53 pre-defined market segments’ audience plans including travel, education, finance, automobile,
real estate and more, with key analysis metrics to streamline the audience identification process for marketers in these industries, who can identify their desired user profiles
and compare two market segments in just one click.
iAudience’s brand module helps clients map out the brand positioning and competitive landscapes by showing the overlaps of their consumers and their competitors.
This enables marketers to filter out brand loyalists from brand switchers for more effective, bespoke communication and implement the most appropriate content and
marketing strategies to further grow their customer base.
Below is a sample interface for our iAudience solution.
iNsights 2.0
In February 2022, we released iNsights 2.0, our upgraded all-in-one marketing analytics platform, that extends our intelligent data analytics coverage from sole Web to
both Web and WeChat Mini program ecosystem, enabling global brands gain unparalleled insights and achieve more effective data-driven marketing and smarter business
decisions. Utilizing full-data analytics to produce key metrics, dimensions, reliable and accurate insights, iNsights 2.0 helps clients analyze their campaign performance to
refine campaign strategies and guide future campaign planning. Through a user-friendly tracking functions, it not only helps brands create and track events and provide
custom analysis for specific metrics to generate insights on campaign performance, such as most-clicked banners or most-engaged with gaming campaign, but also provides
customized traffic source tracking paths, as well as custom QR codes for both online and offline campaigns and tailored segmentation capabilities for re-marketing
campaigns. Furthermore, combining with iSuite products including iAccess, iNsights 2.0 forms a one-stop MarTech solution that optimizes cross-channel marketing
campaigns and transforms data into actionable insights that allow brands to adopt precise remarketing strategies and retarget high-value customers. To summarize, iNsights
2.0 provides marketers with in-depth analyses, including:
64
•
•
•
Conversion path analysis—Holistic analysis of when, where and how a user interacts with various devices by the multiple touch points he or she has come in
contact with, including the “last mile” through which the user is converted, i.e., making a purchase or otherwise taking an action that the marketer desires; and
Cross-channel effectiveness analysis—Analysis of the effectiveness of the various marketing channels in achieving different marketing objectives and their
respective cost effectiveness. Combining these with conversion path analyses, marketers can identify the portfolio of channels that work in tandem with each
other to generate the greatest marketing impact and effectiveness.
E-commerce analysis—Analysis of e-commerce performance in metrics such as total sales, order amount, conversion rate to measure business growth and
product performance including product views, individual product sales growth to facilitate product development and promotion strategies.
Below is a sample interface for our iNsights 2.0 solution.
We also launched new data enterprise solutions including iParllay and iSCRM which utilize our SaaS capabilities to enrich our service offerings.
iParllay
iParllay is our social commerce platform leveraging our customer management and marketing automation capabilities. It provides various solutions, including:
•
•
•
Integrate online-to-offline customer touch points, covering advertising, website, livestreaming, meeting, WeChat articles, social referral campaigns to draw high
quality leads and build strong customer database;
Unify sales leads from multiple channels, track customers’ lifestyle and nurture sales leads with marketing automation through well-organized enterprise
customer database;
Offer professional marketing services for business growth such as private domain traffic operation, KOL and social group marketing, social marketing
campaigns, search engine optimization (“SEO”), search engine marketing (“SEM”) and more.
65
iSCRM
iSCRM is our WeChat social customer relationship management (“SCRM”) that provides enterprises with WeChat private traffic management and operation. Our one-
stop data management SaaS platform provides full-funnel services along the consumer journey by integrating online and offline sales, leveraging the power of Tencent
ecosystem, providing mini-program development and operation, advertising, social customer relationship management and social communities. We offer three major
integrated systems including WeCom SCRM, WeChat Mini-program and business intelligence with capabilities of precise private traffic data-driven marketing strategies,
social community management, cross-channel online store operation and O2O marketing.
66
In addition to data enterprise solutions, we also offer a suite of intelligent enterprise solutions. For example, we have built up tailored mini programs or mini program
stores based on WeChat to fulfill specific requirements of our clients. The mini programs or mini program stores offer our clients not only a WeChat-based e-commerce
marketplace but also an interface for them to directly engage with their consumers. We have also established a consumer data platform, or CDP, to address some legacy data
silo issues our clients face in China. Our CDP facilitates AI-driven personalized marketing campaigns and drives precise and real-time retail and sales decisions such as store
expansions, product selection and offerings to targeted customer segments, as well as personalized customer services. For example, it provides location-based services to
target potential customers within 5km of a client’s physical store, attracting more traffic and enabling other marketing triggers.
Marketing Solutions
Audience Engagement and Activation Solutions: iAccess
iAccess is our cross-channel audience engagement and activation solution tailored for brand awareness-driven campaigns and performance-driven campaigns. iAccess
provide marketers with a comprehensive suite of targeting or re-targeting options to reach out to, or re-connect with, potential audience identified by iAudience. Marketers
can choose to target these audience based on their gender, age, income levels, geographic locations, interest, device, and device operating system. Marketers are also afforded
the flexibility to select their preferred content format, budgeting requirement, display frequency and time to reach these audience.
Below is a sample interface for our iAccess solution.
67
Our Data and Data Analytics Capabilities and Technologies
Our Data Assets
Our data assets are the backbone of our solutions and data analytics capabilities. We had analyzed approximately 1,364.6 million active profiled users or devices in
terms of number of cookies that we place through internet browsers in China as of March 31, 2022. According to the China Internet Network Information Center, there were
1,032 million internet users in China as of December 31, 2021 and the number of mobile internet users in China had reached 1,029 million up to December 31, 2021.
We collect data from a variety of channels, including through our proprietary tracking tools, from our marketers, publishers and ad exchanges when managing
marketing campaigns, and to a lesser extent, from third-party strategic partners. We track data with our proprietary toolbars and software development kits installed on apps
and websites. The data that we have tracked are complemented by, and blended with, marketing campaign performance data from marketers, publishers and ad exchanges.
To a lesser extent, we collect data from selected third-party data partners, including major internet companies in China and financial institutions, through our data
collaboration arrangement with them. Our data assets primarily include users’ intent, interest, online transactional, social data and demographic data, as well as campaign
performance data.
•
•
•
Intent data — Intent data refers to data that indicates the various intent of a user. Intent data directly identifies the interests and immediate needs of a specific
user. An example of intent data would be search terms entered into search engines by a particular user looking for business class air tickets from Hong Kong to
Shanghai. We obtain intent data primarily from the websites and apps on which we have installed our proprietary sharing toolbars and software development kits
as well as through API connection with major search engines where marketers’ search marketing is executed.
Interest data — Interest data refers to the category and semantic meaning of the content of websites and apps that a user visits, including visit frequency and
sequence, from which we are able to infer the various interests of a user. Interest data shows the awareness of the relevant information by a specific user. An
example of interest data would be data concerning how frequently a particular user interested in fine dining browses webpages of luxury Japanese cuisine
restaurants. We collect interest data from websites and apps on which we have installed our proprietary sharing toolbars and software development kits as well as
through API connection with certain ad exchanges.
Online transactional data — Online transactional data refers to a user’s behavior on online commerce platforms, including the items he or she is browsing or has
added to his or her shopping cart. Online transactional data directly identifies the purchasing intent and immediate needs of a specific user. An example of online
transactional data would be a particular user browsing for high-end skin care products and adding a specific brand of eye serum into the shopping cart in
preparation of a purchase. We obtain online transactional data from partnerships with branded E-commerce platforms and the re-marketing campaigns for our E-
commerce clients.
68
•
•
•
Social data — Social data refers a user’s behavior on social networks, such as Sina Weibo and Tencent QZone, including the content the user shares from
websites or apps via social sharing toolbars, and the content the user posts, shares on the social networks, his or her “social graph,” such as his or her “friends”
and “followers” and other behavior data the user publicly shares on social networks. Social data demonstrates that a specific user is engaged in certain particular
topics or content online on social media. An example of social data would be the name of a restaurant being recommended by a particular user via his or her
social network account. We obtain social data by installing our proprietary sharing toolbars and software development kits on websites and apps, as well as
through API connections with major social networks.
Demographic data — Demographic data refers to a user’s age, gender, income level and geographic location. In addition to inferred demographic information
through our data tracking and profiling analytic capabilities and technologies, we obtain actual demographic data from social media accounts through our
strategic relationship with selected third-party data partners, including major internet companies in China.
Campaign performance data — Campaign performance data refers to a user’s interaction with, and response to, a given marketing message, starting with such
user’s click on the content and including the user’s interaction with the destination site to which the link leads, and all other actions taken by the user, including
E-commerce transaction, clicks, registration or sign-ups, video viewing, and “follow” or “likes” on social media platforms. We obtain campaign performance
data from websites and apps on which we have installed our proprietary sharing toolbars and software development kits, in managing client campaigns, and
through our data collaboration arrangements with selected third-party data partners.
We distill structured variables from large volume of unstructured data to construct context-rich user profiles. As of March 31, 2022, we analyzed approximately
1,364.6 million active profiled users or devices in terms of number of cookies that we place through internet browsers. We “pre-package” our user profiles into audience
groups that can be utilized by specific industry verticals for precise targeting. Data involving our user profiles and audience groups are continuously fed into our content
distribution opportunity matching process, enabling marketers to make cost-efficient decisions on real-time audience engagement opportunities and continuously optimize
these decisions to access and activate their target audience through different channels.
Our Data Analytics Capabilities and Technologies
We apply data science technologies extensively throughout the online marketing cycle to support audience tracking, profiling and segmentation and to execute cost-
efficient decisions on real-time audience engagement. We also launched a strategic growth initiative on enterprise solutions, leveraging our data analytics expertise and
experience in online marketing. Our proprietary data analytics capabilities and technologies include:
Deep Learning and Artificial Intelligence
•
•
•
Audience tracking engine — Our audience tracking engine monitors our audience across various devices and channels to identify which user has been interacting
with what content, through which devices and the environment the user is in. It also uses cookies and other digital fingerprinting technologies, which take into
account social network IDs, browsing behavior, network usage, IP addresses, surfing patterns, and device features, to recognize, identify, and re-identify a user
across multiple channels, devices, and geographic locations, including de-duplication of multiple devices to a user.
Contextual analysis engine — Our contextual analysis engine parses all data properties to understand the context and content which audiences are interacting in
and with, including news articles, social networks, search engines, mobile apps, etc. These help understand what a user is interested in, including product
categories, brand names, product names, keywords, and the depth of their interest.
Natural language processing (NLP) algorithms — Our NLP algorithms are important elements of our contextual analysis engine. We use these algorithms to
extract structure from unstructured data, so that it can be processed and analyzed effectively. Our NLP algorithms are designed to understand and analyze
Chinese and English languages and their usage in various contexts. They enable the extraction of information about entities, correlations, sentiments and
emotions from vast amounts of text converted from audio and video streams and other digital content. In addition, we combine deep learning techniques with our
natural language processing capabilities to further enhance the accuracy of attributes of our user profiles.
69
Predictive Analytics
•
•
User profiling engine — Combining the data collected through, and processed by, our contextual analysis engine and audience tracking engine, our user profiling
engine infers the user’s interest, demographic, intent and other features through multi-dimensional data drill down and dynamic correlation analysis. In addition,
we employ various models and algorithms on user profiles to expand and provide more breadth and depth on each user profile.
Profile Segmentation Algorithms — We use various algorithms to organize user profiles, which are generated and updated dynamically in real time, responding
to real time changes in user interests and needs. This allows for accurate and detailed segmentation of user interests through multiple dimensions, e.g. by user
interest keywords and user interest categories.
Real-Time Matching Technologies
•
•
Real-time user engagement algorithms — Our real time user engagement algorithms execute marketing decisions based on a wide range of parameters, including
predictions on click-through rate and conversion rate, inventory price, inventory safety and inventory segment, and consider audience compatibility,
demographics, and frequency capping or other budgeting restrictions among other parameters, to compute the most cost-efficient decisions on real-time audience
engagement opportunities.
Online continuous real-time bid optimization algorithms — Our online continuous real-time bid optimization algorithms consider a wide range of parameters,
including purchasing efficiency, predicted conversion rate, return on media value, budget allocation efficiency, inventory safety, and what marketers are willing
to pay to dynamically optimize our bidding and pricing strategies. Our real-time bid optimization algorithms continuously sieve through a large volume of user
engagement opportunities per day to decide which are the best possible opportunities to engage with.
Data Privacy and Security
We collect data solely to analyze audience and campaign performance. In order to identify each user profile and to protect data privacy, we develop an approach to
assign each profile to a corresponding unique profile number based on our proprietary indexing methodology. We then use that number as the anonymous identification for
the profile and associate it with all related data. In general, we do not collect personally identifiable information. If such information is inadvertently obtained by us, our
policy is to immediately delete such information.
We treat all information we collect as confidential. We have set up proper control such as encryption and access right on these information. We do not disclose any
information we gather from a marketer or any third party data partner unless such disclosure is approved by it, which in turn has obtained end user consent.
We have put in place appropriate physical, electronic and managerial procedures to safeguard and secure our data assets, including to prevent and detect any
unauthorized access and data breach, to preserve their integrity and to ensure their appropriate use.
•
•
•
•
•
•
On the software level, we maintain login information across all our computer systems to control access, and individuals with different levels or job duties are
assigned different levels of access permissions. For example, only high-level technology personnel, including head of system operations and certain other
technical developments leaders have root access to our operation system; and only database managers have access to the relevant database. We have central
controls to govern user roles and permissions.
On the hardware levels, our servers are located at our offices and IDCs, and only system operation personnel have access to our servers. In addition, we have
established hardware firewall where all traffic is inspected and filtered according to a comprehensive set of rules. We conduct comprehensive security reviews of
our data assets on a regular basis and ad hoc security reviews from time to time as special needs arise.
We also perform the monitoring and maintenance of our data privacy and security mechanism on a regular basis.
We perform regular vulnerability scanning on website or web application to identify any weak configuration or vulnerabilities. We apply patch regularly and fix
any configuration issues.
We monitor any suspicious network traffic regularly including unexpected outgoing traffic such as huge data exfiltration volume and suspicious DNS query. We
gather any events or alerts from servers and endpoints with security information and event management facility to set up alerts for any abnormal events or
potential security breach.
We secure and monitor privileged access, particularly on Internet accessible accounts such as web or cloud hosting, and implement multi-factor authentication on
these accounts.
We give sufficient priority to develop and upgrade our mechanism to protect data and prevent data leakage. We also endeavor to build up cyber threat intelligence
capability to complement the detection mechanisms. As a testament to our dedication to data security
70
and protection, we are not only in compliance with General Data Protection Regulation (“GDPR”), agreed upon by the European Parliament and Council in April 2016 but
also qualified for the third level of information system security in mainland China.
Our Technology Infrastructure
Our platform is built on a highly scalable and reliable cloud-based technology architecture. This allows us to harness large quantities of real-time data and ensures high
speed performance at a large scale to accommodate more clients and increased complexity of their online marketing campaigns.
•
•
•
Real-time analytics — Our cloud-based technology architecture is built to be fully distributed while having a single unified access layer. Large amounts of data
are ingested through multiple highly-optimized points and analyzed using both offline batch processing and online real-time processing through streaming
technologies. This architecture allows us to combine multiple data dimensions and apply various machine learning algorithms in real- time to our data, providing
the most up-to-date and accurate representations of a user’s traits and online behavior.
Scalability — With modular architecture that is built to be horizontally scalable, our platform can be easily expanded as data storage requirements and client base
increase. Our data repositories are clustered and our data processing architecture is distributed in several cities in China and Hong Kong, which supports efficient
expansion. When need arises, we can easily add servers and integrate them into our existing server clusters as either data nodes or processing nodes. In addition,
load balancing technology helps us improve distribution of workloads across multiple computing components, optimizing resource utilization and minimizing
response time.
Reliability — Our technology layers have built hardware redundancy and will switch if errors are detected. We built our platform on a distributed computing
architecture. Furthermore, our data processing architecture is located within the same cities where servers of major ad exchanges in China are located, facilitating
low latency access and reliability as we bid for content distribution opportunities in real time.
Our Content Distribution Channels and Social Medial Platform Partners
For our marketing solutions, we provide marketers with one-stop access to a wide variety of cross-channel content distribution opportunities in China through our deep
relationship with content distribution channel partners, which primarily include mobile and online publishers, major search engines and ad exchanges. For example, we
purchase or promote content distribution opportunities on content distribution channels, including premium channels such as Tencent, Baidu, Google and Alibaba. Media
cost for content distribution opportunities on Tencent, Baidu, Google and Alibaba channels in aggregate accounted for 87.4%, 75.9% and 55.5% of our media costs in 2019 ,
2020 and 2021, respectively. Media cost for content distribution opportunities on our largest and second largest channel partners accounted for 53.1% and 12.2% of our
media cost in 2021, respectively.
We generally enter into annual framework agreements with content distribution channel partners, which set out each party’s rights and responsibilities with respect to
the relevant content distribution opportunities. For example, we are generally required to examine advertising content to ensure its compliance with applicable laws and
content distribution channel partners’ policies. We are also generally required to prepay media cost, which is based on pricing models determined by content distribution
partners and calculated based on content distribution partners’ tracking. In addition, these agreements generally provide for certain rebates or incentives, generally calculated
as a percentage of marketing spend, that we are entitled to should the marketing spend during the terms exceed specified thresholds.
For our enterprise solutions, we currently collaborate with Tencent and other social media platforms for the operating environment of our enterprise solutions. We
primarily deliver our enterprise products on WeChat in the form of WeChat Mini Programs and WeChat Official Accounts.
Our Clients
We sell our solutions primarily by entering into sales contracts with marketers, marketing agencies or other merchants. We enter into marketing campaign contracts
with marketers and marketing agencies for our marketing solutions and service contracts with merchants, many of who are also our marketers for our enterprise solutions.
We treat entities which enter into sales contracts with us and incur spending during the relevant period as our clients. Therefore, we count specific sub-brands or divisions
within the same brand or holding company as distinct clients so long as we have signed campaign contracts with different entities. On the other hand, even though multiple
sales contracts may be involved, we only record one single client if those contracts with us are signed by the same entity. For our marketing solutions, our clients include
both marketers who have direct contractual relationships with us, or direct marketer clients, and marketing agency clients. Our “end marketers,” or “marketers” comprise
marketers we serve, either directly or through marketing agencies, regardless if they have direct contractual relationship with us. In 2021, we had 3,442 marketers, including
1,838 marketers represented by our marketing agency clients.
71
Our marketers span a diverse array of industry segments, with gaming, entertainment and media, personal care and beauty, e-commerce, education & training, and
automobile and petroleum being among the top five in terms of gross billing contribution in 2021. They also feature companies of different sizes, including approximately
300 multinational companies in 2021. Our marketers come from a variety of regions, with headquarters in Europe, North America, or Asia. In determining the geographic
classification of revenue, we look at the geographic location of our subsidiaries or the VIE and its subsidiaries which executed the marketing campaign contract. Our
subsidiaries or VIE and its subsidiaries in China generally are our signing entities for marketing campaign contracts with clients which are based in China. Our Singapore
subsidiary generally is our signing entity for marketing campaign contracts with clients based in Southeast Asia. Our Hong Kong subsidiaries generally are our signing
entities for marketing campaign contracts with other clients.
Our gross billing per client decreased by US$23,989, or 7.4%, from US$324,439 in 2019 to US$300,450 in 2020, increased by US$28,420, or 9%, from US$300,450
in 2020 to US$328,870 in 2021. Relatedly, the total number of clients that we served increased by 14.2% from 1,975 in 2019 to 2,256 in 2020, and increased by 7% from
2,256 in 2020 to 2,423 in 2021, primarily attributable to our increased ability to cater to the growing market demand especially from specified action marketing campaigns.
In 2019, 2020 and 2021, we did not derive over 10% of our net revenues from a marketer.
Sales, Business Development and Account Management
Our sales and business development workforce is mainly focused on attracting more clients for our marketing solutions and enterprise solutions, and optimizing the
client base to focus on profitability and liquidity. Leveraging our existing positions and reputations in industry sectors where we already have a strong presence, we are able
to attract more clients in those sectors. With marketing solutions as our entry point, we drive customer retention and loyalty with our data-driven enterprise solutions and
growing customer lifetime value with our smart retail enterprise solutions. Our full-stack marketing and enterprise solutions allow cost-effective conversion of clients of our
marketing solutions into clients of our enterprise solutions and vice versa, enabling us to lower our client acquisition costs compared to acquiring new clients separately. We
also expect to benefit from the cross-selling opportunities from our recent strategic business cooperation with Baozun by offering our solutions to Baozun’s brand partners.
In addition, as we further expand our enterprise solution offerings in collaboration with Baozun, our marketing solutions clients may accelerate their adoption of our
enterprise solutions.
In addition, we are focused on diversifying our client base. We have partnered with local marketing agencies at selected first and second-tier cities in China to expand
our client base in industry segments where we have relatively less presence, as well as to attract and retain high quality enterprises to use our solutions on a self-serve basis.
Furthermore, our sales and business development team works closely with overseas marketing agencies and channel partners in the home countries of overseas marketers,
who help promote our solutions to overseas marketers.
Our sales and business development team is organized by geographic region, and is further divided into groups that focus on sales to marketers or to marketing
agencies in each geographic region.
Supporting our sales and business development team are our account managers under our operational support team, who help maintain and grow the accounts of our
clients. While our intuitive user interfaces are designed to enable clients to easily deploy and utilize our solutions themselves with minimal customer support, we make
online and telephonic helpdesk facilities available and provide onsite engineering support to clients and also assign account managers for our direct marketer clients and
some of our marketing agency clients. Our account mangers provide consultative services on the use of our solutions, and in addition, for our managed service clients, more
in-depth servicing on campaign planning, execution and result measurement and analysis. As of December 31, 2021, we had 550 employees for sales, business development
and account management.
We use a variety of traditional and web-based channels to drive our brand awareness and generate demand, including through direct marketing, print advertising in
trade journals, offline sales efforts and client referrals. We regularly attend trade shows and industry conferences, and speak to the press about the latest trends in China’s
digital market industry and developments in our solution offerings. In addition, we periodically post case studies and observations and analysis on industry trends on our
website and social media, including our WeChat public account.
Research and Development
We are committed to continually enhancing and innovating our solutions, technologies and technical infrastructure. Our current R&D initiatives include leveraging our
technology from our marketing solutions to provide the consumer in-depth analysis, forming 360-degree consumer profiles and marketing automation to enhance our
integrated solutions.
In addition to continuous R&D resources devoted to the customization requirements from key account clients, we have launched a number of standard off-the-shelf
products to cater to the strong needs of mid-end enterprises for our enterprises solutions and will continue to allocate more R&D resources there. Our R&D process is
demand and innovation driven and involves collaborative efforts,
72
including from our other functional teams, including sales and marketing, and product and operation support. Our R&D process advocates adaptive planning, iterative and
incremental development cycles, and encourages rapid and flexible response to change. We typically release new solution features or improvements every week.
Intellectual Property
We have developed all of the key technologies supporting our platform and solutions in-house. Our intellectual property rights are a key component of our success. We
rely on a combination of trademark and trade secret laws, and contractual restrictions, including through confidentiality, non-disclosure invention assignment agreements
with our key employees, consultants and third parties with whom we do business, to establish, maintain and protect our proprietary information and other intellectual
property.
Notwithstanding these efforts, we cannot be sure that any intellectual property we own will not be challenged, invalidated, or circumvented or that such intellectual
property will be commercially useful in protecting our brand, products, services and technology.
As of December 31, 2021, we had two patents and 141 computer software copyrights in China, and 33 registered trademarks in China, Hong Kong and Singapore.
Competition
China’s independent online marketing technology market is highly competitive, fragmented and rapidly changing. We mainly compete with independent online
marketing technology companies in China that offer marketing solutions through demand side platform and use advanced technologies to optimize marketing campaigns for
marketers.
We compete for online marketing revenue based on many factors, including our ability to deliver return on marketing expenditure at scale, client trust, geographic
reach, breadth and depth of relationships with publishers, ad exchanges, ad networks and other participants in the online marketing ecosystem, comprehensiveness of
solutions and service offerings, pricing structure and competitiveness, cross-channel capabilities, accessibility and user-friendliness of solutions and brand awareness. We
compete for content distribution opportunities based on our ability to maximize the value of content distribution opportunities for content distribution channels partners,
provide them with a wide array of solutions covering various types of content distribution opportunities and our ability to increase fill rates. While our industry is evolving
rapidly and is becoming increasingly competitive, we believe that our highly scalable and flexible business model, large Chinese consumer data set, and omni-channel,
targeted audience reach, proprietary, cutting-edge technologies, strong, diverse and loyal client base, deep knowledge and familiarity with China’s online marketing industry,
and visionary leadership enable us to remain competitive.
In addition, independent online marketing technology platforms face competitive pressure from large and well-established internet companies, such as Alibaba, Baidu,
Tencent and Google, which have established stronger and broader presence across the online marketing ecosystem and have significantly more financial, marketing and other
resources, more extensive client base and broader supplier relationship, and longer operating histories and greater brand recognition than we do. While we believe that we do
not directly compete with these large and well-established internet companies for marketing spend as we promote their content distribution opportunities or purchase their
content distribution opportunities in the ordinary course of our business in connection with our execution of marketing campaigns, and these companies generally do not
provide integrated marketing solutions the way we do, they are major players in the online marketing technology industry as they provide online marketing technology and
offer services and solutions that help marketers achieve one or more aspects of their marketing goals in one or more phases of their online marketing cycle. In addition, these
large and well-established companies control content distribution channels and would directly compete with us should we vertically expand our business to own or operate
content distribution channels in the future.
Online marketing technology platforms also face competition from marketing agencies, who may have their own relationships with content distribution channels and
can directly connect marketers with such channels. Furthermore, online marketing technology platforms continue to face competition from traditional media including direct
marketing, television, radio, cable and print advertising companies.
With respect to our SaaS-based enterprise solutions, our competitors include local cloud-based commerce and marketing service providers, as well as WeChat-based
third-party service providers in China. We may also face competition from international SaaS companies, which have longer operating histories, greater financial, technical,
marketing, distribution, professional services or other resources and greater name recognition. In addition, many of our prospective competitors may have close relationship
with our existing and new clients and bear an extensive knowledge of this industry. As a result, they may be able to respond more quickly to new or emerging technologies
and changes in clients’ requirements, or devote greater resources to the development, promotion and sale of their products. We believe the principal competitive factors in
our industries include the functionality of the products and services, user experience, technology capabilities, sale capabilities, pricing, brand recognition and reputation. In
addition, new and enhanced technologies may further increase competition in our industries.
73
Regulation
This section sets forth a summary of the most significant regulations or requirements that affect our business activities in the PRC or our shareholders’ right to receive
dividends and other distributions from us.
We operate in an increasingly complex legal and regulatory environment. We are subject to a variety of PRC and foreign laws, rules and regulations across numerous
aspects of our business. This section sets forth a summary of the principal PRC laws, rules and regulations relevant to our business and operations in the PRC.
Regulations on Advertising Business
The Advertising Law of the People’s Republic of China, promulgated by the Standing Committee of the National People’s Congress on April 24, 2015 and became
effective on September 1, 2015 and was amended on October 27, 2018, is the principal law regulating our business. This law regulates contents of advertisements, codes of
conduct for advertising, and the supervision and administration of advertising industry. It also stipulates that advertisers, advertising operators, and advertisement publishers
shall abide by the Advertising Law and other laws and regulations, be honest and trustworthy, and compete in a fair manner in advertising business. According to the
Advertising Law, advertising operators and advertisement publishers shall examine the relevant certification documents and verify the contents of advertisements in
accordance with laws and regulations. According the Advertising Law, if advertising operators know or should have known the content of the advertisements is false or
deceptive but still provide advertising design, production and agency services in connection with the advertisements, they might be subject to penalties, including
confiscation of revenue and fines, and the competent PRC authority may suspend or revoke their business licenses. In addition, the Regulations on the Administration of
Advertisement, promulgated by the State Council on October 26, 1987 requires the advertising operators to submit applications to the industry and commerce authorities for
approval and registration. During the course of business, advertising operators are required to check papers or certificates and examine the contents of advertisements.
According to this regulation, advertising operators may not publish, broadcast, install or post any advertisements which violate the provisions of the relevant regulations.
On July 4, 2016, the State Administration for Industry and Commerce, or the SAIC, promulgated the Interim Measures for the Administration of Internet Advertising,
or Interim Measures on Internet Advertising to regulate advertising activities conducted via the internet. According to the Interim Measures on Internet Advertising,
advertisements published or distributed via the internet shall not interfere with users’ normal use of the internet. For example, advertisements published on web page pop-up
windows or in others forms shall be clearly marked with a “close” sign to give the users an opportunity to close them out. No entity or individual may induce users to click
on the contents of an advertisement through deception. An internet advertisement publisher or advertising operator, shall establish and maintain an acceptable registration,
examination and file management system for its advertisers; examine, verify and record the identity information of each advertiser. The Interim Measures on Internet
Advertising also require internet advertisement publishers and advertising operators to verify related supporting documents, check the contents of the advertisement and
prohibits them from designing, producing, providing services or publishing any advertisement if the content and the supporting documents do not match each other or the
documentary evidence thereof are insufficient.
The Advertising Law defines an “advertising operator” as any natural person, legal person or other organization that agrees to provide advertising design, production
and agency services for advertisers. Therefore, we are an “advertising operator” as provided in the Advertising Law and thus subject to the content review and conduct
requirements of the Advertising Law and the Interim Measures on Internet Advertising, or the Interim Measures. To facilitate compliance with Advertising Law, we have
developed certain advertising business management rules containing these mandatory content review and conduct requirements, and are establishing internal mechanisms to
implement these rules.
Prior to June 29, 2015, we were regulated by the Regulations for the Administration of Foreign-Invested Advertising Enterprises, promulgated by the SAIC and
MOFCOM, which prescribed certain conditions on foreign investors that invest in companies in advertising business in China. Among other things, such foreign investors
shall have at least three years’ track record primarily engaging in advertising business and shall have obtained an Opinion on the Approval of Foreign-invested Advertising
Enterprise Project, which is issued by the SAIC or its local counterparts. The Regulations for the Administration of Foreign-Invested Advertising Enterprises were abolished
on June 29, 2015 by the SAIC after consultation with MOFCOM.
Regulations on Internet Information Service
There are several principal regulations on internet information service business, including (i) the Telecommunications Regulations of the People’s Republic of China,
promulgated by the State Council on September 25, 2000 and most recently amended on February 6, 2016, (ii) the Administrative Measures on Internet Information
Services, promulgated by the State Council on September 25, 2000 and most recently amended on January 8, 2011, or the Internet Measures, and (iii) the Catalogue of
Telecommunication Services, issued by the State Council on September 25, 2000, and most recently amended by the MIIT on June 6, 2019. According to the Internet
Measures, “internet information services” include provision of information services through the internet to internet users. Since we have websites that provides information,
including description of our business and solutions, to online users, we are deemed to be providing “internet information service,” and are therefore subject to these
regulations on internet information services. Pursuant to the Internet Measures, there are two categories of internet information services, namely, services of an operative
nature and services
74
of a non-operative nature. The Internet Measures require providers of operative internet information services to obtain an operating permit and imposes certain restrictions on
the percentage of foreign ownership in such providers. Our business does not involve the provision of operative internet information services, and therefore, we are not
required to obtain any operating permits or subject to foreign ownership restrictions under these regulations. In accordance with the Internet Measures, we shall complete a
filing process for our website, which has been done.
Regulations on Value-added Telecommunication Services
On September 25, 2000, the State Council promulgated the Telecommunications Regulations of the People’s Republic of China, or the Telecom Regulations, which
was amended on July 29, 2014 and February 6, 2016. The Telecom Regulations is the primary PRC law governing telecommunication services and sets out the general
regulatory framework for telecommunication services provided by PRC companies. The Telecom Regulations distinguishes between “basic telecommunication services” and
“value-added telecommunication services.” The Telecom Regulations defines value-added telecommunications services as telecommunications and information services
provided through public network infrastructures. Pursuant to the Telecom Regulations, commercial operators of value-added telecommunications services must first obtain
an operating license from the MIIT, or its provincial level counterparts.
The Catalog of Telecommunications Business, or the Catalog, which was issued as an attachment to the Telecom Regulations and updated in June 11, 2001, February
21, 2003, December 28, 2015 and June 6, 2019, further categorizes value-added telecommunication services into two classes: Class 1 value-added telecommunication
services and Class 2 value-added telecommunication services. Information services provided via cable networks, mobile networks or internet fall within Class 2 value-added
telecommunications services.
On July 3, 2017, the MIIT issued the Administrative Measures for the Licensing of Telecommunications Business, or the Telecom Licensing Measures, which became
effective on September 1, 2017, to supplement the Telecom Regulations. The Telecom Licensing Measures sets forth the types of licenses required to operate value-added
telecommunications services and the qualifications and procedures for obtaining such licenses. The Telecom Licensing Measures also provides that an operator providing
value-added services in multiple provinces is required to obtain an inter-regional license, whereas an operator providing value-added services in one province is required to
obtain an intra-provincial license. Any telecommunication services operator must conduct its business in accordance with the specifications in its license.
Regulations on Foreign Direct Investment in Value-Added Telecommunications Companies
Foreign direct investment in telecommunications companies in China is governed by the Provisions on the Administration of Foreign-Invested Telecommunications
Enterprises, which was promulgated by the State Council on December 11, 2001 and amended on September 10, 2008 and February 6, 2016. These regulations require that
foreign-invested value-added telecommunications enterprises in China must be established as Sino-foreign equity joint ventures and that the foreign investors may acquire
up to 50% equity interests in such joint ventures. In addition, a major foreign investor in a value-added telecommunications business in China must demonstrate a good track
record and experience in operating value-added telecommunications businesses. Moreover, foreign investors that meet these requirements must obtain approvals from the
MIIT and MOFCOM, to provide value-added telecommunication services in China and the MIIT and MOFCOM retain considerable discretion in granting such approvals.
On July 13, 2006, the Ministry of Information Industry, or the MII, released the Notice on Strengthening the Administration of Foreign Investment in the Operation of
Value-added Telecommunications Business, or the MII Notice, pursuant to which, for any foreign investor to invest in telecommunications businesses in China, a foreign-
invested telecommunications enterprise must be established and such enterprise must apply for the relevant telecommunications business operation licenses. Furthermore,
under the MII Notice, domestic telecommunications enterprises may not rent, transfer or sell a telecommunications business operation license to foreign investors in any
form, and they may not provide any resources, premises, facilities and other assistance in any form to foreign investors for their illegal operation of any telecommunications
business in China. In addition, under the MII Notice, the internet domain names and registered trademarks used by a value-added telecommunication service operator shall
be legally owned by such operator or its shareholders.
Furthermore, the Guidance Catalog of Industries for Foreign Investment, or the Foreign Investment Catalog, the latest version of which was promulgated jointly by
MOFCOM and the National Development and Reform Commission, or the NDRC, on June 28, 2017 and became effective on July 28, 2017, classifies businesses into three
categories with regard to foreign investment:(i) “encouraged,” (ii) “restricted,” and (iii) “prohibited.” The latter two categories are included in the negative list (Negative
List, which was most recently amended on December 27, 2021), which was first introduced into the Foreign Investment Catalog in 2017, and listed, in a unified manner, the
restrictive measures for the entry of foreign investment. Industries that are not listed in the Foreign Investment Catalog or the Special Administrative Measures are permitted
areas for foreign investments, and are generally open to foreign investment unless specifically restricted by other PRC regulations. Our business falls under value-added
telecommunications services, which are listed under the Special Administrative Measures.
75
In view of these restrictions on foreign direct investment in value-added telecommunications services and certain other types of businesses under which our business
may fall, we have established domestic consolidated affiliated entities to engage in value- added telecommunications services. For a detailed discussion of our consolidated
affiliated entities, see “Item 4. Information on the Company—C. Organizational Structure.” Due to the lack of interpretative guidance from the relevant PRC governmental
authorities, there are uncertainties regarding whether PRC governmental authorities would consider our corporate structure and contractual arrangements to constitute
foreign ownership of a value-added telecommunications business. In order to comply with PRC regulatory requirements, we operate a substantial portion of our business
through our consolidated affiliated entities, which we have contractual relationships with but we do not have actual ownership interests in. If our current ownership structure
is found to be in violation of current or future PRC laws, rules or regulations regarding the legality of foreign investment in value-added telecommunications services and
other types of businesses on which foreign investment is restricted or prohibited, we could be subject to severe penalties.
Regulations on Internet Content Providers
The Administrative Measures on Internet Information Services, or the Internet Content Measures, which was promulgated by the State Council on September 25, 2000
and amended on January 8, 2011, set out guidelines on the provision of internet information services. The Internet Content Measures specifies that internet information
services regarding news, publications, education, medical and health care, pharmacy and medical appliances, among other things, are required to be examined, approved and
regulated by the relevant authorities. The Internet Content Measures specifies a list of prohibited content. Internet information providers are prohibited from producing,
copying, publishing or distributing information that is humiliating or defamatory to others or that infringes the legal rights of others. Internet information providers that
violate such prohibition may face criminal charges or administrative sanctions. If any prohibited content is found, they must remove the content immediately, keep a record
of such content and report to the relevant authorities. In accordance with Provisions on the Governance of Network Information Content Ecology promulgated by the CAC
on December 15, 2019, which became effective on March 15, 2020, the utilization of personalized algorithm recommendation technology taken in internet content provision
service shall be in compliance with all the requirements as stated above as well.
The Internet Content Measures classifies internet information services into commercial internet information services and non- commercial internet information
services. Commercial internet information services refer to services that provide information or services to internet users with charge. A provider of commercial internet
information services must obtain the value-added telecommunications business operation license.
Regulations on Privacy Protection
According to the Internet Measures, “internet information services” means the activity of providing information services through the internet to internet users. Since
we have websites that provide information to internet users, we are considered an internet information service provider under the Internet Measures and are therefore, subject
to regulations relating to the protection of privacy, including prohibitions on producing, copying, publishing or distributing information that is humiliating or defamatory to
others or that infringes on the lawful rights and interests of others. Internet information service providers that violate the prohibition could face criminal charges or
administrative sanctions by the PRC security authorities. In addition, relevant authorities may suspend their services, revoke their licenses or temporarily suspend or close
down their websites.
Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by MIIT, in December 2011, internet information service
providers are prohibited from collecting any user-related information that can reveal the identity of the user whether by itself or when used in combination with other
information, or providing any such information to third parties without the consent of that user. Internet information service providers must expressly inform the users of the
method, content and purpose to collect and process such user personal information, and may only collect such information necessary for their services. Internet information
service providers are also required to properly maintain the user personal information and, in case of any leakage or likely leakage of such information, must take remedial
measures immediately and report any material leakage to the telecommunications regulatory authority.
In December 2012, the Decision on Strengthening Network Information Protection promulgated by the Standing Committee of the National People’s Congress
emphasizes the need to protect electronic information that contains personal identification information and other private data. The decision requires internet information
service providers to establish and publish policies regarding the collection and use of personal electronic information, to take necessary measures to ensure the security of the
information and to prevent leakage, damage or loss.
Furthermore, the MIIT’s Rules on Protection of Personal Information of Telecommunications and Internet Users issued in July 2013 contain detailed requirements
upon the activities collecting or using personal information of users in the provision of telecommunication service and internet information service, which mainly include: (i)
the telecommunication business operators or internet information service providers shall expressly advise users about the purpose, method and scope of the collection or use
of information, and the ways to inquire or correct information, and the consequences of refusal to provide information, etc.; (ii) the
76
telecommunication business operators or internet information service providers shall not go beyond the necessary and the purpose for their service, nor by means of
deceiving, misleading or force or in violation of the laws, regulations or the agreements between the parties; (iii) any collected information shall be kept in strict confidence
with adequate measures; (iv) shall establish user complaint handling mechanism to accept complaints from the users, and etc. Internet information service providers,
including us, may subject to penalties, including fines, warnings, orders to correct and even criminal charges if failed to fulfill the aforesaid requirements.
The Personal Information Protection Law of the PRC (the “Personal Information Protection Law”), issued on August 20, 2021 by the SCNPC, provided a
comprehensive personal information protection system, under which in case of any personal information processing, individual prior consent must be obtained except in
other circumstances stipulated therein to the contrary. Further, any data processing activities in relation to sensitive personal information including biometrics, religious
beliefs, specific identities, medical health, financial accounts, whereabouts, personal information of teenagers under fourteen years old and other personal information once
leaked or illegally used might easily lead to the infringement of personal dignity or harm of personal and property safety, are only allowed provided such activities are
purpose-specified, highly necessary and strictly protected. Personal information processors who use personal information on automated decision-making must ensure the
transparency of decision-making and the fairness and impartiality of the results and may not impose unreasonable differential treatment in terms of transaction prices and
other transaction conditions. In addition, cross-border personal information transmission is restricted unless certain requirements in the Personal Information Protection Law
have been satisfied, including security review organized by the national cyberspace department and other conditions specified by the laws, regulations and the national
cyberspace department.
Regulations on Information Security, Censorship and Privacy
The Standing Committee of the National People’s Congress, China’s national legislative body, enacted the Decisions on the Maintenance of Internet Security on
December 28, 2000 and amended them on August 27, 2009 that may subject persons to criminal liabilities in China for any attempt to use the internet to: (i) gain improper
entry to a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information or
(v) infringe upon intellectual property rights. In 1997, the Ministry of Public Security issued the Administration Measures on the Security Protection of Computer
Information Network with International Connections which was amended in 2011 and prohibits using the internet to leak state secrets or to spread socially destabilizing
materials. If an ICP license holder violates these measures, the PRC government may revoke its ICP license and shut down its websites. Pursuant to the Ninth Amendment to
the Criminal Law issued by the Standing Committee of the National People’s Congress on August 29, 2015, effective on November 1, 2015, any ICP provider that fails to
fulfill the obligations related to internet information security as required by applicable laws and refuses to take corrective measures, will be subject to criminal liability for (i)
any large-scale dissemination of illegal information; (ii) any severe effect due to the leakage of users’ personal information; (iii) any serious loss of evidence of criminal
activities; or (iv) other severe situations, and any individual or entity that (i) sells or provides personal information to others unlawfully or (ii) steals or illegally obtains any
personal information will be subject to criminal liability in severe situations.
77
The Cybersecurity Law of the PRC, or the Cybersecurity Law, which was promulgated on November 7, 2016 by the Standing Committee of the National People’s
Congress and came into effect on June 1, 2017, provides that network operators shall meet their cyber security obligations and shall take technical measures and other
necessary measures to protect the safety and stability of their networks. Under the Cybersecurity Law, network operators are subject to various security protection-related
obligations, including: (i) network operators shall comply with certain obligations regarding maintenance of the security of internet systems; (ii) network operators shall
verify users’ identities before signing agreements or providing certain services such as information publishing or real- time communication services; (iii) when collecting or
using personal information, network operators shall clearly indicate the purposes, methods and scope of the information collection, the use of information collection, and
obtain the consent of those from whom the information is collected; (iv) network operators shall strictly preserve the privacy of user information they collect, and establish
and maintain systems to protect user privacy; (v) network operators shall strengthen management of information published by users, and when they discover information
prohibited by laws and regulations from publication or dissemination, they shall immediately stop dissemination of that information, including taking measures such as
deleting the information, preventing the information from spreading, saving relevant records, and reporting to the relevant governmental agencies.
On December 28, 2021, the CAC, jointly with the relevant authorities, published the Measures for Cybersecurity Review (the “Review Measures”) which stipulates
that a critical information infrastructure operator purchases network products and services or an online platform operator conducts data processing, either of which affects or
may affect national security shall conduct a cybersecurity review.
The SCNPC promulgated the Data Security Law of the PRC (the “Data Security Law”), on June 10, 2021, which came into effect on 1 September 2021. The Data
Security Law applies to data processing activities, including the collection, storage, use, processing, transmission, availability and disclosure of data, and security
supervision of such activities within the territory of the PRC. Where data processing activities outside the territory of the PRC damage national security, public interests or
the legitimate rights and interests of PRC citizens and organizations, such activities shall be subject to legal liabilities. The PRC would also establish a data security review
system, under which data processing activities that affect or may affect national security shall be reviewed. According to the Data Security Law, whoever carries out data
processing activities shall establish a sound data security management system throughout the whole process, organize data security education and training, and take
corresponding technical measures and other necessary measures to ensure data security. Important data shall also be categorized and protected more strictly. The Data
Security Law also requires formulating the important data catalogues to enhance the protection of important data.
Regulations on Foreign-related Surveys Measures
According to the Foreign-related Surveys Measures, foreign-related surveys include: (i) market and social surveys conducted under the entrustment or financial aid of
any overseas organization, individual, or the agency of any overseas organization in China; (ii) market and social surveys conducted in cooperation with any overseas
organization, individual, or the agency of any overseas organization in China; (iii) market surveys lawfully conducted by the agency of any overseas organization in China;
and (iv) market and social surveys of which the materials and results are to be provided to any overseas organization, individual, or the agency of any overseas organization
in China. Any foreign-related market survey must be conducted by a foreign-related survey institution and no individual or organization may conduct any foreign-related
survey without a license for foreign-related surveys. According to the Foreign-related Surveys Measure and the Negative List, only a domestic enterprise or a sino-foreign
enterprise which meet the several requirements stipulated in the Foreign-related Surveys Measures can apply for license for the foreign- related survey. Industries that are not
listed in the Negative List are permitted areas for foreign investments, and are generally open to foreign investment unless specifically restricted by other PRC regulations.
We collect data of multiple kinds and from multiple sources through our consolidated subsidiaries in the PRC and Hong Kong. These data include users’ search,
browse, E-commerce and social data, demographic data, campaign performance data, and certain technical data, from our proprietary tracking tools, our marketers,
publishers and ad exchanges in connection with marketing campaigns, and from collaboration with selected third-party data partners. Except for the general definitions of
market surveys and social surveys defined in the Foreign-related Surveys Measures, there is no further clarification or specific guidance on the characteristics and scope of
“foreign-related surveys”. In the opinion of our PRC counsel, Jingtian & Gongcheng, the collection and use of data of our business do not fall within the scope of “foreign-
related survey” and therefore we are not required to obtain a foreign-related survey license under the Foreign-related Survey Measures as currently interpreted and enforced
by the relevant PRC regulatory authorities. However, in light of these uncertainties and out of prudence, we through OptAim Network, VIE, applied for and were granted the
foreign-related survey license on June 6, 2017 by the Chinese National Bureau of Statistics.
Regulations on Intellectual Property Rights
China has adopted legislation governing intellectual property rights, including copyrights, trademarks and patents. China is a signatory to major international
conventions on intellectual property rights and is subject to the Agreement on Trade Related Aspects of Intellectual Property Rights as a result of its accession to the World
Trade Organization in December 2001.
78
Computer Software Copyright
On March 1, 2013, the Regulations for the Protection of Computer Software promulgated by the State Council came into effect. These regulations are formulated for
protecting the rights and interests of computer software copyright owners, encouraging the development and application of computer software and promoting the
development of software business.
Patent
Patents in the PRC are principally protected under the Patent Law of the People’s Republic of China, which was amended by the Standing Committee of the National
People’s Congress in 2008 and further amended on 17 October 2020 and effective on 1 June 2021. This law is formulated for protecting the rights and interests of patentees,
encouraging invention, promoting the application of inventions, enhancing innovation capacity, and facilitating the advancement of science and technology, and the
economic and social development. Under this law, the duration of a patent right is either 10 years or 20 years from the date of application, depending on the type of patent
right.
Trademark
The PRC Trademark Law, promulgated in 1983 and most recently amended in 2019, which such amendments became effective on November 1, 2019, protects the
proprietary rights with respect to registered trademarks. The Trademark Office under the SAIC handles trademark registrations and may grant a term of 10 years for
registered trademarks, which may be extended for another 10 years upon request. Trademark license agreements shall be filed with the Trademark Office for record. In
addition, if a registered trademark is recognized as a well-known trademark, the protection of the proprietary right of the trademark holder may reach beyond the specific
class of the relevant products or services.
Domain Name
The Ministry of Industry and Information Technology promulgated the Measures on Administration of Internet Domain Names, or the Domain Name Measures, on
August 24, 2017, which took effect on November 1, 2017 and replaced the Administrative Measures on China Internet Domain Name promulgated by MIIT on November 5,
2004. According to the Domain Name Measures, the MIIT is in charge of the administration of PRC internet domain names. The domain name registration follows a first-to-
file principle. Applicants for registration of domain names shall provide the true, accurate and complete information of their identities to domain name registration service
institutions. The applicants will become the holder of such domain names upon the completion of the registration procedure. These measures are formulated with reference
to the norms on administration of internet domain names worldwide, for the purposes of promoting the healthy development of China’s internet sector and guaranteeing the
safe and reliable operation of the internet domain name system in the PRC.
Regulations on Employment
There are several principal rules and regulations in the PRC with respect to rights and obligations of employers and labors, including (i) the Labor Law of the People’s
Republic of China, promulgated by the Standing Committee of the National People’s Congress effective on January 1, 1995, amended and became effective on December
29, 2018, or the Labor Law, (ii) the Labor Contract Law of the People’s Republic of China, promulgated by the Standing Committee of the National People’s Congress
effective on July 1, 2013, or the Labor Contract Law, (iii) the Social Insurance Law of the People’s Republic of China, promulgated by the Standing Committee of the
National People’s Congress effective on July 1, 2011, amended and became effective on December 29, 2018, or the Social Insurance Law, which was, and (iv) the
Regulations on the Management of Housing Provident Fund, promulgated by the State Council on March 24, 2002 and amended and became effective on March 4, 2019.
According to the Labor Law and the Labor Contract Law, employers must execute written labor contracts with full-time employees. All employers must compensate
their employees with wages equal to at least the local minimum wage standard. All employers are required, among other things, to establish a system for labor safety and
workplace sanitation, and to provide employees with workplace safety training. Violations of the Labor Law and the Labor Contract Law may result in the imposition of
fines and other administrative penalties. For serious violations, criminal liability may arise. In addition, pursuant to the Social Insurance Law, employers in the PRC are
required to provide employees with welfare schemes covering pension insurance, unemployment insurance, maternity insurance, work-related injury insurance, medical
insurance and housing funds.
Regulations on Taxation
PRC Enterprise Income Tax
PRC enterprise income tax is calculated based on taxable income, which is determined under (i) the PRC Enterprise Income Tax Law, promulgated by the National
People’s Congress of China and implemented on January 1, 2008, amended and became effective
79
on December 29, 2018, or the EIT Law, and (ii) the implementation rules to the EIT Law promulgated by the State Council and implemented on January 1, 2008 and
amended on April 23, 2019. The EIT Law imposes an uniform enterprise income tax rate of 25% on all resident enterprises in the PRC, including foreign-invested
enterprises and domestic enterprises, unless they qualify for certain exceptions. According to the EIT Law and its implementation rules, the income tax rate of an enterprise
that has been determined to be a high and new technology enterprise may be reduced to 15% with the approval of relevant tax authorities.
In addition, according to the EIT Law, enterprises that are incorporated outside the PRC but have their “de facto management body” located in China may be
considered as PRC resident enterprises and may therefore be subject to PRC enterprise income tax at the rate of 25% on their worldwide income. The implementation rules
of the EIT Law define “de facto management body” as “establishment that carries out substantial and overall management and control over the manufacturing and business
operations, personnel, accounting, properties, etc. of an enterprise.” And the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises
as PRC Tax Resident Enterprises on the Basis of De Facto Management Bodies, or Circular 82, further provides certain specific criteria to determine whether the “de facto
management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular applies only to offshore enterprises controlled by
PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position
on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises.
According to Circular 82, a Chinese-controlled offshore-incorporated enterprise will be regarded as a PRC tax resident by virtue of having its “de facto management
body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-
day operational management and the place where the enterprise performs its duties are in the PRC; (ii) decisions relating to the enterprise’s financial and human resource
matters are made or are subject to approval of organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals and
board and shareholder resolutions are located or maintained in the PRC; and (iv) 50% or more of voting board members or senior executives habitually reside in the PRC. In
the event that we are considered a PRC resident enterprise, we would be subject to the PRC enterprise income tax at the rate of 25% on our worldwide income.
We are organized under the laws of the Cayman Islands and not controlled by a PRC enterprise or PRC enterprise group, we therefore do not believe that we meet all
of the conditions above. But if we are considered a PRC resident enterprise by the competent tax authority, we would be subject to the PRC enterprise income tax at the rate
of 25% on our worldwide income.
Income Tax for Share Transfers
According to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-Resident Enterprises, or Circular 698, promulgated by
the SAT on December 10, 2009, which is replaced by the Circular on Issues of Tax Withholding regarding Non-PRC Resident Enterprise Income Tax, or Circular 37,
promulgated by the SAT on October 17, 2017, and the SAT’s Announcement on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-
Resident Enterprises, or Circular 7, promulgated by the SAT on February 3, 2015, if a non-resident enterprise transfers the equity interests of a PRC resident enterprise
indirectly by transfer of the equity interests of an offshore holding company (issued by a PRC resident enterprise) without a reasonable commercial purpose, the PRC tax
authorities have the power to reassess the nature of the transaction and the indirect equity transfer may be treated as a direct transfer. As a result, the gain derived from such
transfer, which means the equity transfer price less the cost of equity, may be subject to PRC withholding tax at a rate of up to 10%. Under the terms of Circular 7, a transfer
that meets all of the following circumstances will be deemed to have no reasonable commercial purposes: (i) over 75% of the value of the equity interests of the offshore
holding company are directly or indirectly derived from PRC taxable properties; (ii) at any time during the year before the indirect transfer, over 90% of the total properties
of the offshore holding company are investments within PRC territory, or in the year before the indirect transfer, over 90% of the offshore holding company’s revenue is
directly or indirectly derived from PRC territory; (iii) the function performed and risks assumed by the offshore holding company are insufficient to substantiate its corporate
existence; or (iv) the foreign income tax imposed on the indirect transfer is lower than the PRC tax imposed on the direct transfer of the PRC taxable properties.
There is uncertainty as to the application of Circular 37 and Circular 7. Circular 37 and Circular 7 may be determined by the PRC tax authorities to be applicable to our
prior private equity financing transactions that involved non-resident investors, if any of such transactions were determined by the tax authorities to lack reasonable
commercial purpose. As a result, we and our non-resident investors in such transactions may be taxed under Circular 37 and Circular 7, and we may be required to expend
valuable resources to comply with Circular 37 and Circular 7 or to establish that we should not be taxed under the general anti-avoidance rule of the EIT Law, which may
have a material adverse effect on our financial condition and results of operations.
Value Added Tax
On January 1, 2012, the State Council launched a pilot value-added tax, or VAT, reform program, or the Pilot Program, applicable to businesses in selected industries,
such as industries involving the leasing of tangible movable property, transportation services,
80
research and development and technical services, information technology services, cultural and creativity services, logistics ancillary services and attestation and consulting
services. Businesses subject to the Pilot Program are subject to VAT instead of business tax. On May 24, 2013, the Ministry of Finance and the SAT issued the Circular on
Tax Policies in the Nationwide Pilot Collection of Value Added Tax in Lieu of Business Tax in the Transportation Industry and Certain Modern Services Industries. On
August 1, 2013, the Pilot Program was implemented throughout China. On March 23, 2016, SAT and Ministry of Finance promulgated Circular on Comprehensively
Promoting the Pilot Program of the Collection of Value-added Tax in Lieu of Business Tax, which became effective on May 1, 2016. According to the 2016 Circular, general
taxpayers who are engaged in technical services, information technology services, cultural creativity services, logistics supporting services, leasing services, attestation
consulting services and/or other modern service industries are subject to a VAT at the rate of 6%. On November 19, 2017, the State Council promulgated The Decisions on
Abolishing the Provisional Regulations of the PRC on Business Tax and Amending the Provisional Regulations of the PRC on Value-added Tax, or Order 691. According to
the VAT Law and Order 691, all enterprises and individuals engaged in the sale of goods, the provision of processing, repair and replacement services, sales of services,
intangible assets, real property and the importation of goods within the territory of the PRC are the taxpayers of VAT. The VAT tax rates generally applicable are simplified
as 17%, 11%, 6% and 0%, and the VAT tax rate applicable to the small-scale taxpayers is 3%. The Notice of the Ministry of Finance and the SAT on Adjusting Value-added
Tax Rates, or the Notice, was promulgated on April 4, 2018 and came into effect on May 1, 2018. According to the Notice, the VAT tax rate of 17% and 11% are changed
into 16% and 10%, respectively. On March 20, 2019, the Ministry of Finance, State Taxation Administration and General Administration of Customs jointly promulgated the
Relevant Policies Notice on Deepening Reform of VAT Tax, or the Notice 39, effective on April 1, 2019, which lowers the VAT tax rate of 16% and 10% to 13% and 9%,
respectively.
Dividends Withholding Tax
We are a Cayman Islands exempted limited liability company, used as a holding company and a substantial part of our income may come from dividends we receive
from our PRC subsidiary by distributions to our Hong Kong subsidiaries. Pursuant to the EIT Law and its implementation rules, and Special Double Taxation Avoidance
Agreement, dividends generated after January 1, 2008 and distributed to our Hong Kong subsidiaries by our PRC subsidiary are subject to withholding tax at a rate of 5%.
The PRC and the Hong Kong Special Administrative Region entered into the Arrangement for the Avoidance of Double Taxation and Prevention of Fiscal Evasion
with respect to Taxes on Income, or Special Double Taxation Avoidance Agreement, on August 21, 2006. This arrangement reduces the withholding tax rate in respect of the
payment of dividends by a PRC enterprise to a Hong Kong enterprise, such as from our PRC subsidiaries to our Hong Kong subsidiaries, from the statutory rate of 10% to
5% if the Hong Kong enterprise directly holds at least 25% of the PRC enterprise. Pursuant to the SAT’s Notice on the Issues concerning the Application of the Dividend
Clauses of Tax Agreements, or Circular 81, a Hong Kong resident enterprise must meet the following conditions, among others, in order to benefit from the reduced
withholding tax rate: (i) it must be is a company; (ii) it must directly own the required percentage of equity interests and voting rights in the PRC resident enterprise; and (iii)
it must have directly owned such required percentage in the PRC resident enterprise throughout the 12 months prior to receiving the dividends. Furthermore, the
Announcement of the State Taxation Administration on Issuing the Administrative Measures for Entitlement to Treaty Benefits for Non-resident Taxpayers, or Non-Resident
Tax Treatments Measures, which became effective in October 14, 2019, require that non-resident taxpayers collect, gather and retain relevant materials for future reference
in accordance with the provisions of this measure and be administrated and supervised subsequently by the relevant tax authority in order for the reduced withholding tax
rate to apply. There are also other conditions for the reduced withholding tax rate including that Hong Kong recipient must be the beneficial owner of the income.
As uncertainties remain regarding the interpretation and implementation of the EIT Law and its implementation rules, we cannot assure you that, if we are deemed a
PRC resident enterprise, any dividends to be distributed by us to our non-PRC shareholders and ADS holders would not be subject to any PRC withholding tax.
Regulations on Foreign Exchange
The Regulations of the People’s Republic of China on Foreign Exchange Control, promulgated by the State Council on August 5, 2008, are principal regulations on
foreign currency exchange in the PRC. Under these regulations, the Renminbi is freely convertible for current account items after due process, including distribution of
dividends, trade-related foreign exchange transactions and service-related foreign exchange transactions, whereas foreign exchange for capital account items, such as direct
investments or loans, require prior approval of and registration with SAFE.
Capital Settlement and Overseas Remittance of Foreign-Invested Enterprises
On May 13, 2013, SAFE promulgated the Provisions on Foreign Exchange Administration Over Direct Investment Made by Foreign Investors in the PRC in order to
promote and facilitate foreign investors to make direct investment in the PRC. Under these provisions, a foreign-invested enterprise may remit funds abroad for purchase and
remit foreign exchange with relevant banks from capital reduction, liquidation, advance recovery of investment, profit distribution, etc. after due registration. On June 1,
2015, SAFE Circular 19 came into effect, which introduced a reform of the administration to the settlement of the foreign exchange capital for foreign-invested enterprises
national wide based on the pilot experience in certain regions in the early days. On June 9, 2016, SAFE Circular 16 was promulgated, which included more detailed
provisions on capital account settlement and overseas remittance for foreign-invested enterprises. This notice allows foreign-invested enterprises to settle their foreign
exchange receipt on a discretionary basis and explicitly includes foreign debts and repatriated funds raised through overseas listing as foreign exchange receipts that can be
81
settled discretionally in addition to foreign exchange capital, but continues to prohibit foreign-invested enterprises from using the Renminbi fund converted from their
foreign exchange capitals for expenditure beyond their business scopes, investment in security market, offering of entrustment loans or purchase of any investment
properties. Although this makes a further relaxation of policies on the control over foreign exchange settlement of capital accounts, in practice, there are still several specific
requirements that affect the abilities of the PRC enterprises to access the offshore financing capitals.
According to Interim Administrative Measures for the Record-filing of the Incorporation and Change of Foreign-invested Enterprises promulgated by the Ministry of
Commerce, or the MOC, effective on October 8, 2016, foreign investors making capital contributions to their PRC subsidiaries shall make necessary filings in the Foreign
Investment Comprehensive Management Information System, or FICMIS. Pursuant to the Interim Measures on the Management of Foreign Debts promulgated jointly by
SAFE, Ministry of Finance, the NDRC, effective on March 1, 2003, PRC foreign-invested companies may not procure loans which exceed the difference between its
registered capital and its total investment amount as recorded in FICMIS.
On January 12, 2017, the People’s Bank of China promulgated the Circular on Management of Cross-border Financing. According to this circular, an enterprise shall
file the cross-border financing contracts for the record with the Capital Project Information System of SAFE after the execution date of the contracts but no later than three
working days before the withdrawal date. In addition, according to the Circular on Promoting the Administrative Reform, promulgated by the NDRC on September 14,
2015, any medium or long term loan to be provided by foreign entities to domestic enterprises must be recorded and registered by the NDRC.
Outbound Investment and Financing and Roundtrip Investment
On July 4, 2014, the Circular on the Relevant Issues Concerning Foreign Exchange Control on Domestic Residents Outbound Investment and Financing and Roundtrip
Investment though Special Purpose Vehicles promulgated by SAFE came into effect. This circular prescribes operational procedures and registration requirements for
roundtrip investment through special purpose companies and others. In particular, it states that a domestic resident shall apply to the relevant local branch of SAFE for
foreign exchange registration of overseas investment, prior to making contribution to a special purpose company with legitimate domestic or overseas assets or interests.
Equity Incentive Plans
On February 15, 2012, the Notice of SAFE on Relevant Issues Concerning the Foreign Exchange Administration for Domestic Individuals’ Participation in Equity
Incentive Plans of Overseas-Listed Companies came into effect. This notice prescribes foreign exchange registration requirements for domestic individuals such as directors,
supervisors, officials and other employees in relation to equity incentive plans of companies listed abroad, including employee stock ownership plans, employee stock option
plans and other equity incentive programs permitted by applicable laws and regulations. Under the notice, individuals who participate in equity incentive plans of an
overseas listed company shall, through the domestic companies they serve, collectively entrust a domestic agency to handle matters such as foreign exchange registration
with SAFE, account opening, and funds transfer and remittance, and also entrust an overseas institution to handle matters such as exercise of options, purchasing and sale of
related equity and transfer of funds. An individual may use his/her own foreign currency funds in his/her personal foreign currency deposit account, RMB funds or other
legitimate domestic funds to participate in an equity incentive plan.
Regulations on Dividend Distribution
The principal legislation with respect to payment or distribution of dividends by wholly foreign-owned enterprises include (i) the Company Law of the People’s
Republic of China, most recently amended by the Standing Committee of the National People’s Congress as of October 26, 2018, and (ii) Foreign Investment Law of the
People’s Republic of China, which was promulgated on March 15, 2019 and effective from January 1, 2020. Under these laws, wholly foreign-owned enterprises in the PRC
may pay dividends only out of accumulated profits, after setting aside annually at least 10% of accumulated after-tax profits as reserve fund, if any, until such time as the
accumulative amount of such fund reaches 50% of the enterprise’s registered capital. A wholly foreign-owned enterprise may allocate a portion of its after-tax profits to its
employee welfare and bonus funds at its discretion. These reserve funds may not be distributed as cash dividends.
Regulations on Foreign Investment
According to the Negative List, there is no restriction on the foreign-invested advertising company as advertising industry falls within neither the catalogue of
prohibitions nor the catalogue of restrictions. Moreover, the Regulations for the Administration of Foreign-Invested Advertising Enterprises, which prescribed certain
restrictions on foreign investors were abolished on June 29, 2015.
According to the Negative List, market survey falls into the catalogue of restrictions, which means foreign investors can engage in businesses in this industry only
through a sino-foreign enterprise, while social survey falls into the catalogue of prohibitions.
82
On March 15, 2019, the National People’s Congress approved the Foreign Investment Law, which came into effect on January 1, 2020 on December 26, 2019, the
State Council adopted Implementing Rules for the Foreign Investment Law of the People’s Republic of China which took effect from January 1, 2020, to interprete and
implement the Foreign Investment Law. These rules replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture
Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and
ancillary regulations. The organization form and activities of foreign-invested enterprises shall be governed by the laws of the Company Law of the People’s Republic of
China and the Partnership Enterprise Law of the People’s Republic of China. Foreign-invested enterprises established before the implementation of the Foreign Investment
Law may retain the original business organization and so on within five years after the implementation of the Foreign Investment Law.
The Foreign Investment Law is formulated to further expand opening-up, promote foreign investment and protect the legitimate rights and interests of foreign
investors. According to the Foreign Investment Law, foreign investments are entitled to pre-entry national treatment and are subject to negative list management system. The
pre-entry national treatment means that the treatment given to foreign investors and their investments at the stage of investment access shall not be less favorable than that of
domestic investors and their investments. The negative list management system means that the state implements special administrative measures for access of foreign
investment in specific fields. Foreign investors shall not invest in any forbidden fields stipulated in the negative list effective on June 2018 and shall meet the conditions
stipulated in the negative list before investing in any restricted fields.
The Foreign Investment Law does not mention the relevant concept and regulatory regime of VIE structures, since it is relatively new, uncertainties still exist in
relation to its interpretation and implementation. 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 the Foreign Investment Law does not explicitly classify contractual arrangements as a form of foreign
investment, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the
definition. In addition, the definition contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative
regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the
Stale Council to provide for contractual arrangements as a form of foreign investment.
If our contractual arrangements is considered a form of foreign investment, then we may be required to complete the MOC market entry clearance, and we face
uncertainties as to whether such clearance can be timely obtained, or at all. If we are not able to obtain such clearance when required, VIE structure may be regarded as
invalid and illegal. As a result, we would not be able to (i) continue our business in China through our contractual arrangements with the VIE and shareholder of the VIE, (ii)
exert control over the VIE, (iii) receive the economic benefits of the VIE under such contractual arrangements, or (iv) consolidate the financial results of the VIE. Were this
to occur, our results of operations and financial condition would be materially and adversely affected and the market price of our ADSs may decline. Furthermore, if future
laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual
arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures
to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and
business operations.
C.
Organizational Structure
The following chart illustrates our company’s organizational structure, including our principal subsidiaries and consolidated affiliated entities as of March 31, 2022:
83
(1)
The nominee shareholder of OptAim Network is Mr. Jian Tang, who is our co-founder, chairman of the board and chief executive officer.
84
We conduct substantially all our operations through the following consolidated subsidiaries:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
iClick Interactive Asia Limited: primarily focusing on providing online advertising, SaaS products and services to Hong Kong and overseas clients
Tetris Media Limited and Tetris Information Technology (Shanghai) Co., Ltd.: primarily focusing on providing online advertising, SaaS products and services.
Its business to Hong Kong and overseas clients are gradually being transferred to iClick Interactive Asia Limited
Performance Media Group Limited: primarily focusing on providing online advertising services to Hong Kong clients
Tetris (Shanghai) Data Technology Co., Ltd.: primarily focusing on providing online advertising, SaaS products and services to PRC clients
China Search (Asia) Limited and its subsidiary: promoting content distribution opportunities for the publisher under our sales agency arrangement
iClick Interactive (Singapore) Pte. Ltd: primarily focusing on providing online advertising services to Singapore and other overseas clients
iClick Data Technology (Beijing) Limited (previously named iClick Interactive (Beijing) Advertisement Co., Ltd.): primarily focusing on providing our online
advertising, SaaS products and services to PRC clients, through itself, and the VIE and the VIE’s subsidiary
Anhui Zhiyunzhong Information Technology Co., Ltd.: primarily focusing on providing mobile online advertising to PRC clients
OptAim (Beijing) Information Technology Co., Ltd.: primarily focusing on providing mobile online advertising, SaaS products and services to PRC clients
Beijing OptAim Network Technology Co., Ltd., the VIE, and its subsidiaries: primarily focusing on providing mobile online advertising services to PRC
clients
Changyi (Shanghai) Information Technology Co., Ltd. and its subsidiaries: primarily focusing on providing SaaS products and services
Shanghai Myhayo Technology Co., Ltd. and Anhui Myhayo Technology Co., Ltd.: primarily focusing on providing mobile content distributions in PRC
Optimal Power Limited and its subsidiaries: primarily focusing on providing online advertising, SaaS products and services with premium media licensing
assets
CMRS Group Holding Limited and its subsidiaries: primarily focusing on promoting online advertising, social media, KOLs and smart content generation
services
After the abolishment of the foreign ownership restriction in advertising business, we had been transferring the advertising business previously operated by the VIE,
OptAim Network, primarily consisted of our mobile marketing solution business, to our wholly-owned subsidiaries. As of December 31, 2018, our wholly-owned
subsidiaries had replaced OptAim Network as contracting party for all our mobile marketing solution business. OptAim Network acquired Shanghai Myhayo Technology
Co., Ltd. and Anhui Myhayo Technology Co., Ltd. in November 2018 and March 2019 respectively, providing a content distribution channel and a mobile content
aggregator of articles and short videos in the PRC, which presents customized feeds to users via its mobile application.
Contractual Arrangements with OptAim Network
Foreign ownership in advertising companies used to be subject to certain restrictions under the PRC laws and regulations. For example, according to the
Administrative Provisions on Foreign-Invested Advertising Enterprises, foreign investors were required to meet several conditions in order to invest in the PRC advertising
business, such as a minimum number of years of advertising-related experience and an approval from the relevant PRC regulatory authority. OptAim is a Cayman Islands
company and iClick Beijing, its PRC subsidiary, is considered an FIE. To comply with the then-effective PRC laws and regulations, including the Administrative Provisions
on Foreign-Invested Advertising Enterprises, iClick Beijing entered into a set of contractual arrangements with OptAim Network and its shareholder. The laws and
regulations that imposed restrictions on foreign ownership in advertising companies, including the Administrative Provisions on Foreign-Invested Advertising Enterprises
were abolished in June 2015.
85
Under the Measures on the Administration of Foreign-related Surveys, or the Foreign-related Surveys Measures, promulgated by the National Bureau of Statistics of
China on October 13, 2004, no individual or organization may conduct any foreign-related survey without a license for foreign-related survey granted by the National
Bureau of Statistics in China or its local counterparts. Under the Catalogue for the Guidance of Foreign Investment Industries, promulgated by the Ministry of Commerce
and National Development and Reform Commission on June 28, 2017, only a domestic enterprise or a sino-foreign enterprise which meets the several requirements
stipulated in the Foreign-related Surveys Measures can apply for a license for the foreign-related survey. We do not believe our collection and use of multiple kinds of data
from multiple sources in China to improve the cost-effectiveness of marketing campaigns for marketers in and outside China fall within the scope of “foreign-related survey”
under the Foreign-related Survey Measures. However, there are uncertainties under the PRC laws whether such activities may be deemed as “foreign-related survey,” which
would require a foreign-related survey license from the National Bureau of Statistics in China or its local counterparts. In light of these uncertainties and out of prudence, we,
through the VIE, OptAim Network, applied for and were granted a foreign-related survey license on June 6, 2017. If the PRC regulatory authorities disagree with our
interpretation of what would constitute foreign-related survey and enforcement practices on foreign-related survey licensing requirement or if we expand our business scope
to engage in activities falling within the scope of foreign-related survey, we will need to continue to rely on iClick Beijing’s contractual arrangements with OptAim Network
and its shareholder to conduct certain of our operations in China, including to transfer such operations to VIE to the extent they are deemed foreign-related survey. See “Item
3. Key Information—D. Risk Factors—Risk Related to Our Corporate Structure—We rely on the contractual arrangements that establish the structure for certain of our
operations in China and we will need to rely on the contractual arrangements when and to the extent our operations are deemed as foreign-related survey.”
Under the relevant PRC laws, commercial operators of value-added telecommunication services, which refer to providers of telecommunications and information
services through public network infrastructures that provide information or services to internet users with a charge, shall obtain a value-added telecommunications business
operation license. See “Regulations -Regulations on Value-added Telecommunication Services” and “—Regulations on Internet Content Providers.” It is unclear whether
Myhayo’s business model would render it a commercial operator of value-added telecommunication services under the relevant PRC laws, in which case Myhayo would be
required to hold a value-added telecommunication license. Pursuant to the Negative List, jointly promulgated by MOFCOM and the NDRC on October 24, 2019, foreign
investment in value-added telecommunication services is subject to certain restrictions. See “—Regulations—Regulations on Foreign Direct Investment in Value-Added
Telecommunications Companies”. As a result, we acquired Myhayo through OptAim Network, the VIE. In August 2019, Myhayo obtained the value-added
telecommunication business operation license from the relevant local counterpart of MIIT.
The contractual arrangements between iClick Beijing, OptAim Network and the shareholder of OptAim Network allow us to:
•
•
•
exercise effective control over OptAim Network and its subsidiaries;
receive substantially all of the economic benefits of OptAim Network and its subsidiaries; and
have an exclusive option to purchase all or part of the equity interests and assets in OptAim Network.
As a result of these contractual agreements, we control and receive the economic benefits of the business operations of the VIE and its subsidiaries, which is not
equivalent to equity ownership in the VIE and its subsidiaries. Accordingly, under the U.S. GAAP, the financial statements of the VIE and its subsidiaries are consolidated as
part of our financial statements. Accordingly, we are the primary beneficiary of the VIE and its subsidiaries for accounting purposes and consolidate the financial results of
VIE and its subsidiaries in our consolidated financial statements in accordance with the U.S. GAAP. Neither we nor our investors own any equity ownership in, direct
foreign investment in, or control of VIE as a result of the contractual agreements with the VIE, its nominee shareholder and our subsidiary, and these agreements have not
been tested in a court of law in the PRC.
These contractual arrangements may not be as effective as direct ownership in providing us with control over the VIE. If the VIE or its shareholder fails to perform
their respective obligations under these contractual arrangements, our recourse to the assets held by the VIE is indirect and we may have to incur substantial costs and
expend significant resources to enforce such arrangements in reliance on legal remedies under PRC law. These remedies may not always be effective, particularly in light of
uncertainties in the PRC legal system. Furthermore, in connection with litigation, arbitration or other judicial or dispute resolution proceedings, assets under the name of any
of record holder of equity interest in VIE, including such equity interest, may be put under court custody. As a consequence, we cannot be certain that the equity interest will
be disposed pursuant to the contractual arrangement or ownership by the record holder of the equity interest.
86
The following is a summary of the currently effective contractual arrangements by and among iClick Data Technology (Beijing) Limited, our wholly-owned
subsidiary, OptAim Network, our consolidated VIE, the shareholder of OptAim Network.
Agreements that Provide Us with Effective Control over OptAim Network Third Amended and Restated Equity Pledge Agreement
iClick Beijing, OptAim Network and the shareholder of OptAim Network entered into the third amended and restated equity pledge agreement on November 1,
2021. Pursuant to the third amended and restated equity pledge agreement, the shareholder of OptAim Network has pledged all of his equity interest in OptAim Network to
iClick Beijing to guarantee the performance by such shareholder and OptAim Network of his obligations under the exclusive business cooperation agreement, power of
attorney and the third amended and restated exclusive call option agreement as well as his liabilities arising from any breach. If OptAim Network or its shareholder breaches
any obligations under these agreements, iClick Beijing, as pledgee, will be entitled to dispose of the pledged equity and have priority to be compensated by the proceeds
from the disposal of the pledged equity. The shareholder of OptAim Network agrees that before his obligations under the contractual arrangements are discharged, he will
not dispose of the pledged equity interests, create or allow any encumbrance on the pledged equity interests, or take any action which may result in any change of the
pledged equity that may have material adverse effects on the pledgee’s rights under this agreement without the prior written consent of iClick Beijing. The third amended
and restated equity pledge agreement will remain effective until OptAim Network and its shareholder discharge all their obligations under the contractual arrangements and
pay out all consulting and services fees under the exclusive business cooperation agreement. We have completed the registration of the equity pledge with the relevant office
of the State Administration for Market Regulation in accordance with PRC Property Rights Law on December 15, 2021.
Power of Attorney
Through power of attorney dated November 1, 2021, the shareholder of OptAim Network irrevocably authorizes iClick Beijing or any person(s) designated by iClick
Beijing to act as his attorney-in-fact to exercise all of such shareholder’s voting and other rights associated with the shareholder’s equity interest in OptAim Network, such as
the right to appoint directors, supervisors and officers, as well as the right to sell, transfer, pledge and dispose of all or a portion of the shares held by such shareholder. The
power of attorney will remain in force unless iClick Beijing gives out any instruction in writing otherwise. Once the power of attorney are terminated in whole or in part,
each shareholder shall revoke his/her power of attorney to iClick Beijing and immediately sign another power of attorney with the person(s) designated by iClick Beijing.
Spousal Consent
The spouse of Mr. Jian Tang signed a spousal consent letter on November 1, 2021. Mr. Jian Tang holds 100% equity interest in OptAim Network. Under the spousal
consent letter, the signing spouse unconditionally and irrevocably agreed that she was aware of the disposal of OptAim Network shares held by Mr. Jian Tang in the
following third amended and restated exclusive call option agreement, the abovementioned power of attorney, and the third amended and restated equity pledge agreement.
The signing spouse confirmed not having any interest in the OptAim Network shares and committed not to impose any adverse assertions upon those shares. The signing
spouse further confirmed that her consent and approval are not needed for any amendment or termination of the abovementioned agreements and committed that she shall
take all necessary measures needed for the performance of those agreements.
Agreement that Allows Us to Receive Economic Benefits from OptAim Network Exclusive Business Cooperation Agreement
iClick Beijing, OptAim Network and Zhiyunzhong entered into an exclusive business cooperation agreement on November 1, 2021. Pursuant to this agreement,
iClick Beijing or its designated party has the exclusive right to provide OptAim Network and Zhiyunzhong with technical support, consulting services and other services.
Without iClick Beijing’s prior written consent, OptAim Network and Zhiyunzhong shall not accept any technical support and services covered by this agreement from any
third party. OptAim Network and Zhiyunzhong agree to pay service fees in an amount equal to 100% of their respective net income for the relevant period on a monthly
basis. iClick Beijing owns the intellectual property rights arising out of the provisions of services under this agreement. OptAim Network and Zhiyunzhong shall grant an
irrevocable call option to iClick Beijing to purchase all or any of their assets or business with the lowest price allowed by PRC law. Unless iClick Beijing terminates this
agreement, this agreement will remain effective until any party thereto is dissolved in accordance with PRC law.
87
Agreement that Provides Us with the Option to Purchase the Equity Interest in OptAim Network Third Amended and Restated Exclusive Call Option Agreement
iClick Beijing, OptAim Network and the shareholder of OptAim Network entered into a third amended and restated exclusive call option agreement on November 1,
2021. Pursuant to the third amended and restated exclusive call option agreement, the shareholder of OptAim Network has irrevocably granted iClick Beijing or any third
party designated by iClick Beijing a third amended and restated exclusive call option to purchase all or part of his respective equity interests in OptAim Network. Until there
is any evaluation request by PRC law, the purchase price is equal to RMB100 or the lowest price allowed by PRC law. Unless otherwise agreed, the shareholder of OptAim
Network will immediately gift iClick Beijing or any third party designated by iClick Beijing with the purchase price after iClick Beijing or any third party designated by
iClick Beijing exercises the option. iClick Beijing may transfer all or part of its option under this agreement to a third party under the approval of the shareholder of iClick
Beijing. Without iClick Beijing’s prior written consent, the shareholder of OptAim Network shall not, among other things, amend its articles of association, increase or
decrease the registered capital, sell, dispose of or set any encumbrance on its assets, business or revenue outside the ordinary course of business, enter into any material
contract, merge with any other persons or make any investments, distribute dividends, or enter into any transactions which have material adverse effects on its business. The
shareholder of OptAim Network also undertakes that he will not sale, transfer, pledge, or otherwise dispose of his equity interests in OptAim Network to any third party or
create or allow any encumbrance on his equity interests. This agreement will remain effective until iClick Beijing or any third party designated by iClick Beijing has
acquired all equity interest of OptAim Network from its shareholder.
In the opinion of Jingtian & Gongcheng, our PRC legal counsel:
•
•
the ownership structures of iClick Beijing and OptAim Network do not contravene any applicable PRC laws or regulations currently in effect; and
the contractual arrangements among iClick Beijing, OptAim Network, the shareholder of OptAim Network and Zhiyunzhong governed by PRC law are
valid, binding and enforceable, and do not contravene any PRC laws or regulations currently in effect.
However, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules. Accordingly, the PRC
regulatory authorities may in the future take a view that is contrary to or otherwise different from the above opinion of our PRC legal counsel. It is uncertain whether any
new PRC laws or regulations relating to VIE structures will be adopted or if adopted, what they would provide. If the PRC government finds that the agreements that
establish the structure for the operation of OptAim Network 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—We
rely on the contractual arrangements that establish the structure for certain of our operations in China and we will need to rely on the contractual arrangements when and to
the extent our operations are deemed as foreign-related survey,” and “—Substantial uncertainties exist with respect to the newly enacted PRC Foreign Investment Law and
how it may impact the viability of our current corporate structure, corporate governance and business operations.”
D.
Property, Plant and Equipment
Our headquarters, principal executive office and some subsidiaries are located in Hong Kong, in an approximately 2,400 square-meter facility, under certain lease
agreements expiring on December 31, 2024. As of December 31, 2021, we leased approximately 12,600 square-meter office space in China located in Beijing, Shanghai,
Shenzhen, Anhui, Xi’an and Guangzhou, which primarily carry out the functions of technology and data engineering, sales and business development and operation support.
Outside of China and Hong Kong, we also have subsidiaries or sales offices in Singapore, Taiwan, Korea, Thailand and London.
We lease all of our facilities and do not own any real property. Our leases will expire from 2022 to 2024, and we have renewed leases that expired on or before the
date of this annual report. We believe that our current facilities are suitable and adequate to meet our current needs. If we require additional space, we expect to be able to
obtain additional facilities on commercially reasonable terms.
ITEM 4A.UNRESOLVED STAFF COMMENTS
Not applicable.
88
ITEM 5.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the
related notes included elsewhere in this annual report on Form 20-F. This discussion may contain forward-looking statements based upon current expectations that involve
risks and uncertainties. Our actual results may differ materially from those 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.
ITEM 5A.
OPERATING RESULTS
Key Factors Affecting Our Results of Operations
We believe the key factors affecting our financial condition and results of operations include the following:
•
•
•
•
•
•
Our ability to expand mobile app channels;
Our ability to expand enterprise solutions;
Our revenue models;
Our ability to optimize client base and increase client spending;
Our ability to enlarge audience data set, strengthen data analytics capabilities and innovate technologies; and
Seasonality;
Our Ability to Expand Mobile App Channels
Our future growth depends on our ability to expand our content distribution channels, in particular mobile app channels, to capture a larger share of the marketing
spend in China. We have been prioritizing the execution of our mobile strategy since 2014 to capture a larger share of marketing spend on mobile apps, including through
our acquisition of OptAim on July 24, 2015, which have significantly strengthened our mobile capabilities.
While marketing via non-mobile channels has been established for several years, marketing via mobile channels, in particular via mobile apps, which has a more
dynamic competitive landscape, is a relatively new phenomena in China driven by recent innovations in mobile technologies and the growing popularity and prevalence of
mobile devices and mobile apps. We have experienced and expect to continue to face significant competition for our mobile marketing solutions. In addition, in light of the
rising demand for marketing via mobile apps, mobile app publishers, especially popular mobile apps, publishers tend to command stronger bargaining power compared to
their non-mobile app publisher counterparts. All this have contributed to margin pressure on our marketing solutions.
Furthermore, as we continue to focus on the growth on mobile channels, we may, from time to time, prioritize on engaging with marketing agency clients, which
may generate larger marketing spend per client compared to direct marketer clients. On the other hand, net revenues as a percentage of gross billing and gross profit margin
tend to be lower for marketing agency clients, compared to direct marketer clients. Marketing agency clients represented 33.9%, 29.2% and 36.8% of our clients in 2019,
2020 and 2021, respectively.
We primarily rely on third-party content distribution channels to access mobile content distribution opportunities. To further expand our mobile content
distribution network, we need to develop new and enhance our existing relationships with content distribution channel partners, which depends, in part, on our ability to
continually generate sufficient marketing spend from our clients on these channels, especially mobile app channels. We also intend to strengthen our relationships with
content distribution channel partners through technology collaboration to facilitate innovative and effective user engagement. Furthermore, we are building proprietary
mobile content distribution channels through inorganic growth. For example, in 2018, we acquired Myhayo, a content distribution channel and a mobile content aggregator
of articles and short videos in the PRC, which presents customized feeds to users via its mobile application. In 2020, we acquired Optimal Power Limited and its subsidiaries
which
89
certain premium media licensing assets in countries including Singapore, Greater China (including Hong Kong), Australia, India, Indonesia, Philippines and Malaysia.
Our Ability to Expand Enterprise Solutions
Our future growth also depends on our ability to expand our enterprise solutions. The markets for certain of our offerings remain relatively new and it is uncertain
whether our efforts, and related investments, will ever result in significant profits for us. Also, if we are unable to develop enhancements to and new features for our existing
services that keep pace with rapid technological developments, our business could be impacted. The success of our development, and implementation of new features and
services depends on several factors, including the timely completion, introduction and market acceptance of the feature, service or enhancement by customers, administrators
and developers, as well as our ability to integrate all of our service offerings and develop adequate selling capabilities in this new market. Failure in this regard may
significantly impair our revenue growth as well as negatively impact our operating results if additional costs are not offset by additional revenues.
Our Revenue Models/ Solution Mix
We derive revenue primarily from four sources and report them on either the net or gross basis. For our marketing solutions, we derive revenue from (i)
incentives earned from the website publishers, for which we act as a sales agent for their content distribution opportunities, or the sales agency arrangement, which is
reported on a net basis, (ii) performing cost-plus marketing campaigns, which is reported on a net basis, (iii) performing specified actions marketing campaigns (i.e., a CPM,
CPC, CPA, CPS, CPL or ROI basis), which is reported on a gross basis. For our enterprise solutions, we derive revenue from the offering of SaaS products and services,
which is reported on a gross basis and a net basis. Please see “—Key Components of Results of Operations—Net Revenues” above for more details.
With respect to our marketing solutions, the gross profit margins for our sales agency arrangement and cost-plus marketing campaigns are higher than that for our
specified action marketing campaigns as cost of revenues for our sales agency arrangement and cost-plus marketing campaigns does not include media cost. As a result, an
increase in the percentage of gross billing recognized as net revenues from performing specified actions marketing campaigns will have a positive impact on our net
revenues and a negative impact on gross profit margin. On the other hand, an increase in the percentage of gross billing recognized as net revenues from our sales agency
arrangement and from performing cost-plus marketing campaigns will have a negative impact on our net revenues and a positive impact on gross profit margin.
Our marketing solutions and enterprise solutions each represent a mixture of revenue recognized on gross basis and on net basis and the proportion of each
fluctuates from period to period. Therefore, our net revenues, net revenues as a percentage of gross billing, gross profit margin and the comparability of our financial results
in one period to another may be affected by the relative proportion of our gross billing recognized as net revenues on a gross basis and a net basis. The relative proportions of
gross billing recognized as net revenues on a gross basis and a net basis are affected by a variety of factors, in particular, the terms of the arrangements with our clients,
including whether to conduct their marketing campaigns on a specified-action (i.e., gross) or cost-plus (i.e., net) basis in a particular period, which in turn depends on clients’
needs and goals.
Since May 2018, we started to offer enterprise solutions and have gradually scaled up our enterprise solution business. In 2021, net revenues from enterprise
solutions accounted for 21.2% of our total net revenues, increasing from 11.3% in 2020 and 5.2% in 2019. Enterprise solutions generally have higher margin than marketing
solutions. With respect to our enterprise solutions, since the margin of providing services is generally lower than providing pure SAAS product as it involves additional labor
costs, our overall margin may be impacted as we ramp up our “SaaS + X” model.
Our Ability to Optimize Client Base and Increase Client Spending
Our growth and profitability are dependent upon our ability to optimize our client base and increase our clients’ spending related to marketing and customer
management. We started a comprehensive review of our client base for other marketing solutions in 2016 to focus on profitability and liquidity. For example, we terminated
relationships with certain clients for our other marketing solutions, which had relatively long account receivable cycles and yielded relatively low operating profit margins.
We have also been focused, and expect to continue our focus, on sales to direct marketer clients, which tend to command higher gross profit margin compared to agency
clients. However, as we continue to focus on the growth on mobile channels, we may, from time to time, prioritize on engaging with marketing agency clients, which may
generate larger marketing spend per client compared to direct marketer clients. Furthermore, our growth and profitability also depend on our ability to attract more marketers
to our self-service model, and to further diversify our client base to capture the growth in additional industry verticals and geographic markets.
90
Our ability to increase clients’ spending on our platform depends on whether our solutions can effectively address marketers’ evolving and diverse needs in a
cost-efficient manner. To that end, we plan to develop and offer more tailored, innovative and user- friendly solutions and services and enhance our sales, marketing and
account servicing efforts. For example, we strive to promote our newly launched enterprise solutions to clients by enhancing our ability to effectively identify and address
clients’ needs on CRM and comprehensive and customized data acquisition, mining and analytics for real-time, data-driven and more accurate decision making.
Our Ability to Enlarge Audience Data Set, Strengthen Data Analytics Capabilities and Innovate Technologies
Our performance is significantly dependent on our ability to enlarge audience data set, strengthen data analytics capabilities and innovate technologies. This helps
clients achieve more precise audience targeting and enables us to retain clients and increase their marketing spend. It also helps drive up our gross profit margin under our
gross revenue model as we make better decisions about which content distribution opportunities to bid for and at which price, and better predict user interaction with a
marketing message to achieve our clients’ minimum key performance indicator, or KPI requirements without having to purchase additional content distribution opportunities
and incur additional media cost. Such KPIs generally include target audience reach (i.e., the percentage of target audience we successfully engage through our platform),
click-through rate (i.e., the ratio of users who click on a specific link to the number of total users who view a marketing message) and landing rate (i.e., the ratio of users who
arrive at the clients’ websites to the number of total users who view a marketing message). Furthermore, our ability to enlarge audience data set, strengthen data analytics
capabilities and innovate technologies enables us to extend our data application across more aspects in online marketing and beyond to capitalize on more growth
opportunities.
We plan to continue collaborating with clients and other third parties to increase the dimensions and varieties of our data assets and develop new strategic
relationships to exploit new data sources and enlarge audience data set. We also plan to continue investing in our data science technologies and upgrading our technology
infrastructure.
Seasonality
We have experienced seasonal fluctuations in revenue. The fourth quarter of each calendar year generally contributes the largest portion of our annual gross
billing as marketers tend to allocate a significant portion of their online marketing budgets to that quarter, which coincides with Chinese consumers’ increased purchases
around the holidays and shopping events in that quarter, such as Single’s Day on November 11 of each year. The first quarter of each calendar year generally contributes the
smallest portion of our annual gross billing, primarily due to a lower level of allocation of online marketing budgets by marketers at the beginning of the calendar year in
which the Chinese New Year holidays fall, during which time businesses in China are generally closed. We expect our gross billing to continue fluctuating based on seasonal
factors that affect the online marketing industry as a whole.
Impact of COVID-19
Since December 2019, there has been an outbreak of COVID-19 in China and around the world. In March 2020, the World Health Organization declared the
COVID-19 a pandemic. The pandemic has resulted in quarantines, travel restrictions, home office policies, and the temporary closure of stores and facilities in China, Hong
Kong and many other jurisdictions for most part of 2020, with some of such restrictions still continuing as of the date hereof, including in jurisdiction where we have
operation. These measures have slowed down the development of the Chinese economy and adversely affected the global economic conditions and financial markets.
Majority of our revenues and our workforce are based in China and Hong Kong. Our operations have been, and may continue to be, materially and adversely affected by
potential delays in or reductions of business activities and commercial transactions and by general uncertainties surrounding the duration of the government’s extended
business and travel restrictions. In addition, our business operations could be disrupted if any of our employees is suspected of contracting the coronavirus or any other
infectious disease, since it could require our employees to be quarantined and/or our offices to be disinfected. In 2020, especially in the first half thereof, our clients in
industries adversely affected by the COVID-19 outbreak, including travel and hospitality sectors, among others, reduced their budgets on advertising, which had an adverse
impact on our results of operations. In the first quarter of 2022, we experienced significant delays in solution delivery due to the resurgence of COVID-19 in first quarter of
2022 in Shanghai and other regions in China, which had an adverse impact on our revenue. The travel restrictions and lockdowns materially reduced the efficiency of
communication between our employees and customers, delayed our working process and delivery.
We noted that the advertising budgets for our clients recovered across-the-board, especially since the second half of 2020, as a result of the relaxation of
restrictions on economic and social life due to a slowdown of COVID-19 cases in China. In addition,
91
we believe brands may also increasingly appreciate the importance of consumer behavioral data integration and analysis, especially during challenging times like a
pandemic, which may favor our enterprise solutions business in the long run.
The outlook for the pandemic remains fluid, and the full and long-term implications from COVID-19 on our business and results of operations remain uncertain.
Any significant resurgence of COVID-19 may have an adverse effect on our results of operations, financial condition, business and prospects. Any potential impact on our
results will depend on, to a large extent, future developments and new information that may emerge regarding the duration of COVID-19 and the actions taken by
governmental authorities and other entities to contain COVID-19 or treat its impact, which are mostly beyond our control. We are closely monitoring the pandemic and its
impact on us. Additionally, to the extent the COVID-19 adversely affects our business, results of operations, cash flows, financial condition and/or prospects, it may also
have the effect of heightening many of the other risks described in this “Risk Factors” section.
Gross Billing
We regularly review a number of financial and operating metrics, including those set forth below, to help us evaluate our business, measure our performance,
identify trends affecting our business, establish budgets, measure the effectiveness of sales and marketing, and assess our operational efficiencies.
Operating metrics:
Gross billing from marketing solutions*
Gross billing from enterprise solutions
Total
2019
(% of total
gross
billing)
(US$ in
thousands)
Year Ended December 31,
2020
(US$ in
thousands)
(% of total
gross
billing)
2021
(% of total
gross
billing)
(US$ in
thousands)
630,331
10,436
640,767
98.4
1.6
100.0
648,922
28,893
677,815
95.7
4.3
100.0
727,340
69,512
796,852
91.3
8.7
100.0
*
operates and assesses the financial condition and results of the online marketing service business as a whole.
Formerly “mobile marketing solutions” and “other marketing solutions” are combined into marketing solutions effective from January 1, 2020, as management
Gross billing is an important operating measure by which we evaluate and manage our business. We define gross billing as the aggregate dollar amount that our
clients pay us, after deducting rebates paid and discounts given to clients.
We use gross billing to assess our business growth, market share and scale of operations, and our ability to generate gross billing is strongly correlated to our
ability to generate net revenues. As we have defined gross billing for internal uses, it may not be comparable to similarly titled measures used by other companies in the
industry which present the impact of media costs differently.
Our gross billing increased from US$640.8 million in 2019 to US$677.8 million in 2020 and further to US$796.9 million in 2021, which was primarily a result of
increasing marketers’ demands, especially from the entertainment and media, e-commerce, personal care and beauty verticals. Gross billing from our marketing solutions
increased from US$630.3 million 2019 to US$648.9 million in 2020 and further to US$727.3 million in 2021, as we continued to capture the continued growth on online
marketing demand on mobile apps and various multi-channel marketing. Gross billing from our enterprise solutions increased from US$10.4 million in 2019 to US$28.9
million in 2020 and further to US$69.5 million in 2021, primarily as a result of the increasing need for online and offline consumer behavior data integration.
Gross billing derived from our sales agency arrangement was US$35.2 million, US$20.4 million, and US$16.8 million in 2019, 2020 and 2021, respectively,
none of which was recognized as net revenues for the respective periods.
Gross billing derived from our cost-plus marketing campaigns was US$430.0 million, US$435.3 million and US$498.2 million in 2019, 2020 and 2021,
respectively, out of which US$17.1 million and US$26.7 million and US$26.1 million was recognized as net revenues for the respective periods.
Gross billing derived from our specified action marketing campaigns was US$165.3 million, US$193.3 million and US$212.4 million in 2019, 2020 and 2021,
respectively, all of which was recognized as net revenues for the respective periods.
92
Gross billing derived from our enterprise solutions was US$10.4 million and US$28.9 million and US$69.5 million in 2019, 2020 and 2021, respectively, out of
which US$10.4 million and US$28.9 million and US$65.1 million was recognized as net revenues for the respective periods.
Our gross billing per client decreased by US$23,989, or 7.4%, from US$324,439 in 2019 to US$300,450 in 2020, while increased by US$28,420, or 9%, from
US$300,450 in 2020 to US$328,870 in 2021. The total number of our clients increased by 14.2% from 1,975 in 2019 to 2,256 in 2020 and further to 2,423 in 2021,
primarily attributable to our increased ability to capture to the growing market demand from different industries.
Results of Operations
The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read together with our
consolidated financial statements and related notes included elsewhere in this annual report. The operating results in any period are not necessarily indicative of the results
that may be expected for any future period and the period-to-period comparisons discussed below may not be meaningful and are not indicative of our future trends.
Net revenues
Cost of revenues
Gross profit
Operating expenses
Research and development expenses
Sales and marketing expenses
General and administrative expenses
Total operating expenses
Operating loss
Interest income
Interest expense
Other gains, net
Fair value (losses)/ gains on convertible notes
Fair value losses on derivative liabilities
Loss before income tax Expense
Share of losses from an equity investee
Income tax expense
Net loss
Key Components of Results of Operations
Net Revenues
2019
Year Ended December 31,
2020
2021
(US$ in
thousands)
(% of net
revenues)
(US$ in
thousands)
(% of net
revenues)
(US$ in
thousands)
(% of net
revenues)
199,408
(142,703)
56,705
100.0
(71.6)
28.4
254,745
(181,482)
73,263
100.0
(71.2)
28.8
307,702
(218,549)
89,153
(5,574)
(42,968)
(20,304)
(68,846)
(12,141)
537
(1,915)
2,992
133
—
(10,394)
(408)
(47)
(10,849)
(2.8)
(21.5)
(10.2)
(34.5)
(6.1)
0.3
(1.0)
1.5
0.1
—
(5.2)
(0.2)
(0.0)
(5.4)
(5,349)
(38,028)
(31,648)
(75,025)
(1,762)
1,297
(2,650)
5,852
(4,433)
(11,466)
(13,162)
(111)
(1,633)
(14,906)
(2.1)
(14.9)
(12.5)
(29.5)
(0.7)
0.5
(1.0)
2.3
(1.8)
(4.5)
(5.2)
(0.1)
(0.6)
(5.9)
(9,527)
(52,872)
(39,643)
(102,042)
(12,889)
824
(4,089)
2,203
—
—
(13,951)
(107)
(2,540)
(16,598)
100.0
(71.0)
29.0
(3.1)
(17.2)
(12.9)
(33.2)
(4.2)
0.2
(1.3)
0.7
—
—
(4.6)
(0.0)
(0.8)
(5.4)
We generate revenue primarily from clients’ marketing spend through our platform as they utilize our solutions in cost-plus and specified action marketing
campaigns, and to a less extent from incentives granted by the publishers under our sales agency arrangement. We derive revenue primarily from four sources and report
them on either the net or gross basis. For our marketing solutions, we derive revenue from (i) incentives earned from the website publishers, for which we act as a sales agent
for their content distribution opportunities, or the sales agency arrangement, which is reported on a net basis, (ii) performing cost-plus marketing campaigns, which is
reported on a net basis, (iii) performing specified actions marketing campaigns (i.e., a CPM, CPC, CPA, CPS, CPL or ROI basis), which is reported on a gross basis. For our
enterprise solutions, we derive revenue from the offering of SaaS products and services, which is reported on a gross basis and a net basis.
We record incentives from the publishers under the sales agency arrangement as net revenues. We consider the publishers to be our customers under the sales
agency arrangement. The amount of such incentives is determined based on a variety of factors, including yearly market spending at the publishers’ platforms. Under our
sales agency arrangement, we do not receive any rebate
93
from the publishers. Net revenues from our sales agency arrangement, which equal the incentives received from the publishers under the sales agency arrangement were
US$6.6 million, US$5.8 million and US$4.2 million in 2019, 2020 and 2021, respectively.
We record service fees, net of media costs and rebates and discounts to clients for cost-plus marketing campaigns, as net revenues. We consider these clients to be
our customers for cost-plus marketing campaigns. Service fees are generally calculated as a percentage of media cost. Such percentage is negotiated on a client-by-client,
and campaign-by-campaign basis. Rebates received from the publishers for cost-plus marketing campaigns are recorded as net revenues. Net revenues from our cost-plus
marketing campaigns were US$17.1 million, US$26.7 million and US$26.0 million in 2019, 2020 and 2021, respectively.
We record the aggregate gross dollar amount that our clients spend through our platform for specified action marketing campaigns, which includes media cost, as
net revenues. We consider these clients to be our customers for specified action marketing campaigns. We charge our clients for specified actions, such as when a user clicks
on their marketing messages, or a CPC pricing model, or when their marketing messages are displayed, or a CPM pricing model. Rebates received from publishers for
specified action marketing campaigns are recorded as deduction of cost of revenues. Net revenues from our specified action marketing campaigns were US$165.3 million,
US$193.3 million and US$212.4 million in 2019, 2020 and 2021, respectively.
We grant rebates and discounts to marketers and marketing agencies to incentivize and encourage them to use our solutions. These rebates and discounts are
calculated based on certain factors, including yearly market spending of the marketers and marketing agencies that we reasonably estimate that they are able to achieve based
on the historical spending patterns of similar clients on our platform. The rebates and discounts we grant are settled when the relevant account receivables from the marketers
and marketing agencies are settled, and the timing of settlement is independent of the settlement of the rebates or incentives, as the case may be, from the publishers, which
is generally three to six months after the end of the relevant period to which such rebates or incentives, as the case may be, relate. In all other circumstances, rebates and
discounts we grant are recorded as reduction of revenue.
Starting from 2019, we also generate revenue from SaaS products which are cloud-hosted software offering enterprise solutions to customers through provision
of software licenses and retail and CRM solutions. Revenues under this arrangement primarily consist of fees for (i) licensing to provide customers with access to one or
more of the existing cloud applications for e-commerce, marketing and customer management, (ii) the development of new cloud applications customized for individual
customer, and (iii) various combinations of technical support, maintenance services and digitalized operational services provided by us. Net revenues from our enterprise
solutions were US$10.4 million, US$28.9 million and US$65.1 million in 2019, 2020 and 2021, respectively.
The table below shows our net revenues breakdown for our marketing solutions, and enterprise solutions for the periods presented.
Net revenues from marketing solutions*
Net revenues from enterprise solutions
Total net revenues
2019
Year Ended December 31,
2020
2021
(US$ in
thousands)
(% of net
revenues)
(US$ in
thousands)
(% of net
revenues)
(US$ in
thousands)
(% of net
revenues)
188,972
10,436
199,408
94.8
5.2
100.0
225,852
28,893
254,745
88.7
11.3
100.0
242,610
65,092
307,702
78.8
21.2
100.0
*
operates and assesses the financial condition and results of the online marketing service business as a whole.
Formerly “mobile marketing solutions” and “other marketing solutions” are combined into marketing solutions effective from January 1, 2020, as management
In 2019, 2020 and 2021, US$65.7 million, US$61.3 million and US$77.5 million rebates were received from publishers under cost-plus marketing campaigns,
respectively, which were recognized as net revenues for our marketing solutions, representing 32.9%, 24.1% and 31.9% of our net revenues in respective periods. Of these
rebates, US$31 thousand, US$0.5 million and US$0.2 million were received under cost-plus marketing campaigns from the publisher for which we acted as its sales agent
under our sales agency arrangement in respective periods.
In 2019, 2020 and 2021, US$8.7 million, US$7.1 million and US$5.1 million incentive revenues were received from publishers under our sales agency
arrangement, respectively, which were recognized as net revenues for our marketing solutions, representing 4.4%, 2.8% and 2.1% of our net revenues in respective periods.
These exclude US$31 thousand, US$0.5 million and
94
US$0.2 million rebates that were received under cost-plus marketing campaigns from the publisher for which we acted as its sales agent under our sales agency arrangement
in respective periods.
In 2019, 2020 and 2021, we granted rebates and discounts of US$72.4 million, US$48.5 million and US$76.2 million, respectively, to marketers and marketing
agencies under our cost-plus and specified action marketing campaigns for our marketing solutions, which were recognized as reduction of revenue in respective periods,
representing 36.3% and 19.0% and 31.4% of our net revenues in respective periods. Of these rebates and discounts we granted, US$12.9 million, US$8.6 million and
US$15.1 million was in connection with our specified action (i.e., gross) marketing campaigns in respective periods, and US$59.5 million, US$40.0 million and US$61.1
million, were in connection with our cost-plus (i.e., net) marketing campaigns in respective periods.
We have a diverse client base in terms of the geographic location of our clients’ or marketers’ headquarters as we help them, especially multinational marketers,
navigate through the fragmented online marketing landscapes in China to identify and reach their potential audience. In determining the geographic classification of our
revenue, we look at the geographic location of our subsidiary or the VIE and its subsidiaries which executed the marketing campaign contract. Our subsidiaries or VIE and
its subsidiaries in China generally are our signing entities for marketing campaign contracts with clients which are based in China. Our Singapore subsidiary generally is our
signing entity for marketing campaign contracts with clients based in Southeast Asia. Our Hong Kong subsidiaries generally are our signing entities for the other clients. Our
clients are primarily based in China. Our net revenues from clients in China increased significantly from 2019 to 2020 and further to 2021 as a result of (i) the business
expansion in OptAim, which used its consolidated subsidiaries in China to execute marketing campaign contracts, (ii) our continuous priority in the execution of our mobile
strategy, and (iii) revenue contribution from Changyi which operates enterprise solutions business in China. In 2019, 2020 and 2021, we derived 11.8%, 15.8% and
17.2% of our net revenues from outside China, respectively. The table below shows our net revenues breakdown by geographic region for the periods presented.
PRC
Hong Kong
Others
Total net revenues
Cost of Revenues
2019
Year Ended December 31,
2020
2021
(US in
thousands)
(% of net
revenues)
(US in
thousands)
(% of net
revenues)
(US in
thousands)
(% of net
revenues)
175,970
22,567
871
199,408
88.2
11.3
0.5
100.0
214,444
40,197
104
254,745
84.2
15.8
0.0
100.0
254,874
52,599
229
307,702
82.8
17.1
0.1
100.0
Cost of revenues for our marketing solutions primarily consists of:
•
•
Media cost in connection with specified-action marketing campaigns. Media cost refers to cost we pay to publishers for acquisition of content distribution
opportunities, which is partially offset by rebates we receive from publishers in specified-action marketing campaigns. Media cost represented 96.4%,
93.2% and 88.1% of our cost of revenues in 2019, 2020 and 2021, respectively.
Amortization of expenses. This relates to amortization of computer software acquired in the acquisitions of Buzzinate, OptAim, Myhayo, Optimal Power
Limited and CMRS which represented 3.6%, 2.3% and 1.1% of our cost of revenues in 2019, 2020 and 2021, respectively.
Cost of revenues for our enterprise solutions primarily consists of amortization expenses related to the computer software and systems, salaries and benefits of relevant
operations and support personnel, depreciation of relevant property and equipment and other direct services costs. The table below sets forth a breakdown of our cost of
revenues for the periods indicated:
Cost of revenues:
Marketing solutions
Enterprise solutions
Total cost of revenues
2019
Year Ended December 31,
2020
(US$ in thousands)
2021
(139,976)
(2,727)
(142,703)
(172,917)
(8,565)
(181,482)
(194,912)
(23,637)
(218,549)
95
Operating Expenses
We classify our operating expenses into three categories: research and development expenses, sales and marketing expenses and general and administrative
expenses. The following table sets forth our operating expenses, both in absolute amount and as a percentage of our net revenues, for the periods presented.
Operating expenses
Research and development expenses
Sales and marketing expenses
General and administrative expenses
2019
Year Ended December 31,
2020
2021
(US$ in
thousands)
(% of net
revenues)
(US$ in
thousands)
(% of net
revenues)
(US$ in
thousands)
(% of net
revenues)
(68,846)
(5,574)
(42,968)
(20,304)
(34.5)
(2.8)
(21.5)
(10.2)
(75,025)
(5,349)
(38,028)
(31,648)
(29.5)
(2.1)
(14.9)
(12.5)
(102,042)
(9,527)
(52,872)
(39,643)
(33.2)
(3.1)
(17.2)
(12.9)
•
•
•
Research and development expenses. Research and development expenses consist primarily of (i) salary and welfare for research and development
personnel, (ii) rental expenses and (iii) depreciation of office premise and servers utilized by research and development personnel. We expect to
continue increase our new product and service offering, and as a result, we anticipate that research and development expenses will continue to
increase in future periods.
Sales and marketing expenses. Sales and marketing expenses consist primarily of (i) advertising and marketing expenses, and (ii) salary and welfare
for sales and marketing personnel.
General and administrative expenses. General and administrative expenses consist primarily of (i) salary and welfare for general and administrative
personnel, (ii) audit, legal and professional service fees. We expect to continue to invest in our corporate infrastructure and incur expenses related to
being a public company, including accounting and legal fees, and compliance costs, and (iii) bad debt expenses.
Taxation
The Cayman Islands
We and our subsidiary incorporated in the Cayman Islands are not subject to income, corporation or capital gains tax, estate duty, inheritance tax or gift tax. In
addition, payment of dividends to our shareholders or the shareholder of our subsidiary in the Cayman Islands are not subject to withholding tax in the Cayman Islands.
The British Virgin Islands
Our subsidiaries incorporated in the British Virgin Islands are not subject to income or capital gains taxes, estate duty, inheritance tax or gift tax. In addition,
payment of dividends to the shareholders of our subsidiaries in British Virgin Islands are not subject to withholding tax in the British Virgin Islands.
Hong Kong
Our subsidiaries incorporated in Hong Kong are subject to 16.5% Hong Kong profit tax on their taxable income generated from operations in Hong Kong under
the current Hong Kong Inland Revenue Ordinance. Under the Hong Kong tax laws, we are exempted from the Hong Kong income tax on our foreign-derived income. In
addition, payments of dividends from our Hong Kong subsidiary to us are not subject to any Hong Kong withholding tax.
PRC
Generally, our PRC subsidiaries, our consolidated VIE and its subsidiary, which are considered PRC resident enterprises under PRC tax law, are subject to
enterprise income tax on their worldwide taxable income as determined under PRC tax laws and accounting standards at a rate of 25%. High and new technology enterprises
(“HNTE”) will enjoy a preferential enterprise income tax rate of 15% under the EIT Law. Our certain subsidiaries in the PRC, which are qualified as a HNTE under the EIT
Law, are eligible for a preferential enterprise income tax rate of 15% for a period of three years so long as these entities obtain approval from relevant tax authority if they
are profitable during the period.
96
We are subject to value added tax, or VAT, at a rate of 6% on the services we provide, less any deductible VAT we have already paid or borne. We are also subject
to surcharges on VAT payments in accordance with PRC law. VAT has been phased in since August 2013 to replace the business tax that was previously applicable to the
services we provide. During the periods presented, we were not subject to business tax on the services we provide.
Dividends paid by our wholly foreign-owned subsidiary in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of
10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between the PRC and the Hong Kong Special Administrative Region on the
Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and receives approval from the relevant tax authority. If our Hong Kong
subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary
would be subject to withholding tax at the standard rate of 5%. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We rely on
dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our
PRC subsidiaries to make payments to us could have a material adverse effect on our ability to conduct our business.”
If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise
Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Item 3. Key Information—D. Risk Factors—Risks Related to
Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to
us and our non-PRC shareholders or ADS holders.”
Year Ended December 31, 2021 Compared to Year Ended December 31, 2020
Net Revenues
Our net revenues increased by US$53.0 million, or 21%, from US$254.7 million in 2020 to US307.7 million in 2021.
Net revenues from our marketing solutions increased by US$16.7 million, or 7% from US$225.9 million in 2020 to US$242.6 million in 2021, primarily as a
result of the growing market demand from specified action marketing campaigns.
Net revenues from our enterprise solutions increased by US$36.2 million, or 125% from US$28.9 million in 2020 to US$65.1 million in 2021, which was
primarily driven by our strategic focus on this segment with more diversified new products and services offering during the year, the growing market demand for the
collection of information from different consumer online and offline touchpoints, integration of such information into a single data management platform to facilitate better
informed business decisions, and the value added services we tailor made to clients for content creation, integrated multi-channel distribution transformation, private domain
management, etc.
Cost of Revenues, Gross Profit and Gross Profit Margin
Our cost of revenues increased by US$37.0 million, or 20.4%, from US$181.5 million in 2020 to US$218.5 million in 2021, primarily as a result of an increase in
media cost, which increased by US$24.1 million, or 14.3%, from US$168.5 million in 2020 to US$192.6 million in 2021 as a result of our sales growth during the year.
Cost of revenues for our marketing solutions increased by US$22.0 million, or 12.7%, from US$172.9 million in 2020 to US$194.9 million in 2021, which was
in line with the higher market demand for our marketing solutions.
Cost of revenues for our enterprise solutions increased by US$15.0 million, or 176.0%, from US$8.6 million in 2020 to US$23.6 million in 2021, primarily as a
result of increase of staff expenses, development cost and service expenses to capture the market growth on this business stream.
As a result of the above, our gross profit increased from US$73.3 million in 2020 to US$89.2 million in 2021. Specifically, gross profit for our marketing
solutions decreased by US$5.2 million, or 10.0%, from US$52.9 million in 2020 to US$47.7 million in 2021. Gross profit for our enterprise solutions increased by US$21.2
million, or 103.9%, from US$20.3 million in 2020 to US$41.5 million in 2021.
Our gross profit margin increased from 28.8% in 2020 to 29.0% in 2021, primarily due to our strong momentum in enterprise solutions with higher margin,
partially offset by the lower margin in marketing solutions due to the changing regulatory environment and heightened macroeconomic uncertainties. We have started to
strategically reduce lower margin and higher risk
97
businesses in our more capital-intensive marketing solutions segment in order to focus on the higher growth potential of enterprise solutions.
Operating Expenses
Our operating expenses increased by US$27.0 million, or 36.0%, from US$75.0 million in 2020 to US$102.0 million in 2021, primarily due to increase of share-
based compensation, staff cost for product innovation and business development, and bad debt expenses. The operating expenses as a percentage of net revenues increased
from 29.5% in 2020 to 33.2% in 2021.
•
•
•
Sales and marketing expenses. Our sales and marketing expenses increased by US$14.9 million, or 39.0%, from US$38.0 million in 2020 to US$52.9
million in 2021. The increase was primarily related to new business development, and the nature includes year on year increment in share-based
compensation expenses of US$7.3 million, staff cost of US$4.6 million especially from newly acquired subsidiaries, and promotional expenses of US$1.8
million. Sales and marketing expenses as a percentage of net revenues increased from 14.9% in 2020 to 17.2% in 2021.
General and administrative expenses. Our general and administrative expenses increased by US$8.0 million, or 25.3%, from US$31.6 million in 2020 to
US$39.6 million in 2021, primarily due to increase in staff cost of US$0.9 million and bad debt expenses of US$5.8 million on specific provision of
certain clients in 2021. General and administrative expenses as a percentage of net revenues increased from 12.5% in 2020 to 12.9% in 2021.
Research and development expenses. Our research and development expenses increased by US$4.2 million, or 78.1%, from US$5.3 million in 2020 to
US$9.5 million in 2021, primarily due to increase in staff cost for continuous product innovation and development. Research and development expenses
as a percentage of net revenues increased from 2.1% in 2020 to 3.1% in 2021.
Interest Income
Our interest income was US$1.3 million and US$0.8 million in 2020 and 2021, respectively.
Interest Expense
Our interest expense was US$2.7 million and US$4.1 million in 2020 and 2021, respectively. The change was primarily attributable to the increase of credit
facilities used during the year, with the increase of banking facilities offered by banks.
Other Gains, Net
Our other gains, net was US$5.9 million in 2020 and US$2.2 million in 2021, respectively. The change was affected by impairment loss of long term
investments.
Fair Value Losses on Derivative Liabilities
We recorded fair value losses on derivative liabilities of US$11.5 million in 2020 while we did not record any fair value gains or losses on derivative liabilities in
2021. Our fair value losses on derivative liabilities were primarily in relation to a call option for investors to purchase our convertible notes.
Fair Value Losses on Convertible Notes
We recorded fair value losses on convertible notes of US$4.4 million in 2020 while we did not record any fair value gains or losses on convertible notes in 2021.
The amount of our fair value losses on convertible notes in 2020 was primarily impacted by volatility in the price of our ADSs.
Share of Losses from an Equity Investee
Our share of losses of an equity investee was US$0.1 million in 2020 and 2021. Our share of losses of an equity investee is primarily associated with net losses
from our joint venture with VGI Global Media Plc in Thailand that was set up in May 2019.
98
Income Tax Expense
We recorded an income tax expenses of US$1.6 million and US$2.5 million in 2020 and 2021, respectively. The increase was primarily due to increasing
profitability of operating companies.
Net Loss
As a result of the foregoing, our net loss increased by 11.4% from US$14.9 million in 2020 to US$16.6 million in 2021.
Year Ended December 31, 2020 Compared to Year Ended December 31, 2019
Net Revenues
Our net revenues increased by US$55.3 million, or 27.8%, from US$199.4 million in 2019 to US$254.7 million in 2020.
Net revenues from our marketing solutions increased by US$36.9 million, or 19.5% from US$189.0 million in 2019 to US$225.9 million in 2020, primarily as a
result of the growing market demand for our marketing solutions, especially in gaming and education sectors.
Net revenues from our enterprise solutions increased by US$18.5 million, or 176.9% from US$10.4 million in 2019 to US$28.9 million in 2020, which was
primarily driven by the growing market demand for the collection of information from different consumer online and offline touchpoints, and integration of such information
into a single data management platform to facilitate better informed business decisions.
Cost of Revenues, Gross Profit and Gross Profit Margin
Our cost of revenues increased by US$38.8 million, or 27.2%, from US$142.7 million in 2019 to US$181.5 million in 2020, primarily as a result of an increase in
media cost, which increased by US$30.9 million, or 22.5%, from US$137.6 million in 2019 to US$168.5 million in 2020 as a result of our sales growth during the year.
Cost of revenues for our marketing solutions increased by US$32.9 million, or 23.5%, from US$140.0 million in 2019 to US$172.9 million in 2020, which was
in line with the growth of our marketing solutions business, primarily driven by higher market demand for our marketing solutions.
Cost of revenue for our enterprise solutions increased by US$5.9 million, or 214.1%, from US$2.7 million in 2019 to US$8.6 million in 2020, primarily as a
result of increase of staff expenses and development cost to cater the market growth on this business stream.
As a result of the above, our gross profit increased from US$56.7 million in 2019 to US$73.3 million in 2020. Specifically, gross profit for our marketing
solutions increased by US$3.9 million, or 8.0%, from US$49.0 million in 2019 to US$52.9 million in 2020. Gross profit for our enterprise solutions increased by US$12.6
million, or 163.7%, from US$7.7 million in 2019 to US$20.3 million in 2020.
Our gross profit margin increased from 28.4% in 2019 to 28.8% in 2020, primarily due to our strong momentum in enterprise solutions with higher margin.
Operating Expenses
Our operating expenses increased by US$6.2 million, or 9.0%, from US$68.8 million in 2019 to US$75.0 million in 2020, primarily due to increase of share-
based compensation and staff cost. The operating expenses as a percentage of net revenues decreased from 34.5% in 2019 to 29.5% in 2020.
•
Sales and marketing expenses. Our sales and marketing expenses decreased by US$5.0 million, or 11.5%, from US$43.0 million in 2019 to US$38.0
million in 2020. The decrease was primarily due to the operational efficiency and reduction of promotional expenses during COVID-19 outbreak,
partially offset by increase in staff cost and share-based compensation. Sales and marketing expenses as a percentage of net revenues decreased from
21.5% in 2019 to 14.9% in 2020.
99
•
•
General and administrative expenses. Our general and administrative expenses increased by US$11.3 million, or 55.9%, from US$20.3 million in
2019 to US$31.6 million in 2020, primarily due to increase in staff cost, share based compensation and professional fee for fund raising activities.
General and administrative expenses as a percentage of net revenues increased from 10.2% in 2019 to 12.5% in 2020.
Research and development expenses. Our research and development expenses decreased by US$0.3 million, or 4.0%, from US$5.6 million in 2019 to
US$5.3 million in 2020, primarily due to decrease in share-based compensation for research and development personnel, partially offset by increase in
staff cost. Research and development expenses as a percentage of net revenues decreased from 2.8% in 2019 to 2.1% in 2020.
Interest Income
Our interest income was US$0.5 million and US$1.3 million in 2019 and 2020, respectively.
Interest Expense
Our interest expense was US$1.9 million and US$2.7 million in 2019 and 2020, respectively. The change was primarily attributable to the increase of available
credit facilities during the year.
Other Gains, Net
Our other gains, net were US$3.0 million in 2019 and US$5.9 million in 2020, respectively. The change was primarily due to the increase of government grants
such as wage subsidy from the Hong Kong government in 2020 due to COVID-19 outbreak.
Fair Value Losses on Convertible Notes
Our fair value losses on convertible notes was US$4.4 million, compared with fair value gains on convertible notes of US$0.1 million in 2019. The amount of our
fair value losses on convertible notes was primarily impacted by volatility in the price of our ADSs.
Fair Value Losses on Derivative Liabilities
Our fair value losses on derivative liabilities were nil and US$11.5 million in 2019 and 2020, respectively. Our fair value losses on derivative liabilities were
primarily in relation to a call option for investors to purchase our convertible notes.
Share of Losses from an Equity Investee
Our share of losses of an equity investee was US$0.4 million and US$0.1 million in 2019 and 2020, respectively. Our share of losses of an equity investee is
primarily associated with net losses from our joint venture with VGI Global Media Plc in Thailand that was set up in May 2019.
Income Tax Expense
We recorded an income tax expenses of US$47,000 and US$1.6 million in 2019 and 2020, respectively. The change was primarily due to increasing profitability
of operating companies.
Net Loss
As a result of the foregoing, our net loss increased by 37.4% from US$10.8 million in 2019 to US$14.9 million in 2020.
Recent Accounting Pronouncements
For detailed discussion on recent accounting pronouncements, see Note 2(an) to our consolidated financial statements included elsewhere in this annual report.
100
B. Liquidity and Capital Resources
Cash Flows and Working Capital
Our principal sources of liquidity have been cash generated from our operating activities, proceeds from our equity and debt issuances and proceeds from bank
borrowings. As of December 31, 2021, we had US$41.4 million in cash and cash equivalents, time deposits of US$11.1 million, restricted cash of US$36.1 million, and
borrowing capacity of US$75.5 million under our revolving credit facilities of a total principal amount of US$213.3 million. As of December 31, 2021, our cash and cash
equivalents primarily consisted of cash on hand, cash held at bank, and time deposits placed with banks or other financial institutions, which have original maturities of three
months or less. Out of our cash and cash equivalents as of December 31, 2021, US$26.1 million was held in U.S. dollar, RMB111.7 million (US$17.6 million) was held in
Renminbi, HK$63.8 million (US$8.2 million) was held in Hong Kong dollar, EUR197.0 thousand (US$336.0 thousand) was held in European dollar, SGD217.0 thousand
(US$159.0 thousand) was held in Singapore dollar, TWD3.1 million (US$113.0 thousand) was held in New Taiwan dollar, JPY3.2 million (US$29 thousand) was held in
Japanese Yen and a subsequent 67.0 thousand (US$50.0 thousand) was held in other currencies. As of December 31, 2021, we had violated certain financial covenants with
respect to our bank borrowings extended by a bank, however, we have obtained the necessary waiver letter such that the bank would not demand immediate repayment. We
closely monitor our cash balance and future payments obligations by preparing monthly management account and regular fund reports to provide a timely overview of our
overall cash position and liquidity and risk control measurements. Such reports will be reviewed by our chief financial officer and our financial controller. In addition, we
have adopted a stringent cash management policy. We also regularly monitor our current and expected liquidity requirements to ensure that we maintain sufficient cash
balances to meet our liquidity needs. As of December 31, 2021, the VIE and its subsidiaries held US$2.7 million cash and cash equivalents.
We believe that our current cash and cash equivalents, short-term investments, together with the borrowing capacity under our revolving credit facilities and the
term loan facility will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months. We may, however, need additional
capital in the future to fund our continued operations. If we determine that our cash requirements exceed our available financial resources, we may seek to issue equity or
debt securities or obtain credit facilities.
The issuance and sale of additional equity would result in further dilution to our shareholders. The incurrence of indebtedness would result in increased fixed
obligations and could result in operating and financial covenants that might restrict our operations. We cannot assure you that financing will be available in amounts or on
terms acceptable to us, if at all.
In addition, although we consolidate the results of our consolidated VIE and its subsidiary, we only have access to the assets or earnings of our consolidated VIE
and its subsidiary through our contractual arrangements with our consolidated VIE and its subsidiaries and its shareholder. See “Item 4. Information on the Company—C.
Organizational Structure—Contractual Arrangements with OptAim Network.” For restrictions and limitations on liquidity and capital resources as a result of our corporate
structure, see “—Holding Company Structure.” A substantial amount of our future revenues are likely to be denominated in Renminbi. Under existing PRC foreign exchange
regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in
foreign currencies without prior approval from SAFE as long as certain routine procedural requirements are fulfilled. However, approval from or registration with competent
government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans
denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions or change the foreign
exchange control policy in the future. In addition, current PRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any,
determined in accordance with Chinese accounting standards and regulations. Our PRC subsidiary is required to set aside at least 10% of its after-tax profits after making up
previous years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. These reserves are not
distributable as cash dividends. Furthermore, capital account transactions, which include foreign direct investment and loans, must be approved by and/or registered with
SAFE and its local branches. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Governmental control of currency conversion
may limit our ability to utilize our revenues effectively and affect the value of your investment.”
101
The following table sets forth a summary of our cash flows for the periods indicated:
Selected Consolidated Cash Flow Data:
Net cash used in operating activities
Net cash provided by/(used in) investing activities
Net cash provided by financing activities
Effect on exchange rate changes on cash and cash equivalents
and restricted cash
Net increase in cash and cash equivalents and restricted cash
Cash and cash equivalents and restricted cash at the beginning of year
Cash and cash equivalents and restricted cash at the end of year
Operating Activities
2019
Year Ended December 31,
2020
(US$ in thousands)
2021
(30,294)
6,762
44,804
(394)
21,272
39,828
60,706
(19,633)
(27,693)
79,983
1,014
32,657
60,706
94,377
(19,673)
(22,390)
24,743
532
(17,320)
94,377
77,589
Net cash used in operating activities amounted to US$19.7 million in 2021, which was mainly attributable to a net loss of US$16.6 million and a net decrease in
working capital of US$37.4 million, partially offset by non-cash items of US$34.3 million. The net decrease in working capital of US$37.4 million was primarily attributable
to increase in accounts receivable of US$58.6 million and decrease in deferred revenue of US$5.3 million, partially offset by an increase in accounts payable of US$23.4
million. The non-cash items of US$34.3 million were primarily attributable to allowance for credit losses on accounts receivable of US$12.4 million, share-based
compensation expenses of US$13.5 million and impairment on long-term investments of US$4.0 million.
Net cash used in operating activities amounted to US$19.6 million in 2020, which was mainly attributable to a net loss of US$14.9 million and a net decrease in
working capital of US$34.9 million, partially offset by non-cash items of US$30.2 million. The net decrease in working capital of US$34.9 million was primarily attributable
to decrease in accounts payable of US$23.3 million, and increase in prepaid media cost and rebate receivables of US$8.4 million and US$5.0 million, respectively. The non-
cash items of US$30.2 million were primarily attributable to fair value loss on derivative liabilities and convertible notes of US$11.5 million and US$4.4 million,
respectively, share based compensation of US$6.2 million, and amortization of intangible assets and right-of-use assets of US$6.1 million.
Net cash used in operating activities amounted to US$30.3 million in 2019, which was mainly attributable to a net loss of US$10.8 million and a net decrease in
working capital of US$33.9 million, partially offset by non-cash items of US$14.4 million. The net decrease in working capital of US$33.9 million was primarily attributable
to increase in accounts receivable and prepaid media cost of US$85.4 million and US$6.7 million, respectively, partially offset by increase in accounts payable of US$61.3
million. The non-cash items of US$14.4 million were primarily attributable to amortization of intangible assets and right-of-use assets of US$6.3 million, convertible notes
transaction expenses in form of non-employee warrant award, and share-based compensation of US$2.1 million.
Investing Activities
Net cash used in investing activities in 2021 was US$22.4 million, due to an increase in time deposits of US$11.0 million, US$10.9 million of net loan amount to
third parties, US$10.0 million and US$4.5 million for acquisition of businesses and long-term investments respectively, partially offset by a decrease in short-term
investments of US$15.6 million.
Net cash used in investing activities in 2020 was US$27.7 million, due to an increase in short-term investments of US$22.3 million, prepaid long-term investment costs
and other long-term investments of US$1.9 million and US$7.1 million, respectively.
Net cash provided by investing activities in 2019 was US$6.8 million, due to a decrease in short-term investments of US$17.6 million, related to investment
deposit product, partially offset by net of cash paid for acquisition of business of US$7.2 million, prepaid long-term investment costs and other long-term investments of
US$1.0 million each.
102
Financing Activities
Net cash provided by financing activities in 2021 was US$24.7 million, which was primarily attributable to net proceeds from bank borrowings of US$17.8
million and net proceeds from issuance of ordinary shares upon subscription from Baozun Inc. of US$17.0 million respectively, partially offset by share repurchase
amounting to US$10.7 million.
Net cash provided by financing activities in 2020 was US$80.0 million, which was primarily attributable to net proceeds from follow-on and private placement of
US$53.4 million and US$18.5 million respectively.
Net cash provided by financing activities in 2019 was US$44.8 million, which was primarily attributable to net proceeds from convertible notes of US$28.7
million and proceeds from bank borrowings, net of US$28.5 million.
Credit Facilities
In January and February 2019, we entered into two facility agreements for working capital loans with a commercial bank, which provide for a 6-month revolving
loan of an aggregate amount of US$15.0 million. We provide corporate guarantee and deposits as pledge to secure our obligations under this revolving loan. The interest rate
of this loan facility was fixed at 5.25% per annum in 2019 and reduced to 4.00% in August 2020. As of December 31, 2021, the total outstanding amount of the revolving
loan was US$3.6 million.
In March 2019, we entered into a facility agreement with a commercial bank, which provides for a one-year factoring loans of HK$24.0 million (US$3.1
million). We provide corporate guarantee and accounts receivable as pledge to secure our obligations under this revolving loan. The interest rate of this loan facility was at
4.25% per annum over 1-month Hong Kong Interbank Offered Rate (“HIBOR”) for loan in HKD, 2.00% per annum over 1-month HIBOR for loan in RMB, or 4.25% per
annum over 1-month London Interbank Offered Rate (“LIBOR”) for loan in US$. As of December 31, 2021, the total outstanding amount of the revolving loan was
HK$648.1 thousand (US$83.6 thousand).
In April 2019, we entered into a facility agreement for working capital loans with a commercial bank. The loan facility provides for a one-year revolving loan of
US$13.6 million, which is supported by standby documentary credit facilities of US$15.0 million. In April 2021, this loan was subsequently amended. The amended
agreement provides for a one-year revolving loan of US$50.0 million. We provide corporate guarantee, deposits and accounts receivable as pledge to secure our obligations
under this revolving loan. The interest rate of this loan facility is either (i) 5.22% in RMB, or (ii) 1-month LIBOR plus 3.00% per annum if the loan is drawn down in US$.
As of December 31, 2021, the total outstanding amount of the revolving loan was RMB202.7 million (US$31.9 million).
In August 2019, we entered into two facility agreements for working capital loans with a commercial bank, which provide for (i) a one-year revolving loan of
RMB18.5 million (US$2.6 million) and (ii) a one-year revolving loan of US$1.6 million, respectively. We provide corporate guarantee and deposits as pledge to secure our
obligations under this revolving loan. The interest rate of this loan facility was the benchmark interest rate determined by the People’s Bank of China for loans over one year
granted by financial institutions plus 0.97% per annum. This loan was subsequently renewed in September 2019 and August 2020. The one-year revolving loan of US$1.6
million was replaced by a one-year revolving loan of RMB11.5 million (US$1.8 million). The interest rate of these facilities is 3.60% per annum and reduced to 3.00% in
August 2021. As of December 31, 2021, the total outstanding amount of the revolving loans was RMB17.0 million (US$2.7 million).
In October 2019, we entered into a one-year facility agreement for working capital loans with a commercial bank, which provides for (i) US$15.0 million
standby documentary credit facilities, (ii) US$10.0 million combined limit for pre-shipment buyer loan and revolving loan, and (iii) US$1.0 million overdraft facilities. We
provide corporate guarantee and bank deposits as pledge to secure our obligations under these loan facilities. In March 2021, this loan was subsequently amended, which
provides for (i) US$15.0 million combined limit for pre-shipment buyer loan and post-shipment buyer loan, (ii) US$6.0 million revolving loan, and (iii) US$1.0 million
overdraft facilities. For the pre-shipment buyer loan and post-shipment buyer loan, the interest rate is at either (i) HIBOR plus 3.85% per annum if the loan is drawn down in
HK$, or (ii) LIBOR plus 3.85% per annum if the loan is drawn down in US$. For the revolving loan, the interest rate is at either (i) HIBOR plus 4.25% per annum if the loan
is drawn down in HK$, or (ii) LIBOR plus 4.25% per annum if the loan is drawn down in US$. For the overdraft facility, the interest rate is at the bank’s US$ best lending
rate. We had no outstanding balance under these loan facilities as of December 31, 2021.
In December 2019, we entered into a facility agreement for working capital loans with a commercial bank, which provide for a half-year revolving loan of
RMB50.0 million (US$7.0 million). We provide corporate guarantee and accounts receivable of certain subsidiaries to secure our obligations. It was subsequently renewed
and amended in December 2020 and December 2021.
103
The amended agreement provides for a half-year revolving loan of RMB80.0 million (US$12.6 million). The interest rate of this facility was 6.35% and reduced to 6.25% in
December 2021. As of December 31, 2021, the total outstanding amount of this revolving loan was RMB80.0 million (US$12.6 million).
In December 2019, we entered into a facility agreement for working capital loans with a commercial bank, which provide for one-year revolving loan of
RMB50.0 million (US$7.0 million). We provide corporate guarantee and deposits as pledge to secure our obligations under this revolving loan. It was subsequently renewed
and amended in December 2020. The interest rate of this loan facility was subsequently amended to 3.00% per annum. As of December 31, 2021, the total outstanding
amount of this revolving loan was RMB50.0 million (US$7.9 million).
In June 2020, we entered into a facility agreement for working capital loans with a commercial bank, which provides for a one-year non-revolving loan of
RMB3.0 million (US$0.5 million). The interest rate of this loan facility is fixed at 4.5025% per annum and reduced to 4.2525% in September 2021 As of December 31,
2021, the total outstanding amount of this non-revolving loan was RMB3.0 million (US$0.5 million).
In August 2020, we entered into a bank acceptance draft discount facility agreement with a commercial bank, which provides for a revolving loan of RMB40.0
million (US$6.1 million). The interest rate of this loan facility is based on cost of funding at the time of discounting plus a risk premium depending on the accepting bank’s
credit rating. As of December 31, 2021, we had no outstanding balance under this revolving loan.
In August 2020, we entered into a facility agreement for working capital loans with a commercial bank, which provides for a one-year non-revolving loan of
RMB20.0 million (US$3.1 million). The interest rate of this loan facility is fixed at 4.90% per annum. As of December 31, 2021, the total outstanding amount of this non-
revolving loan was RMB7.0 million (US$1.1 million).
In October 2020, we entered into a facility agreement for working capital loans with a commercial bank, which provide for one-year revolving loan of
RMB100.0 million (US$15.2 million). We provide corporate guarantee and deposits as pledge to secure our obligations under this revolving loan. The interest rate of this
loan facility is fixed at 3.25% per annum and reduced to 3.00% in August 2021. As of December 31, 2021, the total outstanding amount of this revolving loan was RMB63.0
million (US$9.9 million).
In February 2021, we entered into a facility agreement for working capital loans with a commercial bank, which provides for a revolving loan of RMB220.0
million (US$34.6 million). The interest rate of this loan facility is fixed at 4.00% per annum. As of December 31, 2021, we had no outstanding balance under this revolving
loan.
In March 2021, we entered into a facility agreement for working capital loans with a commercial bank, which provides for a one-year non-revolving loan of
RMB2.0 million (US$0.3 million). The interest rate of this loan facility is fixed at 4.50% per annum. As of December 31, 2021, the total outstanding amount of this non-
revolving loan was RMB2.0 million (US$0.3 million).
In March 2021, we entered into a facility agreement for working capital loans with a commercial bank, which provides for a one-year non-revolving loan of
RMB20.0 million (US$3.1 million). The interest rate of this loan facility is fixed at 4.50% per annum. As of December 31, 2021, the total outstanding amount of this non-
revolving loan was RMB5.0 million (US$0.8 million).
In April 2021, we entered into a facility agreement for working capital loans with a commercial bank, which provides for a one-year non-revolving loan of
RMB4.0 million (US$0.6 million). The interest rate of this loan facility is fixed at 3.85% per annum. As of December 31, 2021, the total outstanding amount of this non-
revolving loan was RMB4.0 million (US$0.6 million).
In April 2021, we entered into a facility agreement for working capital loans with a commercial bank, which provides for a one-year non-revolving loan of
RMB20.0 million (US$3.1 million). The interest rate of this loan facility is fixed at 4.35% per annum. As of December 31, 2021, the total outstanding amount of this non-
revolving loan was RMB20.0 million (US$3.1 million).
In May 2021, we entered into a facility agreement for working capital loans with a commercial bank, which provides for a one-year non-revolving loan of
RMB3.0 million (US$0.5 million). The interest rate of this loan facility is fixed at 4.00% per annum. As of December 31, 2021, the total outstanding amount of this non-
revolving loan was RMB3.0 million (US$0.5 million).
104
In December 2021, we entered into a facility agreement for working capital loans with a commercial bank, which provides for a revolving loan of US$30.0
million. The interest rate of this loan facility is LIBOR plus 0.70% per annum. As of December 31, 2021, we had no outstanding balance under this revolving loan.
As of December 31, 2018 certain financial covenants (minimum monthly adjusted quick ratio and minimum quarterly EBITDA as defined in the banking
facilities agreements) as set out in these loan agreements have been breached. The relevant subsidiaries have obtained waiver letters for waiving the requirements to meet the
financial covenants such that the bank would not demand immediate repayment. As of December 31, 2020, no financial covenants as set out in these loan agreements have
been breached. As of December 31, 2021 certain financial covenant (minimum quarterly EBITDA as defined in the banking facilities agreements) as set out in these loan
agreements have been breached. We have obtained waiver letter such that the bank would not demand immediate repayment.
Out of our banking facilities of US$121.7 million and US$213.3 million available as of December 31, 2020 and 2021, respectively, US$56.0 million and
US$75.5 million have been utilized by us as of December 31, 2020 and 2021, respectively. As of December 31, 2021, total unutilized revolving, service trade and term loan
facilities amounted to US$115.4 million, US$18.0 million and US$4.4 million (December 31, 2020: US$58.7 million, US$6.0 million and US$1.0 million) respectively.
Total undrawn facilities available for drawdown as of December 31, 2021, net of bank deposits that would need to be pledged as restricted cash upon utilization of the
facilities, amounted to US$33.3 million.
Other than those shown in “—Credit Facilities,” we did not have any significant capital and other commitments, long-term obligations, or guarantees as of
December 31, 2021.
Capital Expenditures
We made capital expenditures of US$0.7 million, US$1.1 million and US$1.6 million in 2019, 2020 and 2021, respectively. In these periods, our capital
expenditures were mainly used for the purchase of property and equipment and purchase of software. We will continue to make capital expenditures to support our business.
Material Cash Requirements
Our material cash requirements as of December 31, 2021 and any subsequent interim period primarily include our bank borrowings, operating lease obligations,
purchase obligations and investment commitment obligations.
Holding Company Structure
iClick Interactive Asia Group Limited is a Cayman Islands exempted limited liability company, used as a holding company with no material operations of its
own. We conduct our operations primarily through our wholly-owned subsidiaries, our consolidated VIE and its subsidiary in China. As a result, our ability to pay dividends
depends upon dividends paid by our PRC subsidiaries. If our PRC subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments
governing their debt may restrict their ability to pay dividends to us. In addition, our wholly-owned subsidiaries are permitted to pay dividends to us only out of their
retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our wholly-owned PRC subsidiaries and
consolidated affiliated entities is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its
registered capital. Although the statutory reserves can be used, among other ways, to increase the registered capital and eliminate future losses in excess of retained earnings
of the respective companies, the reserve funds are not distributable as cash dividends except in the event of liquidation. Remittance of dividends by a wholly foreign-owned
company out of China is subject to examination by the banks designated by SAFE. We currently plan to reinvest all earnings from our PRC subsidiaries to their business
developments and do not plan to request dividend distributions from them.
C.
Research and Development, Patents and Licenses, Etc.
See “Item 4. Information On the Company—B. Business Overview—Research and Development” and “—Intellectual Property.”
D.
Trend Information
Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events since January 1, 2021 that
are reasonably likely to have a material effect on our net revenues, income,
105
profitability, liquidity or capital resources, or that would cause reported consolidated financial information not necessarily to be indicative of future operating results or
financial condition.
E.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations relates to our consolidated financial statements, which have been prepared in
accordance with United States of America generally accepted accounting principles (“U.S. GAAP”). The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs and expenses, and related disclosures. On an on-going basis, we evaluate our
estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.
We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the
time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we
reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors. There are
other items within our financial statements that require estimation but are not deemed critical, as defined above. Changes in estimates used in these and other items could
have a material impact on our financial statements. For a detailed discussion of our significant accounting policies and related judgments, see “Notes to Consolidated
Financial Statements – Note 2 Principal accounting policies”.
Impairment assessment of goodwill
Nature of estimate: Goodwill is subject to periodic assessments of impairment. We conduct a goodwill impairment test at the reporting unit level annually in the
fourth quarter, or more frequently when events or circumstances occur indicating that the recorded goodwill may be impaired. We assess qualitative factors to determine
whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If a qualitative assessment identifies a possible
impairment or we impair the assets of a reporting unit, then a quantitative goodwill impairment test is performed. If the carrying value of the reporting unit is above fair
value, an impairment loss is recognized in an amount equal to the excess.
We have two reporting units, which include (i) the Marketing Solutions business and (ii) the Enterprise Solutions business. Our consolidated goodwill balance
was US$81.7 million as of December 31, 2021, and the goodwill associated with the Marketing Solutions reporting unit and Enterprise Solutions reporting unit was US$53.0
million and US$28.7 million, respectively.
Assumptions: We estimate the fair values of our Marketing Solutions and Enterprise Solutions reporting units using the market approach and the income
approach, respectively. The market approach considers revenue multipliers based on market data of comparable companies engaged in similar operations and economic
characteristics. The income approach considers a number of factors that include expected future cash flows, revenue growth rates, an estimated terminal value using a
terminal year long-term future growth rate, a discount rate, and requires us to make certain assumptions and estimates regarding future profitability of the business. The
goodwill impairment assessment is sensitive to our estimates in these factors. Some of the inherent estimates and assumptions used in determining fair value of the reporting
units are outside the control of management, including interest rates, cost of capital, tax rates and market multiples on revenue for comparable entities. While we believe we
have made reasonable estimates and assumptions to calculate the fair value of the reporting units, it is possible a material change could occur. If our actual results are not
consistent with our estimates and assumptions used to calculate fair value, it could result in material impairments of our goodwill. When one of our assumptions relating to
these factors decreased/increased by 5% while holding all other assumptions constant, the result of the goodwill impairment assessment would not be impacted and the fair
value of the individual reporting units would still be above the respective carrying value.
Based on the annual impairment test conducted for the years ended December 31, 2019, 2020 and 2021, the fair value of the reporting unit exceeded the carrying
value, indicating that the goodwill was not impaired. Our estimate of the key assumptions did not change significantly throughout the periods presented.
Fair value determination related to the accounting for business combinations
Nature: We completed business combinations in 2019, 2020 and 2021 which require us to perform purchase price allocations. We allocate the fair value of
purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired, including amounts attributed to noncontrolling interests based on
their estimated fair values at the date of acquisition. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is
recorded as goodwill. Allocation of purchase consideration to identifiable assets and liabilities affects our amortization expense,
106
as acquired finite-lived intangible assets are amortized over the useful life, whereas any indefinite lived intangible assets, including goodwill, are not amortized.
Assumptions: In order to recognize the fair values of assets acquired and liabilities assumed, mainly consisting of intangible assets and goodwill, we use various
models such as relief-from-royalty and multi-period excess earnings to value intangible assets and discounted cash flow to value goodwill. We make estimates and
assumptions about projected future cash flows including sales growth, operating margins, attrition rates, and discount rates based on historical results, business plans,
expected synergies, perceived risk and marketplace data considering the perspective of marketplace participants. Determining the useful life of an intangible asset also
requires judgment as different types of intangible assets will have different useful lives and certain assets may be considered to have indefinite useful lives. For significant
acquisitions we may use independent third-party valuation specialists to assist us in determining the fair values of assets acquired and liabilities assumed.
While we believe those expectations and assumptions are reasonable, they are inherently uncertain. Unanticipated market or macroeconomic events and
circumstances may occur, which could affect the accuracy or validity of the estimates and assumptions, which could result in subsequent impairments.
Impairment assessment of investments in equity securities without readily determinable fair value
Nature: We measure certain financial instruments at fair value on a nonrecurring basis, consisting primarily of our equity securities without readily determinable fair
value. These investments are accounted for under the measurement alternative and are measured at cost, less impairment, subject to upward and downward adjustments
resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. These adjustments require quantitative assessments of
the fair value of equity securities, primarily using a market approach. These investments are also evaluated for impairment, based on qualitative factors and events including
(i) adverse performance of investees; (ii) adverse industry developments affecting investees; and (iii) adverse regulatory, social, economic or other developments affecting
investees and (iv) valuation methods and key valuation assumptions and data used in estimating the impairment amounts. If a qualitative assessment indicates that the
investment is impaired, we estimate the investment’s fair value in accordance with the principles of ASC 820. If the fair value is less than the investment’s carrying value, we
recognize an impairment loss in net income equal to the difference between the carrying value and fair value. We recognized impairment losses of US$4.0 million for the
year ended December 31, 2021.
Assumptions: These judgements include valuation methods and key valuation assumptions and estimates used in estimating impairment amounts. The quantitative
assessment requires the use of unobservable inputs, such as selection of comparable companies and multiples, and discount for lack of marketability. For the assessment of
impairment based on qualitative factors, it considers the companies’ financial and liquidity position and access to capital resources, among others. When our assessment
indicates that an impairment exists, we write down the investment to its fair value. Our estimates of these inputs require subjective management judgment and are inherently
uncertain. The fair value of equity securities is sensitive to changes in the unobservable inputs used to determine fair value. While we believe we have made reasonable
estimates and assumptions to calculate the fair value of the equity securities, it is possible a material change could occur. As a result, if factors change and different
assumptions are used, the fair value of the equity securities could be significantly different from what we recorded in the reporting period. When one of our estimates of a
discount for lack of marketability and price-to-sales multiples of comparable companies decreased/increased by 5% while holding all other estimates constant, there would
be no significant impact to our consolidated results of operations.
107
ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
A.
Directors and Senior Management
Directors and Executive Officers
The following table sets forth information regarding our directors and executive officers as of the date of this annual report.
Directors and Executive Officers
Jian Tang
Wing Hong Sammy Hsieh
Lub Bun Chong
Matthew Chu Pong Fong
Dylan Huang
Philip Kan
David Zhang
Age
45
49
55
41
47
66
48
Position/Title
Chairman of the Board, Chief Executive Officer and Co-Founder
Director and Co-Founder
Director
Director
Director
Director
Director and Chief Financial Officer
Mr. Jian Tang is our chairman of the board, chief executive officer and co-founder and has served as our chief operating officer since January 2016 and our chief
technology officer since November 2016. Mr. Tang has approximately 20 years of experience in digital advertising and is well-known in the area of advertising technologies
and big data in China. Prior to joining us, Mr. Tang founded OptAim in 2012, which was later acquired by us in July 2015. Prior to founding OptAim, Mr. Tang was
Tencent’s engineering director of Advertising Platform Department who helped initiate and develop Tencent’s programmatic ad exchange platform. Mr. Tang had also served
key research and engineering and management roles at Yahoo’s global research and development center, Baidu and Microsoft Research from 2005 to 2011, where he led a
number of major technical and research and development projects. Mr. Tang received his doctor’s degree in computer engineering from Tsinghua University. Mr. Tang was
named by Campaign Asia as one of the leaders in its Digital A-List in 2016.
Mr. Wing Hong Sammy Hsieh is our director and co-founder and served as our chief executive officer from 2009 to 2019. Prior to founding our company, Mr. Hsieh
held senior positions in a number of prominent technology companies. Mr. Hsieh was general manager for Asia Pacific at Efficient Frontier (now an Adobe company), a
leading digital performance marketing company in 2008. Prior to that, Mr. Hsieh was director of Search Marketing at Yahoo Hong Kong during 2000 to 2008, during which
he oversaw the business operations, including sales, marketing, business development and product management. Mr. Hsieh also held various sales and marketing positions at
the LVMH Group and British American Tobacco earlier in his career. Mr. Hsieh received his bachelor’s degree in economics from the University of California, Los Angeles.
Mr. Lub Bun Chong has served as our director since July 2019. Mr. Chong is currently a partner of C Consultancy Limited, a Hong Kong-based corporate and
financial advisory firm which specializes in the advertising, digital and media sectors of China and Southeast Asia. Prior to founding C Consultancy Limited, he was the
chief financial officer and the director of mergers and acquisitions of Clear Media (00100.HK), and the chief financial officer of Focus Media (002027.SZ). Mr. Chong
previously worked at PricewaterhouseCoopers in China, Hong Kong and Singapore during the 1990s. Mr. Chong is the author of “Managing a Chinese Partner” (published
by Palgrave Macmillan) and a contributor of China articles to reputable publications. Mr. Chong received his bachelor’s degree of accountancy from National University of
Singapore and his MBA degree with merit from Manchester Business School. Mr. Chong is a chartered accountant in Singapore.
Mr. Matthew Chu Pong Fong has served as our director since January 2020. Mr. Fong has more than 10 years of professional experience in auditing, corporate
finance and financial management for both private and listed corporations. He held multiple financial leadership positions, including as a manager at a Hong Kong-based
multi-strategy private investment fund, from 2015 to 2017, and the chief financial officer of Fornton Group Limited, a knitwear manufacturer, from 2011 to 2014. Mr. Fong
also led teams in performing financial audit-related engagements including initial public offering and acquisition at Ernst & Young from 2007 to 2009. Mr. Fong obtained his
bachelor degree in accountancy from The Hong Kong Polytechnic University in 2003 and is currently a fellow member of the Association of Chartered Certified
Accountants.
108
Mr. Dylan Huang has served as our director since December 2017. Mr. Huang has served as senior vice president of Meituan-Dianping since 2017. Mr. Huang served
as the corporate vice president, group chief technology officer and general manager at Tencent Online Media Group from 2008 to 2017, leading its media’s mobile initiative.
He was the senior lead program manager, program manager, software design engineer and software design engineer in test at Microsoft Corporation from 2001 to 2008. Mr.
Huang received his bachelor’s degree in electrical engineering from Zhejiang University and his MBA degree from Washington Business School.
Mr. Philip Kan has served as our director since January 2021. Mr. Kan has extensive experience in management, finance, banking, capital market, information
technology, risk management, corporate governance and corporate development. Mr. Kan has been the responsible officer, director and the senior management of several
financial institutions regulated by SFC since 2003. Mr. Kan was the founder and a director of Galileo Capital Group Ltd (HKEX:8029) from July 2000 to October 2008, a
boutique corporate finance house providing services in co-sponsoring IPOs, shares placement, M&A, assets management and financial advisory. Prior to founding Galileo
Capital Group Ltd, Mr. Kan held senior positions in a number of prominent companies. Mr. Kan was the senior vice president for First Pacific Bank Limited, oversees the
centralized banking services units (i.e. processing support units) and the Information Technology Division of the Bank. Prior to that, Mr. Kan was the manager of Systems &
Operations at HSBC from 1987 to 1992. Mr. Kan also held various management positions at the AIG Finance (HK) Ltd, General Electric Co and Bank of America earlier in
his career. Mr. Kan received his MBA degree from Henley Management College, Brunel University in the United Kingdom. Mr. Kan also held a Fellow Membership of the
Chartered Institute of Management (FCIM) and the Institute of Management Services (FMS) in the United Kingdom. Mr. Kan is currently a member of the Disciplinary
Panel of the Hong Kong Institute of Certified Public Accountants.
Mr. David Zhang has served as our director and chief financial officer since January 31, 2022. Prior to joining iClick, Mr. Zhang served in senior management roles
and advisory capacities at Big Four accounting firms and conglomerates listed on the Hong Kong and US stock exchanges. He received a bachelor’s degree in accounting
from the University of Shanghai for Science and Technology and studied civil law in Peking University. Mr. Zhang is a Member of the Chinese Institute of Certified Public
Accountants. He holds qualification as a PRC lawyer.
Employment Agreements and Indemnification Agreements with Executive Officers
We have entered into employment agreements with each of our executive officers.
Term and Termination
Pursuant to these agreements, we will be entitled to terminate a senior executive officer’s employment for cause at any time without remuneration for certain act of
dishonesty, serious misconduct or any other act that justifies immediate dismissal of the officer, or if that officer is precluded by law from performing his duty as an officer.
We may also terminate a senior executive officer’s employment by giving three months’ prior written notice or three months’ salary if the senior executive officer is not
qualified for his position after we provide relevant training to him. A senior executive officer may terminate his or her employment at any time by giving three months’ prior
written notice.
Confidentiality; IP
Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use,
except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information, including but
not limited to, trade secrets, any information concerning the process, system, data, financials, dealings or other confidential business information. The executive officers have
also agreed that all intellectual property rights which they conceive, develop, write or otherwise created in the course of their employment, whether during or outside normal
working hours, will be vested solely in us, and the officers will, at our request and expense, execute such assignments and assurances as may be reasonably necessary to
perfect our ownership of those rights.
Non-Competition and Non-Solicitation
In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and
typically for six months following the last date of employment, unless otherwise agreed. Specifically, during such term each executive officer has agreed not to (i) directly or
indirectly engage or involve in any business which is in competition with us; (ii) directly or indirectly canvass or solicit from our clients any goods or services similar to
ours; and (iii) entice, endeavor to entice, persuade or procure away any of our employees.
109
Indemnification Agreements
We have entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree to indemnify our directors and
executive officers against certain liabilities and expenses incurred by them in connection with claims made by reason of their being a director or officer of our company.
B.
Compensation of Directors and Executive Officers
For the year ended December 31, 2021 we paid an aggregate of approximately US$1.0 million in cash to our executive officers, and we paid an aggregate of
approximately US$0.2 million to our non-executive directors. Subject to the requirements under the applicable laws, we have not set aside or accrued any amount to provide
pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries and variable interest entity are required by law to make
contributions based on the insurance scales set forth by the local government for employees’ pension insurance, medical insurance, unemployment insurance and other
statutory benefits and a housing provident fund. Our Hong Kong subsidiaries are required by the Hong Kong Mandatory Provident Fund Schemes Ordinance to make
monthly contributions to the mandatory provident fund scheme in an amount equal to at least 5% of an employee’s salary.
Share Incentive Plans
2018 Plan
Under the 2018 Plan, the maximum number of ordinary shares that may be issued to the beneficiaries is 2,398,137, which have been issued to Arda as trustee to the
beneficiaries of the 2018 Plan. As of March 31, 2022, options to purchase 288,973 ordinary shares are outstanding, including vested and unexercised options to purchase
288,973 ordinary shares.
The following paragraphs describe the principal terms of the 2018 Plan.
Type of Awards. The 2018 Plan permits the award of options to purchase our ordinary shares.
Trustee. Mr. Wing Hong Sammy Hsieh through Arda upon trust serves as the trustee to the beneficiaries of the 2018 Plan. Upon a grantee’s exercise of any options
awarded under the 2010 Plan, the trustee shall hold the resulting ordinary shares until a public offering of our ordinary shares on a stock exchange or if our board of directors
decides to transfer the ordinary shares to the grantee, and until either of such transfer events, the trustee shall pay cash or other dividend payments on these ordinary shares to
the grantee. The trustee shall only deal with the trust properties in such manner as our board of directors from time to time directs in writing.
Award Agreement. Any award granted under the 2018 Plan is evidenced by an award agreement that sets forth terms, conditions and limitations on such award,
which may include the number of options awarded, the exercise price, the vesting schedule, the provisions applicable in the event of the grantee’s employment or service
terminates, among others. We may amend or delete the terms of any award from time to time, provided that no such amendment shall impair the rights and benefits of any
participant without his or her consent.
Eligibility. We may grant awards to employees of our company or any of our subsidiaries.
Vesting Schedule. Unless otherwise stated in respective grants, subject to forfeiture and arrangement on termination of employment or service, 25% of the share
options shall be vested at the one-year anniversary of the grant date and 1/36 of the remaining 75% of the shares options shall be vested per month thereafter. In the event a
take-over offer is made to our ordinary shares, we will use our best endeavors to procure that such take-over offer be extended to any ordinary shares that may be allotted
pursuant to the exercise of unexercised share options.
Exercise of Options. Vested options will become exercisable during the first five business days of January, April, July and October until the termination date of the
2018 Plan, subject to other terms and conditions provided in the relevant award agreements. Once all the preconditions are met, a participant may exercise options in whole
or in part by giving written notice of exercise to us specifying information such as the number of shares to be purchased.
110
Transfer Restrictions. The participant will not be permitted to transfer, assign, dispose of, or create or purport to create any encumbrances over any option. In
principle, all options shall be exercisable only by the participants. Any such transfer, assignment, disposal or encumbrance or purported encumbrance shall result in the
automatic cancellation of the option.
Termination and amendment of the 2018 Plan. Our board of directors may amend or discontinue the 2018 Plan, provided that such amendment or termination shall
not impair the rights of a participant under any award without such participant’s consent.
The following table summarizes, as of March 31, 2022, the outstanding options granted under the 2018 Plan to our directors, executive officers and other grantees.
Name
Jian Tang
Other grantees
*
Less than 1% of our total outstanding ordinary shares.
2017 and 2018 Performance-Based Incentive Shares
Ordinary Shares
Underlying
Outstanding
Options
Exercise Price
(US$/Share)
0.2687—4.0304
0.3224—20.0000
Grant Date
August 1, 2015
August 18, 2014 to
July 1, 2017
*
*
Expiration Date
August 1, 2025
April 13, 2022 to
April 1, 2027
In December 2016, our board of directors and shareholders authorized the issuance of 1,068,114 ordinary shares to Mr. Jian Tang and certain other employees in
China upon the fulfillment of certain performance conditions in 2017, and the issuance of 801,086 ordinary shares to Mr. Jian Tang and certain other employees in China
upon the fulfillment of certain performance conditions in 2018.
Since the performance conditions were not fulfilled in 2017 and 2018, the 1,068,114 and 801,086 ordinary shares were not issued to Mr. Jian Tang and certain other
employees.
Post-IPO Plan
Under our Post-IPO Plan, previously named as 2017 Share Incentive Plan, which became effective in December 2017, is to promote the success of our business. On
September 22, 2018, August 31, 2020, February 26, 2021 and December 31, 2021, our board of directors approved an increase of 1,500,000 Class A ordinary shares,
1,000,000 Class A ordinary shares, 1,000,000 Class A ordinary shares, and 1,500,000 Class A ordinary shares, respectively, to the award pool under the Post-IPO Plan. As a
result, the maximum number of ordinary shares which may be issued pursuant to all awards under the Post-IPO Plan will initially be 6,000,000 Class A ordinary shares, plus
an annual increase on the first day of each of our fiscal year during the term of the Post-IPO Plan commencing with the fiscal year beginning January 1, 2018, by an amount
equal to the least of (i) 0.5% of the total number of Class A ordinary shares issued and outstanding on the last day of the immediately preceding fiscal year; (ii) 150,000
Class A ordinary shares or (iii) such number of Class A ordinary shares as may be determined by our board of directors. All of such shares will be Class A ordinary shares.
As of March 31, 2022, the award pool under the Post-IPO Plan is 6,641,374 Class A ordinary shares. As of March 31, 2022, 697,397 Class A ordinary shares are
outstanding under our Post-IPO Plan, representing the shares underlying the unvested 697,397 restricted Class A ordinary shares units.
The following paragraphs describe the principal terms of the Post-IPO Plan.
Types of Awards. The Post-IPO Plan permits the awards of options, restricted shares and restricted share units.
Plan Administration. Our board of directors or a committee of one or more members of the board of directors will administer the Post-IPO Plan. The committee or
the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and
conditions of each award grant.
Award Agreement. Awards granted under the Post-IPO Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award,
which may include the term of the award, the provisions applicable in the event of the grantee’s employment or service terminates, and our authority to unilaterally or
bilaterally amend, modify, suspend, cancel or rescind the award.
111
Eligibility. We may grant awards to our employees, directors and consultants of our company. However, we may grant options that are intended to qualify as
incentive share options only to our employees and employees of our parent companies and subsidiaries.
Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.
Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will
expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is ten years from the date of a
grant.
Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than by will or the laws of descent and distribution, except as otherwise
provided by the plan administrator.
Termination and amendment of the Post-IPO Plan. Unless terminated earlier, the Post-IPO Plan has a term often years. Our board of directors has the authority to
amend or terminate the plan subject to shareholder approval to the extent necessary to comply with applicable law. Shareholder approval is required for any amendment to
the Post-IPO Plan that (i) increases the number of shares available under the Post-IPO Plan, or (ii) permits the plan administrator to extend the term of the Post-IPO Plan or
the exercise period for an option beyond ten years from the date of grant.
C.
Board Practices
Our board of directors consists of seven directors, including executive directors and non-executive directors. Pursuant to our ninth amended and restated
memorandum and articles of association, the size of our board of directors shall be limited to nine. Please refer to “Item 3. Key Information—D. Risk Factors—Risks
Related to Our American Depositary Shares—As a company incorporated in the Cayman Islands, we will adopt certain home country practices in relation to corporate
governance matters that differ significantly from the NASDAQ corporate governance requirements; these practices may afford less protection to shareholders than they
would enjoy if we complied fully with the NASDAQ corporate governance requirements.” The powers and duties of our directors include convening general meetings and
reporting our board’s work at our shareholders’ meetings, declaring dividends and distributions, determining our business and investment plans, appointing officers and
determining the term of office of the officers, preparing our annual financial budgets and financial reports, formulating proposals for the increase or reduction of our
authorized capital as well as exercising other powers, functions and duties as conferred by our articles of association. Our directors may exercise all the powers of our
company to borrow money, mortgage its business, property and uncalled capital and issue debentures or other securities whenever money is borrowed or as security for any
obligation of our company or of any third party. None of our non- executive directors has a service contract with us that provides for benefits upon termination of service.
A director may vote in respect of any contract or proposed contract or arrangement notwithstanding 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 meeting of the directors at which any such contract or proposed contract or arrangement is considered. A director
who is in any way, whether directly or indirectly, interested in a contract or proposed contract with us is required to declare the nature of his interest at a meeting of our
directors. A general notice given to the directors by any director to the effect that he is a member, shareholder, director, partner, officer or employee of any specified
company or firm and is to be regarded as interested in any contract or transaction with that company or firm shall be deemed a sufficient declaration of interest for the
purposes of voting on a resolution in respect to a contract or transaction in which he has an interest, and after such general notice it shall not be necessary to give special
notice relating to any particular transaction.
Committees of the Board of Directors
We are a foreign private issuer (as such term is defined in Rule 3b-4 under the Exchange Act), and our ADSs are listed on the NASDAQ Global Market. Under
Section 5615 of the NASDAQ Stock Market Rules, NASDAQ-listed companies that are foreign private issuers are permitted to follow home country practice in lieu of the
corporate governance provisions specified by NASDAQ with limited exceptions. Please refer to “Item 3. Key Information—D. Risk Factors—Risks Related to Our
American Depositary Shares—As a company incorporated in the Cayman Islands, we will adopt certain home country practices in relation to corporate governance matters
that differ significantly from the NASDAQ corporate governance requirements; these practices may afford less protection to shareholders than they would enjoy if we
complied fully with the NASDAQ corporate governance requirements.” We have established an audit committee, a compensation committee, and a corporate governance
and nominating committee under the board of directors. We have adopted a charter for each of the three committees. Each committee’s members and functions are described
below.
112
Audit Committee Our audit committee consists of Matthew Chu Pong Fong, Lub Bun Chong, and Dylan Huang, and is chaired by Matthew Chu Pong Fong. Lub
Bun Chong, Matthew Chu Pong Fong and Dylan Huang each satisfy the “independence” requirements of the Rule 5605(a)(2) of the Listing Rules of the NASDAQ Stock
Market and meet the independence standards under Rule 10A-3 under the Exchange Act. We have determined that each of Matthew Chu Pong Fong, and Lub Bun Chong
qualify as “audit committee financial expert.” 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:
•
•
•
•
•
•
•
•
selecting the independent registered public accounting firm and pre-screening all auditing and non-auditing services permitted to be performed by the
independent registered public accounting firm;
reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response;
reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;
discussing the annual audited financial statements with management and the independent registered public accounting firm;
reviewing major issues as to the adequacy of our internal controls and any special audit steps adopted in light of material control deficiencies;
annually reviewing and reassessing the adequacy of our audit committee charter;
meeting separately and periodically with management and the independent registered public accounting firm; and
reporting regularly to the board of directors.
Compensation Committee Our compensation committee consists of Dylan Huang, Wing Hong Sammy Hsieh and Jian Tang, and is chaired by Dylan Huang. Dylan
Huang satisfies the “independence” requirements of the Listing Rules of the NASDAQ Stock Market. The compensation committee will assist the board 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 upon. The compensation committee is responsible for, among other things:
•
•
•
reviewing the total compensation package for our executive officers and making recommendations to the board with respect to it;
reviewing the compensation of our directors and making recommendations to the board with respect to it; and
periodically reviewing and approving any long-term incentive compensation or equity plans, programs or similar arrangements, annual bonuses, and
employee pension and welfare benefit plans.
Corporate Governance and Nominating Committee Our corporate governance and nominating committee consists of Philip Kan, Wing Hong Sammy Hsieh and
Jian Tang, and is chaired by Philip Kan. Philip Kan satisfies the “independence” requirements of the Listing Rules of the NASDAQ Stock Market. The corporate governance
and nominating committee will assist the board in selecting individuals qualified to become our directors and in determining the composition of the board and its
committees. The corporate governance and nominating committee will be responsible for, among other things:
•
•
•
recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board;
reviewing annually with the board the current composition of the board with regards to characteristics such as independence, age, skills, experience and
availability of service to us; and
monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper
compliance.
Duties of Directors
Under Cayman Islands law, our directors have a common law duty to act honestly in good faith with a view to our best interests and for a proper purpose. Our
directors also have a duty to exercise the skill they actually possess with the care and diligence that a reasonably prudent person would exercise in comparable
circumstances. In fulfilling their duty of care to us, our
113
directors must ensure compliance with our memorandum and articles of association. We have the right to seek damages if a duty owed by our directors is breached. In
limited exceptional circumstances, a shareholder may have the right to seek damages in our name if a duty owed by our directors is breached.
Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers of our board of
directors include, among others:
•
•
•
•
•
•
•
convening general meetings and reporting our board’s work at our shareholders’ meetings;
declaring dividends and distributions;
determining our business and investment plans;
appointing officers and determining the term of office of the officers;
preparing our annual financial budgets and financial reports;
formulating proposals for the increase or reduction of our authorized capital; and
exercising other powers, functions and duties as conferred by our articles of association.
Our directors may exercise all the powers of our company to borrow money, mortgage its business, property and uncalled capital and issue debentures or other
securities whenever money is borrowed or as security for any obligation of our company or of any third party.
Terms of Directors and Officers
Pursuant to our ninth amended and restated memorandum and articles of association, our board of directors shall have the power from time to time and at any time to
appoint any person as a director to fill a casual vacancy on the board or as an addition to the existing board (subject to the maximum size limit). Any director so appointed by
the board shall hold office only until the next following annual general meeting and shall then be eligible for re-election. Our directors will not be subject to a term of office
and will hold their offices until such time as they are removed from office by an ordinary resolution of our shareholders with or without cause, or by the board of directors
for cause. “Cause” shall mean a conviction for a criminal offence involving dishonesty or engaging in conduct which brings the director or us into disrepute or which results
in material financial detriment to us. In addition, the office of any of our directors shall be vacated if the director (a) resigns his office by notice in writing to our company;
(b) becomes of unsound mind or dies; (c) without special leave of absence from our board of directors, is absent from meetings of the board for six consecutive months and
the board of directors resolves that his office be vacates; (d) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his
creditors; (e) is prohibited by law from being a director; or (f) ceases to be a director by virtue of any provision of the Statutes or is removed from office pursuant to our
memorandum and articles of association.
Pursuant to our ninth amended and restated memorandum and articles of association, any removal or appointment of chairman of the board is subject to shareholder
approval by ordinary resolution.
D.
Employees
Employees
As of December 31, 2019, 2020 and 2021, we had a total of 884, 1,145 and 1,192 employees, respectively. The table below provides a breakdown of our employees
by function as of December 31, 2021:
Product, technology and data engineering
Sales, business development and account management
General and administrative
Total
Number of
employees
% of Total
499
550
143
1,192
42
46
12
100
As of December 31, 2021, we had a total of 1,192 employees, increased by 4% from 1,145 as of December 31, 2020. The increase primarily resulted from the
increase in headcount for product, technology and data engineering function, as we continuously expand and develop our solutions.
114
We enter into standard labor contracts and confidentiality agreements with our management and employees. Our success depends on our ability to attract, retain and
motivate qualified personnel. We believe we offer our employees competitive compensation packages and an environment that encourages initiative and self-development.
We provide specific training to new employees at orientation to familiarize them with our working environment and operational procedures. We also design and implement
in-house training programs tailored to each job function and set of responsibilities to enhance performance. As a result, we have generally been able to attract and retain
qualified personnel and maintain a stable core management team.
In addition to salaries and benefits, we provide commission-based compensation for our sales force and performance-based bonuses for other employees. We also
allow many of our employees to participate in share-based incentive plans to align their interests more closely with those of our shareholders. As required by regulations in
China, we participate in various employee social security plans that are administered by municipal and provincial governments, including housing, pension, medical
insurance and unemployment insurance plans. We are required under PRC law to make contributions to employee benefit plans at specified percentages of the salaries,
bonuses and certain allowances of our employees, up to a maximum amount specified by the local governments from time to time.
We believe that our working environment and the support and benefits provided to our employees have contributed to maintaining good working relationships with
our employees. None of our employees are represented by labor unions.
E.
Share Ownership
The 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 more than 5% of our total outstanding shares.
As of March 31, 2022, there were 49,484,241 ordinary shares outstanding, par value $0.001 per share, being the sum of 44,449,814 Class A ordinary shares and
5,034,427 Class B ordinary shares. The calculations in the table below are based on 48,113,683 ordinary shares outstanding as of March 31, 2022, comprising (i) 43,079,256
Class A ordinary shares, excluding (x) the 1,093,585.5 Class A ordinary shares held by Arda Holdings Limited underlying the options granted but not yet exercised (whether
or not they are vested) and the options reserved for issuance under our 2018 Plan, and (y) the 276,972.5 Class A ordinary shares held by JPMorgan Chase Bank N.A., our
depositary, underlying the unvested restricted Class A ordinary shares units under our Post-IPO Plan, and (ii) 5,034,427 Class B ordinary shares outstanding.
115
Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and
the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days as of March 31, 2022, including through the exercise
of any option, warrant or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any
other person.
Directors and Executive Officers:
Wing Hong Sammy Hsieh(1)
Jian Tang(2)
Lub Bun Chong
Matthew Chu Pong Fong
Dylan Huang
Philip Kan
David Zhang
All directors and executive officers as a group
Principal Shareholders:
Bubinga Holdings Limited(1)
Igomax Inc.(3)
Baozun Inc.(4)
Creative Big Limited(5)
Integrated Asset Management (Asia) Ltd.(6)
Marine Central Limited(7)
Ordinary Shares Beneficially Owned
Class A
Ordinary
Shares
Number
Class B
Ordinary
Shares
Number
Total Ordinary Shares
Number
%
Aggregate
Voting
Power %
241,294
424,207
(i)
(i)
(i)
(i)
(i)
690,001
—
396,294
1,235,734
3,589,744
3,282,453
2,564,103
2,282,815
2,102,263
—
—
—
—
—
4,385,078
2,282,815
2,102,263
649,349
—
—
2,524,109
2,526,470
(i)
(i)
(i)
(i)
(i)
5,075,079
2,282,815
2,498,557
1,885,083
3,589,744
3,282,453
2,564,103
5.2%
5.3%
(i)%
(i)%
(i)%
(i)%
(i)%
10.5%
4.7%
5.2%
4.0%
7.5%
6.8
5.3%
31.9%
29.5%
(i)%
(i)%
(i)%
(i)%
(i)%
61.5%
31.8%
29.5%
10.0%
2.5%
2.3%
1.8%
Notes:
(i)
††
††
Less than 1% of our total outstanding shares.
For each person and group included in this column, percentage ownership is calculated by dividing the number of ordinary shares beneficially owned by such person
or group, including shares that such person or group has the right to acquire within 60 days of March 31, 2022, by the sum of (1) 48,113,683, which is the total
number of ordinary shares outstanding as of March 31, 2022; and (2) the number of ordinary shares that such person or group has the right to acquire within 60 days
of March 31, 2022.
For each person and group included in this column, percentage of voting power is calculated by dividing the voting power beneficially owned by such person or
group by the voting power of all of our Class A and Class B ordinary shares as a single class. Each holder of Class A ordinary shares is entitled to one vote per share
and each holder of our Class B ordinary shares is entitled to 20 votes per share on all matters submitted to them for a vote. Our Class A ordinary shares and Class B
ordinary shares vote together as a single class on all matters submitted to a vote of our shareholders, except as may otherwise be required by law. Our Class B
ordinary shares are convertible at any time by the holder thereof into Class A ordinary shares on a one-for-one basis.
(1) Represents (a) 2,282,815 Class B ordinary shares held by Bubinga Holdings Limited, a British Virgin Islands company wholly owned by Mr. Wing Hong Sammy
Hsieh, and (b) 241,294 Class A ordinary shares held by Mr. Hsieh. The registered office address of Bubinga Holdings Limited is Vistra Corporate Services
Centre, Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands. The address of Mr. Wing Hong Sammy Hsieh is 15/F, Prosperity Millennia Plaza,
663 King’s Road, Quarry Bay, Hong Kong S.A.R.
(2) Represents (a) 2,102,263 Class B ordinary shares held by Igomax Inc., a British Virgin Islands company wholly owned by Mr. Jian Tang, (b) 27,913 Class A
ordinary shares that are issuable upon exercise of options held in trust by Mr. Tang on behalf of certain consultants of OptAim, and (c) 396,294 Class A ordinary
shares held by Igomax Inc..
116
(3) Represents (a) 2,102,263 Class B ordinary shares held by Igomax Inc., a British Virgin Islands company wholly owned by Mr. Jian Tang, and (b) 396,294 Class
A ordinary shares held by Igomax Inc..
(4) Represents (a) 1,235,734 Class A ordinary shares in the form of 2,471,468 ADSs and (b) 649,349 Class B ordinary shares, as reported in the press release
contained in the Form 6-K, which was furnished by us to the SEC on January 26, 2021.
(5) Represents 3,589,744 Class A ordinary shares held by Creative Big Limited, as reported in the Schedule 13G filed by Creative Big Limited on March 5, 2020.
Creative Big Limited is a company incorporated in the British Virgin Islands. These ordinary shares were issued for acquisition of Optimal Power Limited. Mr.
Kenny Sin Nang Chiu is the sole shareholder and the sole director of Creative Big Limited. The principal business office of Creative Big Limited is Flat 23B,
Block 6, Hanley Villa, 22 Yau Lai Road, Yau Kom Tau, Tsuen Wan, Hong Kong S.A.R.
(6) Represents 3,282,453 Class A ordinary shares directly held by Integrated Asset Management (Asia) Ltd., a company incorporated in the British Virgin Island, as
reported in the Schedule 13G/A filed by Integrated Asset Management (Asia) Ltd. on February 14, 2022. Mr. Yam Tak Cheung is the sole shareholder and the
sole director of Integrated Asset Management (Asia) Ltd. The principal business office of Integrated Asset Management (Asia) Ltd. is 21/F, 88 Gloucester Road,
Wan Chai, Hong Kong S.A.R.
(7) Represents 2,564,103 Class A ordinary shares held by Marine Central Limited, as reported in the Schedule 13G filed by Marine Central Limited on May 6, 2020.
Mr. Jianjun Huang is the majority shareholder and the sole director of Marine Central Limited, who possesses power to direct the voting and disposition of the
shares beneficially owned by Marine Central Limited.
To our knowledge, as of March 31, 2022, 39,837,472, or 82.8% of our ordinary shares were held by one record holder in the United States, which was JPMorgan
Chase Bank, N.A., the depositary of our ADS program. The number of beneficial owners of our ADSs in the United States is likely to be much larger than the number of
record holders of our ordinary shares in the United States.
We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.
117
ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
A.
Major Shareholders
Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”
B.
Related Party Transactions
There were no transactions nor balances with related parties as of and for the years ended December 31, 2019, 2020 and 2021.
Contractual Arrangements with our Variable Interest Entity and its Shareholder
See “Item 4. Information on the Company—C. Organizational Structure.”
Shareholders Agreement
We entered into a fourth amended and restated shareholders agreement on December 28, 2016 with our shareholders, which consist of holders of our ordinary shares,
series A preferred shares, series B preferred shares, series C preferred shares, series D preferred shares and series E preferred shares.
The shareholders agreement provides for certain shareholders rights. Except for the registration rights described below, all the shareholders’ rights under the
shareholders agreement automatically terminated upon completion of our initial public offering.
Set forth below is a description of the registration rights granted under the agreement.
Demand Registration Rights. Holders of at least 25% of the registrable securities, which include our ordinary shares issued or issuable to certain ordinary
shareholders, ordinary shares issued or to be issued upon conversion of our preferred shares, ordinary shares issued as a dividend of our preferred shares, or ordinary shares
owned or acquired by purchasers of our preferred shares, may, at any time, request registration of their shares and we will use our reasonable best efforts to cause such shares
to be registered. We, however, are not obligated to effect a demand registration if we have already effected three demand registrations. We also have the right to defer the
filing of a registration statement for up to forty-five days on any one occasion or for up to a total of ninety days during any twelve month period if our board of directors
determines in good faith that the registration at such time would be materially detrimental to us and our shareholders, provided that we may not register any securities for our
own account or any other person within such period other than pursuant to a registration statement relating to the sale of securities pursuant to our share incentive plan,
relating to a corporate reorganization or other transaction under Rule 145 of the Securities Act, a registration on any form that does not include substantially the same
information as would be required to be included in a registration statement covering the sale of the registrable securities, or a registration in which the only ordinary shares
being registered are ordinary shares issuable upon conversion of debt securities that are also being registered.
Form F-3 Registration Rights. When we are eligible for registration on Form F-3, upon a written request from any holder of the registrable securities then
outstanding, we must promptly file a registration statement on Form F-3 covering the offer and sale of the registrable securities by the requesting shareholders and other
holders of registrable securities who choose to participate in the offering upon notice. We, however, are not obligated to effect more than two such Form F-3 registrations
that have been declared and ordered effective within any twelve-month period.
Piggyback Registration Rights. If we propose to file a registration statement for a public offering for our own account or for the account of holder of equity
securities, other than pursuant to a registration statement relating to the sale of securities pursuant to our share incentive plan, relating to a corporate reorganization or other
transaction under Rule 145 of the Securities Act, a registration on any form that does not include substantially the same information as would be required to be included in a
registration statement covering the sale of the registrable securities, or a registration in which the only ordinary shares being registered are ordinary shares issuable upon
conversion of debt securities that are also being registered, then we must offer holders of our registrable securities an opportunity to include in this registration all or any part
of their registrable securities.
Underwritten Offering. The underwriters of any underwritten offering may in good faith request a reduction in the number of shares offered by reducing the number
to be satisfactory to the underwriter in the following order: (i) if the offering is our IPO, exclude from the underwritten offering all of the registrable securities (so long as the
only securities included in such offering are those sold for our own account) or (ii) otherwise exclude up to twenty-five percent (25%) of the registrable securities requested
to
118
be registered but only after first excluding all other equity securities from the registration and underwritten offering and so long as the number of shares to be included in the
registration on behalf of the non-excluded holders is allocated among all holders in proportion, as nearly as practicable, to the respective amounts of registrable securities
requested by such holders to be included.
Expenses of Registration. We will pay all expenses incurred in complying with the terms of the registration rights provisions, other than the underwriting discounts
and commissions applicable to the sale of registrable securities pursuant to the registration rights provisions (which shall be borne by the holders requesting registration on a
pro rata basis in proportion to their respective numbers of registrable securities sold in such registration), provided that expenses for a demand or F-3 registration withdrawn
at the request of a majority of holders of registrable securities shall be borne by the withdrawing shareholders unless such withdrawal is due to our action or inaction or an
event outside of the reasonable control of such holders.
Termination of Obligations. The registration rights set forth above shall terminate on the later of (i) the date that is five years from the date of closing of a qualified initial
public offering and (ii) with respect to any holder, the date on which such holder may sell all of their registrable securities under Rule 144 of the Securities Act in any ninety-
day period.
Share Issuance to Baozun Inc. and Strategic Business Cooperation
Share Subscription Agreement
In January 2021, we issued 649,349 Class B ordinary shares to Baozun at an aggregate subscription price of approximately US$17.2 million pursuant to an share
subscription agreement. Baozun is subject to a 180-day lock-up period on the above shares subscribed from us.
Strategic Cooperation Framework Agreement
In January 2021, we have entered into a strategic cooperation framework agreement with Baozun, pursuant to which both parties will collaborate in developing a
full-cycle, closed-loop e-commerce service model, covering areas such as system development, IT services, digital marketing, store operation, customer services and
warehousing and fulfillment services to better serve potential brand partners.
Registration Rights Agreement
In January 2021, we have also entered into a registration rights agreement with Baozun. Set forth below is a description of the registration rights granted under the
registration rights agreement.
Demand registration. Holders of at least 5% of the voting power of the then outstanding shares, may, at any time, request registration of their shares and we will use
our reasonable best efforts to cause such shares to be registered. We, however, are not obligated to effect a demand registration if we have already effected two demand
registrations. We also have the right to defer the filing of a registration statement for up to forty-five days on any one occasion or for up to a total of ninety days during any
twelve month period if our board of directors determines in good faith that the registration at such time would be materially detrimental to us and our shareholders, provided
that we may not register any securities for our own account or any other person within such period other than pursuant to a registration statement relating to the sale of
securities pursuant to our share incentive plan, relating to a corporate reorganization or other transaction under Rule 145 of the Securities Act, a registration on any form that
does not include substantially the same information as would be required to be included in a registration statement covering the sale of the registrable securities, or a
registration in which the only ordinary shares being registered are ordinary shares issuable upon conversion of debt securities that are also being registered.
Form F-3 Registration Rights. When we are eligible for registration on Form F-3, upon a written request from any holder of the registrable securities then
outstanding, we must promptly file a registration statement on Form F-3 covering the offer and sale of the registrable securities by the requesting shareholders and other
holders of registrable securities who choose to participate in the offering upon notice. We, however, are not obligated to effect more than two such Form F-3 registrations
that have been declared and ordered effective within any twelve-month period.
Piggyback Registration Rights. If we propose to file a registration statement for a public offering for our own account or for the account of holder of equity
securities, other than pursuant to a registration statement relating to the sale of securities pursuant to our share incentive plan, relating to a corporate reorganization or other
transaction under Rule 145 of the Securities Act, a registration on any form that does not include substantially the same information as would be required to be included in a
registration statement covering the sale of the registrable securities, or a registration in which the only ordinary shares being
119
registered are ordinary shares issuable upon conversion of debt securities that are also being registered, then we must offer holders of our registrable securities an opportunity
to include in this registration all or any part of their registrable securities.
Underwritten Offering. If the managing underwriters of any underwritten offering advises us in writing that, in its opinion, the number of securities to be included in
such offering is greater than the total number of securities which can be sold therein without having a material adverse effect on the distribution of such securities or
otherwise having a material adverse effect on the marketability thereof, or the “Maximum Number of Securities,” then we shall include in such registration the registrable
securities that the participating holders have requested to be registered thereunder only to the extent the number of such registrable securities does not exceed the Maximum
Number of Securities. If such amount exceeds the Maximum Number of Securities, the number of registrable securities included in such Registration shall be allocated
among all the participating holders on a pro rata basis (based on the number of registrable securities held by each participating holder). If the amount of such registrable
securities does not exceed the Maximum Number of Securities, we may include in such Registration any ordinary shares of our company and other ordinary shares held by
other security holders of us, as we may in our discretion determine or be obligated to allow, in an amount which together with the registrable securities included in such
Registration shall not exceed the Maximum Number of Securities.
Expenses of Registration. We will pay all expenses incurred in complying with the terms of the registration rights provisions, other than the underwriting discounts
and commissions applicable to the sale of registrable securities pursuant to the registration rights provisions (which shall be borne by the holders requesting registration on a
pro rata basis in proportion to their respective numbers of registrable securities sold in such registration), provided that expenses for a demand or F-3 registration withdrawn
at the request of a majority of holders of registrable securities shall be borne by the withdrawing shareholders unless such withdrawal is due to our action or inaction or an
event outside of the reasonable control of such holders.
Termination of Obligations. The registration rights set forth above shall terminate with respect to any holder, the date on which such holder and its permitted
transferee hold less than 5% of the voting power of the then outstanding shares of our company.
Employment Agreements and Indemnification Agreements
See “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management—Employment Agreements and Indemnification Agreements
with Executive Officers.”
Share Incentive Plan
See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Share Incentive Plans.”
C.
Interests of Experts and Counsel
Not applicable.
ITEM 8.FINANCIAL INFORMATION
A.
Consolidated Statements and Other Financial Information
We have appended consolidated financial statements filed as part of this annual report.
Legal and Administrative Proceedings
Other than as disclosed in this annual report, we are not presently a party to any legal or administrative proceedings or claims that, if determined adversely to us,
would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. Regardless of the outcome,
litigation or any other legal or administrative proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of management
resources and other factors.
Dividend Policy and Dividend Distribution
Our board of directors has discretion as to whether to distribute dividends, subject to applicable laws. In addition, our shareholders may, by ordinary resolution,
declare a dividend, but no dividend may exceed the amount recommended by our
120
directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend on its shares out of either profit or share premium amount, provided that in 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 course of business. Even if our board
of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general
financial condition, contractual restrictions and other factors that the board of directors may deem relevant.
We have not previously declared or paid cash dividends and we do not currently plan to declare or pay any dividends in the near future on our shares or ADSs. We
currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.
We are an exempted limited liability company, used as a holding company incorporated in the Cayman Islands. We rely principally on dividends from our PRC
subsidiaries, VIE and its subsidiary for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC
subsidiaries to pay dividends to us. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Dividend Distribution.”
If we pay any dividends, we will pay our ADS holders to the same extent as holders of our ordinary shares, subject to the terms of the deposit agreement, including
the fees and expenses payable thereunder. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.
B.
Significant Changes
Except as disclosed elsewhere in this annual report, we have not experienced any significant changes since the date of our audited consolidated financial statements
included in this annual report.
ITEM 9.THE OFFER AND LISTING
A.
Offering and Listing Details
Not Applicable.
B.
Plan of Distribution
Not Applicable.
C.
Markets
Our ADSs, two ADSs representing one Class A ordinary share, have been listed on the Nasdaq Global Market since December 21, 2017.
D.
Selling Shareholders
Not Applicable.
E.
Dilution
Not Applicable.
F.
Expenses of the Issue
Not Applicable.
121
ITEM 10.ADDITIONAL INFORMATION
A.
Share Capital
Not Applicable.
B.
Memorandum and Articles of Association
In December 2018, the shareholders of our company approved a special resolution to delete certain provisions of our articles of association which can be more
efficiently dealt with through our website and with public filings, and to adopt the ninth amended and restated memorandum an articles of association reflecting such
changes. The following are summaries of material provisions of our ninth amended and restated memorandum and articles of association, as well as the Companies Act
(Revised) insofar as they relate to the material terms of our ordinary shares.
Objects of Our Company. Under our ninth amended and restated memorandum and articles of association, the objects of our company are 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 issued in registered form and are issued when registered in our register of members. Our shareholders who are non-
residents of the Cayman Islands may freely hold and vote their shares.
Register of Members. Under Cayman Islands law, we must keep a register of members and there should be entered therein:
(a)
(b)
(c)
(d)
the names and addresses of the members;
a statement of the shares held by each member, and the statement shall:
i.
ii.
iii.
confirm the amount paid or agreed to be considered as paid on the shares of each member;
confirm the number and category of shares held by each member;
confirm whether each relevant category of shares held by a member carries voting rights under our current memorandum and articles of association,
and if so, whether such voting rights are conditional;
the date on which the name of any person was entered on the register as a member; and
the date on which any person ceased to be a member.
Under Cayman Islands law, the register of members of our company is prima facie evidence of the matters set out therein (i.e. the register of members will raise a
presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members should be deemed as a matter of Cayman Islands
law to have legal title to the shares as set against its name in the register of members. Upon the closing of our initial public offering, the register of members should be
immediately updated to record and give effect to the issue of shares by us to the Depositary (or its nominee) as the depositary. Once our register of members has been
updated, the shareholders recorded in the register of members should be deemed to have legal title to the shares set against their name.
If the name of any person is incorrectly entered in or omitted from our register of members, or if there is any default or unnecessary delay in entering on the register
the fact of any person having ceased to be a member of our company, the person or member aggrieved (or any member of our company or our company itself) may apply to
the Cayman Islands Grand Court for an order that the register be rectified, and the Court may either refuse such application or it may, if satisfied of the justice of the case,
make an order for the rectification of the register.
Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. In addition, our shareholders may by
ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our directors. Under Cayman Islands law, dividends may be declared and
paid only out of funds legally available therefor, namely out of either profit or our share premium account, and provided further that a dividend may not 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. Our share capital is currently divided into Class A ordinary shares and Class B ordinary shares. On a show of hands each shareholder is entitled to one
vote or, on a poll, each Class A ordinary share shall be entitled to one (1) vote on all matters subject to vote at general meetings of the Company, and each Class B ordinary
share shall be entitled to twenty (20)
122
votes on all matters subject to vote at general meetings of the Company. Unless otherwise required under the laws of the Cayman Islands, Class A ordinary shares and Class
B ordinary shares shall vote together as a single class.
Voting at any meeting of shareholders is by way of a poll, unless the chairman allows a vote by show of hands on a resolution which relates purely to a procedural or
administrative matter. Procedural and administrative matters are those that are not on the agenda of the general meeting and relate to the chairman’s duties to maintain the
orderly conduct of the meeting or allow the business of the meeting to be properly and effectively dealt with, while affording all shareholders a reasonable opportunity to
express their views.
A quorum required for a meeting of shareholders consists of two shareholders entitled to vote present in person or by proxy or, if the shareholder is a legal entity, by
its duly authorized representative. A majority of the board or the chairman of the board may call extraordinary general meetings, which extraordinary general meetings shall
be held at such times and locations (as permitted hereby) as such person or persons shall determine. Advance notice of at least ten clear days is required for the convening of
our annual general shareholders’ meeting and any other general shareholders’ meeting.
An ordinary resolution to be passed by the shareholders requires the affirmative vote of a simple majority of votes attached to the ordinary shares cast in a general
meeting, while a special resolution requires the affirmative vote of no less than two-thirds of votes cast attached to the ordinary shares. Both ordinary resolutions and special
resolutions may also be passed by unanimous written resolutions signed by all the shareholders of our company, as permitted by the Companies Act and our ninth amended
and restated memorandum and articles of association. An ordinary resolution will be required for important matters including appointment or removal of the chairman of the
board of directors, or removal of any directors (other than “for cause”), etc. A special resolution will be required for fundamental matters including a change of control event,
and statutory matters such as merger, a change of name, making changes to our memorandum and articles of association or other matter as required under the laws of the
Cayman Islands.
Conversion. Class B ordinary shares are convertible into Class A ordinary shares. All Class B ordinary shares are subject to automatic conversion into Class A
ordinary shares when the beneficial ownership of Class B ordinary shares is transferred to persons who are not an affiliate of the holders of the Class B ordinary shares. Each
Class B ordinary share is generally convertible into one Class A ordinary share. However, if and when the nominal amount of one Class A ordinary share changes by reason
of consolidation or sub-division, the applicable conversion rate of Class B ordinary shares into Class A ordinary shares shall equal the quotient of the revised nominal
amount, divided by the former nominal amount, of one Class A ordinary share.
Transfer of Ordinary Shares. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her ordinary shares 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 on which 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 other evidence 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 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 exceed four; and
a fee of such maximum sum as the NASDAQ may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in
respect thereof.
If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was lodged, 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 NASDAQ, be suspended and the register closed at such times and for such periods
as our board of directors may from time to time determine, provided, however,
123
that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as our board may determine.
Liquidation. On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of shares), assets available for distribution among
the holders of ordinary shares shall be distributed among the holders of our ordinary shares on a pro rata basis. If our assets available for distribution are insufficient to repay
all of the paid-up capital, the assets will be distributed so that the losses are borne by our shareholders proportionately.
Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a
notice served to such shareholders at least 14 days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid are subject to
forfeiture.
Redemption, Repurchase and Surrender of Ordinary Shares. We may issue shares on terms that such shares are subject to redemption, at our option or at the option of
the holders thereof, on such terms and in such manner as may be determined, before the issue of such shares, by our board of directors or by an ordinary resolution of our
shareholders. Our company may also repurchase any of our shares provided that the manner and terms of such purchase have been approved by our board of directors or by
ordinary resolution of our shareholders, or are otherwise authorized by our memorandum and articles of association. Under the Companies Act, the redemption or repurchase
of any share may be paid out of our company’s profits or out of the proceeds of a fresh issue of shares made for the purpose of such redemption or repurchase, or out of
capital (including share premium account and capital redemption reserve) if the company can, immediately following such payment, pay its debts as they fall due in the
ordinary course 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 redemption or
repurchase would result in there being no shares issued and outstanding, or (c) if the company has commenced liquidation. In addition, our company may accept the
surrender of any fully paid share for no consideration.
Variations of Rights of Shares. The rights attached to any class or series of shares (unless otherwise provided by the terms of issue of the shares of that class or
series) may be varied with the consent in writing of all the holders of the issued shares of that class or series or with the sanction of a special resolution passed at a separate
meeting of the holders of the shares of that class or series. The rights conferred upon the holders of the shares of any class issued 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 or issue of further shares ranking pari passu with such existing class of
shares.
Issuance of Additional Shares. Our ninth amended and restated memorandum and articles of association authorizes our board of directors to issue additional ordinary
shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.
Our ninth amended and restated memorandum and articles of association also authorizes our board of directors to establish from time to time one or more series of
preferred shares and to determine, with respect to any series of preference shares, the terms and rights of that series, including:
•
•
•
•
the designation of the series;
the number of shares of the series;
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 preferred shares without action by our shareholders to the extent authorized but unissued.
Issuance of these 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 obtain copies of our list of
shareholders or our corporate records. However, we will provide our shareholders with annual audited financial statements.
124
Anti-Takeover Provisions. Some provisions of our ninth amended and restated memorandum and articles of association may discourage, delay or prevent a change of
control 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 ninth amended and restated memorandum and
articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.
General Meetings of Shareholders and Shareholder Proposals. Our shareholders’ general meetings may be held in such place within or outside the Cayman Islands as
our board of directors considers appropriate.
As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings. Our ninth amended and restated memorandum
and articles of association provide that we shall in each year hold a general meeting as our annual general meeting.
Shareholders’ annual general meetings and any other general meetings of our shareholders may be convened by a majority of our board of directors or our chairman.
Our board of directors shall give no less than ten clear days’ written notice of a shareholders’ meeting to those persons whose names appear as members in our register of
members on the date the notice is given (or on any other date determined by our directors to be the record date for such meeting) and who are entitled to vote at the meeting.
Exempted Company. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident
companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be
registered as an exempted company. The requirements for an exempted company 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 first instance);
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.
C.
Material Contracts
We 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” and “Item 10. Additional Information—C. Material Contracts” or
elsewhere in this annual report.
D.
Exchange Controls
See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations on Foreign Exchange” and “—Regulations on Dividend
Distribution.”
125
E.
Taxation
The following summary of the material Cayman Islands, Hong Kong, the PRC and United States federal income tax consequences of an investment in our ADSs or
ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this annual report, all of which are subject to change. This summary does not
deal with all possible tax consequences relating to an investment in our ADSs or ordinary shares, such as the tax consequences under United States state or local tax laws, or
tax laws of jurisdictions other than the Cayman Islands, Hong Kong, the PRC and the United States.
Cayman Islands Taxation
The Cayman Islands currently levies no taxes on individuals 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 or our shareholders or ADS holders levied by the government of the Cayman Islands
except for stamp duties which may be applicable on instruments executed in, or brought within the jurisdiction of the Cayman Islands. The Cayman Islands is not party to
any double tax treaties that are applicable to any payments made to or by our company. There are no exchange control regulations or currency restrictions in the Cayman
Islands.
People’s Republic of China Taxation
Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de facto management body” within the
PRC is considered a resident enterprise. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and
overall management over the business, productions, personnel, accounts and properties of an enterprise. In April 2009, the SAT issued a circular, known as Circular 82,
which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in
China. Although this circular applies only to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or
foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the term “de facto management body” should be applied in determining the tax
resident status of all offshore enterprises. According to Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be
regarded as a PRC tax resident by virtue of having its “de facto management body” in China only if all of the following conditions are met: (i) the primary location of the
day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by
organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located
or maintained in the PRC; and (iv) at least 50% of voting board members or senior executives habitually reside in the PRC.
We believe that iClick Interactive Asia Group Limited is not a PRC resident enterprise for PRC tax purposes. iClick Interactive Asia Group Limited is not controlled
by a PRC enterprise or PRC enterprise group and we do not believe that iClick Interactive Asia Group Limited meets all of the conditions above. iClick Interactive Asia
Group Limited is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its 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. However, the tax resident status of
an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.”
If the PRC tax authorities determine that iClick Interactive Asia Group Limited is a PRC resident enterprise for enterprise income tax purposes, we may be required
to withhold a tax at the rate of 10% (or other preferential rates in the applicable tax treaty) from dividends we pay to our shareholders that are non-resident enterprises,
including the holders of our ADSs. In addition, non- resident enterprise shareholders (including our ADS holders) may be subject to a 10% PRC tax on gains realized on the
sale or other disposition of ADSs or ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise,
dividends paid to our non-PRC individual shareholders (including our ADS holders) and any gain realized on the transfer of ADSs or ordinary shares by such shareholders
may be subject to PRC tax at a rate of 20% (which in the case of dividends would be withheld at source) unless a reduced rate is available under an applicable tax treaty. It is
also unclear whether non- PRC shareholders of iClick Interactive Asia Group Limited would be able to claim the benefits of any tax treaties between their country of tax
residence and the PRC in the event that iClick Interactive Asia Group Limited is treated as a PRC resident enterprise.
126
According to the PRC Enterprise Income Tax Law, Law of the People’s Republic of China on the Administration of Tax Collection promulgated on April 24, 2015,
and the SAT’s Announcement on Matters Concerning Withholding of Income Tax of Non-resident Enterprises at Source promulgated on October 17, 2017, entities that have
the direct obligation to make certain payments to a non-resident enterprise should act as withholding agents for the non-resident enterprise, and such payments include:
income from equity investments (including dividends and other return on investment), interest, rents, royalties and income from assignment of property as well as other
incomes subject to enterprise income tax received by non-resident enterprises in China.
United States Federal Income Tax Considerations
The following is a summary of material U.S. federal income tax considerations that are likely to be relevant to the purchase, ownership and disposition of our
ordinary shares or ADSs by a U.S. Holder (as defined below).
This summary is based on provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and regulations, rulings and judicial interpretations thereof, in
force as of the date hereof. Those authorities may be changed at any time, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those
summarized below.
This summary is not a comprehensive discussion of all of the tax considerations that may be relevant to a particular investor’s decision to purchase, hold, or dispose
of ordinary shares or ADSs. In particular, this summary is directed only to U.S. Holders that hold ordinary shares or ADSs as capital assets and does not address all of the tax
consequences to U.S. Holders who may be subject to special tax rules, such as banks, brokers or dealers in securities or currencies, traders in securities electing to mark to
market, financial institutions, life insurance companies, tax exempt entities, partnerships (including any entities treated as partnerships for U.S. tax purposes) and the partners
therein, holders that own or are treated as owning 10% or more of our shares (measured by voting power or value), persons holding ordinary shares or ADSs as part of a
hedging or conversion transaction or a straddle, or persons whose functional currency is not the U.S. dollar. Moreover, this summary does not address state, local or non-U.S.
taxes, the U.S. federal estate and gift taxes, or the Medicare contribution tax applicable to net investment income of certain non-corporate U.S. Holders, or alternative
minimum tax consequences of acquiring, holding or disposing of ordinary shares or ADSs.
For purposes of this summary, a “U.S. Holder” is a beneficial owner of ordinary shares or ADSs that is a citizen or resident of the United States or a U.S. domestic
corporation or that otherwise is subject to U.S. federal income taxation on a net income basis in respect of such ordinary shares or ADSs.
You should consult your own tax advisors about the consequences of the acquisition, ownership and disposition of the ordinary shares or ADSs, including the relevance
to your particular situation of the considerations discussed below and any consequences arising under non-U.S., state, local or other tax laws.
ADSs
In general, if you are a U.S. Holder of ADSs, you will be treated, for U.S. federal income tax purposes, as the beneficial owner of the underlying ordinary shares that
are represented by those ADSs.
The U.S. Treasury has expressed concerns that parties to whom ADSs are released before the underlying shares are delivered to the depositary (“pre-release”), or
intermediaries in the chain of ownership between holders of ADSs and the issuer of the security underlying the ADSs, may be taking actions that are inconsistent with the
claiming of foreign tax credits by holders of ADSs. These actions would also be inconsistent with the claiming of the reduced rate of tax, described below, applicable to
dividends received by certain non-corporate holders. Accordingly, the creditability of PRC taxes, and the availability of the reduced tax rate for dividends received by certain
non-corporate U.S. Holders, each described below, could be affected by actions taken by such parties or intermediaries.
Taxation of Dividends
Subject to the discussion below under “Passive Foreign Investment Company Rules,” the gross amount of any distribution of cash or property with respect to our
ordinary shares or ADSs that is paid out of our current or accumulated earnings and profits (as determined for United States federal income tax purposes) will generally be
includible in your taxable income as ordinary dividend income on the day on which you receive the dividend, in the case of ordinary shares, or the date the depositary
receives the dividends, in the case of ADSs, and will not be eligible for the dividends-received deduction allowed to U.S. corporations under the Code.
127
We do not expect to maintain calculations of our earnings and profits in accordance with U.S. federal income tax principles.
Therefore, U.S. Holders should expect that distributions generally will be treated as dividends for U.S. federal income tax purposes.
Subject to certain exceptions for short-term positions, the dividends received by an individual with respect to the ordinary shares or ADSs will be subject to taxation
at a preferential rate if the dividends are “qualified dividends.” Dividends paid on the ordinary shares or ADSs will be treated as qualified dividends if:
•
•
the ordinary shares or ADSs are readily tradable on an established securities market in the United States or we are eligible for the benefits of a
comprehensive tax treaty with the United States that the U.S. Treasury determines is satisfactory for purposes of this provision and that includes an exchange
of information program; and
we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a PFIC.
The ADSs are listed on the NASDAQ Global Market, and will qualify as readily tradable on an established securities market in the United States so long as they are
so listed. Based on our audited financial statements, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2020 and 2021
taxable years. In addition, based on our audited financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our
income, and our market capitalization, we do not anticipate becoming a PFIC for our current taxable year or in the foreseeable future, as discussed under “Passive Foreign
Investment Company Rules.”.
Because the ordinary shares are not themselves listed on a U.S. exchange, dividends received with respect to the ordinary shares that are not represented by ADSs
may not be treated as qualified dividends. U.S. Holders of ordinary shares or ADSs should consult their own tax advisors regarding the potential availability of the reduced
dividend tax rate on shares in the light of their own particular circumstances.
In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see “Item 10. Additional Information—E. Taxation—
People’s Republic of China Taxation”), a U.S. Holder may be subject to PRC withholding taxes on dividends paid on our ADSs or ordinary shares. In that case, we may,
however, be eligible for the benefits of the Agreement Between the Government of the United States of America and the Government of the People’s Republic of China for
the Avoidance of Double Taxation and the Prevention of Tax Evasion with Respect to Taxes on Income (the “Treaty”). If we are eligible for such benefits, dividends we pay
on our ordinary shares, regardless of whether such shares are represented by the ADSs, would be eligible for the reduced rates of taxation described above. Dividend
distributions with respect to our ordinary shares or ADSs generally will be treated as “passive category” income from sources outside the United States for purposes of
determining a U.S. Holder’s U.S. foreign tax credit limitation. Subject to the limitations and conditions provided in the Code and the applicable U.S. Treasury Regulations, a
Holder may be able to claim a foreign tax credit against its U.S. federal income tax liability in respect of any PRC income taxes withheld at the appropriate rate applicable to
the U.S. Holder from a dividend paid to such U.S. Holder. As a result of recent changes to the U.S. foreign tax credit rules, for taxable years beginning after December 28,
2021, any PRC withholding tax generally will need to satisfy certain additional requirements in order to be considered a creditable tax for a U.S. Holder, except in the case of
a U.S. Holder that is eligible for, and properly claims, the benefits of the Treaty. We have not determined whether these requirements have been met, and, accordingly, no
assurance can be given that any PRC withholding tax will be creditable. Alternatively, a U.S. Holder may be able to elect to deduct PRC withholding taxes in computing
such U.S. Holder’s taxable income (provided that the U.S. Holder elects to deduct, rather than credit, all foreign income taxes paid or accrued for the relevant taxable year).
The availability and calculation of foreign tax credits and, in the case of a U.S. Holder that elects to deduct foreign taxes, the availability of deductions for foreign taxes,
involves the application of complex rules that also depend on a U.S. Holder’s particular circumstances. Accordingly, U.S. Holders are urged to consult their tax advisors
regarding the availability of the foreign tax credit or the deductibility of foreign taxes under their particular circumstances.
U.S. Holders that receive distributions of additional ADSs or ordinary shares or rights to subscribe for ADSs or ordinary shares as part of a pro rata distribution to all
our shareholders generally will not be subject to U.S. federal income tax in respect of the distributions.
128
Taxation of Dispositions of ADSs or Ordinary Shares
Subject to the discussion below under “Passive Foreign Investment Company Rules,” if a U.S. Holder realizes gain or loss on the sale, exchange or other disposition
of ADSs or ordinary shares, that gain or loss will be capital gain or loss and generally will be long-term capital gain or loss if the ADS or ordinary shares have been held for
more than one year. Long-term capital gain realized by a U.S. Holder that is an individual generally is subject to taxation at a preferential rate. The deductibility of capital
losses is subject to limitations.
Gain, if any, realized by a U.S. Holder on the sale or other disposition of the ADSs or ordinary shares generally will be treated as U.S. source income for U.S. foreign
tax credit purposes. Consequently, if a PRC withholding tax is imposed on the sale or disposition of the shares, a U.S. Holder that does not receive significant foreign source
income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of such PRC taxes. However, in the event that gain from the
disposition of the ADSs or ordinary shares is subject to tax in the PRC, we may be eligible for the benefits of the Treaty, in which case, such gain may be treated as PRC
source gain under the Treaty. In addition, as a result of recent changes to the foreign tax credit rules, for taxable years beginning after December 28, 2021, any PRC
withholding tax imposed on the sale or other disposition of the ADSs or ordinary shares is unlikely to be treated as creditable, unless the U.S. Holder is eligible for, and
properly claims, the benefits of the Treaty. U.S. Holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in,
and disposition of, the ADSs or ordinary shares.
Deposits and withdrawals of ordinary shares by U.S. Holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax
purposes.
Passive Foreign Investment Company Rules
Special U.S. tax rules apply to companies that are considered to be PFICs. We will be classified as a PFIC in a particular taxable year if either
•
•
75 percent or more of our gross income for the taxable year is passive income; or
the average percentage of the value of our assets (including assets of subsidiaries in which we own at least 25 percent of the stock) that produce or are held
for the production of passive income is at least 50 percent. Although the law in this regard is not entirely clear, we treat our consolidated variable interest
entities as being owned by us for U.S. federal income tax purposes because we control their management decisions and are entitled to substantially all of the
economic benefits associated with these entities.
We expect to derive sufficient active revenues and to have sufficient active assets, so that we will not be classified as a PFIC for the current taxable year or in the
foreseeable future. However, because the PFIC tests must be applied each year, and the composition of our income and assets and value of our assets (which may be
determined by reference to the market value of our ADSs) may change, and because the treatment of VIE for U.S. federal income tax purposes is not entirely clear, it is
possible that we may become a PFIC in the current or a future year. In the event that, contrary to our expectation, we are classified as a PFIC in any year and a U.S. Holder
does not make a mark-to-market election, as described in the following paragraph, the holder will be subject to a special tax at ordinary income tax rates on “excess
distributions,” including certain distributions by us and gain that the holder recognizes on the sale of our ordinary shares or ADSs. The amount of income tax on any excess
distributions will be increased by an interest charge to compensate for tax deferral, calculated as if the excess distributions were earned ratably over the period that the U.S.
Holder holds its ordinary shares or ADSs. Classification as a PFIC may also have other adverse tax consequences, including, in the case of individuals, the denial of a step-
up in the basis of his or her ordinary shares or ADSs at death.
A U.S. Holder can avoid the unfavorable rules described in the preceding paragraph by electing to mark its ordinary shares or ADSs to market. If the U.S. Holder
makes this mark-to-market election, the holder will be required in any year in which we are a PFIC to include as ordinary income the excess of the fair market value of the
shares at year-end over the holder’s basis in those shares. In addition, any gain the U.S. Holder recognizes upon the sale of the holder’s ADSs or ordinary shares will be
taxed as ordinary income in the year of sale.
A U.S. Holder that owns an equity interest in a PFIC must annually file IRS Form 8621. A failure to file one or more of these forms as required may toll the running
of the statute of limitations in respect of each of the U.S. Holder’s taxable years for which such form is required to be filed. As a result, the taxable years with respect to
which the U.S. Holder fails to file the form may remain open to assessment by the IRS indefinitely, until the form is filed.
129
U.S. Holders should consult their own tax advisors regarding the U.S. federal income tax considerations discussed above and the desirability of making a mark-to-
market election.
Foreign Financial Asset Reporting
Certain U.S. Holders who are individuals that own “specified foreign financial assets” with an aggregate value in excess of US$50,000 on the last day of the taxable
year or $75,000 at any time during the taxable year are generally required to file an information statement along with their tax returns, currently on Form 8938, with respect
to such assets. “Specified foreign financial assets” include any financial accounts held at a non-U.S. financial institution, as well as securities issued by a non-U.S. issuer
(which would include the ordinary shares and the ADSs) that are not held in accounts maintained by financial institutions. Higher reporting thresholds apply to certain
individuals living abroad and to certain married individuals. Regulations extend this reporting requirement to certain entities that are treated as formed or availed of to hold
direct or indirect interests in specified foreign financial assets based on certain objective criteria. U.S. Holders that fail to report the required information could be subject to
substantial penalties. In addition, the statute of limitations for assessment of tax would be suspended, in whole or part. Prospective investors should consult their own tax
advisors concerning the application of these rules to their investment in the ADSs, including the application of the rules to their particular circumstances.
Backup Withholding and Information Reporting
Dividends paid on, and proceeds from the sale or other disposition of, the ADSs or ordinary shares to a U.S. Holder generally may be subject to the information
reporting requirements of the Code and may be subject to backup withholding unless the U.S. Holder provides an accurate taxpayer identification number and makes any
other required certification or otherwise establishes an exemption. Backup withholding is not an additional tax. The amount of any backup withholding from a payment to a
U.S. Holder will be allowed as a refund or credit against the U.S. Holder’s U.S. federal income tax liability, provided the required information is furnished to the U.S.
Internal Revenue Service in a timely manner.
A holder that is a foreign corporation or a non-resident alien individual may be required to comply with certification and identification procedures in order to
establish its exemption from information reporting and backup withholding.
F.
Dividends and Paying Agents
Not applicable.
G.
Statement by Experts
Not applicable.
H.
Documents on Display
We are subject to the periodic reporting and other informational requirements of the Exchange Act. Under the Exchange Act, we are required to file reports and other
information with the SEC. Specifically, we are required to file annually a Form 20-F no later than four months after the close of each fiscal year. Copies of reports and other
information, when so filed, may be inspected without charge and may be obtained at prescribed rates at the public reference facilities maintained by the SEC at 100 F Street,
N.E., Room 1580, Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public Reference Room by calling the SEC at 1-800-SEC-
0330. The SEC also maintains a web site at www.sec.govthat contains reports, proxy and information statements, and other information regarding registrants that make
electronic filings with the SEC using its EDGAR system. As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the furnishing and
content of quarterly reports and proxy statements, and officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions
contained in Section 16 of the Exchange Act.
We will furnish JPMorgan Chase Bank, N.A., the depositary of our ADSs, with our annual reports, which will include a review 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 contained in any notice of a shareholders’ meeting received by the depositary from us.
130
I.
Subsidiary Information
For a list of our subsidiaries, see “Item 4. Information on the Company—C. Organizational Structure.”
ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Inflation
Since our inception, 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 change in the consumer price index for 2019 , 2020 and 2021 were increases of 2.9%, 2.5% and 0.9%, respectively.
Quantitative and Qualitative Disclosures about Market Risk
Foreign Exchange Risk
Foreign currency risk arises from future commercial transactions and recognized assets and liabilities. A significant portion of our revenue-generating transactions
and expense-related transactions are denominated in Renminbi, which is the functional currency of our subsidiaries, VIE and its subsidiaries in China. Our commercial
transactions outside China are primarily denominated in U.S. dollars and Hong Kong dollars, which are pegged to U.S. dollars. We do not hedge against currency risk.
The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic
conditions in China and by China’s foreign exchange policies. Accordingly, it is difficult to predict how market forces or PRC or U.S. government policy may impact the
exchange rate between the Renminbi and the U.S. dollar in the future. In addition, the PBOC may, from time to time, release policies and measures concerning the foreign
exchange market to limit fluctuations in Renminbi exchange rates and for other policy considerations.
To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of Renminbi against the U.S. dollar would reduce the Renminbi
amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary
shares or ADSs, servicing our outstanding debts, or for other business purposes, appreciation of the U.S. dollar against the Renminbi would reduce the U.S. dollar amounts
available to us. For U.S. dollars against Renminbi, there was appreciation of approximately appreciation of approximately 5.0%，appreciation of approximately 0.5% and
depreciation of approximately 7.2% in 2019, 2020 and 2021, respectively
As of December 31, 2021, we had Renminbi-denominated cash and cash equivalents, accounts receivable, prepaid cost and deferred revenue of RMB111.7 million,
RMB 1,205.2 million, RMB 229.3 million and RMB 117.9 million, respectively. We estimate that a 10% depreciation of Renminbi against the U.S. dollar based on the
foreign exchange rate on December 31, 2021 would result in a change of our holding U.S. dollar equivalents of US$1.6 million, US$17.2 million, US$3.3 million and
US$1.7 million for cash and cash equivalents, accounts receivable, prepaid cost and deferred revenue, respectively. In addition, we estimate that a 10% depreciation of
Renminbi against the U.S. dollar based on the foreign exchange rate on December 31, 2021 would result in a decrease of US$29.4 million and US$24.8 million in our net
revenues and cost of revenues in 2021.
Certain of our operating activities are transacted in HK dollars. We consider the foreign exchange risk in relation to transactions denominated in HK dollars with
respect to U.S. dollars is not significant as HK dollar is pegged to U.S. dollar.
Interest Rate Risk
Our main interest rate exposure relates to bank borrowings. We also have interest-bearing assets, including cash and cash equivalents, short-term investments and
restricted cash. We manage our interest rate exposure with a focus on reducing our overall cost of debt and exposure to changes in interest rates. 0.1% of the aggregate
principal outstanding amount of our bank borrowings as of December 31, 2021 was at floating rates.
As of December 31,2021, if interest rates increased/decreased by 1%, with all other variables having remained constant, and assuming the amount of bank
borrowings outstanding at the end of the year was outstanding for the entire year, our net loss would have been US0.001 million higher/lower, respectively. These were
mainly as a result of higher/lower interest expense for our bank borrowings at floating rates.
131
ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
A.
Debt Securities
Not applicable.
B.
Warrants and Rights
Not applicable.
C.
Other Securities
Not applicable.
D.
American Depositary Shares
Fees and Charges Our ADS Holders May Have to Pay
The depositary may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of shares, issuances in respect of share
distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger, exchange of securities or
any other transaction or event affecting the ADSs or deposited securities, and each person surrendering ADSs for withdrawal of deposited securities or whose ADRs are
cancelled or reduced for any other reason, $5.00 for each 100 ADSs (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, as the case may be. The
depositary may sell (by public or private sale) sufficient securities and property received in respect of a share distribution, rights and/or other distribution prior to such
deposit to pay such charge.
The following additional charges shall be incurred by the ADR holders, by any party depositing or withdrawing shares or by any party surrendering ADSs and/or to
whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADSs or the
deposited securities or a distribution of ADSs), whichever is applicable:
•
•
•
•
•
•
•
a fee of up to US$0.05 per ADS for any cash distribution made pursuant to the deposit agreement;
a fee of US$1.50 per ADR or ADRs for transfers of certificated or direct registration ADRs;
an aggregate fee of up to US$0.05 per ADS per calendar year (or portion thereof) for services performed by the depositary in administering the ADRs (which
fee may be charged on a periodic basis during each calendar year and shall be assessed against holders of ADRs as of the record date or record dates set by
the depositary during each calendar year and shall be payable in the manner described in the next succeeding provision);
a fee for the reimbursement of such fees, charges and expenses as are incurred by the depositary and/or any of its agents (including, without limitation, the
custodian and expenses incurred on behalf of holders in connection with compliance with foreign exchange control regulations or any law or regulation
relating to foreign investment) in connection with the servicing of the shares or other deposited securities, the sale of securities (including, without limitation,
deposited securities), the delivery of deposited securities or otherwise in connection with the depositary’s or its custodian’s compliance with applicable law,
rule or regulation (which fees and charges shall be assessed on a proportionate basis against holders as of the record date or dates set by the depositary and
shall be payable at the sole discretion of the depositary by billing such holders or by deducting such charge from one or more cash dividends or other cash
distributions);
a fee for the distribution of securities (or the sale of securities in connection with a distribution), such fee being in an amount equal to the $0.05 per ADS
issuance fee for the execution and delivery of ADSs which would have been charged as a result of the deposit of such securities (treating all such securities as
if they were shares) but which securities or the net cash proceeds from the sale thereof are instead distributed by the depositary to those holders entitled
thereto;
stock transfer or other taxes and other governmental charges;
cable, telex and facsimile transmission and delivery charges incurred at your request in connection with the deposit or delivery of shares, ADRs or deposited
securities;
132
•
•
transfer or registration fees for the registration of transfer of deposited securities on any applicable register in connection with the deposit or withdrawal of
deposited securities; and
in connection with the conversion of foreign currency into U.S. dollars, JPMorgan Chase Bank, N.A. (“JPMorgan”) shall deduct out of such foreign currency
the fees, expenses and other charges charged by it and/or its agent (which may be a division, branch or affiliate) so appointed in connection with such
conversion.
JPMorgan and/or its agent may act as principal for such conversion of foreign currency.
We will pay all other charges and expenses of the depositary and any agent of the depositary (except the custodian) pursuant to agreements from time to time
between us and the depositary. The charges described above may be amended from time to time by agreement between us and the depositary.
Fees and Other Payments Made by the Depositary to Us
The depositary may make available to us a set amount or a portion of the depositary fees charged in respect of the ADR program or otherwise upon such terms and
conditions as we and the depositary may agree from time to time. The depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing
shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The depositary collects fees for making distributions to investors by
deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The depositary may collect its annual fee for depositary
services by deduction from cash distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. The depositary
will generally set off the amounts owing from distributions made to holders of ADSs. If, however, no distribution exists and payment owing is not timely received by the
depositary, the depositary may refuse to provide any further services to holders that have not paid those fees and expenses owing until such fees and expenses have been
paid. At the discretion of the depositary, all fees and charges owing under the deposit agreement are due in advance and/or when declared owing by the depositary. For the
year ended December 31, 2021, we received US$0.4 million reimbursement, after deduction of applicable U.S. taxes, from the depositary.
133
ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
None.
PART II
ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS
A-D. Material Modifications to the Rights of Security Holders
See “Item 10. Additional Information—B. Memorandum and Articles of Association—Ordinary Shares” for a description of the rights of securities holders, which
remain unchanged.
E. Use of Proceeds
The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File No. 333-221034) in relation to our initial public
offering, which was declared effective by the SEC on December 21, 2017 and to the registration statement on Form F-3, as amended (File No. 333-232435) in relation to our
follow-on offering, which was declared effective by the SEC on July 15, 2019.
In December 2017, we completed our initial public offering, in which we issued and sold an aggregate of 3,750,000 ADSs (excluding ADSs issued upon the exercise
of the over-allotment options), representing 1,875,000 Class A ordinary shares, at an initial offering price of US$8.00 per ADS. In the same month, the underwriters of our
initial public offering exercised their over-allotment options to purchase an additional 562,500 ADSs in full. The net proceeds we received from the initial public offering
and the exercise of the over-allotment options in full totaled approximately US$27.5 million. Roth Capital Partners, LLC was the representative of the underwriters for our
initial public offering. None of the transaction expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or
more of our equity securities or our affiliates.
For the period from December 21, 2017, the date that the Form F-1 was declared effective by the SEC, to December 31, 2021, we had used the net proceeds from our
initial public offering as follows:
•
•
approximately US$12 million of the net proceeds for research and development and expansion of our suite of solutions and service offerings; and
approximately US$16 million of the net proceeds for sales and marketing.
We intend to use the remainder of the proceeds from our initial public offering, as disclosed in our registration statement on Form F-1, for (i) research and
development and expansion of our suite of solutions and service offerings, and (ii) funding our working capital and other general corporate purposes. None of the net
proceeds from the initial public offering have been paid, directly or indirectly, to any of our directors or officers or their associates, persons owning 10% or more of our
equity securities or our affiliates.
In September 2020, we completed the follow-on offering of 8,500,001 ADSs, of which 6,877,214 ADSs (excluding ADSs issued upon the exercise of the over-
allotment options), representing an aggregate of 3,438,607 Class A ordinary shares were sold by us. The net proceeds we raised from the follow-on public offering were
approximately US$53.0 million, after deducting underwriting discounts and commissions and offering expenses payable by us. BofA Securities, Inc. was the
representative of the underwriters for our follow-on offering. None of the transaction expenses included payments to directors or officers of our company or their
associates, persons owning more than 10% or more of our equity securities or our affiliates.
For the period from July 15, 2019, the date that the registration statement on Form F-3 was declared effective by the SEC, to December 31, 2021, we had used the
net proceeds from our follow-on offering as follows:
•
approximately US$45 million for working capital and other general corporate purpose and for investment, acquisition and business collaboration
opportunities that complement or enhance our existing operations and are strategically beneficial to our long-term goals.
134
None of the net proceeds from the initial public offering have been paid, directly or indirectly, to any of our directors or officers or their associates, persons
owning 10% or more of our equity securities or our affiliates. We still intend to use the remainder of the proceeds from our follow-on offering as disclosed in our
prospectus dated September 2, 2020 on Form 424B5 filed with the SEC on September 4, 2020.
ITEM 15.CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, we carried out an
evaluation of the effectiveness of our disclosure controls and procedures, which is defined in Rules 13a-15(e) of the Exchange Act, as of December 31, 2021. Based upon
that evaluation, our management, with the participation of our chief executive officer and chief financial officer, has concluded that, as of the end of the period covered by
this annual report, our disclosure controls and procedures were not effective in ensuring that the information required to be disclosed by us in the reports that we file or submit
under the Exchange Act was recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that the information required
to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive
officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and
15d-15(f) under the Exchange Act of 1934. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of consolidated financial statements in accordance with U.S. GAAP. Because of its inherent limitations, a system of internal control
over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
Our management conducted an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2021. We have excluded Sky Gem
International Limited from our assessment of internal control over financial reporting as of December 31, 2021, because it was acquired by us in a purchase price
combination in 2021. Sky Gem International Limited is a partially owned subsidiary whose total assets and total revenues excluded from management’s assessment and our
audit of internal control over financial reporting represent less than 1%, respectively, of our related consolidated financial statement amounts as of and for the year ended
December 31, 2021. In making this assessment, it used the criteria established within the Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) (2013 framework). Based on this assessment, our management has concluded that, as of December 31, 2021, our
internal control over financial reporting was not effective. We and our independent registered public accounting firm identified two material weaknesses in our internal
control over financial reporting. These two material weaknesses identified relate to (1) the lack of sufficient accounting personnel with appropriate understanding of U.S.
GAAP and SEC reporting requirements, and (2) the lack of an up-to-date manual of accounting policies and procedures to facilitate preparation of U.S. GAAP financial
statements, which could result in adjustments to U.S. GAAP not identified in a timely and complete manner, causing material misstatements in the Company's financial
reporting. To remediate these two weaknesses, we have adopted the following measures to improve our internal control over financial reporting.
•
•
•
We hired additional personnel with managerial positions in our finance department with an appropriate understanding of and work experience involving U.S.
GAAP and SEC reporting requirements. We will continue to put effort in hiring additional personnel with an appropriate understanding of and work
experience involving U.S. GAAP and SEC reporting requirements to ensure there are sufficient resources in the financial reporting functions.
Besides, we established clear roles and responsibilities for financial reporting and accounting personnel to address complex accounting and financial
reporting issues.
Furthermore, we sponsored our existing financial reporting and accounting personnel to complete external courses relating to U.S. GAAP and SEC reporting
such that the financial reporting and accounting personnel can earn the necessary credentials to be qualified as certified public accountants in the U.S.
135
•
•
We are also establishing an ongoing program to provide sufficient and additional appropriate training to our financial reporting and accounting staff,
especially trainings related to U.S. GAAP and SEC financial reporting requirements. For instance, we continue to require our existing financial reporting and
accounting personnel to regularly attend U.S. GAAP and SEC reporting requirement training and workshops hosted by external organizations at least on an
annual basis.
In addition, we have formalized the procedures and controls regarding the financial reporting process and developed and implemented a comprehensive set of
U.S. GAAP policies and standardized financial reporting procedures, including a manual of accounting policies and financial reporting checklists, to allow
early detection, prevention and resolution of potential misstatements. However, we are in the process of hiring additional financial reporting and accounting
personnel to timely update the manual of accounting policies, and properly prepare and review financial statements and related footnote disclosures based on
U.S. GAAP and SEC reporting requirements.
We are fully committed to continue to implement measures to remediate our material weaknesses in our internal control over financial reporting.
Attestation Report of the Independent Registered Public Accounting Firm
Our independent registered public accounting firm, PricewaterhouseCoopers, has audited the effectiveness of our internal control over financial reporting as of
December 31, 2021, as stated in its report, which appears on page F-2 of this annual report.
Changes in Internal Control over Financial Reporting
Other than the above, there have not been any changes in our internal control over financial reporting in the year ended December 31, 2021, which have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16.[Reserved]
ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT
Our board of directors has determined that Matthew Chu Pong Fong and Lub Bun Chong are our audit committee financial experts. Each of Matthew Chu Pong Fong
and Lub Bun Chong satisfies the independent requirements of the Rule 5605(c)(2) of the Listing Rules of the NASDAQ Stock Market and meet the independence standards
under Rule 10A-3 under the Exchange Act.
ITEM 16B.CODE OF ETHICS
Our board of directors adopted a code of business conduct and ethics that applies to our directors, officers and employees. We have filed our code of business
conduct and ethics as an exhibit to our registration statement on Form F-1 (file No. 333-221034), as amended, initially filed with the SEC on October 20, 2017. We have
posted a copy of our code of business conduct and ethics on our website at http://ir.i-click.com.
136
ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by
PricewaterhouseCoopers, our independent registered public accounting firm, for the periods indicated. We did not pay any other fees to our independent registered
public accounting firm during the periods indicated below.
Audit fees (1)
Tax fees (2)
Audit related fees (3)
2020
2021
(US$ in thousands)
1,220
18
295
1,570
21
489
(1)
(2)
(3)
“Audit fees” means the aggregate fees billed for professional services rendered by our principal auditors for the audit of our annual financial statements and the review
of our comparative interim financial statements.
“Tax fees” include fees billed for tax compliance and tax consultations.
“Audit-related fees” represent the aggregate fees billed in each of the fiscal years listed for the assurance and related services rendered by our principal auditors that are
reasonably related to the performance of the audit or review of our financial statements and not reported under “Audit fees.”
The policy of our audit committee is to pre-approve all audit and other service provided by PricewaterhouseCoopers as 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 COMMITTEES
Not applicable.
ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS
The following table sets forth information about our purchases of outstanding ADSs in 2021:
Period
January 2021
February 2021
March 2021
April 2021
May 2021
June 2021
July 2021
August 2021
September 2021
October 2021
November 2021
December 2021
Total
(a)Total Number of
ADSs Purchased
(b)Average Price Paid
per ADS (US$)(1)
(c) Total Number
of ADSs Purchased
as Part of Publicly
Announced Plans
or Programs(3)
(d) Approximately
Dollar Value of ADSs
that May Yet be
Purchased Under the
Plans or Programs
(in US$ million)(3)
—
—
90,768
—
249,906
282,735
—
—
—
227,549
—
358,960
1,209,918
—
—
11.9085
—
11.6530
11.3717
—
—
—
6.9974
—
5.2540
8.8324
—
—
90,768
—
249,906
282,735
—
—
—
227,549
—
358,960
1,209,918
14.77
14.77
13.69
13.69
10.78
7.56
7.56
17.56
17.56
15.97
15.97
14.08
14.08
(1)
(2)
Two ADSs represent one Class A ordinary share. The average price per ADS is calculated using the execution price for each repurchase excluding commissions paid
to brokers.
On November 28, 2018, we announced a share repurchase program in which we may purchase our own ADSs with an aggregate value of up to US$10 million over
the next 12-month period, ending November 27, 2019. On March 27, 2019, we
137
entered into a trading plan with an authorized brokerage firm in the U.S. for the purpose of repurchasing our issued and outstanding ADSs in accordance with Rule
10b5-1 under the U.S. Securities Exchange Act of 1934, as amended, and has been established pursuant to, and as part of, the US$10 million share buyback program
that was previously authorized by our board of directors on November 28, 2018.
On January 15, 2020, we announced a share repurchase program in which we may purchase our own ADSs with an aggregate value of up to US$10 million over the
12-month period ending on December 29, 2020. We expect to effect the proposed share repurchase on the open market at prevailing market prices, in negotiated
transactions off the market, and/or in other legally permissible means from time to time as market conditions warrant in compliance with applicable requirements of
Rule 10b5-1 and/or Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended, at times and in such amounts as we deem appropriate. The share
repurchase program does not obligate us to acquire any particular number of ADSs and may be suspended, terminated or extended at any time at our discretion
without prior notice.
On December 10, 2020, we further announced a share repurchase program in which we may purchase our own ADSs with an aggregate value of up to US$15 million
from December 30, 2020 to December 31, 2021. On August 25, 2021, we announced the upsize of share repurchase program by US$10 million from US$15 million
to US$25 million from December 30, 2020 to December 31, 2021. We expect to effect the proposed share repurchase on the open market at prevailing market prices,
in negotiated transactions off the market, and/or in other legally permissible means from time to time as market conditions warrant in compliance with applicable
requirements of Rule 10b5-1 and/or Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended, at times and in such amounts as we deem appropriate.
The share repurchase program does not obligate us to acquire any particular number of ADSs and may be suspended, terminated or extended at any time at our
discretion without prior notice.
On December 22, 2021, we announced a share repurchase program in which we may purchase its own ADSs with an aggregate value of up to US$20 million from
January 1, 2022 to December 31, 2022. We expect to effect the proposed share repurchase on the open market at prevailing market prices, in negotiated transactions off
the market, and/or in other legally permissible means from time to time as market conditions warrant in compliance with applicable requirements of Rule 10b5-1 and/or
Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended, at times and in such amounts as the we deem appropriate. The share repurchase program
does not obligate us to acquire any particular number of ADSs and may be suspended, terminated or extended at any time at our discretion without prior notice.
(3)
(4)
138
ITEM 16F.
CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G.
CORPORATE GOVERNANCE
As a Cayman Islands company listed on the NASDAQ Global Market, we are subject to the NASDAQ corporate governance requirements. However, NASDAQ
Global Market 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 NASDAQ corporate governance requirements. We follow our home country practices and rely
on certain exemptions provided by the Nasdaq Stock Market Rules to a foreign private issuer, including exemptions from the requirements to have:
•
•
•
•
shareholder approval for certain events, including the establishment or amendment of certain equity based compensation plans and arrangements and certain
transactions involving issuances of a 20% or more interest in our company;
majority of independent directors on our board of directors;
only independent directors being involved in the selection of director nominees and determination of executive officer compensation; and
regularly scheduled executive sessions of independent directors.
As a result of our reliance on the corporate governance exemptions available to foreign private issuers, you will not have the same protection afforded to
shareholders of companies that are subject to all of Nasdaq’s corporate governance requirements. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our
American Depositary Shares—We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions
applicable to U.S. domestic public companies.”
ITEM 16H.MINE SAFETY DISCLOSURE
Not applicable.
ITEM 16I.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not applicable.
139
ITEM 17.FINANCIAL STATEMENTS
We have elected to provide financial statements pursuant to “Item 18. Financial Statements.”.
PART III
ITEM 18.FINANCIAL STATEMENTS
See pages beginning on page F-1 in this annual report.
ITEM 19.EXHIBITS
Exhibit
Number
Description of Document
1.1
2.1
2.2
2.3
2.5
4.1*
4.2*
4.3*
4.4*
4.5*
4.6
4.7
4.8
4.9
Ninth Amended and Restated Memorandum and Articles of Association, as currently in effect (incorporated by reference to Exhibit 1.1 of our annual
report on Form 20-F (file No. 001-38313) filed with the Securities and Exchange Commission on April 25, 2019)
Registrant’s Specimen American Depositary Receipt (included in Exhibit 2.3)
Registrant’s Specimen Certificate for Class A Ordinary Shares (incorporated by reference to Exhibit 4.2 of our Registration Statement on Form F-1 (file
No. 333-221034) filed with the Securities and Exchange Commission on October 20, 2017)
Form of Deposit Agreement among the Registrant, the depositary and holder of the American Depositary Receipts (incorporated by reference to
Exhibit 4.3 of our Registration Statement on Form F-1/A (file No. 333-221034) filed with the Securities and Exchange Commission on December
1, 2017)
Fourth Amended and Restated Shareholders Agreement dated December 28, 2016 (incorporated by reference to Exhibit 10.2 of our Registration Statement
on Form F-1 (file No. 333-221034) filed with the Securities and Exchange Commission on October 20, 2017)
English translation of Exclusive Business Cooperation Agreement between iClick Beijing, OptAim Network and Zhiyunzhong dated November 1, 2021
English translation of Third Amended and Restated Exclusive Call Option Agreement among iClick Beijing, OptAim Network and the shareholders of
OptAim Network dated November 1, 2021
English translation of Third Amended and Restated Equity Pledge Agreement among iClick Beijing, OptAim Network and the shareholders of OptAim
Network dated November 1, 2021
English translation of Irrevocable Power of Attorney granted by the Jian Tang dated November 1, 2021
English translation of Spousal Consent granted by Xinyu Fan dated November 1, 2021
2018 Share Incentive Plan (incorporated by reference to Exhibit 10.2 of our Registration Statement on Form S-8 (file No. 333-225568) filed with the
Securities and Exchange Commission on June 12, 2018)
Form of Indemnification Agreement with Executive Officers and Directors (incorporated by reference to Exhibit 10.9 of our Registration Statement on
Form F-1 (file No. 333-221034) filed with the Securities and Exchange Commission on October 20, 2017)
Form of Employment Agreement and One Way Non-disclosure Agreement with Executive Officers (incorporated by reference to Exhibit 10.10 of our
Registration Statement on Form F-1 (file No. 333-221034) filed with the Securities and Exchange Commission on October 20, 2017)
Post-IPO Share Incentive Plan, as amended and restated on February 26, 2021 (incorporated by reference to Exhibit 10.1 of our Registration Statement on
Form S-8 (file No. 333-253596) filed with the Securities and Exchange Commission on February 26, 2021)
4.10*
Registration Rights Agreement, dated January 26, 2021, by and among the Registrant and Baozun Inc.
140
4.11*
8.1*
11.1
12.1*
12.2*
13.1**
13.2**
15.1*
15.2*
15.3*
Strategic Cooperation Framework Agreement, dated January 26, 2021, by and among the Registrant and Baozun Inc.
Subsidiaries of the Registrant
Code of Business Conduct and Ethics of the Registrant (incorporated by reference to Exhibit 99.1 of our Registration Statement on Form F-1 (file
No. 333-221034) filed with the Securities and Exchange Commission on October 20, 2017)
CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Consent of Travers Thorp Alberga
Consent of Jingtian & Gongcheng
Consent of PricewaterhouseCoopers
101.INS*
Inline XBRL Instance Document—this instance document does not appear in the Interactive Data File because its XBRL tags are not embedded within
the Inline XBRL document
101.SCH*
Inline XBRL Taxonomy Extension Schema Document
101.CAL*
Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*
Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*
Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Extension Presentation Linkbase Document
104.*
Cover Page Interactive Data File (embedded within the Inline XBRL document)
_____________
*
**
Filed with this annual report on Form 20-F
Furnished with this annual report on Form 20-F
141
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this
annual report on this Form 20-F on its behalf.
SIGNATURES
Date: April 29, 2022
iClick Interactive Asia Group Limited
/s/ Jian Tang
Jian Tang
By:
Name:
Title: Chairman of the Board, Chief Executive Officer
142
iCLICK INTERACTIVE ASIA GROUP LIMITED
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm (PCAOB ID:1389)
Consolidated Balance Sheets as of December 31, 2020 and 2021
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2019, 2020 and 2021
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2019, 2020 and 2021
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2020 and 2021
Notes to the Consolidated Financial Statements
Pages
F-2 - F-5
F-6 - F-8
F-9
F-10 – F-12
F-13 – F-14
F-15 – F-94
F-1
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of iClick Interactive Asia Group Limited
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of iClick Interactive Asia Group Limited and its subsidiaries (the “Company”) as of December 31, 2021 and
2020, and the related consolidated statements of comprehensive loss, of changes in shareholders’ equity and of cash flows for each of the three years in the period ended
December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control
over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021
and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles
generally accepted in the United States of America (“U.S. GAAP”). Also in our opinion, the Company did not maintain, in all material respects, effective internal control
over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO because material
weaknesses in internal control over financial reporting existed as of that date related to the lack of sufficient financial reporting and accounting personnel with appropriate
understanding of U.S. GAAP and Securities and Exchange Commission reporting requirements, and the lack of an up-to-date manual of accounting policies and procedures
to facilitate preparation of U.S. GAAP financial statements.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material
misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weaknesses referred to above are described in
Management’s Annual Report on Internal Control over Financial Reporting appearing under Item 15. We considered these material weaknesses in determining the nature,
timing, and extent of audit tests applied in our audit of the 2021 consolidated financial statements, and our opinion regarding the effectiveness of the Company’s internal
control over financial reporting does not affect our opinion on those consolidated financial statements.
Change in Accounting Principle
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for credit losses on financial instruments in 2020.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting included in management's report referred to above. Our responsibility is to express opinions on
the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance
with the U.S. federal securities laws 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 audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting
was maintained in all material respects.
F-2
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts
and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management,
as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that
our audits provide a reasonable basis for our opinions.
As described in Management’s Annual Report on Internal Control over Financial Reporting, management has excluded Sky Gem International Limited from its assessment
of internal control over financial reporting as of December 31, 2021, because it was acquired by the Company in a purchase business combination during 2021. We have also
excluded Sky Gem International Limited from our audit of internal control over financial reporting. Sky Gem International Limited is a partially-owned subsidiary whose
total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting represent less than 1%, respectively, of the
related consolidated financial statement amounts as of and for the year ended December 31, 2021.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes
those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s
assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required
to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our
especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts
or disclosures to which they relate.
F-3
Goodwill impairment assessment
As described in Notes 2(q) and 13 to the consolidated financial statements, the Company’s consolidated goodwill balance was US$81.7 million as of December 31, 2021,
and the goodwill associated with the Marketing Solutions reporting unit and Enterprise Solutions reporting unit was US$53.0 million and US$28.7 million respectively.
Management conducts a goodwill impairment test at the reporting unit level annually in the fourth quarter, or more frequently when events or circumstances occur indicating
that the recorded goodwill may be impaired. The Company compares the fair value of each reporting unit to its carrying value, with an impairment charge recorded for the
amount by which the carrying amount exceeds the reporting unit’s fair value up to a maximum amount of the goodwill balance for the reporting unit. For evaluation of
reporting units using a quantitative assessment, the fair values of the Marketing Solutions reporting unit and the Enterprise Solutions reporting unit were estimated using a
market approach and an income approach, respectively. Under the market approach, the Company estimates the fair value of the Marketing Solutions reporting unit based on
market multiples of current year revenue for the reporting unit. Under the income approach, the Company estimates the fair value of the Enterprise Solutions reporting unit
based on the discounted cash flow method derived from the reporting unit’s long-term forecasts which included a five-year future cash flow projection and an estimated
terminal value. Estimating fair value of individual reporting units requires the exercise of significant management judgment, including judgment in a market approach about
the use of significant assumptions with respect to multiples of revenues for comparable entities with similar operations and economic characteristics, and judgment in an
income approach about appropriate revenue growth rates, an estimated terminal value using a terminal year long-term future growth rate and a discount rate.
The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment is a critical audit matter are (i) the significant
judgment by management when estimating the fair value measurements of the reporting units; (ii) a high degree of auditor judgment, subjectivity, and significant audit effort
in performing procedures and evaluating audit evidence related to management's identification of comparable entities with similar operations and economic characteristics
and their corresponding multiples of revenues for the Marketing Solutions reporting unit, and management’s cash flow projections and significant assumptions related to the
revenue growth rates, the estimated terminal value using a terminal year long-term future growth rate and a discount rate for the Enterprise Solutions reporting unit; and (iii)
the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial
statements. These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the estimation
of the fair value of the Company's reporting units. These procedures also included, among others (i) testing management’s process for estimating the fair value of the
reporting units; (ii) evaluating the appropriateness of the income approach model (discounted cash flow method) and the market approach model (market multiple method);
(iii) testing the completeness, accuracy and relevance of the underlying data used in the models in estimating the fair value of the reporting units; and (iv) evaluating the
reasonableness of management's identification of comparable entities with similar operations or economic characteristics and their corresponding multiples of revenues for
the Marketing Solutions reporting unit; and the significant assumptions used by management in the cash flow projections related to the revenue growth rates, the estimated
terminal value using a terminal year long-term future growth rate and the discount rate for the Enterprise Solutions reporting unit. Evaluating the reasonableness of the
significant assumptions used by management in estimating the fair value of (i) the Marketing Solutions reporting unit and (ii) the Enterprise Solutions reporting unit,
respectively, involved (i) evaluating the nature of operations and economic characteristics of comparable entities identified by management and comparing the multiples of
revenues to the current trading multiple of the Company, as well as to external market data, and (ii) evaluating whether the significant assumptions used by management in
the cash flow projections, related to the revenue growth rates, the estimated terminal value using a terminal year long-term future growth rate and the discount rate, were
reasonable considering the current and past performance of the reporting unit; the consistency with external market and industry data; and whether these assumptions were
consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of
the valuation methods, (ii) the reasonableness of certain significant assumptions, related to the discount rate and terminal growth rate assumption, for the estimation of fair
value of the Enterprise Solutions reporting unit, and (iii) the reasonableness of management's identification of comparable entities with similar operations or economic
characteristics and their corresponding multiples of revenues for the Marketing Solutions reporting unit.
F-4
Impairment assessment of investments in equity securities without readily determinable fair value
As described in Notes 2(m) and 8 to the consolidated financial statements, the Company's investments in equity securities without readily determinable fair value amounted
to US$12.1 million as of December 31, 2021. For equity investments without readily determinable fair value, the Company has elected to use the measurement alternative to
measure its equity investments at cost, less any impairment, plus or minus changes resulting from observable price changes in orderly transactions for identical or similar
investments of the same issuer, if any. Management makes a qualitative assessment as to whether the investment is impaired at each reporting date. If a qualitative
assessment indicates that the investment is impaired, management estimates the investment’s fair value in accordance with the principles of ASC 820. If the fair value is less
than the investment’s carrying value, the Company recognizes an impairment loss in net income equal to the difference between the carrying value and fair value. Significant
judgment is applied by management in (i) determining whether the investments in equity securities without readily determinable fair value are impaired and (ii) estimating
the impairment amount if an impairment exists. These judgments consider various factors and events including (a) adverse performance of investees; (b) adverse industry
developments affecting investees; and (c) adverse regulatory, social, economic or other developments affecting investees; and (d) valuation methods and key valuation
assumptions and data used in estimating the impairment amounts. Key valuation assumptions mainly comprised selection of comparable companies and multiples, and
discount for lack of marketability. The Company recognized impairment losses of US$4.0 million for the year ended December 31, 2021.
The principal considerations for our determination that performing procedures relating to the impairment assessment of investments in equity securities without readily
determinable fair value is a critical audit matter are the significant judgments by management in (i) making the qualitative assessment of whether investments in equity
securities are impaired and (ii) estimating the impairment amount if an impairment exists. This in turn led to significant auditor judgment, subjectivity and effort in (i)
performing procedures to evaluate the reasonableness of significant judgments management applied in determining whether the investments in equity securities are impaired;
(ii) performing procedures to evaluate the reasonableness of valuation methods and key assumptions and data management used in estimating the impairment amounts; and
(iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial
statements. These procedures included testing the effectiveness of controls relating to management’s impairment assessment of investments in equity securities without
readily determinable fair value, including controls over the qualitative assessment of whether investments in equity securities are impaired and the determination of the fair
value of these equity securities. These procedures also included, among others, (i) testing management’s process for determining whether the investments in equity securities
without readily determinable fair value are impaired by assessing the investees’ performance data as well as other relevant market information considered by management;
and (ii) evaluating management's estimation of the impairment amount if an impairment exists by evaluating the appropriateness of the valuation methods and the
reasonableness of key valuation assumptions and data used by management in estimating the impairment amounts. In performing these procedures, factors being considered
include (a) the investee’s current and past performances, (b) the consistency with industry and third party data, and (c) whether these assumptions and related estimates were
consistent with evidence obtained in other areas of the audit.
In addition, the audit effort involved the use of professionals with specialized skill and knowledge to assist in performing these procedures and evaluating the audit evidence
obtained from these procedures.
/s/PricewaterhouseCoopers
Hong Kong
April 29, 2022
We have served as the Company’s auditor since 2016.
F-5
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Assets
Current assets
Cash and cash equivalents
Time deposits
Restricted cash
Short-term investments
Amount due from an equity investee
Accounts receivable, net of allowance for credit losses of
US$11,749 and US$22,786 as of December 31, 2020 and
2021, respectively
Rebates receivable
Prepaid media costs
Other current assets
Total current assets
Non-current assets
Deferred tax assets
Property and equipment, net
Investment in an equity investee
Prepayments for long-term investments
Other long-term investments
Intangible assets, net
Goodwill
Right-of-use assets
Other assets
Total non-current assets
Total assets
Note
2020
2021
As of December 31,
5
5
6
2(k)
7(b)
9
10
23(e)
11
7(a)
8
8
12
13
14
10
52,232
89
42,145
23,720
218
143,142
10,964
34,528
14,138
321,176
953
1,113
460
2,924
8,651
56,431
74,419
3,421
567
148,939
41,443
11,128
36,146
7,771
276
187,261
5,575
36,709
24,957
351,266
1,185
1,931
354
-
12,114
53,713
81,674
3,834
1,663
156,468
470,115
507,734
The accompanying notes are an integral part of these consolidated financial statements.
F-6
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF DECEMBER 31, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Liabilities and equity
Current liabilities
Accounts payable (including accounts payable of the consolidated
variable interest entity (“VIE”) and its subsidiaries without
recourse to the Company of US$371 and US$2,262 as of
December 31, 2020 and 2021, respectively)
Deferred revenue (including deferred revenue of the consolidated
VIE and its subsidiaries without recourse to the Company of
US$644 and US$88 as of December 31, 2020 and 2021,
respectively)
Accrued liabilities and other current liabilities (including accrued
liabilities and other current liabilities of the consolidated VIE
and its subsidiaries without recourse to the Company of US$1,519
and US$1,444 as of December 31, 2020 and 2021, respectively)
Lease liabilities (including lease liabilities of the consolidated
VIE and its subsidiaries without recourse to the Company of
US$298 and US$295 as of December 31, 2020 and 2021,
respectively)
Bank borrowings (including bank borrowing of the consolidated
VIE and its subsidiaries without recourse to the Company of
US$457 and US$1,889 as of December 31, 2020 and 2021,
respectively)
Income tax payable (including income tax payable of the
consolidated VIE and its subsidiaries without recourse
to the Company of US$483 and US$575 as of
December 31, 2020 and 2021, respectively)
Total current liabilities
Non-current liabilities
Contingent consideration payable
Lease liabilities (including lease liabilities of the consolidated
VIE and its subsidiaries without recourse to the Company of
US$186 and US$89 as of December 31, 2020 and 2021,
respectively)
Deferred tax liabilities (including deferred liabilities of the
consolidated VIE and its subsidiaries without recourse to the
Company of US$146 and US$99 as of December 31, 2020 and
2021, respectively)
Other liabilities
Total non-current liabilities
Total liabilities
Commitments and contingencies
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Note
2020
2021
As of December 31,
43,140
66,587
15
28,199
22,802
16
29,331
29,735
14
1,955
2,141
17
56,040
75,530
4,182
162,847
4,050
200,845
4(d)
7,755
-
14
1,373
1,463
23(e)
16
27
14,156
4,896
28,180
13,378
459
15,300
191,027
216,145
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONSOLIDATED BALANCE SHEETS (CONTINUED)
AS OF DECEMBER 31, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Equity
Ordinary shares – Class A (80,000,000 shares authorized as of
December 31, 2020 and 2021, respectively;
40,996,215 and 42,865,515 shares issued and outstanding as
of December 31, 2020 and 2021, respectively)
Ordinary shares – Class B (20,000,000 shares
authorized as of December 31, 2020 and 2021, respectively;
4,820,608 and 5,034,427 shares issued and outstanding as of
December 31, 2020 and 2021, respectively)
Treasury shares (2,396,372 and 2,323,802 shares as of
December 31, 2020 and 2021, respectively)
Additional paid-in capital
Statutory reserves
Accumulated other comprehensive (losses)/income
Accumulated deficit
Total iClick Interactive Asia Group Limited shareholders’ equity
Non-controlling interests
Total equity
Note
2020
2021
As of December 31,
19
41
19
19
5
(10,341)
492,400
81
(2,478)
(207,606)
272,102
6,986
279,088
43
5
(20,908)
525,508
81
860
(221,237)
284,352
7,237
291,589
Total liabilities and equity
470,115
507,734
The accompanying notes are an integral part of these consolidated financial statements.
F-8
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Net revenues
Cost of revenues
Gross profit
Operating expenses
Research and development expenses
Sales and marketing expenses
General and administrative expenses
Total operating expenses
Operating loss
Interest income
Interest expense
Other gains, net
Fair value losses on derivative liabilities
Fair value gains/(losses) on convertible notes
Loss before share of loss from an equity investee and
income tax expense
Share of loss from an equity investee
Income tax expense
Net loss
Net loss attributable to non-controlling interests
Net loss attributable to iClick Interactive Asia Group
Limited’s ordinary shareholders
Net loss
Other comprehensive (loss)/income:
Foreign currency translation adjustment, net of US$nil tax
Comprehensive loss
Comprehensive loss attributable to non-controlling interests
Comprehensive loss attributable to iClick Interactive
Asia Group Limited
Net loss per share attributable to iClick Interactive Asia
Group Limited
- Basic
- Diluted
Weighted average number of ordinary shares used in per
share calculation:
- Basic
- Diluted
The accompanying notes are an integral part of these consolidated financial statements.
F-9
Note
For the years ended December 31,
2019
199,408
(142,703)
56,705
2020
254,745
(181,482)
73,263
2021
307,702
(218,549)
89,153
(9,527)
(52,872)
(39,643)
(102,042)
(12,889)
824
(4,089)
2,203
-
-
(13,951)
(107)
(2,540)
(16,598)
2,967
(13,631)
(16,598)
3,484
(13,114)
2,823
(5,574)
(42,968)
(20,304)
(68,846)
(12,141)
537
(1,915)
2,992
-
133
(10,394)
(408)
(47)
(10,849)
1,246
(9,603)
(10,849)
(1,700)
(12,549)
1,334
(5,349)
(38,028)
(31,648)
(75,025)
(1,762)
1,297
(2,650)
5,852
(11,466)
(4,433)
(13,162)
(111)
(1,633)
(14,906)
2,288
(12,618)
(14,906)
5,274
(9,632)
2,015
(11,215)
(7,617)
(10,291)
(0.34)
(0.34)
(0.32)
(0.32)
(0.28)
(0.28)
28,583,548
28,583,548
39,368,436
39,368,436
48,187,235
48,187,235
22
18
18
7(a)
23
24
24
24
24
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Ordinary shares
Treasury shares
Balance as of December 31, 2018
Reissuance of treasury shares upon exercise of
employee share options and vesting of RSUs
Convertible notes transaction
expenses in form of share-
based awards (Note 21(c))
Share-based compensation expenses
Issuance of shares upon vesting of RSUs
Business combinations
Contribution from non-controlling interests
Capital injection in a subsidiary
Repurchase of ordinary shares
Issuance of ordinary shares upon
conversion of convertible notes
Net loss for the year
Foreign currency translation
Balance as of December 31, 2019
Number
of
shares
27,986,700
Number
of
shares
1,363,860
Amount
28
Additional
paid-in
capital
293,072
Amount
(576 )
Accumulated
deficit
(181,413 )
Statutory
reserves
81
269,943
1
(269,943 )
132
182
-
-
23,750
-
-
-
-
410,242
-
-
28,690,635
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
650,956
-
-
-
29
-
1,744,873
-
-
-
-
-
-
(4,414 )
-
-
-
(4,858 )
3,298
2,115
-
-
1,023
1,223
-
4,431
-
-
305,344
-
-
-
-
-
-
-
-
-
(9,603 )
-
(191,016 )
-
-
-
-
-
-
-
-
-
-
-
81
The accompanying notes are an integral part of these consolidated financial statements.
F-10
Accumulated
other
comprehensive
losses
(5,867 )
Total iClick
Interactive
Asia Group
Limited
shareholders’
equity
105,325
Non-
controlling
interests
1,315
Total
shareholders’
equity
106,640
315
-
315
-
-
-
-
-
-
-
-
-
-
3,298
2,115
-
-
1,023
1,223
(4,414 )
4,431
(9,603 )
-
-
-
11,815
1,882
(1,223 )
-
-
(1,246 )
(88 )
12,455
3,298
2,115
-
11,815
2,905
-
(4,414 )
4,431
(10,849 )
(1,700 )
114,556
(1,612 )
(7,479 )
(1,612 )
102,101
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Ordinary shares
Treasury shares
Number
of
shares
28,690,635
Amount
Number
of
shares
29 1,744,873
Additional
paid-in
capital
Accumulated
deficit
Amount
(4,858) 305,344
-
-
-
-
-
(3,972)
Accumulated
other
comprehensive
losses
Statutory
reserves
Total iClick
Interactive
Asia Group
Limited
shareholders’
equity
Non-
controlling
interests
(191,016)
81
(7,479)
102,101
12,455
Balance as of December 31, 2019
Cumulative effect of adoption of new
accounting standard (Note 2(j))
Reissuance of treasury shares upon exercise of
employee share options and vesting of RSUs
Share-based compensation expense
Issuance of shares upon vesting of RSUs
Repurchase of ordinary shares
Issuance of ordinary shares but held as
treasury
shares
Capital injection in a subsidiary (Note 1(a)(iv))
Purchase of interests in subsidiaries from non-
controlling interests (Notes 1(a)(iv), (v))
Issuance of ordinary shares upon share
offerings
(Note 1(c))
Issuance of ordinary shares pursuant to
convertible
notes conversion (Note 21(c))
Business combinations (Note 4(c)(d))
Contribution from non-controlling interests
(Note 1(a)(iii))
Net loss for the year
Foreign currency translation
Balance as of December 31, 2020
546,340
-
171,932
-
-
-
313,011
5,546,007
6,776,204
3,772,694
-
-
-
45,816,823
1
-
(546,340)
-
194
-
-
397,839
-
(5,677)
-
-
-
-
-
5
7
4
-
-
800,000
-
-
-
-
-
-
-
1,110
6,249
-
-
-
1,716
2,795
71,912
68,888
34,386
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(12,618)
-
-
-
-
-
-
-
-
-
-
-
46 2,396,372
-
(10,341) 492,400
(207,606)
81
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
5,001
(2,478)
(3,972)
1,305
6,249
-
(5,677)
-
1,716
2,795
71,917
68,895
34,390
-
(12,618)
5,001
272,102
Total
equity
114,556
(3,972)
1,305
6,249
-
(5,677)
-
-
-
-
-
-
-
-
(1,716)
(9,798)
(7,003)
-
-
7,987
73
71,917
68,895
42,377
73
(2,288)
(14,906)
273
6,986
5,274
279,088
The accompanying notes are an integral part of these consolidated financial statements.
F-11
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (CONTINUED)
FOR
2021
(US$’000, except share data and per share data, or otherwise noted)
DECEMBER
ENDED
YEARS
THE
31,
2019,
2020
AND
Ordinary shares
Treasury shares
Balance as of December 31, 2020
Reissuance of treasury shares upon exercise of
employee share options and vesting of RSUs
Share-based compensation expense
Issuance of shares upon vesting of RSUs
Repurchase of ordinary shares
Issuance of ordinary shares upon subscription
from Baozun Inc. (Notes 1(d) and 21(d))
Issuance of ordinary shares upon settlement
for
contingent consideration payable (Note 4(d))
Business combination (Note 4(e))
Net loss for the year
Foreign currency translation
Balance as of December 31, 2021
Number
of
shares
45,816,823
Amount
46
677,530
—
572,500
—
649,349
183,740
—
—
—
47,899,942
1
—
—
—
1
—
—
—
—
48
Number
of
shares
2,396,372
(677,530)
—
—
604,960
—
—
—
—
—
2,323,802
Additional
paid-in
capital
492,400
Accumulated
deficit
(207,606)
Statutory
reserves
81
540
11,969
—
—
18,539
2,060
—
—
—
525,508
—
—
—
—
—
—
—
(13,631)
—
(221,237)
—
—
—
—
—
—
—
—
—
81
Amount
(10,341)
120
—
—
(10,687)
—
—
—
—
—
(20,908)
Accumulated
other
comprehensive
(losses)/income
(2,478)
Total iClick
Interactive
Asia Group
Limited
shareholders’
equity
272,102
—
—
—
—
—
—
—
—
3,338
860
661
11,969
—
(10,687)
18,540
2,060
—
(13,631)
3,338
284,352
Non-
controlling
interests
6,986
Total
equity
279,088
—
—
—
—
—
—
661
11,969
—
(10,687)
18,540
2,060
3,072
(2,967)
146
7,237
3,072
(16,598)
3,484
291,589
The accompanying notes are an integral part of these consolidated financial statements.
F-12
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Cash flows from operating activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation of property and equipment
Amortization of intangible assets
Amortization of right-of-use assets
(Gains)/losses on disposals of property and equipment
Allowance for credit losses on accounts receivable
Accounts receivable written off
Allowance for credit losses on loans and interest receivable
Convertible notes transaction expenses in form of non-employee warrant award
Other convertible notes transaction expenses
Other share-based compensation expenses
Share-based compensation expenses in relation to the to ordinary shares
upon subscription from Baozun Inc.
Fair value losses on derivative liabilities
Fair value (gains)/losses on convertible notes
Fair value (gains)/losses on short-term investments
Impairment on long-term investments
Fair value changes on contingent consideration payables
Deferred tax
Share of losses from an equity investee
Changes in operating assets and liabilities, net
Accounts receivable
Prepayments and other assets
Rebates receivables
Prepaid media costs
Accounts payable
Accrued liabilities and other current liabilities
Deferred revenue
Income tax payable
Income tax recoverable
Lease liabilities
Amount due from an equity investee
Net cash used in operating activities
Cash flows from investing activities
Purchase of property and equipment
Purchase of intangible assets
Redemption/(purchase) of short-term investments
Investment in an equity investee
Purchase of other long-term investments
Prepayment for long-term investment costs
(Purchase)/redemption of time deposits
Acquisition of businesses, net of cash received
Loan to third parties
Repayment of loan from third parties
Proceeds from disposals of property and equipment
Net cash provided by/(used in) investing activities
The accompanying notes are an integral part of these consolidated financial statements.
F-13
For the years ended December 31,
2019
2020
(10,849)
(14,906)
334
4,774
1,548
(2)
1,995
-
-
3,298
1,258
2,115
-
-
(133)
(107)
-
-
(1,083)
408
(85,382)
(5,490)
(1,602)
(6,735)
61,318
3,862
722
1,001
-
(1,389)
(155)
(30,294)
(474)
(232)
17,599
(566)
(1,000)
(1,000)
(410)
(7,171)
-
-
16
6,762
381
4,189
1,930
3
6,587
(2,621)
-
-
-
6,249
-
11,466
4,433
(1,404)
-
-
(1,151)
111
1,996
(1,426)
(4,987)
(8,383)
(23,345)
3,392
265
(121)
(55)
(2,173)
(63)
(19,633)
(556)
(575)
(22,267)
(412)
(7,129)
(1,901)
321
6,226
(1,400)
-
-
(27,693)
2021
(16,598)
648
3,238
2,785
(16)
12,424
(1,669)
289
-
-
11,969
1,530
-
-
316
4,038
(418)
(905)
107
(58,615)
3,333
5,626
(1,463)
23,447
(1,504)
(5,323)
(80)
7
(2,781)
(58)
(19,673)
(1,386)
(203)
15,633
-
(4,108)
(394)
(11,039)
(10,007)
(17,303)
6,400
17
(22,390)
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Cash flows from financing activities
Proceeds from exercise of share options
Proceeds from bank borrowings
Repayments of bank borrowings
Proceeds from issuance of convertible notes,
net of transaction expenses
Redemption of convertible notes
Contribution from non-controlling interests
Repurchase of ordinary shares
Net proceeds from issuance of ordinary shares upon share offerings
Net proceeds from issuance of ordinary shares upon subscription
from Baozun Inc.
Purchase of interests in subsidiaries from non-controlling interests
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents and
restricted cash
Cash and cash equivalents and restricted cash at the beginning of
year
Effect on exchange rate changes on cash and cash equivalents and
restricted cash
Cash and cash equivalents and restricted cash at the end of year
Reconciliation of cash and cash equivalents and restricted cash
within the consolidated balance sheets to the amounts shown
in the consolidated statements of cash flows above:
Cash and cash equivalents
Restricted cash, current
Supplemental disclosure of cash flow information:
Interests paid
Cash paid for income taxes
Supplemental schedule of non-cash investing and financing
activities:
Convertible notes transaction expenses in form of
share-based awards
Fair value (gains)/losses on convertible notes
Fair value losses on derivative liabilities
Issuance of ordinary shares upon conversion of convertible notes
Issuance of ordinary shares upon acquisition of subsidiaries
Issuance of convertible notes upon exercise of call option
Issuance of ordinary shares upon settlement for contingent
consideration payable
Transfer of prepayments for long-term investments to other
long-term investments
The accompanying notes are an integral part of these consolidated financial statements.
F-14
For the years ended December 31,
2019
2020
315
140,507
(111,986)
28,742
(11,265)
2,905
(4,414)
-
-
-
44,804
21,272
39,828
(394)
60,706
36,854
23,852
60,706
(2,109)
(130)
3,298
(133)
-
4,431
-
-
-
-
1,305
180,511
(165,131)
19,184
(15,196)
73
(5,677)
71,917
-
(7,003)
79,983
32,657
60,706
1,014
94,377
52,232
42,145
94,377
(2,545)
(2,960)
-
4,433
11,466
68,895
42,377
11,466
-
-
2021
661
248,784
(231,025)
-
-
-
(10,687)
-
17,010
-
24,743
(17,320)
94,377
532
77,589
41,443
36,146
77,589
(3,922)
(3,677)
-
-
-
-
-
-
2,060
7,023
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
1
(a)
Organization and principal activities
Organization and nature of operation
iClick Interactive Asia Group Limited (the “Company”) and its subsidiaries are collectively referred to as the Group. The Company was incorporated under the
law of Cayman Islands as a limited company on February 3, 2010. The Group has been principally engaged in the provision of online advertising services
(“Marketing Solutions”) since then. Starting from January 1, 2019, the Group is also engaged in the provision of software and data analytical tool licenses,
customer relationship management solutions, and digitalized operational solutions (“Enterprise Solutions”). The Group’s principal operations and geographic
market are in Greater China and have offices in Hong Kong and The People’s Republic of China (“the PRC”). There are also sales teams in Singapore and the
United Kingdom.
The accompanying consolidated financial statements include the financial statements of the Company, its principal subsidiaries and consolidated VIE and the
VIE’s subsidiaries (defined in Note 1(b)) as follows:
Name
Tetris Media Limited
iClick Interactive Asia Limited
Relationship
Subsidiary
Subsidiary
China Search (Asia) Limited
iClick Interactive (Singapore) Pte. Ltd.
iClick Data Technology (Beijing) Limited
(“Beijing WFOE”)
Search Asia Technology (Shenzhen) Co.,
Ltd.
Performance Media Group Limited
Addoil Broadcasts Limited (“Addoil”)
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
CMRS Digital Solutions Limited
Subsidiary
Beyond Digital Solutions Limited
Subsidiary
CruiSo Digital Solutions Limited
Subsidiary
Tetris Information Technology (Shanghai)
Co., Ltd.
OptAim (Beijing) Information Technology
Co., Ltd. (“OptAim WFOE”)
Subsidiary
Subsidiary
Effective interest held
through
equity
ownership/ contractual
arrangements
(Note (i))
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
Date of
incorporation/
establishment
July 2007
December 2008
September 2010
January 2011
January 2011
Place of
incorporation/
establishment
Hong Kong
Hong Kong
Hong Kong
Singapore
The PRC
January 2011
The PRC
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
The PRC
The PRC
January 2013
January 2013
April 2008
April 2010
May 2011
April 2008
November 2014
F-15
Principal activities
Investment holding
Online advertising, SaaS products
and services
Online advertising
Online advertising
Online advertising, SaaS products
and services
Online advertising
Online advertising
Developing and operating mobile
application
Online advertising, SaaS products
and services
Online advertising, SaaS products
and services
Online advertising, SaaS products
and services
Online advertising, SaaS products
and services
Online advertising, SaaS products
and services
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
1
(a)
Organization and principal activities (Continued)
Organization and nature of operation (Continued)
The accompanying consolidated financial statements include the financial statements of the Company, its principal subsidiaries and consolidated VIE and the
VIE’s subsidiaries (defined in Note 1(b)) as follows: (Continued)
Name
Relationship
Anhui Zhiyunzhong Information Technology Co., Ltd.
(“OptAim Anhui”)
Tetris (Shanghai) Data Technology Co., Ltd.
Subsidiary
Subsidiary
(Shanghai) Technology Co., Ltd.
Beijing OptAim Network Technology Co., Ltd.
(“Beijing OptAim”)
Zhiyunzhong
(“Shanghai OptAim”)
Shanghai Myhayo Technology Co., Ltd. (“Myhayo”)
(Notes (ii), (iii))
Anhui Myhayo Technology Co., Ltd. (“Anhui Myhayo”)
(Notes (ii), (iii))
Changyi
(Shanghai)
(“Changyi”) (Note (iv))
Xi'an Changzhan Information Technology Ltd. (“Xian
Changyi”)
Optimal Power Limited (“Optimal”) (Note (v))
Full Lucky International Limited (“Full Lucky”)
Information Technology Ltd.
VIE
VIE’s
subsidiary
VIE’s
subsidiary
VIE’s
subsidiary
Subsidiary
Subsidiary
Subsidiary
Subsidiary
Effective interest held
through
equity
contractual
arrangements
(Note (i))
ownership/
100%
100%
100%
100%
36.8%
36.8%
59.84%
59.84%
100%
100%
F-16
Date of
incorporation/
establishment
November 2017
October 2020
September 2012
Place of
incorporation/
establishment
The PRC
The PRC
The PRC
Principal activities
advertising, SaaS
advertising, SaaS
Online
products and services
Online
products and services
Online advertising
September 2014
The PRC
Online advertising
May 2017
September 2018
January 2014
The PRC
The PRC
The PRC
Mobile content aggregator
and online advertising
Mobile content aggregator
and online advertising
SaaS products and services
August 2019
The PRC
SaaS products and services
September 2019
January 2019
BVI
Hong Kong
Investment holding
Online
products and services
advertising, SaaS
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
1
(a)
Organization and principal activities (Continued)
Organization and nature of operation (Continued)
Note:
(i)
(ii)
(iii)
(iv)
Save for the impacts from the transactions detailed in Notes (iii), (iv) and (v) below, there was no change in the Company’s effective interest held
through equity ownership/ contractual arrangements over the principal subsidiaries and consolidated VIE and the VIE’s subsidiaries during the
years ended December 31, 2019, 2020 and 2021.
Although the Company owns less than 50% ownership in these entities, these entities are consolidated as the Company obtains control with its
controlling voting right at the level of both shareholders and board of directors pursuant to agreements with other investors of these entities.
The Company acquired 40% equity interest of Anhui Myhayo and Shanghai Myhayo in November 2018. In August 2019 and August 2020, there
were contribution from non-controlling interests of US$2,905 to Anhui Myhayo and US$73 to Shanghai Myhayo, respectively, whereby the
Company's (i) equity interest in Anhui Myhayo was diluted to 36.8% in August 2019 and (ii) equity interest in Shanghai Myhayo was diluted to
36.8% in August 2020. These transactions did not result in a loss of the Company’s control over Anhui Myhayo and Shanghai Myhayo and were
accounted for as transactions with non-controlling interests, resulting in an increase in equity by US$2,905 and US$73 for the years ended
December 31, 2019 and 2020, respectively.
The Company acquired 34.38% equity interest of Changyi, which held 100% equity interest of Suzhou Changyi, Xian Changyi, Shanghai Changyu
and Anhui Changyi, in January 2019 (Note 4(a)). During the years ended December 31, 2019 and 2020, the Company has further completed the
following transactions in relation to Changyi.
-
-
-
In May 2019, the Company injected a total cash of RMB15 million (equivalent to US$2,217) to Changyi as paid-up capital, upon which the
Company's equity interest in Changyi increased to 41.46%.
In September 2020, the Company further injected a total cash of RMB65 million (equivalent to US$9,477) to Changyi as paid-up capital,
resulting in a transfer of non-controlling interests of US$1,716 to additional paid-in capital for the year ended December 31, 2020. The
Company’s equity interest in Changyi increased further to 52.62%.
In December 2020, the Company acquired 7.22% equity interest of Changyi from non-controlling interests using 313,011 Class A ordinary
shares of the Company with a fair market value of US$4,176, resulting in a transfer of non-controlling interests of US$1,658 to additional
paid-in capital for the year ended December 31, 2020. The Company’s equity interests in Changyi increased further to 59.84%.
These transactions did not change the Company’s control over Changyi and were accounted for as transactions with non-controlling interests.
(v)
The Company acquired 80% equity interest of Optimal in May 2020 (Note 4(c)). In December 2020, the Company acquired the remaining 20%
equity interest of Optimal from the non-controlling interest shareholder at a cash consideration of US$7,003, whereby the Company’s equity
interests in Optimal increased to 100%. This was accounted for as a transaction with non-controlling interests with an increase in additional paid-in
capital of US$1,137 and a reduction in non-controlling interests of US$8,140 for the year ended December 31, 2020.
F-17
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
1
(b)
Organization and principal activities (Continued)
Consolidated VIE and VIE’s subsidiaries
When the Company acquired OptAim WFOE in July 2015, OptAim WFOE is considered as a foreign invested enterprise and any foreign ownership in
advertising business was subject to certain restrictions under the PRC laws and regulations at that time. To comply with the then-effective PRC laws and
regulations, certain of the Group’s operations are conducted through Beijing OptAim and its subsidiaries Shanghai OptAim, Shanghai Myhayo and Anhui
Myhayo (together, “OptAim VIE”). OptAim WFOE, a wholly-owned subsidiary of the Company, or a wholly foreign owned enterprise (“WFOE”) of the
Company, entered into a series of contractual agreements among Beijing OptAim and Beijing OptAim’s legal shareholders.
Management evaluated the contractual relationships among the Company, OptAim WFOE and OptAim VIE as detailed below, and concluded that OptAim
WFOE is the primary beneficiary of OptAim VIE. As a result, OptAim VIE’s results of operations, assets and liabilities have been included in the Group’s
consolidated financial statements.
As a result of an internal restructuring within the Group in 2021 to move the VIE structure from OptAim WFOE to Beijing WFOE (being another wholly-
owned subsidiary of the Company in the PRC), on November 1, 2021, the VIE contractual agreements as detailed below were amended and restated, which
were to provide Beijing WFOE with the power, rights and obligations equivalent in all material respects to those it would possess as the principal equity holder
of OptAim VIE by signing such contractual agreements among Beijing OptAim and Beijing OptAim’s legal shareholders to have Beijing WFOE replacing
OptAim WFOE as the primary beneficiary of OptAim VIE.
OptAim VIE
The Company’s relationships with Beijing OptAim and its shareholders are governed by the following contractual arrangements:
•
•
•
Cooperative Agreement
Under the cooperative agreement between OptAim WFOE/Beijing WFOE and Beijing OptAim, OptAim WFOE/Beijing WFOE has the exclusive
right to provide to Beijing OptAim, among others, technical consulting, technical support, business consulting, and appointment and dismissal of
employees. OptAim WFOE/Beijing WFOE will collect a fee from Beijing OptAim to be determined at the sole discretion of OptAim
WFOE/Beijing WFOE. The term of this agreement will not expire unless OptAim WFOE/Beijing WFOE provides prior written notice to Beijing
OptAim.
Purchase Option Agreement
The parties to the purchase option agreement are OptAim WFOE/Beijing WFOE, Beijing OptAim and each of the shareholders of Beijing OptAim.
Under the purchase option agreement, each of the shareholders of Beijing OptAim irrevocably granted OptAim WFOE/Beijing WFOE or its
designated representative(s) an exclusive option to purchase, to the extent permitted under PRC law, all or part of its equity interests in Beijing
OptAim. OptAim WFOE/Beijing WFOE or its designated representative(s) have sole discretion as to when to exercise such options, either in part
or in full. Without prior written consent from OptAim WFOE/Beijing WFOE, Beijing OptAim’s shareholders shall not sell, transfer, mortgage or
otherwise dispose their equity interests in Beijing OptAim. The agreement will not expire until all shares of Beijing OptAim are transferred to
OptAim WFOE/Beijing WFOE or its designated representative(s).
Power of Attorney
Pursuant to the irrevocable power of attorney executed by the shareholders of Beijing OptAim, Beijing OptAim appointed OptAim WFOE/Beijing
WFOE as its attorney-in-fact to exercise all shareholders’ rights in Beijing OptAim, including, without limitation, the power to vote on all matters
of Beijing
F-18
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
1
(b)
Organization and principal activities (Continued)
Consolidated VIE and VIE’s subsidiaries (Continued)
•
•
Power of Attorney (Continued)
OptAim requiring shareholder approval under PRC laws and regulations and the articles of association of Beijing OptAim. The power of attorney
will remain in force until OptAim WFOE/Beijing WFOE provides prior written notice to Beijing OptAim.
Pledge Agreement
Pursuant to the pledge agreement between OptAim WFOE/Beijing WFOE and the shareholders of Beijing OptAim, the shareholders of Beijing
OptAim have pledged all of their equity interests in Beijing OptAim to OptAim WFOE/Beijing WFOE to guarantee the performance by Beijing
OptAim under the cooperative agreement, purchase option agreement, and powers of attorney. If Beijing OptAim and/or its shareholders breach
their contractual obligations under those agreements, OptAim WFOE/Beijing WFOE, as pledgee, will be entitled to certain rights, including the
right to sell the pledged equity interests. Under the pledge agreement, the shareholders of Beijing OptAim are not able to provide any other
guarantee by pledging the shares of Beijing OptAim, transfer or sell their pledged shares to other individual, change share capital of Beijing
OptAim or transfer or sell the assets out of Beijing OptAim. The shareholders of Beijing OptAim have completed the registration of the equity
pledge with the relevant office of the Administration for Industry and Commerce in accordance with the PRC Property Rights Law on June 21,
2017.
Through the aforementioned contractual agreements, OptAim VIE is considered VIE in accordance with Generally Accepted Accounting Principles in the
United States (“U.S. GAAP”) because the Company, through OptAim WFOE/Beijing WFOE, has the ability to:
•
•
•
exercise effective control over OptAim VIE whereby having the power to direct OptAim VIE’s activities that most significantly drive the economic
results of OptAim VIE;
receive substantially all of the economic benefits and residual returns, and absorb substantially all the risks and expected losses from OptAim VIE
as if it was their sole shareholder; and
have an exclusive option to purchase all of the equity interests in OptAim VIE.
As of December 31, 2020 and 2021, the total assets of OptAim VIE were US$7,346 and US$10,506, respectively, mainly comprising cash and cash equivalents,
accounts receivable, prepaid media costs, property and equipment, intangible assets, right-of-use assets, other long-term investment and other assets. As of
December 31, 2020 and 2021, the total liabilities of OptAim VIE were US$4,104 and US$6,741 respectively, mainly comprising accounts payable, deferred
revenue, lease liabilities, bank borrowings, income tax payable, accrued liabilities and other current liabilities, and deferred tax liabilities.
In accordance with the aforementioned agreements, the Company has the power to direct activities of OptAim VIE, and can have assets transferred out of
OptAim VIE. Therefore the Company considers that there is no asset in OptAim VIE that can be used only to settle obligations of OptAim VIE, except for
registered capital and PRC statutory reserves of OptAim VIE amounting to US$2,081 and US$2,081, respectively, as of December 31, 2020 and 2021. As
Beijing OptAim and its subsidiaries were incorporated as limited liability companies under the PRC Company Law, the creditors do not have recourse to the
general credit of the Company for all the liabilities of OptAim VIE. Currently there is no contractual arrangement that could require the Company to provide
additional financial support to OptAim VIE.
As the Company is conducting its PRC online advertising services business through OptAim VIE, the Company will, if needed, provide such support on a
discretion basis in the future, which could expose the Company to a loss.
There is no VIE where the Company has variable interest but is not the primary beneficiary.
F-19
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
1
(b)
Organization and principal activities (Continued)
Consolidated VIE and VIE’s subsidiaries (Continued)
In the opinion of the Company’s management, the contractual arrangements among its subsidiary, the VIE and the nominee shareholder are in compliance with
current PRC laws and are legally binding and enforceable. However, uncertainties in the interpretation and enforcement of the PRC laws, regulations and
policies could limit the Company’s ability to enforce these contractual arrangements. In addition, the nominee shareholder of our VIE is Mr Jian Tang, the
chairman of our board of directors and our chief executive officer, who controls around 30% of the Company in terms of voting power. Therefore, the
enforceability of the contractual agreements between the Company's subsidiary, the VIE and its nominee shareholder depends on whether the shareholder will
fulfil these contractual agreements. As a result, the Company may be unable to consolidate the VIE and VIE’s subsidiaries in the consolidated financial
statements.
The Company’s ability to control OptAim VIE also depends on the power of attorney and the effect of the share pledge under the Pledge Agreement and
OptAim WFOE/Beijing WFOE has to vote on all matters requiring shareholder approval in OptAim VIE. As noted above, the Company believes this power of
attorney is legally enforceable but may not be as effective as direct equity ownership.
(c)
Share offerings in 2020
(i)
Private investment in public equity offering (“PIPE”)
The Company completed a PIPE offering on June 22, 2020 and issued a total of 2,107,400 Class A ordinary shares. The net proceeds received by
the Company, after deducting offering expenses of US$3,469, amounted to US$18,531.
(ii)
Follow-on offering
The Company completed a follow-on offering of 8,500,001 American Depositary Shares (“ADSs”) (equivalent to 4,250,001 Class A ordinary
shares) at a public offering price of US$8.50 per ADS on September 8, 2020. Each ADS represents 0.5 common share. Of the ADSs sold in the
follow-on offering, 6,877,214 ADSs (equivalent to 3,438,607 Class A ordinary shares) were newly issued and sold by the Company and 1,622,787
ADSs (equivalent to 811,394 Class A ordinary shares) were sold by an existing shareholder. The net proceeds received by the Company, after
deducting offering expenses of US$5,070, amounted to US$53,386.
(d)
Issuance of shares to a new investor in 2021
Pursuant to a share subscription agreement entered into between the Company and a new investor Baozun Inc. (“Baozun”) in January 2021, the Company has
issued a total of 649,349 Class B ordinary shares to Baozun for net cash proceeds received by the Company, after deducting an incremental cost of US$213, of
US$17,010.
Cash proceeds received by the Company from the issuance of Class B ordinary shares to Baozun were calculated at US$26.52 per share, which was at discount
as compared to the fair value of US$28.88 as determined based on the closing stock price as of the date of share issuance. The total discount of this share
issuance amounting to US$1,530 represented an incentive to Baozun to enter into the strategic cooperation framework agreement with the Company, which was
recognized as share-based compensation expenses in the consolidated during the year ended December 31, 2021.
2
(a)
Principal accounting policies
Basis of presentation
The consolidated financial statements have been prepared in accordance with the U.S. GAAP. Significant accounting policies followed by the Company in the
preparation of the accompanying consolidated financial statements are summarized below.
F-20
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(b)
Principal accounting policies (Continued)
Use of estimates
The preparation of the Group’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ materially from such estimates.
The Group believes that revenue recognition in determining whether the Company is the principal or an agent to the arrangements with merchants, rebates,
consolidation of VIE, impairment assessment of goodwill, impairment assessment of long-lived assets and intangible assets, fair value determination related to
the accounting for business combinations, impairment assessment of investments in equity securities without readily determinable fair value, determination of
share-based compensation and valuation of convertible notes reflect more significant judgments and estimates used in the preparation of its consolidated
financial statements.
Management bases the estimates on historical experience and on various other assumptions as discussed elsewhere to the consolidated financial statements that
are believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could
materially differ from these estimates.
(c)
Consolidation
The Group’s consolidated financial statements include the financial statements of the Company, its subsidiaries, its VIE and a VIE’s subsidiaries for which the
Company or its subsidiary is the primary beneficiary. All transactions and balances among the Company, its subsidiaries, its VIE and a VIE’s subsidiaries have
been eliminated upon consolidation.
A subsidiary is an entity in which the Company, directly or indirectly, controls more than one half of the voting powers; or has the power to appoint or remove
the majority of the members of the board of directors; or to cast a majority of votes at the meeting of directors; or has the power to govern the financial and
operating policies of the investee under a statute or agreement among the shareholders or equity holders.
A VIE is an entity in which the Company, or its subsidiary, through contractual agreements, bears the risks of, and enjoys the rewards normally associated with
ownership of the entity. In determining whether the Company or its subsidiaries are the primary beneficiary, the Company considered whether it has the power
to direct activities that are significant to the VIE’s economic performance, and also the Group’s obligation to absorb losses of the VIE that could potentially be
significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. Beijing WFOE and ultimately the Company
hold all the variable interests of the VIE and its subsidiaries, and has been determined to be the primary beneficiary of the VIE.
Non-controlling interests are recognized to reflect the portion of their equity that is not attributable, directly or indirectly, to the Company as the controlling
shareholder. Non-controlling interests in the results and equity of subsidiaries are shown separately in the consolidated statement of comprehensive loss,
statement of changes in equity and balance sheet, respectively.
(d)
Foreign currency translation
The reporting currency of the Company is the United States dollars (“US$”). The Company is a holding company engaged in capital raising and financing
activities denominated in US$. As such, the Company’s functional currency has been determined to be the US$. The functional currency of the Company’s
subsidiaries is the local currency of the country in which they are domiciled.
F-21
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(d)
Principal accounting policies (Continued)
Foreign currency translation (Continued)
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at the rates of exchange
existing at the balance sheet date. Transactions in currencies other than the functional currency during the year are converted into the functional currency at the
applicable rates of exchange prevailing at the transaction date. Transaction gains and losses are recognized in “other gains, net”. Assets and liabilities
denominated in foreign currencies are translated at the exchange rates at the balance sheet date. Equity accounts are translated at historical exchange rates and
revenues, expenses, gains and losses are translated using the average rate for the year. Translation adjustments are reported as cumulative translation
adjustments and are shown as a separate component of other comprehensive loss in the consolidated statements of changes in shareholders’ equity and
comprehensive loss.
(e)
Fair value of financial instruments
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. When available, the Company uses quoted
market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure fair value using valuation
techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates. Valuation
techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.
Fair value measurements are based on a fair value hierarchy, based on three levels of inputs, of which the first two are considered observable and the last
unobservable, that may be used to measure fair value which are the following:
Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as quoted
market prices for similar assets and liabilities; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less
active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable
market data.
Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
(i)
Fair value measurement on a recurring basis
Observable inputs are based on market data obtained from independent sources. The Company uses a combination of valuation methodologies, including market
and income approaches based on the Company’s best estimate, which is determined by using information including but not limited to the pricing of recent
rounds of financing of the investees, future cash flow forecasts, liquidity factors and multiples of a selection of comparable companies. The Company’s
contingent consideration (Note 4 (d)), derivative liabilities and convertible notes (Note 18), and debt investment (Note 2(k)) are measured using unobservable
inputs that require a high level of judgment to determine fair value, and thus classified as Level 3 (Note 3(c)).
F-22
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(e)
Principal accounting policies (Continued)
Fair value of financial instruments (Continued)
(i)
Fair value measurement on a recurring basis (Continued)
The Company values its investments in wealth management products issued by banks and pledged deposits placed with a financial institution classified as short-
term investments in the consolidated balance sheets (Note 2(k)) using quoted subscription or redemption prices published by the banks and financial institution.
Accordingly, the Company classifies the valuation techniques that use these inputs as Level 2.
The carrying amounts of cash and cash equivalents, time deposits, restricted cash, accounts receivable, amount due from an equity investee, rebates receivable,
accounts payable, other financial assets and liabilities approximate their fair values due to the short-term nature of these instruments. Based on the borrowing
rates currently available to the Group for debt with similar terms, the carrying amounts of the short-term bank borrowings approximate their fair values (using
Level 2 inputs).
The Group values its listed equity securities using quoted prices for the underlying securities in active markets. Accordingly, the Group classifies the valuation
techniques that use these inputs as Level 1.
(ii)
Fair value measurement on a non-recurring basis
The Group measures an equity investment accounted for using the equity method at fair value on a non-recurring basis only if an impairment charge were to be
recognized. For the years ended December 31, 2019, 2020 and 2021, no impairments were recorded on the asset which would require fair value measurement on
a non-recurring basis.
Equity investments accounted for using the net asset value per share as a practical expedient (Note 2(k)(i)) and measurement alternative (Note 2(m)) are
generally not categorized in the fair value hierarchy. However, if equity investments without readily determinable fair values accounted for using the
measurement alternative were re-measured during the year, they would be classified within Level 3 in the fair value hierarchy because the Group estimated the
value of the investments based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs. See Note 2(m)
for details.
(f)
Cash, cash equivalents and restricted cash
Cash and cash equivalents include cash on hand, cash in bank and time deposits placed with banks or other financial institutions, which have original maturities
of three months or less and are readily convertible to known amounts of cash.
Restricted cash represented bank deposits in accounts that are restricted as to withdrawal or usage. For restriction which is expected to be released within one
year of the balance sheet date, the respective restricted cash balance is classified as current. As of December 31, 2020 and 2021, the Group’s restricted cash
mainly represents balance held in restricted bank accounts as required by certain loan agreements and escrow amount deposited for a business acquisition.
(g)
Time deposits
Time deposits represent demand deposits placed with banks with original maturities of more than three months but less than one year. Interest income is
recognized using the effective interest method in the consolidated statements of comprehensive loss during the periods. Time deposits are valued based on the
prevailing interest rates in the market.
F-23
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(h)
Principal accounting policies (Continued)
Accounts receivable, net
Accounts receivable are presented net of allowance for credit losses. The Group evaluates its accounts receivable for expected credit losses on a regular basis.
The Group maintains an estimated allowance for credit losses which reflects its best estimate of amounts that potentially will not be collected. The Group uses
various credit quality indicators including but not limited to historical collection experience and credit-worthiness of the customers as well as the age of the
receivables balance to monitor the Group’s receivables within the scope of expected credit losses model and use these as a basis to develop the Group’s
expected loss estimates. Additionally, the Group makes specific allowance in the period based on any specific knowledge the Group has acquired that might
indicate that an individual account is uncollectible. The facts and circumstances of each account may require the Group to use judgment in assessing its
collectability. See Note 2(j) for current expected credit losses upon adoption of ASU No. 2016-13, “Financial Instruments—Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments” (“ASC 326”).
(i)
Rebates receivable
Rebates receivable represent sales rebates that have already been earned but not received from third party publishers. The Group earns its rebates from
purchasing advertising spaces from these website publishers.
(j)
Current expected credit losses upon adoption of ASC 326
In 2016, the FASB issued ASC 326, which amends previously issued guidance regarding the impairment of financial instruments by creating an impairment
model that is based on expected losses rather than incurred losses. Subsequently, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326,
to clarify that receivables arising from operating leases are within the scope of lease accounting standards. Further, the FASB issued ASU No. 2019-04, ASU
No. 2019-05, ASU 2019-10, ASU 2019-11, ASU 2020-02 and ASU 2020-03 to provide additional guidance on the credit losses standard. The Group adopted
ASC 326 and several associated ASUs on January 1, 2020 using a modified retrospective approach, resulting in a net adjustment of US$3,972 to the opening
balance of accumulated losses with a corresponding credit loss provision over accounts receivable being recognized in the consolidated balance sheet as of
January 1, 2020. As of December 31, 2020 and 2021, the credit loss provision for accounts receivable and loans and interest receivable being recognized in the
consolidated balance sheets amounted to US$11,749 and US$23,075, respectively.
The Group’s accounts receivable, amount due from an equity investee, rebates receivable, other current assets and other assets are within the scope of ASC 326.
The Group has identified the relevant risk characteristics of its customers and the related receivables and other current assets which include size, type of the
services the Group provides, or a combination of these characteristics. Receivables with similar risk characteristics have been grouped into pools for collective
evaluation. Receivables that do not share similar risk characteristics are evaluated on an individual basis. Receivables evaluated individually are not included in
the collective evaluation. For each pool for collective evaluation, the Group considers the historical credit loss experience, current economic conditions,
supportable forecasts of future economic conditions, and any recoveries in assessing the lifetime expected credit losses. Other key factors that influence the
expected credit loss analysis include customer demographics, payment terms offered in the normal course of business to customers, and industry-specific factors
that could impact the Group’s receivables. Additionally, external data and macroeconomic factors are also considered. This is assessed at each quarter based on
the Group’s specific facts and circumstances.
Management applies ASC 326 in estimating the allowance for credit losses on loans and interest receivable as included in other current assets on the
consolidated balance sheets not sharing similar risk characteristics on an individual basis. The key factors considered when determining the above allowances
for credit losses include the estimated loan collection schedule under different scenarios and their corresponding probability of occurrence, discount rate,
financial condition and performance data of the borrowers and their cash flow forecasts considering current and future economic conditions.
F-24
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
Principal accounting policies (Continued)
Current expected credit losses upon adoption of ASC 326 (Continued)
2
(j)
The following table presents the movement in the allowance for credit losses for the years ended December 31, 2020 and 2021.
Balance at the beginning of year prior to ASC 326
Adoption of ASC 326
Balance at the beginning of year
Provision for the year
Accounts receivable written off
Exchange differences
Balance at the end of year
(k)
Short-term investments
Accounts
receivable
For the years ended
December 31,
Loans and interest
receivable
For the years ended
December 31,
2020
2021
2020
2021
3,469
3,972
7,441
6,587
(2,621)
342
11,749
-
-
11,749
12,424
(1,669)
282
22,786
-
-
-
-
-
-
-
-
-
-
289
-
-
289
Short-term investments represent the Group’s investments in listed equity securities, fund investments, wealth management products, pledged deposits and a
convertible note.
(i)
Fund investments
Fund investments over which the Group does not have the ability to exercise significant influence, are required to be measured at fair value under
ASC 321 “Investments—Equity Securities” (“ASC 321”). The Group has adopted the practical expedient in ASC 820 “Fair Value Measurements
and Disclosures” (“ASC 820”) to estimate fair value using the net asset value per share (or its equivalent) of these investments which were without
readily determinable fair value. Fund investments included in the consolidated balance sheet as short-term investments as of December 31, 2020
and 2021 amounted to US$11,097 and US$3,647 respectively and the change in fair value recorded in consolidated statement of comprehensive
loss. Fair value gain of US$187 and fair value loss of US$452 were recognized under “other gains, net” for the years ended December 31, 2020 and
2021 respectively. There were no fund investments as of December 31, 2019 and no changes in fair values for the year ended December 31, 2019.
(ii)
Listed equity securities
Investments in listed equity securities are reported at fair value in the consolidated balance sheets and the unrealized gains and losses are recorded
in the consolidated statements of comprehensive loss under ASU 2016-01. Listed equity securities recorded in the consolidated balance sheet as
short-term investments as of December 31, 2020 and 2021 amounted to US$2,342 and US$nil, respectively, and the change in fair value recorded
in the consolidated statement of comprehensive loss under “other gains, net” for the years ended December 31, 2019, 2020 and 2021 amounted to
US$nil, US$1,157 and US$127, respectively.
F-25
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(k)
Principal accounting policies (Continued)
Short-term investments (Continued)
(iii)
Wealth management products
Wealth management products are issued by banks in the PRC which are redeemable by the Group at any time. They are unsecured with variable
interest rates and primarily invested in debt securities issued by the PRC government, corporate debt securities and central bank bills. The Group
measures these investments at fair value using the quoted subscription or redemption prices published by the bank. Wealth management products
recorded in the consolidated balance sheet as short-term investments as of December 31, 2020 and 2021 amounted to US$700 and US$1,574
respectively and the change in fair values recorded in the consolidated statement of comprehensive loss under “other gains, net” amounted to
US$107, US$52 and US$9 for the years ended December 31, 2019, 2020 and 2021, respectively.
(iv)
Pledged deposits
Investments in pledged deposits are placed with a financial institution in Hong Kong which are redeemable by the Group at any time with 1-day
notice, secured by certain listed equity securities and interest bearing at a fixed rate of 0.2% per annum. The Group measures these investments at
fair value using the quoted subscription or redemption prices published by the financial institution. Pledged deposits recorded in the consolidated
balance sheet as short-term investments as of December 31, 2020 and 2021 amounted to US$9,581 and US$nil, respectively, and the change in fair
values recorded in the consolidated statement of comprehensive loss under “other gains, net” for the years ended December 31, 2019, 2020 and
2021 amounted to US$nil, US$8 and US$nil, respectively.
(v)
Debt investment
Debt investment of the Group includes an investment in a convertible note issued by a private company made in 2021 accounted for under the fair
value option, for which the fair value as of the acquisition date and December 31, 2021 was US$2,550, respectively. Interest income and all other
changes in the carrying amount of this debt investment are recognized in earnings. There was no material change in its fair value for the year ended
December 31, 2021 since the convertible note was acquired at the end of 2021. There was no debt investment as of December 31, 2020.
(l)
Investment in an equity investee
Investment in an equity investee represents the Group's investment in a privately held company. The Group applies the equity method to account for an equity
investment in common stock or in-substance common stock, according to Accounting Standards Codification (“ASC”) 323 “Investment — Equity Method and
Joint Ventures,” over which it has significant influence but does not own a majority equity interest or otherwise control.
Under the equity method, the Group initially records the investments at cost and the difference between the cost of the equity investee and the fair value of the
underlying net assets of the equity investee is recognized as equity method goodwill and intangible assets acquired, which is included in the equity method
investments on the consolidated balance sheets. The Group subsequently adjusts the carrying amount of the investments to recognize its (i) proportionate share
of each equity investee’s post-acquisition net income or loss into earnings, (ii) share of post-acquisition movements in accumulated other comprehensive income
into other comprehensive income, and (iii) cash distributions from investees, after the date of investment. When the Group's share of loss in the equity investee
equals or exceeds its interest in the equity investee, the Group does not recognize further loss, unless the Group has incurred obligations or made payments or
guarantees on behalf of the equity investee.
The Group evaluates its equity method investment for impairment under ASC 323-10. An impairment loss on the equity method investment is recognized in the
consolidated statement of comprehensive loss when the decline in value is determined to be other-than-temporary. No impairment loss has been recorded during
the years ended December 31, 2019, 2020 and 2021.
F-26
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
F-27
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(m)
Principal accounting policies (Continued)
Other long-term investments
The Group’s other long-term investments as of December 31, 2020 and 2021 consist of equity securities without readily determinable fair value.
In accordance with ASC 321 “Investments—Equity Securities” on January 1, 2018, the Group is required to measure its equity investments at fair value and any
changes in fair value are recognized in earnings. For equity investments without readily determinable fair value and does not qualify for the existing practical
expedient in ASC 820 to estimate fair value using the net asset value per share (or its equivalent) of the investments, the Group has elected to use the
measurement alternative to measure its equity investments at cost, less any impairment, plus or minus changes resulting from observable price changes in
orderly transactions for identical or similar investments of the same issuer, if any.
Management makes a qualitative assessment as to whether the investment is impaired at each reporting date. If a qualitative assessment indicates that the
investment is impaired, management estimates the investment’s fair value in accordance with the principles of ASC 820. If the fair value is less than the
investment’s carrying value, the Company recognizes an impairment loss in net loss equal to the difference between the carrying value and fair value.
Management applied judgment in (i) determining whether the investment is impaired, (ii) estimating the impairment amount if an impairment exists, and (iii)
determining valuation methods and key valuation assumptions and data used in estimating the impairment amounts. These judgments consider various factors
and events including a) adverse performance of investees; b) adverse industry developments affecting investees; and c) adverse regulatory, social, economic or
other developments affecting investees. These judgements include the selection of valuation methods in estimating fair value and the determination of key
valuation assumptions used, comprising selection of comparable companies and multiples, and discount for lack of marketability. The Company recognized
impairment losses of US$4,038 for the year ended December 31, 2021. There were no impairment losses recognized for the years ended December 31, 2019 and
2020.
(n)
Property and equipment, net
Property and equipment are stated at historical cost less accumulated depreciation and impairment loss, if any. Depreciation is calculated using the straight-line
method over their estimated useful lives. The estimated useful lives are as follows:
Leasehold improvements
Furniture and fixtures
Office equipment
Motor Vehicles
Over the shorter of lease term or 2 – 5 years
2 – 5 years
3 – 5 years
3 – 5 years
Expenditures for maintenance and repairs are expensed as incurred. The gain or loss on the disposal of property and equipment is the difference between the net
sales proceeds and the carrying amount of the relevant assets and is recognized in the consolidated statement of comprehensive loss.
F-28
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(o)
Principal accounting policies (Continued)
Acquisitions
(i)
Business combinations
The Group accounts for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations.
The Group accounts for its business combinations using the acquisition method of accounting in accordance with ASC 805 “Business
Combinations” (“ASC 805”). The cost of an acquisition is measured as the aggregate of the fair values at the date of exchange of the assets given,
liabilities incurred, and equity instruments issued. Transaction costs directly attributable to the acquisition are expensed as incurred. Identifiable
assets and liabilities acquired or assumed are measured separately at their fair values as of the acquisition date, irrespective of the extent of any
non-controlling interests. The excess of (i) the total costs of acquisition, fair value of the non-controlling interests and acquisition date fair value of
any previously held equity interest in the acquiree over (ii) the fair value of the identifiable net assets of the acquiree is recorded as goodwill. If the
cost of acquisition is less than the fair value of the net assets of the subsidiary acquired, the difference is recognized directly in the consolidated
statements of comprehensive loss as gain on bargain purchase. During the measurement period, which can be up to one year from the acquisition
date, the Group may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the
conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any
subsequent adjustments are recorded to the consolidated statements of comprehensive loss.
(ii)
Assets acquisition
ASC 805-10-55-5A, which sets forth a screen test, provides that if substantially all of the fair value of the assets acquired is concentrated in a single
identifiable asset or group of similar identifiable assets, the assets acquired are not considered to be a business. The acquisition should be accounted
for by the Company as an asset acquisition in accordance with ASC 805-50, rather than as a business combination. Under an asset acquisition, the
cost to acquire the group of assets is allocated to the individual assets acquired or liabilities assumed based on their relative fair values.
(p)
Intangible assets, net
Intangible assets mainly consist of computer software licenses purchased from external parties and computer software and systems, developed technologies,
customer relationship, brand name, contract backlog and advertising contract acquired through the acquisitions of subsidiaries. Identifiable intangible assets are
carried at acquisition cost less accumulated amortization and impairment loss, if any. Amortization of finite lived intangible assets is computed using the
straight-line method over the following estimated useful lives, which are as follows:
Computer software and systems
Developed technologies
Customer relationship
Brand name
Contract backlog
Advertising contract
2 – 5 years
5 years
4 – 5 years
4 years
3 years
30 years
F-29
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(q)
Principal accounting policies (Continued)
Impairment of goodwill
Goodwill represents the excess of the purchase consideration over the fair value of assets and liabilities of businesses acquired. Goodwill is not subject to
regular periodic amortization. Instead, management conducts a goodwill impairment test at the reporting unit level annually in the fourth quarter, or more
frequently when events or circumstances occur indicating that the recorded goodwill may be impaired.
A reporting unit is an operating segment or a component of an operating segment which is a business and for which discrete financial information is available
and reviewed by a segment manager. The Group’s reporting units include (i) the Marketing Solutions and (ii) the Enterprise Solutions.
The Group adopted ASU No. 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Accounting for Goodwill Impairment on January 1, 2020.
In accordance with this guidance, the Group compares the fair value of each reporting unit to its carrying value, with an impairment charge recorded for the
amount by which the carrying amount exceeds the reporting unit’s fair value up to a maximum amount of the goodwill balance for the reporting unit.
For evaluation of reporting units using a quantitative assessment, the Group determines the fair values of the Marketing Solutions reporting unit and the
Enterprise Solutions reporting unit based on a market approach and an income approach, respectively. Under the market approach, the Group estimates the fair
value of the Marketing Solutions reporting unit based on market multiples of current year revenue for the reporting unit. Under the income approach, the Group
estimates the fair value of the Enterprise Solutions reporting unit based on discounted cash flow method derived from the reporting unit’s long-term forecasts
which included a five-year future cash flow projection and an estimated terminal value. The cash flow projection is based on management’s most recent view of
the long-term outlook for the Enterprise Solutions reporting unit in order to come up with revenue growth rates, the estimated terminal value using a terminal
year long-term future growth rate, discount rates, and other assumptions deemed reasonable by management.
(q)
Impairment of goodwill (Continued)
Application of a goodwill impairment test requires significant management judgment, including the identification of reporting units, assigning assets and
liabilities to reporting units, assigning goodwill to reporting units, and estimating the fair value of each reporting unit. Estimating fair value of individual
reporting units requires the exercise of significant management judgment, including judgment in a market approach about the use of significant assumptions
with respect to management's identification of comparable entities with similar operations and economic characteristics and their corresponding multiples of
revenues for the Marketing Solutions reporting unit, and judgment in an income approach about appropriate revenue growth rates, an estimated terminal value
using a terminal year long-term future growth rate and a discount rate for the Enterprise Solutions reporting unit. Changes in these estimates and assumptions
could materially affect the estimation of fair value for each reporting unit.
Based on the assessment performed by management, the fair values of Marketing Solutions reporting unit and Enterprise Solutions reporting unit exceeded their
carrying values by around 41% and 113%, respectively, as of December 31, 2021. Therefore, no impairment for goodwill was recognized for the year ended
December 31, 2021.
(r)
Impairment of other long-lived assets and intangible assets
For other long-lived assets including property and equipment and amortizable intangible assets, the Group evaluates for impairment whenever events or changes
(triggering events) indicate that the carrying amount of an asset may no longer be recoverable. The Group assesses the recoverability of the long-lived assets by
comparing the carrying value of the long-lived assets to the estimated undiscounted future cash flows expected to receive from use of the assets and their
eventual disposition. Such assets are considered to be impaired if the sum of the
F-30
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
expected undiscounted cash flows is less than the carrying amount of the assets. The impairment to be recognized is measured by the amount by which the
carrying amount of the assets exceeds the fair value of the assets.
F-31
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(s)
Principal accounting policies (Continued)
Lease accounting
On January 1, 2019, the Group adopted ASC 842, which requires the recognition of the right-of-use assets (“ROU assets”), and related lease liabilities on the
consolidated balance sheets using a modified retrospective approach. The consolidated financial statements related to periods prior to January 1, 2019 were not
restated, and continue to be reported under ASC Topic 840—Leases ("ASC 840"), which did not require the recognition of operating lease liabilities on the
consolidated balance sheets. As a result the consolidated financial statements related to periods prior to January 1, 2019 are not entirely comparative with
current and future periods. As permitted under ASC 842, the Group elected several practical expedients that permit the Group to not reassess (1) whether
existing contracts are or contain a lease, (2) the classification of existing leases, and (3) whether previously capitalized costs continue to qualify as initial
indirect costs. In addition, the Group has elected not to recognize short-term leases on the consolidated balance sheets. In addition, the Group did not use
hindsight to determine lease term.
For the identified leases, the Group used its incremental borrowing rate to discount the related future payment obligations as of January 1, 2019 to determine its
lease liability as of the adoption date. As of the adoption date on January 1, 2019, the Group recognized lease liabilities of US$2,634 and corresponding ROU
assets of US$2,634, with no equity impact from the adoption.
(s)
Lease accounting (Continued)
The Group records rent expense for operating leases, including leases of office premises, on a straight-line basis over the lease term. The Group begins
recognition of rent expense on the commencement date, which is generally the date that the asset is made available for use. The lease liability is included in
lease liabilities, current and lease liabilities, non-current within the consolidated balance sheets, which are reduced as lease related payments are made. The
ROU asset is amortized on a periodic basis over the expected term of the lease. See Note 14 for additional information.
(t)
Deferred revenue
The Group receives prepayments for services in advance of service performance from certain customers. The amounts received in advance are recorded as
deferred revenue and recognized as revenue in the period which the corresponding services are performed.
(u)
Derivative financial instrument
ASC 815, “Accounting for Derivative Instruments and Hedging Activities” (“ASC 815”) requires every derivative financial instrument (including certain
derivative financial instruments embedded in other contracts) to be recorded on the balance sheet at fair value as either an asset or a liability. ASC 815 also
requires that changes in the fair value of recorded derivatives be recognized currently in earnings unless specific hedge accounting criteria are met. The Group’s
derivative financial instrument included the call option written to the investor to purchase the convertible notes issued in July 2020 classifies as “derivative
liabilities” (the “Call Option”). For the year ended December 31, 2020, the Group recognized fair value losses of US$11,466 on the derivative liabilities. The
Call Option was exercised by the investor on July 30, 2020. There was no derivative financial instrument as of December 31, 2020 and 2021.
(v)
Convertible notes
The Group determines the appropriate accounting treatment of its convertible notes in accordance with the terms in relation to the conversion feature, call and
put option, and beneficial conversion feature (“BCF”). After considering the impact of such features, the Group may account for such instrument as a liability in
its entirety, or separate the instrument into debt and equity components following the respective guidance described under ASC 815 and ASC 470 “Debt”.
F-32
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(v)
Principal accounting policies (Continued)
Convertible notes (Continued)
The conversion features of the convertible notes of the Group meets the definition of a derivative whereby no BCF shall be separately accounted for. Moreover,
the Group has elected the fair value option for convertible notes accounted for as a liability in its entirety whereby the conversion features that meet the
definition of a derivative are not bifurcated given that the entire debt instrument is legally a single contract therefore not to be separated into parts for purposes
of applying the fair value option. Such fair value option permits the irrevocable election on an instrument-by-instrument basis at initial recognition of an asset or
liability or upon an event, that gives rise to a new basis of accounting for that instrument. The convertible notes accounted for under the fair value option are
carried at fair value with realized or unrealized gains and losses recorded in the consolidated statements of comprehensive loss.
Convertible notes are classified as current liabilities if they are convertible or redeemable on demand or if their due date is or will be within one year from the
balance sheet date.
(w)
Treasury shares
The Company accounted for those shares repurchased as treasury shares at cost in accordance with ASC 505-30, and the treasury shares acquired are shown
separately in shareholders’ equity as the Company has not yet decided on the ultimate disposition of those shares. If and when the Company cancels the treasury
shares, the difference between the original issuance price and the repurchase price will be debited into additional paid-in capital.
(x)
Revenue recognition and cost of revenues
The following table presents our revenue recognized from contracts with customers disaggregated by the four types of pricing models:
Recognized over time
- Sales agent
- Cost-plus
- SaaS products and services
Recognized at point in time
- Specified actions
- SaaS products and services
Total
For the years ended December 31,
2019
2020
2021
6,563
17,146
8,687
32,396
165,263
1,749
167,012
199,408
5,834
26,738
28,545
61,117
193,280
348
193,628
254,745
4,195
26,062
57,756
88,013
212,353
7,336
219,689
307,702
The Group’s Marketing Solutions service offerings are the provisions of online advertising services. The Group utilizes a combination of pricing models and
revenue is recognized when the related services are delivered based on the specific terms of the contract, which are commonly based on (i) agreed incentive to
be earned for being a sales agent of a publisher, (ii) cost-plus or (iii) specified actions (i.e. cost per impression (“CPM”), cost per click (“CPC”), cost per action
(“CPA”), cost per sale (“CPS”), cost per lead (“CPL”) or return on investment (“ROI”)) and related campaign budgets, depending on the customers’ preferences
and their campaigns launched. Subsequent to the acquisition of Changyi and its subsidiary Suzhou Changyi (together, “Changyi Group”) on January 1, 2019,
the Group also offers the Enterprise Solutions via the offering of SaaS products and services.
F-33
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(x)
Principal accounting policies (Continued)
Revenue recognition and cost of revenues (Continued)
The Group recognizes revenue when the Group satisfies a performance obligation by transferring a promised service to a customer. The Group considers the
following when determining if a contract exists under which the performance obligations have been satisfied: (i) contract approval by all parties, (ii)
identification of each party’s rights regarding the goods or services to be transferred, (iii) specified payment terms, (iv) commercial substance of the contract,
and (v) collectability of substantially all of the consideration is probable. Collectability is assessed based on a number of factors, including the creditworthiness
of a customer, the size and nature of a customer’s business and transaction history. Revenues are recorded net of value-added taxes.
The Group follows the guidance provided in ASC 606, Revenue from Contracts with Customers, for determining whether the Group is the principal or an agent
in arrangements with customers that involve another party that contributes to providing a specified service to a customer. In these instances, the Group
determines whether it has promised to provide the specified service itself (as principal) or to arrange for the specified service to be provided by another party (as
an agent). This determination depends on the facts and circumstances of each arrangement and, in some instances, involves significant judgment. The Group
recognizes revenue from sales agent and cost-plus arrangement amounting to US$23,709, US$32,572, and US$30,257 for the years ended December 31, 2019,
2020 and 2021, respectively, on a net basis as the Group is not primarily responsible for the fulfillment considering the Company only acts as an intermediary in
executing transactions between the publishers and the customers, does not have control of the promised service as the Company only places orders based on
specification set out by the customers, and does not have full discretion in establishing prices and therefore is the agent in the arrangement with customers. All
other revenue of US$175,699, US$222,173 and US$277,445 for the years ended December 31, 2019, 2020 and 2021, respectively, are reported on a gross basis,
as the Group has determined it is the principal in the arrangement.
Sales agent
In the arrangement with a particular publisher, the Group acts as a sales agent for this publisher in selling marketing spaces to marketing clients. In return, the
Group earns incentives from this publisher based on contractually stipulated amounts when certain spending thresholds are achieved. The Group considers this
particular publisher as a customer and record such incentives as net revenues. Incentives from this publisher are calculated on both a quarterly and an annual
basis in accordance with the terms as set out in the arrangement.
Revenue under this arrangement is recognized over time given the Group considers this particular publisher simultaneously receives and consumes the benefits
provided by the Group's performance as the Group performs. In other words, when the Group purchases marketing spaces on behalf of the marketing clients
throughout the marketing campaigns as requested by them, this particular publisher simultaneously receives and consumes the benefit of the marketing spaces
being purchased and therefore the Group is entitled to incentive payment from this publisher.
The Group grants rebates to marketing clients under the sales agent arrangement. The majority of marketing clients under this arrangement are not customers
under either the cost-plus arrangement or specified actions arrangement. The Group records rebates granted to such marketing clients as reduction of revenue.
Cost-plus
For cost-plus advertisement campaigns, sales are recognized at the fair value of the amount received. Discounts granted to marketing clients under cost-plus
marketing campaigns are recorded as a reduction of revenue. The determination of whether revenue should be reported on a gross or net basis is based on an
assessment of whether the Group is acting as the principal or an agent in the transactions. In the normal course of business, the Group acts as an intermediary in
executing transactions between website publishers and marketing clients. The specified service in the cost-plus arrangement is the provision of marketing space,
which is controlled by the website publishers, rather than the Group. The Group assists the marketing clients to place orders with specific website publishers
based on specification set out the marketing clients. The Group does not have the ability to direct the use of marketing space and does not have any inventory
risk. Pricing is generally based on the actual advertising spending incurred by the marketing clients plus a margin. Accordingly, the Group concludes that it is
not the
F-34
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
principal in these arrangements and reports revenue earned and costs incurred related to these transactions on a net basis.
F-35
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(x)
Principal accounting policies (Continued)
Revenue recognition and cost of revenues (Continued)
Cost-plus (Continued)
Revenue under this arrangement is recognized over time as the Group considers its customers simultaneously receive and consume the benefits provided by the
Group's performance. At the time the Group purchases marketing spaces during the contract term for its customers, the customers’ advertisements could be
placed throughout the marketing campaign. Revenue recognition under this arrangement is not based on an occurrence of significant act or milestone method.
Throughout the various services delivered to clients under the cost-plus arrangements, the Group earns rebates from publishers and grant rebates to marketing
clients. The rebates that the Group grants to marketing clients under cost-plus arrangement are recorded as reduction of revenue and are recorded based on the
amount the marketing clients would ultimately need to spend to earn the corresponding level of rebates. The Group is also able to reasonably estimate the
spending the customers can ultimately achieve based on the historical spending patterns of the customers with similar arrangements. The rebates that the Group
receives from publishers under the cost-plus arrangements are recorded as revenue. These rebates are recognized when a particular milestone is achieved (i.e.
applying the relevant rebates based on the level of spending threshold actually achieved) and spending has actually occurred.
Specified actions
The Group also generates revenue from performing specified actions (i.e. a CPM, CPC, CPA, CPS, CPL or ROI basis). Revenue is recognized on a CPM or
CPC basis as impressions or clicks are delivered while revenue on a CPA, CPS, CPL or ROI basis is recognized once agreed actions are performed. For the
specified actions advertisement campaigns, the Group is the principal as it has the obligation to deliver successful actions requested by marketing clients. Also,
the Group will only be paid if successful actions can be delivered and is exposed to risk of loss. In terms of pricing, the Group has complete latitude in
establishing the selling prices of each of the CPM, CPC, CPA, CPS, CPL or ROI pricing model. The Group's margin may vary as the costs incurred to deliver
successful actions may vary and is therefore exposed to risk of loss whereby validating its degree of responsibility to its customers. Although the inventory risk
under specified actions arrangement is considered to be low, the Group concludes that it is the principal in such arrangement as it is the principal ultimately
responsible for delivering successful actions and in charge of establishing the price per action. Accordingly, the Group reports revenue earned and costs incurred
related to these transactions on a gross basis.
Revenues under this arrangement is recognized at point-in-time when the Group is able to deliver the specified actions as requested by the customers. Upon the
occurrence of the specified actions, the customers take control of the specified actions and this is when the Group recognizes the corresponding revenue. Unlike
the cost-plus arrangement, when the Group purchases marketing spaces in order to deliver the specified actions, the customers do not receive and consume the
benefit as the benefit to be received by the customers is the occurrence of the specified actions. Also, the Group does not create or enhance an asset that the
customers control as the marketing spaces ultimately belong to the publishers. The Group does not have any right to payment for simply purchasing the
marketing spaces and would only be compensated upon delivery of the specified actions.
The Group also grants rebates to marketing clients under the specified actions arrangement. Same as the treatment under cost-plus arrangement, the rebates that
the Group grants to marketing clients under cost-plus arrangement are recorded as reduction of revenue and are recorded based on the amount the marketing
clients would ultimately need to spend to earn the corresponding level of rebates. The rebates that the Group receives from publishers under the specified
actions arrangement are recorded as a reduction of cost of revenues. These rebates are recognized when a particular milestone is achieved (i.e. applying the
relevant rebates based on the level of spending threshold actually achieved) and spending has actually occurred.
F-36
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(x)
Principal accounting policies (Continued)
Revenue recognition and cost of revenues (Continued)
Specified actions (Continued)
Cost of revenues consists of the costs to purchase space for the online advertising operations, amortization expenses related to the Group's computer software
and systems, salaries and benefits of relevant operations and support personnel and depreciation of relevant property and equipment depreciation. The Group
becomes obligated to make payments related to website publishers in the period the marketing impressions and click-through occur. Such expenses are
classified as cost of revenues in the consolidated statements of comprehensive loss as incurred. Cost of revenues also includes rebates received from website
publishers which are recorded as a reduction of cost of revenues when the Group is acting as a principal in a transaction. Following recent reforms of PRC tax
laws, business tax is gradually being replaced by VAT, which is recorded as a reduction of revenue.
SaaS products and services
Under this arrangement, the Group offers SaaS products and services through provision of software and data analytical tool licenses, customer relationship
management (“CRM”) solutions and digitalized operational solutions services. Revenues under this arrangement primarily consist of fees for (i) licensing to
provide customers with access to one or more of the existing cloud applications for e-commerce, marketing and customer management, (ii) the development of
new cloud applications customized for individual customer, (iii) licenses for on-premises software, and (iii) various combinations of software and data analytical
tool licenses, CRM solutions, and digitalized operational solutions services provided by the Group. Contracts with customers under this arrangement are
generally with a term of 1 to 24 months.
Revenues from licensing of existing cloud applications are generally recognized ratably over time over the contract term beginning on the date that the licensing
service is made available to the customer, whereby the Group considers that its customers simultaneously receive and consume the benefits provided by the use
of existing cloud applications. The Group does not have other right to consideration in exchange for goods or service that the Group has transferred to a
customer when that right is conditional on something other than the passage of time.
Revenues from developing new cloud applications exclusively customized for customers and licenses for on-premises software is recognized at point-in-time
when the Group is able to deliver the cloud applications to customers or when the Group provides customers with right to use the on-premises software. The
Group considers the transfer of control of new cloud applications/software to customer, which represents a distinct performance obligation, to be completed
when such cloud applications/software are on-premise and fully functional such that the customer can use and benefit from the cloud applications/software on
its own.
Besides, the Group also provides certain additional services along with the above arrangements of cloud application development and software licensing, such
as technical support, bug fixes, CMR solutions and digitalized operational solutions. These additional services are considered to be a series of distinct services
that are substantially the same and have the same duration and measure of progress; therefore, the Group concludes that they represent a separate combined
performance obligation. Revenues from such additional services are recognized ratably over-time over the contract period.
The respective stand-alone selling prices of each of these performance obligations are determined based upon observable prices in stand-alone transactions and
contractually stated price whereby no allocation of selling prices among individual performance obligations are required.
Cost of revenues for SaaS products and services primarily comprises amortization expenses related to the Group’s computer software and systems, salaries and
benefits of relevant operations and support personnel, depreciation of relevant property and equipment and other direct service costs.
F-37
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(x)
Principal accounting policies (Continued)
Revenue recognition and cost of revenues (Continued)
Contract balances
Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced and revenue recognized
prior to invoicing when the Group has satisfied its performance obligations and has the unconditional right to payment. The Group normally does not have
contract assets, which are primarily unbilled accounts receivable that are conditional on something other than the passage of time.
Deferred revenue represents contract liabilities which related to unsatisfied performance obligations at the end of the period. Due to the generally short-term
duration of the contracts, the majority of the performance obligations are satisfied in the following reporting period. Revenue recognized during the years ended
December 31, 2020 and 2021, respectively, relating to deferred revenue as of January 1, 2020 and 2021 was US$15,760 and US$18,795, respectively. For the
amount remained as deferred revenue as of January 1, 2020 and 2021, respectively, but not recognized as revenue during the years ended December 31, 2020
and 2021, respectively, there is still a contractual obligation for the Group to provide service whereby the Group is not obliged to make any refund of the
amount received from customers. Such amount will be recognized as revenue when all of the revenue recognition criteria are met.
Revenue recognized in the current period from performance obligations related to prior periods was not material.
Practical Expedients
The Group has used the following practical expedients as allowed under ASC 606:
(i)
(ii)
(iii)
The transaction price allocated to the performance obligations that are unsatisfied, or partially unsatisfied, has not been disclosed as substantially all
of the Group’s contracts have a duration of one year or less.
Payment terms and conditions vary by contract type, although terms generally include a requirement of prepayment or payment within one year or
less. In instances where the timing of revenue recognition differs from the timing of invoicing, the Group has determined that its contracts generally
do not include a significant financing component.
The Group generally expenses sales commissions when incurred because the amortization period would be one year or less. These costs are
recorded within sales and marketing expenses.
(y)
Prepaid media costs
Prepaid media costs represent prepayments for online space paid by the Group to third party publishers of websites. Upon utilization, media costs are
recognized in cost of revenues when the Group is determined as acting as the principal. However, when the Group is determined as acting as the agent, those
costs are recognized as deduction to revenue by the Group. These prepayments are classified as current considering the corresponding online spaces are
expected to be purchased and utilized within twelve months from the date of payments.
F-38
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(z)
Principal accounting policies (Continued)
Research and development expenses
Research and development expenses consist primarily of (i) salary and welfare for research and development personnel, (ii) leases expenses and (iii)
depreciation of office premise and servers utilized by research and development personnel. Costs incurred during the research stage are expensed as incurred.
Costs incurred in the development stage, prior to the establishment of technological feasibility, which is when a working model is available, are expensed when
incurred.
The Group accounts for internal use software development costs in accordance with guidance on intangible assets and internal use software. This requires
capitalization of qualifying costs incurred during the software’s application development stage and to expense costs as they are incurred during the preliminary
project and post implementation/operation stages.
The Group incurred development costs in connection with an internal-use enterprise resource planning (“ERP”) software to further enhance management to
monitor the business. While internal and external costs incurred during the preliminary project stage are expensed as incurred, costs relating to activities during
the application development stages have been capitalized. For the years ended December 31, 2019, 2020 and 2021, the Group has capitalized development costs
related to ERP software of US$229, US$156 and US$111, respectively, as intangible assets. In addition, the Group incurred other research and development
costs in relation to other internal use software used to support its operations. Any development costs qualified for capitalization were immaterial for the periods
presented. For the years ended December 31, 2019, 2020 and 2021, the Group has not capitalized any other costs related to internal use software other than the
ERP software.
(aa)
Sales and marketing expenses
Sales and marketing expenses consist primarily of (i) advertising and marketing expenses, and (ii) salary and welfare for sales and marketing personnel.
Advertising expenses are recorded as sales and marketing expenses when incurred, and totaled US$13,084, US$8,658 and US$10,458 for the years ended
December 31, 2019, 2020 and 2021, respectively.
(ab)
General and administrative expenses
General and administrative expenses consist primarily of (i) salary and welfare for general and administrative personnel, (ii) professional service fees, and (iii)
allowance for credit losses.
(ac)
Employee social security and welfare benefits
Employees of the Group in the PRC are entitled to staff welfare benefits including pension, work-related injury benefits, maternity insurance, medical insurance,
unemployment benefit and housing fund plans through a PRC government-mandated multi-employer defined contribution plan. The Group is required to
contribute to the plan based on certain percentages of the employees’ salaries, up to a maximum amount specified by the local government.
The PRC government is responsible for the medical benefits and the pension liability to be paid to these employees and the Group’s obligations are limited to
the amounts contributed and no legal obligation beyond the contributions made.
The Group also makes payments to other defined contribution plans for employees employed by subsidiaries outside the PRC. The Company and subsidiaries
incorporated in Hong Kong are required to make contributions to Mandatory Provident Funds under the Hong Kong Mandatory Provident Fund Schemes
Ordinance. Such contributions are recognized as an expense in profit or loss as incurred.
F-39
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(ad)
Principal accounting policies (Continued)
Non-controlling interests
The non-controlling interests are presented in the consolidated balance sheets, separately from equity attributable to the shareholders of the Company. Non-
controlling interests are presented on the face of the consolidated statement of comprehensive loss as an allocation of the total income or loss for the year
between non-controlling interests holders and the shareholders of the Company.
(ae)
Income taxes
Current income taxes are provided on the basis of net income for financial reporting purposes, adjusted for income and expense items which are not assessable
or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.
Deferred income taxes are accounted for using an asset and liability method. Under this method, deferred income taxes are recognized for the tax consequences
of temporary differences by applying enacted statutory rates applicable to future years to differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities. The tax base of an asset or liability is the amount attributed to that asset or liability for tax purpose. The effect on
deferred taxes of a change in tax rates is recognized in the consolidated statements of comprehensive loss in the period of change. A valuation allowance is
provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be
realized.
Uncertain tax positions
The guidance on accounting for uncertainties in income taxes prescribes a more likely than not threshold for financial statement recognition and measurement of
a tax position taken or expected to be taken in a tax return. Guidance was also provided on derecognition of income tax assets and liabilities, classification of
current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim
periods, and income tax disclosures. Significant judgment is required in evaluating the Group’s uncertain tax positions and determining its provision for income
taxes. The Group recognizes interests and penalties, if any, under accrued expenses and other current liabilities on its consolidated balance sheets and under
other expenses in its statements of comprehensive loss. The Group did not recognize any significant interest and penalties associated with uncertain tax
positions for the years ended December 31, 2019, 2020 and 2021. As of December 31, 2020 and 2021, the Group did not have any significant unrecognized
uncertain tax positions.
F-40
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(af)
Principal accounting policies (Continued)
Share-based compensation
The Company grants stock-based awards, including share options, restricted share units and warrants of the Company, to eligible employees, officers, directors,
and non-employee consultants. The Company accounts for share-based awards granted to employees in accordance with ASC 718, "Compensation - Stock
Compensation" and share-based awards granted to non-employees in accordance with ASC subtopic, 505-50 (“ASC 505-50”), “Equity-Based Payments to Non-
Employees”. ASC 505. On January 1, 2019, the Group adopted ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvement to
Nonemployee Share-based Payment Accounting to amend the accounting for share-based payment awards issued to non-employees. Under ASU 2018-07, the
accounting for awards to non-employees are similar to the model for employee awards.
Option and RSUs granted to employees
Under the fair value recognition provisions of ASC 718-10, share-based compensation costs are measured at the grant date. The share-based compensation
expenses have been categorized as either general and administrative expenses, sales and marketing expenses or research and development expenses, depending
on the job functions of the grantees. For the options and RSUs granted to employees, the compensation expense is recognized using the graded-vesting
attribution approach over the requisite service period, which is generally the vesting period. Forfeitures are estimated at the time of grant, with such estimate
updated periodically and with actual forfeitures recognized currently to the extent they differ from the estimate. In determining the fair value of the Company’s
share options, the binomial option pricing model has been applied. The fair value of RSUs is determined with reference to the fair value of the underlying
shares.
Option modification
According to ASC 718, a change in any of the terms or conditions of equity based awards shall be accounted for as a modification of the award. Therefore, the
Group calculates incremental compensation cost of a modification as the excess of the fair value of the modified option over the fair value of the original option
immediately before its terms are modified. For vested options, the Group would recognize incremental compensation costs on the date of modification and for
unvested options, the Group would recognize, prospectively and over the remaining requisite service period, the sum of the incremental compensation costs and
the remaining unrecognized compensation costs for the original award.
Option, RSUs and warrants granted to non-employees
Effective January 1, 2019, the Company adopted ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-
Based Payment Accounting (“ASU 2018-07”), which expands the scope of Topic 718 to include share-based payment awards to nonemployees. As a result,
stock-based awards granted to consultants and non-employees are accounted for in the same manner as awards granted to employees as described above. The
impact of adoption of this new guidance did not have a material impact on the Group’s consolidated financial statements. Prior to the adoption of ASU 2018-07,
for share-based awards granted to non-employees, the Company accounted for the related share-based compensation expenses in accordance with ASC
subtopic, 505-50 (“ASC 505-50”), “Equity-Based Payments to Non-Employees”. Under the provision of ASC 505-50, these options, RSUs and warrants are
measured as of the earlier of the date at which either: (1) commitment for performance by the non-employee has been reached; or (2) the non-employee’s
performance is complete.
Options and warrants of the Company issued to non-employees are measured based on fair value of the options and warrants which are determined by using the
binomial option pricing model and RSUs of the Company issued to non-employees are measured based on fair value of the RSUs which are determined with
reference to the fair value of the underlying shares.
F-41
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(ag)
Principal accounting policies (Continued)
Government subsidies
The Group receives subsidies from Hong Kong and the local PRC government for general use. General-use subsidies which are not subject to any conditions or
specific use requirements are recorded as subsidy income in the consolidated statements of comprehensive loss.
(ah)
Statutory reserves
The Company’s subsidiaries, a consolidated VIE and subsidiaries incorporated in the PRC, are required on an annual basis to make appropriations of retained
earnings set at certain percentage of after-tax profit determined in accordance with PRC accounting standards and regulations (“PRC GAAP”).
Appropriation to the statutory general reserve should be at least 10% of the after tax net income determined in accordance with the legal requirements in the
PRC until the reserve is equal to 50% of the entities’ registered capital. The Group is not required to make appropriation to other reserve funds and the Group
does not have any intentions to make appropriations to any other reserve funds.
The general reserve fund can only be used for specific purposes, such as setting off the accumulated losses, enterprise expansion or increasing the registered
capital. Appropriations to the general reserve funds are classified in the consolidated balance sheets as statutory reserves.
There are no legal requirements in the PRC to fund these reserves by transfer of cash to restricted accounts, and the Group was not done so.
Relevant laws and regulations permit payments of dividends by the PRC subsidiaries and affiliated companies only out of their retained earnings, if any, as
determined in accordance with respective accounting standards and regulations. Accordingly, the above balances are not allowed to be transferred to the
Company in terms of cash dividends, loans or advances.
(ai)
Related parties
Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other
party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or significant influence, such as
a family member or relative, shareholder, or a related corporation.
(aj)
Dividends
Dividends are recognized when declared. No dividends were declared for the years ended December 31, 2019, 2020 and 2021, respectively. The Group does not
have any present plan to pay any dividends on ordinary shares in the foreseeable future. The Group currently intends to retain the available funds and any future
earnings to operate and expand its business.
F-42
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(ak)
Principal accounting policies (Continued)
Loss per share
Basic loss per share is computed by dividing net loss attributable to holders of ordinary shares by the weighted average number of ordinary shares outstanding
during the year using the two class method. The Group uses the two-class method to calculate net loss per share though both classes share the same rights in
dividends. Therefore, basic and diluted loss per share are the same for both classes of ordinary shares. Using the two class method, net loss is allocated between
ordinary shares based on their participating rights.
Diluted loss per share is calculated by dividing net loss attributable to ordinary shareholders as adjusted for the effect of dilutive ordinary equivalent shares, if
any, by the weighted average number of ordinary and dilutive ordinary equivalents shares outstanding during the year. Dilutive equivalent shares are excluded
from the computation of diluted loss per share if their effects would be anti-dilutive. Ordinary share equivalents consist of the ordinary shares issuable in
connection with the Group’s convertible notes and ordinary shares issuable upon the conversion of the stock options and warrants and vesting of RSUs, using
the treasury stock method.
(al)
Comprehensive income/loss
Comprehensive income/loss is defined as the change in shareholders’ equity of the Group during a period arising from transactions and other events and
circumstances excluding transactions resulting from investments by shareholders and distributions to shareholders.
Comprehensive income/loss is reported in the consolidated statements of comprehensive loss. Accumulated other comprehensive income/losses of the Group
include the foreign currency translation adjustments.
(am)
Segment reporting
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief
operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The CODM is comprised
of certain members of the Company's management team.
The Group’s organizational structure is based on a number of factors that the CODM uses to evaluate, view and run its business operations which include, but
are not limited to, customer base, homogeneity of products and technology. The Group’s operating segments are based on this organizational structure and
information reviewed by the Group’s CODM to evaluate the operating segment results.
The Group reports two operating segments: 1) Marketing Solutions, and 2) Enterprise Solutions. This segment reporting aligns with the manner in which the
Group’s CODM currently receives and uses financial information to allocate resources and evaluate the performance of reporting segments.
F-43
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
2
(an)
Principal accounting policies (Continued)
Recently issued accounting pronouncements
In January 2020, the FASB issued ASU No. 2020-01, “Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic
323), and Derivatives and Hedging (Topic 815)”, that clarifies the interactions between Topic 321, Topic 323, and Topic 815. The amendments in this ASU
affect the application of the measurement alternative for certain equity securities and the equity method of accounting, and guidance for certain forward
contracts and purchased options to purchase securities, that, upon settlement or exercise, would be accounted for under the equity method of accounting. The
ASU is effective for public entities in fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is
permitted. The Group did not early adopt and is currently evaluating the impact of adopting this ASU on its consolidated financial statements.
In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial
Reporting. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. The amendments in this update
provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if
certain criteria are met. The ASU is currently not expected to have a material impact on the consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—
Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which simplifies
accounting for convertible instruments by removing major separation models required under current GAAP. The ASU removes certain settlement conditions
that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas.
The ASU is effective for public in fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is
permitted, but no earlier than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Group did not early adopt and is
currently evaluating the impact of adopting this ASU on its consolidated financial statements.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50),
Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40), which clarifies and
reduces diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that
remain equity classified after modification or exchange. The ASU is effective for public in fiscal years beginning after December 15, 2021, including interim
periods within those fiscal years. Early adoption is permitted for all entities, including adoption in an interim period. The Group did not early adopt and is
currently evaluating the impact of adopting this ASU on its consolidated financial statements.
In July 2021, the FASB issued ASU No. 2021-05, Leases (Topic 842): Lessors—Certain Leases with Variable Lease Payment. The amendment clarifies the
criterion of a lease with variable lease payments not to depend on a reference index or a rate as an operating lease. The ASU is effective for fiscal years
beginning after December 15, 2021, for all entities. Entities that have adopted Topic 842 before the issuance date of this Update have the option to apply the
amendments in this Update either (1) retrospectively to leases that commenced or were modified on or after the adoption of Update 2016-02 or (2) prospectively
to leases that commence or are modified on or after the date that an entity first applies the amendments. The Group did not early adopt and is currently
evaluating the impact of adopting this ASU on its consolidated financial statements.
F-44
2
(an)
3
(a)
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
Principal accounting policies (Continued)
Recently issued accounting pronouncements (Continued)
In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from
Contracts with Customers, which clarifies the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in
practice and inconsistency regarding (i) the recognition of an acquired contract liability; and (ii) payment terms and their effect on subsequent revenue
recognized by the acquirer. The amendments in this Update are effective for fiscal years beginning after December 15, 2022, including interim periods within
those fiscal years. Early adoption of the amendments is permitted. The Group did not early adopt the amendments. The Group is currently evaluating the impact
of adopting this ASU on its consolidated financial statements.
Certain risks and concentration
PRC regulations
The China market in which the Group operates poses certain macro-economic and regulatory risks and uncertainties. These uncertainties extend to the ability of
the Group to engage in online advertising businesses through contractual arrangements in the PRC since the internet and marketing services industries remain
regulated. The Group conducts certain of its operations in the PRC through its variable interest entity, which it consolidates as a result of a series contractual
arrangements enacted. Though the PRC has, since 1978, implemented a wide range of market-oriented economic reforms, continued reforms and progress
towards a full market-oriented economy are uncertain. In addition, the telecommunication, information, and media industries remain highly regulated.
Restrictions are currently in place and are unclear with respect to which segments of these industries foreign owned entities, like the Group, may operate. The
Chinese government may issue from time to time new laws or new interpretations on existing laws to regulate areas such as telecommunication, information and
media. Regulatory risk also encompasses the interpretation by the tax authorities of current tax laws, and the Group’s legal structure and scope of operations in
the PRC, which could be subject to further restrictions resulting in limitations on the Group’s ability to conduct business in the PRC.
There are uncertainties regarding the interpretation and application of current and future PRC laws, rules and regulations, including but not limited to the laws,
rules and regulations governing the validity and enforcement of the contractual arrangements with consolidated VIE. The Group believes that the structure for
operating its business in the PRC (including the ownership structure and the contractual arrangements with the consolidated VIE is in compliance with all
applicable existing PRC laws, rules and regulations, and does not violate, breach, contravene or otherwise conflict with any applicable PRC laws, rules or
regulations. However, the Group cannot assure that the PRC regulatory authorities will not adopt any new regulation to restrict or prohibit foreign investments
in the online advertising business through contractual arrangements in the future or that it will not determine that the ownership structure and contractual
arrangements violate PRC laws, rules or regulations.
F-45
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
3
(a)
Certain risks and concentration (Continued)
PRC regulations (Continued)
If the Company and its consolidated VIE are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the
required permits or approvals, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including:
•
•
•
•
•
revoking the business licenses of such entities;
discontinuing or restricting the conduct of any transactions between the Company’s PRC subsidiaries and OptAim VIE;
imposing fines, confiscating the income of OptAim VIE or the Company’s PRC subsidiaries, or imposing other requirements with which the
Company or its PRC subsidiaries and OptAim VIE may not be able to comply;
requiring the Company to restructure its ownership structure or operations, including terminating the contractual arrangements with OptAim VIE
and deregistering the equity pledges of OptAim VIE, which in turn would affect its ability to consolidate, derive economic interests from, or exert
effective control over OptAim VIE; or
restricting or prohibiting its use of the proceeds of any offering to finance its business and operations in the PRC.
If the imposition of any of these penalties precludes the Group from operating its business, it would no longer be in a position to generate revenue or cash from
it. If the imposition of any of these penalties causes the Company to lose its rights to direct the activities of its consolidated VIE or its rights to receive its
economic benefits, the Company would no longer be able to consolidate these entities, and its financial statements would no longer reflect the results of
operations from the business conducted by VIE except to the extent that the Company receives payments from VIE under the contractual arrangements. Either
of these results, or any other significant penalties that might be imposed on the Company in this event, would have a material adverse effect on its financial
condition and results of operations. Nevertheless, the laws and regulations that imposed restrictions on foreign ownership in advertising companies, including
the Administrative Provisions on Foreign-Invested Advertising Enterprises were abolished in June 2015. To the extent any current or future business of OptAim
VIE can be directly operated by the Company’s wholly owned subsidiaries under PRC law, the Company is in the process of transferring such business to the
Company’s wholly owned subsidiaries.
On January 19, 2015, the Ministry of Commerce (“MOFCOM”), released for public comment a proposed PRC law, the Draft Foreign Investment Law, that
appeared to include VIEs within the scope of entities that could be considered to be foreign investment enterprises (“FIEs”), that would be subject to restrictions
under existing PRC law on foreign investment in certain categories of industry. The National People’s Congress approved the Foreign Investment Law on
March 15, 2019, effective on January 1, 2020. The Foreign Investment Law removes all references to the terms of “de facto control” or “contractual control” as
defined in the draft published in 2015. However, the Foreign Investment Law has a catch-all provision under the definition of “foreign investment” which
includes investments made by foreign investors in China through means stipulated in laws or administrative regulations or other methods prescribed by the State
Council. In the event that the State Council in the future promulgates laws and regulations that deem investments made by foreign investors through contractual
arrangements as “foreign investment,” the Group’s ability to use the contractual arrangements with its VIE and the Group’s ability to conduct business through
the VIE could be severely limited.
F-46
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
3
(a)
Certain risks and concentration (Continued)
PRC regulations (Continued)
Furthermore, on December 19, 2020, the NDRC and MOFCOM promulgated the Foreign Investment Security Review Measures, which took effect on January
18, 2021. Under the Foreign Investment Security Review Measures, investments in military, national defense-related areas or in locations in proximity to
military facilities, or investments that would result in acquiring the actual control of assets in certain key sectors, such as critical agricultural products, energy
and resources, equipment manufacturing, infrastructure, transport, cultural products and services, IT, Internet products and services, financial services and
technology sectors, are required to be approved by designated governmental authorities in advance. Although the term “investment through other means” is not
clearly defined under the Foreign Investment Security Review Measures, the Company cannot rule out the possibility that control through contractual
arrangement may be regarded as a form of actual control and therefore require approval from the competent governmental authority. As the Foreign Investment
Security Review Measures were recently promulgated, there are great uncertainties with respect to its interpretation and implementation. Accordingly, there are
substantial uncertainties as to whether the Group’s VIE structure may be deemed as a method of foreign investment in the future. If the VIE structure were to be
deemed as a method of foreign investment under any future laws, regulations and rules, and if any of the Group’s business operations were to fall under the
“negative list” for foreign investment, we would need to take further actions in order to comply with these laws, regulations and rules, which may materially and
adversely affect our current corporate structure, business, financial condition and results of operations.
The Company’s ability to control the VIE also depends on the powers of attorney the founders have to vote on all matters requiring shareholder approval in the
VIE. As noted above, these powers of attorney are believed to be legally enforceable but may not be as effective as direct equity ownership.
OptAim VIE holds assets that are important to the operation of the Group’s business, including patents for proprietary technology and trademarks. If OptAim
VIE falls into bankruptcy and all or part of its assets become subject to liens or rights of third-party creditors, the Group may be unable to conduct major part of
its business activities in the PRC, which could have a material adverse effect on the Group’s future financial position, results of operations or cash flows.
However, the Group believes this is a normal business risk many companies face. The Group will continue to closely monitor the financial conditions of
OptAim VIE.
OptAim VIE’s assets comprise both recognized and unrecognized revenue-producing assets. The recognized revenue-producing assets include leasehold
improvements, computers and network equipment and computer software which are recognized in the Group’s consolidated balance sheet. The unrecognized
revenue-producing assets mainly consist of patents, trademarks and assembled workforce which are not recorded in the financial statements of OptAim VIE as
it did not meet the recognition criteria set in ASC 350-30-25.
F-47
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
3
(a)
Certain risks and concentration (Continued)
PRC regulations (Continued)
The following table sets forth the financial data for the VIE and VIE’s subsidiaries on an aggregated basis. For purposes of this presentation, activities within
and between the VIE and VIE subsidiaries have been eliminated, but transactions with other entities within the consolidated group have been included without
elimination. Presentation of the comparative amounts for 2019 and 2020 have been expanded to conform to the current year presentation.
Assets
Cash and cash equivalents
Accounts receivable, net
Prepaid media costs
Amounts due from subsidiaries of the Group
Other current assets
Property and equipment, net
Intangible assets
Right-of-use assets
Other long-term investment
Other non-current assets
Total assets
Liabilities
Accounts payable
Deferred revenue
Lease liabilities
Bank borrowing
Income tax payable
Amounts due to subsidiaries of the Group
Accrued liabilities and other current liabilities
Deferred tax liabilities
Total liabilities
F-48
As of December 31,
2020
2021
2,113
1,720
1,587
6,643
1,012
82
336
484
-
12
13,989
371
644
484
457
483
1,878
1,519
146
5,982
2,681
3,586
1,151
5,879
1,266
65
140
384
1,233
-
16,385
2,262
88
384
1,889
575
2,120
1,444
99
8,861
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
3
(a)
Certain risks and concentration (Continued)
PRC regulations (Continued)
Net revenues
From subsidiaries of the Group (Note)
From third parties
Net loss (Note)
Net cash (used in)/provided by operating activities
From subsidiaries of the Group
From third parties
Net cash used in investing activities
Net cash provided by financing activities
Receipts of advances Group companies
Repayments for advances from Group companies
Other financing activities
2019
For the years ended December 31,
2020
2021
1,645
19,025
20,670
(451)
4,761
17,341
22,102
(1,755)
2019
For the years ended December 31,
2020
2021
(1,500)
1,358
(142)
(69)
588
(588)
-
-
2,141
(2,110)
31
(29)
-
-
457
457
1,028
22,837
23,865
(900)
772
(2,453)
(1,681)
(14)
1,588
(554)
1,161
2,195
Note:
Services from VIE and VIE’s subsidiaries to other group companies
The VIE and VIE’s subsidiaries provide online advertising service to other group companies. For the years ended December 31, 2019, 2020 and 2021, the
intercompany online advertising service revenues recognized by VIE and VIE’s subsidiaries were US$1,469, US$4,761 and US$911, respectively. These
transactions are eliminated at the consolidation level.
The VIE and VIE’s subsidiaries also provide other marketing services to other group companies. For the years ended December 31, 2019, 2020 and 2021, the
intercompany other marketing service revenues recognized by VIE and VIE’s subsidiaries were US$176, US$nil and US$117, respectively. These transactions
are eliminated at the consolidation level.
Services from other group companies to VIE and VIE’s subsidiaries
WFOE as primary beneficiary and other subsidiaries of the Group provide online advertising service and SaaS services to VIE and VIE’s subsidiaries. For the
years ended December 31, 2019, 2020 and 2021, the intercompany online advertising and SaaS service revenues from VIE and VIE’s subsidiaries recognized by
WFOE as primary beneficiary and other subsidiaries of the Group were US$4,023, US$996 and US$49, respectively. These transactions are eliminated at the
consolidation level.
As of December 31, 2019, 2020, and 2021, there were no balances for management fees charged to VIE and VIE’s subsidiaries.
In accordance with the VIE arrangements, the Group has the power to direct activities of OptAim VIE, and can have assets transferred out of OptAim VIE.
Therefore, the Group considers that there are no assets of OptAim VIE that can be used only to settle their obligations.
F-49
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
3
(b)
Certain risks and concentration (Continued)
Foreign exchange risk
Assets and liabilities of non-US$ functional currency entities are translated into US$ using the applicable exchange rates at the balance sheet date. Items in the
statements of comprehensive loss are translated into US$ using the average exchange rate during the period. Equity accounts were translated at their historical
exchange rates. The resulting translation adjustments are accumulated as a component of accumulated other comprehensive income on the consolidated
statements of shareholders’ equity.
Certain of the Group’s operating activities are transacted in Renminbi (“RMB”), which is not freely convertible into foreign currencies. All foreign exchange
transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by
the People’s Bank of China.
The revenues and expenses of the Group’s subsidiaries, VIE and VIE’s subsidiaries in the PRC are generally denominated in RMB and their assets and
liabilities are denominated in RMB. RMB is not freely convertible into foreign currencies, and remittances of foreign currencies into the PRC and exchange of
foreign currencies into RMB require approval by foreign exchange administrative authorities and certain supporting documentation. The State Administration
for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into other currencies. Approval of foreign currency
payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices and
signed contracts. The value of RMB is subject to changes in central government policies and to international economic and political developments affecting
supply and demand in the China Foreign Exchange Trading System market.
Certain of the Group’s operating activities are transacted in Hong Kong dollars (“HK$”). Foreign exchange risk arises from future commercial transactions,
recognized assets and liabilities and net investments in foreign operations. The Group considers the foreign exchange risk in relation to transactions
denominated in HK$ with respect to US$ is not significant as HK$ is pegged to US$.
F-50
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
3
(c)
Certain risks and concentration (Continued)
Fair value measurement
(i)
Financial assets and liabilities measured at fair value on a recurring basis
The following table sets forth, by level within the fair value hierarchy (Note 2(e)), financial assets and liabilities measured at fair value as of
December 31, 2020 and 2021. As required by ASC 820, financial assets and financial liabilities are classified in their entirety based on the lowest
level of input that is significant to the respective fair value measurement.
As of December 31, 2020
Short-term investments
Contingent consideration payable
As of December 31, 2021
Short-term investments
Debt investment
Other long-term investments
Contingent consideration payable
Quoted
prices
in active
market for
identical
assets
(Level 1)
Fair value measurements using
Significant
other
observable
inputs
(Level 2)
Significant
unobservable
inputs
(Level 3)
Total fair
value
2,342
-
2,342
-
-
-
-
-
10,281
-
10,281
1,574
-
-
-
1,574
-
(7,755)
(7,755)
-
2,550
12,114
(4,507)
10,157
12,623
(7,755)
4,868
1,574
2,550
12,114
(4,507)
11,731
F-51
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
3
(c)
Certain risks and concentration (Continued)
Fair value measurement (Continued)
(i)
Financial assets and liabilities measured at fair value on a recurring basis (Continued)
The following table presents the changes in Level 3 financial liabilities for the years ended December 31, 2020 and 2021.
Balance at the beginning of
year
Fair value changes
Business combination (Note
4(d))
New issuance of convertible
notes
Issuance of convertible notes
upon exercise of call option
Conversion of convertible
notes
Redemption of convertible
notes
Settlement of contingent
consideration
Balance at the end of year
Convertible notes at
fair value
For the years ended
December 31,
Derivative liabilities
For the years ended
December 31,
Contingent consideration
payable
For the years ended
December 31,
2020
2021
2020
2021
2020
2021
49,008
4,433
-
19,184
11,466
(68,895)
(15,196)
-
-
-
-
-
-
-
11,466
-
-
-
(11,466)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
81
7,755
418
7,674
-
-
-
-
-
-
-
-
-
-
7,755
(3,666)
4,507
The following table presents the changes in Level 3 financial assets for the year ended December 31, 2021. There was no financial asset measured
using Level 3 input as of December 31, 2020.
Balance at the beginning of year
Acquisition
Balance at the end of year
F-52
Debt investment – Convertible note
For the years ended December 31,
2020
2021
-
-
-
-
2,550
2,550
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
3
(c)
Certain risks and concentration (Continued)
Fair value measurement (Continued)
(ii)
Fair value measurement on a non-recurring basis
Equity securities without readily determinable fair value accounted for using the measurement alternative are recorded at fair value only if an
impairment or observable price adjustment is recognized in the current period. These non-recurring fair value measurements use significant
unobservable inputs (Level 3). The Group uses market approach based on the Group’s best estimate to determine the fair value of these
investments. An observable price change is usually resulting from new rounds of financing of the investees. The Group determines whether the
securities offered in new rounds of financing are similar to the equity securities held by the Group by comparing the rights and obligations of the
securities. When the securities offered in new rounds of financing are determined to be similar to the securities held by the Group, the Group
adjusts the observable price of the similar security to determine the amount that should be recorded as an adjustment in the carrying value of the
security to reflect the current fair value of the security held by the Group. There were no fair value changes related to such equity securities due to
the observable price change of the investment without readily determinable fair value in the consolidated balance sheets for the years ended
December 31, 2020 and 2021.
The Group assesses the existence of indicators for other-than-temporary impairment of the investments by considering factors as detailed in Note
2(m). The Group recognized US$nil, US$nil and US$4,038 impairment charges to investments in equity securities without readily determinable
fair value classified as other long-term investments for the years ended December 31, 2019, 2020 and 2021. In determining the fair value of these
investments in equity securities, market multiple method was used, with significant input including (i) a discount for lack of marketability of 20%,
and (ii) price-to-sales multiples of comparable companies ranging from 2.4 to 6.5.
The following table presents the changes in financial asset measured using Level 3 input on a non-recurring basis for the years ended December 31,
2020 and 2021.
Balance at the beginning of year
Investments made/transferred from prepayments
Fair value changes
Impairment on investments
Exchange differences
Balance at the end of year
F-53
Other long-term investments
For the years ended December 31,
2020
2021
1,503
7,135
-
-
13
8,651
8,651
7,417
-
(4,038)
84
12,114
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
3
(d)
Certain risks and concentration (Continued)
Concentration risk (Continued)
(i)
Concentration of revenues
For the years ended December 31, 2020 and 2021, no individual customer accounted for more than 10% of the net revenues. For the year ended
December 31, 2019, one customer accounted for 14% of the net revenues.
(ii)
Concentration of accounts receivable
The Group conducts credit evaluations on its customers and generally does not require collateral or other security from such customers. The Group
grants up to 180 days of credit term to customers and periodically evaluates the creditworthiness of the existing customers in determining an
allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers.
As of December 31, 2020 and 2021, no individual customer accounted for more than 10% of the consolidated accounts receivable. The top 10
accounts receivable accounted for 39% and 37% of the consolidated accounts receivable as of December 31, 2020 and 2021, respectively.
(iii)
Credit risk
As of December 31, 2020 and 2021, substantially all of the Group’s cash and cash equivalents, time deposits and restricted cash were placed with
financial institutions in Hong Kong and the PRC. Management chooses these institutions because of their reputations and track records for stability,
and their known large cash reserves, and management periodically reviews these institutions’ reputations, track records, and reported reserves.
Management expects that any additional institutions that the Group uses for its cash and bank deposits will be chosen with similar criteria for
soundness. The balances in the PRC are not insured since it is not a market practice in the PRC. Nevertheless under the PRC law, it is required that
a commercial bank in the PRC that holds third party cash deposits should maintain a certain percentage of total customer deposits taken in a
statutory reserve fund for protecting the depositors’ rights over their interests in deposited money. PRC banks are subject to a series of risk control
regulatory standards; PRC bank regulatory authorities are empowered to take over the operation and management of any PRC bank that faces a
material credit crisis. The Group believes that it is not exposed to unusual risks as these financial institutions are PRC banks with high credit
quality. The Group had not experienced any losses on its cash and cash equivalents, time deposits and restricted cash during the years ended
December 31, 2019, 2020 and 2021 and believes that its credit risk to be minimal.
F-54
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
4
(a)
Acquisitions
Acquisition of Changyi
In January 2019, the Company acquired 34.38% equity interest of Changyi, a company established in the PRC and an independent software vendor based in
Shanghai, the PRC. Changyi and its underlying subsidiary Suzhou Changyi became subsidiaries of the Company effective from January 1, 2019 as the
Company established control over Changyi Group through certain shareholder agreements since then. Other shareholders of Changyi Group expect the
operating effectiveness brought about by the control over Changyi Group by the Company to be of their best interests. Changyi Group provides intelligent retail
and CRM solutions to clients, allowing them to consolidate consumer’s online and offline information to provide connection within the organization and
stakeholders. The Company expects to increase its market share in the data-driven Enterprise Solutions segment beyond digital marketing through Changyi
Group.
The total purchase consideration for 34.38% equity interest of Changyi amounted to RMB42.6 million (equivalent to approximately US$6,190) by cash.
The acquisition was recorded as a business combination. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed
at the date of acquisition:
Fair value of consideration transferred:
Cash
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash
Other current assets
Property and equipment
Intangible assets
Current liabilities
Deferred tax liabilities
Non-controlling interests
Total identifiable net deficits acquired
Goodwill (Note 13)
6,190
219
490
56
1,830
(405)
(274)
(11,815)
(9,899)
16,089
As of December 31, 2019, purchase consideration payable of US$6,190 was settled and there is no adjustment to the purchase consideration amounts.
The excess of purchase price over tangible assets, identifiable intangible assets acquired and liabilities assumed was recorded as goodwill. Goodwill associated
with the acquisition of Changyi was attributable to the expected synergy arising from the Enterprise Solutions operations. The acquired goodwill is not
deductible for tax purposes. Acquisition-related costs were immaterial and were included in general and administrative expenses for the year ended December
31, 2019.
F-55
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
4
(a)
Acquisition (Continued)
Acquisition of Changyi (Continued)
In determining the fair value of the intangible assets, an income approach was used. In this approach, significant estimates consist of discount rate of 30.2% and
a growth rate on revenue ranging from 10% to 30% over a period of 5 years. The estimated amounts recognized on the acquired identifiable intangible asset and
its estimated useful life are shown in the following table:
Intangible assets
Developed technologies
Customer relationship
Contract backlog
Estimated
useful life
5 years
5 years
3 years
Gross
carrying
amount
117
1,103
610
1,830
Net revenue and net loss of Changyi for the year ended December 31, 2019 were US$5,518 and US$997, respectively.
(b)
Acquisition of Addoil
In February 2019, the Company acquired 100% equity interest of Addoil, a company incorporated in Hong Kong. Addoil and its underlying subsidiary Headline
(together, “Addoil Group”) are engaged in the business of developing and operating a mobile application that collects and utilizes data from users who use its
social functionalities to share food and travel related contents.
The total purchase consideration for all the equity interest of Addoil Group amounted to US$1,218 by cash. The acquisition was recorded as a business
combination. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
Fair value of consideration transferred:
Cash
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash
Other current assets
Property and equipment
Right-of-use asset
Current liabilities
Total identifiable net assets acquired
Goodwill (Note 13)
1,218
18
42
34
34
(35)
93
1,125
As of December 31, 2019, purchase consideration payable of US$1,218 was settled and there is no adjustment to the purchase consideration amounts.
The excess of purchase price over tangible assets and liabilities assumed was recorded as goodwill. Goodwill associated with the acquisition of Addoil Group
was attributable to the expected synergy arising from the consolidated Marketing Solutions business. The acquired goodwill is not deductible for tax purposes.
Acquisition-related costs were immaterial and were included in general and administrative expenses for the year ended December 31, 2020.
F-56
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
4
(b)
Acquisition (Continued)
Acquisition of Addoil (Continued)
Pro-forma results related to the acquisition in accordance ASC 805 have not been presented because the acquisition of Addoil Group is not material, where net
revenue and net loss of the acquired entity is less than 5% of the Company’s consolidated net revenue and net loss for the year ended December 31, 2019.
(c)
Acquisition of Optimal
In May 2020, the Company acquired 80% equity interest of Optimal, a company incorporated in the British Virgin Islands. Optimal, through its wholly-owned
subsidiary, has a business cooperation agreement entered into with a global media asset owner to act as its authorized digital advertising representative in the
PRC for a period of 30 years, which will be automatically renewed annually as long as the Company continues to perform related payment obligations on an
annual license fee of RMB30 thousand (equivalent to US$5). The agreement is essentially an advertising contract. The Company expects to increase its market
share in the Marketing Solution segment in the PRC upon acquisition of this advertising contract.
The acquisition was determined to be an asset acquisition as Optimal did not contain outputs or a substantive process as at the date of acquisition, therefore it
does not constitute a business under ASC 805.
The Company issued 3,589,744 Class A ordinary shares to the seller with a fair value of US$31,949, determined based on the fair value for 80% equity interest
of Optimal.
The following table summarizes the estimated fair values of assets acquired and liabilities assumed at the date of acquisition:
Cash
Intangible asset
Other liabilities
Deferred tax liabilities
Non-controlling interests
Total identifiable net assets acquired
3,001
53,287
(3,030)
(13,322)
(7,987)
31,949
The intangible asset represents the advertising contract, which is amortized using the straight-line method over the estimated useful life of 30 years.
In December 2020, the Company has acquired the remaining 20% equity interest of Optimal (Note 1(a)(v)).
(d)
Acquisition of CMRS Group Holding Limited
In October 2020, the Group acquired 100% equity interest in CMRS Group Holding Limited (“CMRS”), a company incorporated in Hong Kong. CMRS and its
underlying subsidiaries (together, “CMRS Group”) are engaged in the provision of digital marketing, social media and key opinion leaders and smart content
generation enterprise solution services. The Company expects to increase its market share in both Marketing and Enterprise Solutions segments with the
combination of data-driven consumer experience management as well as digital content marketing and management to maximize digital marketing potential and
efficiency through CMRS Group.
The total purchase consideration for CMRS Group amounted to US$14,449. This is comprised of cash consideration of HK$33,594 (equivalent to
approximately US$4,335), 182,950 Class A ordinary shares of the Company with a fair value of US$2,440 and contingent consideration payable at a fair value
of US$7,674.
F-57
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
4
(d)
Acquisitions (Continued)
Acquisition of CMRS Group Holding Limited (Continued)
The acquisition was recorded as a business combination. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed
at the date of acquisition:
Fair value of consideration transferred:
Cash (Note (i))
Class A ordinary shares of the Company
Contingent consideration (Note (ii))
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash
Restricted cash (Note (iii))
Accounts receivable
Intangible assets (Note (v))
Other assets
Deferred tax liabilities
Other liabilities
Total identifiable net assets acquired
Goodwill (Notes 4(d)(iv), 13)
4,335
2,440
7,674
14,449
3,651
532
4,149
2,194
1,792
(362)
(6,216)
5,740
8,709
Note:
(i)
(ii)
Out of the total cash consideration of US$4,335, US$959 was settled during the year ended December 31, 2020 and the remaining balance of
US$3,376 was settled during the year ended December 31, 2021. There is no adjustment to the cash consideration amounts.
Contingent consideration are contingently payable upon the satisfaction of certain financial performance targets of the Company and market
conditions, which are to be settled partially by cash and partially by ordinary shares of the Company. The number of ordinary shares to be issued
and allotted to sellers is determined using the 10-day moving average closing price of the ADS of the Company.
Contingent consideration is measured at fair value at the acquisition date using projected milestone dates, probabilities of success and projected
financial results of the CMRS Group discounted at its fair value as at the acquisition date.
In determining the fair value of the contingent consideration, an income approach was applied by using discounted cash flows. In this approach,
projected risk-adjusted contingent payments are discounted back to the current period using a discounted cash flow model. The key assumptions
used to determine the fair value of the contingent consideration include projected milestone dates within 24 months after acquisition date and
discount rate of 4.32%. Increase or decrease in the fair value of contingent consideration liabilities primarily result from changes in the estimated
probabilities of achieving net profits after tax thresholds or market share prices milestones during the period.
F-58
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
4
(d)
Acquisitions (Continued)
Acquisition of CMRS Group Holding Limited (Continued)
During the year ended December 31, 2021, the Company has partially settled contingent consideration payable with (i) total cash of US$2,024 and
(ii) 183,740 Class A ordinary shares of the Company with a fair value of US$2,060 on the grant date of such consideration shares. The change in
fair value recorded in consolidated statement of comprehensive loss under "other gains, net" for the years ended December 31, 2020 and 2021
amounted to a loss of US$81 and a gain of US$418, respectively. The remaining contingent consideration payable of US$4,507 is repayable in
December 2022, which is recorded as current liabilities in the consolidated balance sheet as of December 31, 2021.
(iii)
(iv)
(v)
The restricted cash includes an escrow amount of US$506 deposited with a bank which has been repaid to the sellers in 2021.
The excess of purchase price over tangible assets, identifiable intangible assets acquired and liabilities assumed was recorded as goodwill.
Goodwill associated with the acquisition of CMRS Group was attributable to the expected synergy with the existing Enterprise Solutions and
Marketing Solutions operations. The acquired goodwill is not deductible for tax purposes. Acquisition-related costs were immaterial and were
included in general and administrative expenses for the year ended December 31, 2020.
In determining the fair value of the intangible assets, an income approach was used. In this approach, significant estimates consist of discount rate
of 22.3% and a growth rate on revenue ranging from 3.0% to 6.2% over a period of 4 years. The estimated amounts recognized on the acquired
identifiable intangible assets and their estimated useful lives are shown in the following table:
Intangible asset
Brand name
Customer relationship
Estimated
useful life
4 years
4 years
Gross carrying
amount
1,162
1,032
2,194
Unaudited pro forma net revenues and net loss of the Company for the years ended December 31, 2019 and 2020 as if the acquisition of CMRS Group had
occurred on January 1, 2019 were as follows.
Net revenues
Net loss
For the years ended December 31,
2019
2020
221,603
(10,505)
270,326
(13,346)
The Company did not have any material, non-recurring pro-forma adjustments directly attributable to the business combination reflected in the reported pro-
forma net revenue and net loss.
The pro forma information is not necessarily indicative of the actual results that would have been achieved had CMRS Group acquisition occurred as of January
1, 2019 or the results that may be achieved in future periods.
F-59
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
4
(e)
Acquisition (Continued)
Acquisition of Sky Gem International Limited
In April 2021, the Company acquired 51% equity interest of Sky Gem International Limited and its subsidiaries (together “Sky Gem”).
Sky Gem, which is principally engaged in the business of developing and providing SaaS solution for apparel business owners across various functions
including production line management, enterprise resources planning, order management system, sales channel management and customer management in the
PRC, Hong Kong, Macau and Taiwan. Upon completion of the acquisition, the Group expects to increase its market share in the data-driven Enterprise
Solutions segment businesses beyond digital marketing through Sky Gem.
The total purchase consideration amounted to US$3,200 which is wholly settled in cash. The acquisition was accounted for as a business combination. The
following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
Fair value of consideration transferred:
Cash
Recognized amounts of identifiable assets acquired and liabilities assumed:
Other assets
Other liabilities
Non-controlling interests
Total identifiable net assets acquired, net of non-controlling interests
Goodwill (Note 13)
3,200
2,000
(17)
(3,072)
(1,089)
4,289
As of December 31, 2021, purchase consideration of US$3,200 was fully settled and there is no adjustment to the purchase consideration amounts.
The excess of purchase price over total identifiable net assets acquired, net of non-controlling interests, was recorded as goodwill. Goodwill associated with the
acquisition of Sky Gem was attributable to the expected synergy arising from the consolidated Enterprise Solutions business. The acquired goodwill is not
deductible for tax purposes. Acquisition-related costs were immaterial and were included in general and administrative expenses for the year ended December
31, 2021.
Pro-forma results related to the acquisition in accordance ASC 805 have not been presented because the contribution of net revenue and net loss of the acquired
entity is less than 1% of the Company’s consolidated net revenue and net loss for the year ended December 31, 2021.
F-60
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
4
(f)
Acquisitions (Continued)
Acquisition of a customer relationship management (“CRM”) platform
In July 2021, the Group completed an acquisition of a PRC-based CRM platform namely Parllay which provides WeChat-based CRM, e-commerce and
marketing SaaS solutions to facilitate the growth of the Company’s Enterprise Solutions segment. iClick anticipates utilizing Parllay's rich expertise in SaaS
technology and the assembled workforce to further enhance iClick's product and services and accelerate revenue of its Enterprise Solutions segment.
The total purchase consideration for all the assets amounted to US$1,825, which is wholly settled in cash. The acquisition was accounted for as a business
combination as it contains outputs and a substantive process that together significantly contribute to the ability to create outputs as at the date of acquisition. The
following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:
Fair value of consideration transferred:
Cash consideration
Recognized amounts of identifiable assets acquired and liabilities assumed:
Intangible assets
Deferred tax liabilities
Total identifiable net assets acquired
Goodwill (Note 13)
1,825
279
(70)
209
1,616
As of December 31, 2021, purchase consideration of US$1,825 was fully settled and there is no adjustment to the purchase consideration amounts.
The excess of purchase price over total identifiable net assets acquired was recorded as goodwill. Goodwill associated with the acquisition of Parllay was
attributable to the expected synergy arising from the consolidated Enterprise Solutions business. The acquired goodwill is not deductible for tax purposes.
Acquisition-related costs were immaterial and were included in general and administrative expenses for the year ended December 31, 2021.
In determining the fair value of the intangible asset, an income approach was used. In this approach, significant estimates consist of discount rate of 22.7% and a
compound annual growth rate on revenue of 32% over a period of 5 years. The estimated amounts recognized on the acquired identifiable intangible asset and
its estimated useful life are shown in the following table:
Intangible asset
Developed technology
Estimated
useful life
5 years
Gross
carrying
amount
279
Pro-forma results related to the acquisition in accordance ASC 805 have not been presented because the acquisition of Parllay is not material, where net revenue
and net loss contributed by Parllay is less than 5% of the Company’s consolidated net revenue and net loss for the year ended December 31, 2021.
F-61
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
5
Cash and cash equivalents and time deposits
Cash and cash equivalents represent cash on hand, cash held at bank, and short-term deposits placed with banks or other financial institutions, which have
original maturities of three months or less.
As of December 31, 2020 and 2021, the Group had time deposits of US$89 and US$11,128 respectively with an average original maturity of 3 months which
are denominated in US$.
Cash and cash equivalents and time deposits as of December 31, 2020 and 2021 primarily consist of the following currencies:
RMB
HK$
US$
European dollars
Singapore dollars
New Taiwan dollars
Japanese Yen
Others
Restricted cash
As of December 31,
2020
Amount in
thousand
105,792
110,094
21,635
107
138
2,303
966
67
US$
equivalent
16,108
14,206
21,635
128
103
80
9
52
52,321
2021
Amount in
thousand
111,651
63,787
26,077
297
217
3,118
3,163
67
US$
equivalent
17,576
8,231
26,077
336
159
113
29
50
52,571
As of December 31, 2020, except for an amount of US$506 in relation to escrow amount deposited for a business acquisition (Note 4(d)), the Company’s
remaining restricted cash of US$41,639 represented bank balances held in restricted bank accounts pursuant to certain bank borrowings (Note 17). As of
December 31, 2021, all the restricted cash represented bank balances held in restricted bank accounts pursuant to certain bank borrowings (Note 17).
Restricted cash carried fixed interest at a weighted average rate of 0.33% (2020: 0.57%) per annum, out of which US$26,111 (2020: US$41,613), US$nil (2020:
US$26) and US$10,035 (2020: US$nil) are denominated in US$, HK$ and RMB, respectively.
Equity investment
On May 31, 2019, the Company and VGI Global Media PLC (“VGI”), an online-to-offline solutions provider across advertising, payment and logistics
platforms in Thailand, jointly established a new company namely V-Click Technology Company Limited (“V-Click”). VGI holds a majority stake of 51% in V-
Click and the Company holds the remaining 49% stake. The investment was accounted for as an equity-method investment due to the significant influence the
Company has over the operating and financial policies of V-Click.
F-62
6
7
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
7
(a)
Equity investment (Continued)
Investment in an equity investee
Movements on the Group’s investment in V-Click during the years ended December 31, 2020 and 2021 were as follows:
Balance at the beginning of year
Capital injection
Share of losses
Exchange differences
Balance at the end of year
For the years ended
December 31,
2020
158
412
(111)
1
460
2021
460
—
(107)
1
354
The Group recognized its share of the equity investee’s loss of US$111 and US$107 for the years ended December 31, 2020 and 2021, respectively. There was
no indicator of impairment noted for this equity-method investment as of December 31, 2020 and 2021.
(b)
Amount due from an equity investee
As of December 31, 2020 and 2021, the amount was due from V-Click in relation to cash advances of US$218 and US $276, respectively, which was
unsecured, interest-free and repayable on demand.
8
Other long-term investments
Prepayments for long-term investments
Other long-term investments, gross
Less: Impairment
As of December 31,
2020
2,924
8,651
-
8,651
2021
-
16,152
(4,038)
12,114
The Group’s other long-term investments consist of securities without readily determinable fair value and over which the Group has neither significant influence
nor control through investments in common stock or in-substance common stock.
F-63
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
8
Other long-term investments (Continued)
Movement of other long-term investments and prepayments for long-term investments for the years ended December 31, 2020 and 2021 is as follows:
Balance at the beginning of year
Investments made/transferred from prepayments
Prepayments made
Impairment
Exchange differences
Balance at the end of year
Representing:
Prepayments for long-term investments
Other long-term investments
For the years ended
December 31,
2020
2,503
7,129
1,901
-
42
11,575
2,924
8,651
11,575
2021
11,575
4,502
-
(4,038)
75
12,114
-
12,114
12,114
The Group used measurement alternative for recording equity investments without readily determinable fair values at cost, less impairment, adjusted for
subsequent observable price changes. Based on ASU 2016-01, entities that elect the measurement alternative will report changes in the carrying value of the
equity investments in current earnings. If measurement alternative is used, changes in the carrying value of the equity investment will be recognized whenever
there are observable price changes in orderly transactions for the identical or similar investment of the same issuer, and impairment charges will be recorded
when any impairment indicators are noted and the fair value is lower than the carrying value.
The Group, with the assistance of an independent valuer, assessed the fair value of certain investments as of the balance sheet date, using significant
unobservable input including price-to-sales multiples of comparable companies and a discount for lack of marketability (the “DLOM”). The Group concluded
that impairment was warranted for certain investments as of December 31, 2021 and recognized US$4,038 (2020: US$nil) impairment charges for investments
without readily determinable fair value for the year ended December 31, 2021, which are related to investees in sports nutrition products business, e-commerce
platforms business, and publishing and advertising business whose financial performance was unsatisfactory with no obvious upturn or potential financing
solutions in the foreseeable future.
9
Accounts receivable, net
Accounts receivable, gross (Note)
Less: allowance for credit losses (Note 2(j))
Accounts receivable, net
Note:
As of December 31,
2020
154,891
(11,749)
143,142
2021
210,047
(22,786)
187,261
As of December 31, 2021, the balance includes bills receivable of US$478 (2020: US$852) which represent short-term notes receivable issued by reputable
financial institutions that entitle the Group to receive the full face amount from the financial institutions at maturity, which generally range from five to six
months from the date of issuance.
F-64
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
10
Other assets
Other assets consist of the following:
Current
Deposits
Prepayments
Loans and interest receivable, net (Notes 2(j), 10(i))
VAT recoverable
Others
Non-current
Rental deposits
Prepayment
As of December 31,
2020
5,359
5,177
1,480
1,088
1,034
14,138
468
99
567
2021
2,609
7,520
12,302
1,275
1,251
24,957
302
1,361
1,663
Note:
(i)
As of December 31, 2021 , the balance represents loans from certain third parties and equity investees of the Group at a weighted average interest
of at 6% (2020: 7%) per annum, together with the related interest receivables, which are unsecured and due on demand or within one year from the
end of the reporting period.
F-65
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
11
Property and equipment, net
Property and equipment consist of the following:
Cost:
Office equipment
Leasehold improvements
Furniture and fixtures
Motor vehicles
Total cost
Less: Accumulated depreciation
Exchange differences
Property and equipment, net
As of December 31,
2020
4,830
1,842
1,094
13
7,779
(6,565)
(101)
1,113
Depreciation expense recognized for the years ended December 31, 2019, 2020 and 2021 are summarized as follows:
Cost of revenues
Research and development
Sales and marketing expenses
General and administrative expenses
Total
F-66
For the years ended December 31,
2019
2
49
21
262
334
2020
3
80
96
202
381
2021
5,035
2,542
1,327
13
8,917
(6,918)
(68)
1,931
2021
7
152
171
318
648
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
12
Intangible assets, net
Intangible assets consist of the following:
Cost:
Computer software
Developed technologies
Customer relationship
Brand name
Contract backlog
Advertising contract
Total cost
Less: Accumulated amortization
Exchange differences
Intangible assets, net
As of December 31,
2020
23,189
117
2,135
1,162
610
53,287
80,500
(24,095)
26
56,431
Amortization expense recognized for the years ended December 31, 2019, 2020 and 2021 are summarized as follows:
Cost of revenues
Research and development
Sales and marketing expenses
General and administrative expenses
The estimated aggregate amortization expense for each of the next five years as of December 31, 2021 is:
For the years ended December 31,
2019
4,771
1
-
2
4,774
2020
4,187
-
-
2
4,189
2022
2023
2024
2025
2026 onwards
F-67
2021
23,673
117
2,135
1,162
610
53,287
80,984
(27,336)
65
53,713
2021
3,070
-
12
156
3,238
Amortization
expense
of intangible
assets
3,200
2,552
2,258
1,840
43,863
53,713
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
13
Goodwill
Movements on goodwill during the year were as follows:
Balance as of January 1, 2020
Goodwill arising from acquisitions during
the year (Note 4(d))
Balance as of December 31, 2020
Goodwill arising from acquisitions during
the year (Notes 4(e) and (f))
Exchange differences
Balance as of December 31, 2021
Marketing
Solutions
49,621
Enterprise
Solutions
16,089
3,403
53,024
-
-
53,024
5,306
21,395
5,905
1,350
28,650
Total
65,710
8,709
74,419
5,905
1,350
81,674
No impairment charge was recognized for the years ended December 31, 2019, 2020 and 2021, respectively.
14
Lease accounting
The Group adopted ASC 842 as of January 1, 2019. As part of the implementation, the Group recognized its lease liabilities, including the current and non-
current portions, within its consolidated balance sheets as of the adoption date, which represents the present value of the Group’s obligation related to the
estimated future lease payments. The Group also recognized ROU assets which represent the right to use the leased assets over the period of individual leases.
The ROU assets were calculated as the lease liabilities less any asset or liability balances that existed at the time of adoption. The amortization expense of ROU
assets amounted to US$1,548, US$1,930 and US$2,785 for the years ended December 31, 2019, 2020 and 2021, respectively.
The lease term is generally specified in lease agreements, however certain agreements provide for lease term extensions or early termination options. To
determine the period for the estimated future lease payments, the Group evaluates whether it is reasonably certain that it will exercise the option at the
commencement date and periodically thereafter. The lease terms of the Group’s operating leases generally ranged from 12 to 36 months (2020: 12 to 60
months), and the weighted average remaining lease term as of December 31, 2021 was 21 months (2020: 13 months).
To determine the estimated future lease payments, the Group reviews each of its lease agreements to identify the various payment components. The Group
includes only the actual lease components in its determination of future lease payments for all the leases. Once the estimated future lease payments are
determined, the Group uses a discount rate to calculate the present value of the future lease payments. As of December 31, 2021, a weighted average discount
rate of 4.3% (2020: 6.5%) has been applied to the remaining lease payments to calculate the lease liabilities included within the consolidated balance sheets.
This represents the incremental borrowing rate the Group would be subject to on borrowings from its available revolving debt agreements.
The following table presents the maturity of the Group’s operating lease liabilities as of December 31, 2021.
2022
2023
2024
Total operating lease payments (undiscounted)
Less: Imputed interest
Total operating lease liabilities (discounted)
F-68
2,421
1,387
120
3,928
(324)
3,604
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
14
Lease accounting (Continued)
Lease expenses for these leases are recognized on a straight-line basis over the lease term. For short-term leases over which the Group has elected not to apply
the recognition requirements of ASC 842, the Group has recognized the lease payments as expenses on a straight-line basis over the lease term. For the years
ended December 31, 2019, 2020 and 2021, total lease cost is comprised of the following:
Relating to the operating lease liabilities
Relating to short-term leases
Supplemental cash flow information related to operating leases is as follows:
Cash payments for amounts included in the
measurement of operating lease liabilities
Right-of-use assets obtained in exchange
for operating lease liabilities
15
Deferred revenue
Deferred revenue, current
Changes in deferred revenue balance for the years ended December 31, 2020 and 2021 were as follows:
Balance at beginning of year
Additions to deferred revenue
Recognition of deferred revenue as revenues
Exchange differences
Balance at end of year
F-69
For the years ended December 31,
2019
1,721
887
2,608
2020
2,155
912
3,067
For the years ended December 31,
2019
2,449
3,199
2020
3,067
2,710
2021
2,862
1,518
4,380
2021
4,380
3,163
As of December 31,
2020
28,199
2021
22,802
For the years ended
December 31,
2020
27,089
203,221
(203,599)
1,488
28,199
2021
28,199
135,292
(141,156)
467
22,802
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
16
Accrued liabilities and other liabilities
Accrued liabilities and other liabilities consist of the following:
Current
Rebates payable to customers
VAT and other taxes payable
Security deposit received from customers
Accrued employee benefits
Accrued professional fees
Accrued marketing and hosting expense
Consideration payable (Note 4(d))
Advance from a former non-controlling interest shareholder (Note)
Others
Non-current
Deferred other income
Advance from a former non-controlling interest (Note)
Note:
As of December 31,
2020
1,236
4,440
510
8,968
5,951
2,939
3,376
-
1,911
29,331
As of December 31,
2020
375
4,521
4,896
2021
733
5,014
418
10,548
5,076
1,326
4,507
475
1,638
29,735
2021
459
-
459
As of December 31, 2021, the amount represents an advance from the seller of Optimal, a former non-controlling interest of the Company, for the purpose of
replenishment of working capital of certain subsidiaries of the Company, which was unsecured, interest-free, and repayable in December 2022.
F-70
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
17
Bank borrowings
1-year revolving loans denominated in RMB at interest rates of 5.22%
(2020: 4.50% to 5.22%) per annum
Half-year revolving loan denominated in RMB at interest rates ranging
from 3.00% to 6.25% (2020: 3.45% to 6.35%) per annum
Revolving service trade loan denominated in HK$ at interest rates ranging
from 4.35% to 4.43% (2020: 4.03% to 4.43%) per annum
Rollover period revolving loan denominated in US$ at an interest rate
4.59% per annum
3-month revolving loan denominated in RMB at an interest rate
of 3.00% (2020: 3.25%) per annum
1-year term loans denominated in RMB at interest rates ranging from
3.85% to 4.50% per annum
As of December 31,
2020
5,584
35,104
3,999
1,000
10,353
-
56,040
2021
31,912
26,691
84
-
9,917
6,926
75,530
Note:
(i)
(ii)
(iii)
Corporate guarantee by the Company, bank deposits of the Group of US$36,146 (2020: US$41,639) and accounts receivable of the Group of
US$18,250 (2020: US$36,956) are provided as pledge to secure the obligations under the facilities from certain banks.
Out of the total banking facilities of US$121,708 and US$213,289 available to the Group as of December 31, 2020 and 2021, respectively,
US$56,040 and US$75,530 have been utilized by the Group as of December 31, 2020 and 2021, respectively. As of December 31, 2020 and 2021,
total undrawn revolving, service trade and term loan facilities amounted to US$115,338, US$18,013 and US$4,408 (2020: US$58,667, US$6,001
and US$1,000) respectively. Total undrawn facilities available for drawdown as of December 31, 2021, net of bank deposits that would need to be
pledged as restricted cash upon utilization of the facilities, amounted to US$33,326.
As of December 31, 2021 certain financial covenants (minimum quarterly EBITDA as defined in the banking facilities agreements) as set out in
these loan agreements have been breached. The Group has obtained waiver letters such that the bank would not demand immediate repayment from
the Group. As of December 31, 2020, no financial covenants as set out in these loan agreements were breached.
The weighted average interest rate for bank borrowings outstanding as of December 31, 2020 and 2021 was 4.19% and 4.64% per annum, respectively. Other
than those shown above, the Company did not have any significant capital and other commitments, long-term obligations, or guarantees as of December 31,
2020 and 2021.
F-71
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
18
Convertible notes at fair value
The Company has issued certain convertible notes in September 2018 (the “2018 Notes”), November 2019 (the “November 2019 Notes”), December 2019 (the
“December 2019 Notes”), January 2020 (the “January 2020 Notes”) and July 2020 (the “July 2020 Notes”). The November 2019 Notes and December 2019
Notes together are referred to as the “2019 Notes”. The January 2020 Notes and July 2020 Notes together are referred to as the “2020 Notes”. There were no
outstanding convertible notes as of December 31, 2020 and 2021.
Convertible notes
Issue date
Maturity date
2018 Notes
November 2019 Notes
December 2019 Notes
January 2020 Notes
July 2020 Notes
September 12, 2018
November 11, 2019
December 16, 2019
January 23, 2020
July 30, 2020
September 12, 2023
November 11, 2022
December 16, 2022
September 12, 2023
September 12, 2023
Principal amounts
US$
30,000
20,000
10,000
3,450
13,100
The movement of transactions of these convertible notes during the years ended December 31, 2019 and 2020 is shown in the table below.
Balance as of January 1, 2019
Years ended December 31, 2019
Fair value changes
New issuance
Conversion of convertible notes (Note (iii))
Redemption of convertible notes (Note (iv))
Balance as of December 31, 2019
Years ended December 31, 2020
Fair value changes
New issuance
Issuance of convertible notes upon exercise of call option (Note (v))
Conversion of convertible notes (Note (iii))
Redemption of convertible notes (Note (iv))
Balance as of December 31, 2020
2018
Notes
34,837
41
-
(4,431)
(11,265)
19,182
3,644
-
-
(7,630)
(15,196)
-
2019
Notes
-
(174)
30,000
-
-
29,826
445
-
-
(30,271)
-
-
2020
Notes
-
-
-
-
-
-
344
19,184
11,466
(30,994)
-
-
Coupon
rate
%
0
5
5
0
0
Total
34,837
(133)
30,000
(4,431)
(11,265)
49,008
4,433
19,184
11,466
(68,895)
(15,196)
-
F-72
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
18
Convertible notes at fair value (Continued)
Note:
(i)
(ii)
All the convertible notes together with the embedding conversion options are recognized as financial liabilities whereby the Company has elected
the fair value option under ASC 825-10 to measure the entire instrument at fair value with realized or unrealized gains and losses recorded in the
consolidated statements of comprehensive loss. Also, ASC 825-10-25-11 requires financial instrument that is legally a single contract not to be
separated into parts for purposes of applying the fair value option.
Issuance costs related to the convertible notes for which the fair value option is elected amounting to US$4,556 and US$44 for the years ended
December 31, 2019 and 2020 respectively. Such costs have been recognized in earnings as incurred and not deferred in accordance with ASC 825-
10-25-3.
(iii)
Details of the conversion of convertible notes for the year ended December 31, 2020 are as follows.
Convertible notes
For the year ended December 31, 2020
2018 Notes
2018 Notes
2018 Notes
November 2019 Notes
December 2019 Notes
January 2020 Notes
July 2020 Notes
Principal
amount
converted
1,000
1,000
2,000
20,000
10,000
3,450
13,100
50,550
Conversion date
June 30,
2020
July 24,
2020
August 11, 2020
February 18,
2020
February 18,
2020
February 3,
2020
July 30,
2020
F-73
Fair value
of
converted
convertible
notes as of
the
conversion
date
Number of
ADSs
converted
Conversion
price per
ADS
US$
248,050
4.03
1,551
236,546
536,596
4.23
3.73
1,752
4,327
5,128,206
3.90
20,282
2,564,102
3.90
9,989
1,088,876
3.17
4,346
3,851,694
13,654,070
3.40
26,648
68,895
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
18
Convertible notes at fair value (Continued)
Note: (Continued)
(iv)
The Company has redeemed the 2018 Notes on the following dates.
Redemption date
August 22, 2019
November 14, 2019
December 12, 2019
February 3, 2020
March 31, 2020
Principal amount Consideration paid for redemption
3,261
4,002
4,002
11,265
3,000
3,450
3,450
9,900
6,900
6,200
13,100
8,004
7,192
15,196
(v)
Pursuant to an agreement entered into with an independent investor on February 17, 2020, the Company agreed to issue the July 2020 Notes with
principal amounts of US$13,100 upon receipt of total cash consideration of US$15,196 from the investor on or before June 16, 2020. This
constitutes a call option written to the investor to purchase the July 2020 Notes (the “Call Option”) which is recorded as a derivative liability and
measured at fair value. In June 2020, the Company has entered into an addendum with the independent investor to extend the payment due date
from June 16, 2020 to July 31, 2020. The investor exercised the Call Option on July 30, 2020, upon which the Company issued the July 2020 Notes
to the investor. On the same date, the investor converted the entire July 2020 Notes into 1,925,848 Class A ordinary shares of the Company.
The fair value of the Call Option recorded as derivative liabilities of US$11,466 as of July 30, 2020 was determined using a binomial model with
the key assumptions being the volatility of 13.39% and risk-free rate of 0.09%. The volatility was based on the implied historical volatility of
certain comparable companies. The risk-free interest rate is equal to the yield of US Treasury Strips with a maturity life equal to the time to
maturity of the July 2020 Notes.
F-74
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
18
Convertible notes at fair value (Continued)
Note: (Continued)
(vi)
The fair values of the 2018 Notes, January 2020 Notes and July 2020 Notes as of the dates of conversion and the end of reporting periods were
determined using Monte Carlo simulation, with key assumptions summarized in the below table. The volatility was based on the implied historical
volatility of certain comparable companies. The risk-free interest rate is equal to the yield, as of the respective measurement dates, of the zero-
coupon U.S. Treasury bill that commensurate with the remaining period until the maturity of the convertible notes.
Measurement date
2018 Notes
February 1, 2019
March 1, 2019
August 22, 2019
November 14, 2019
December 12, 2019
December 31, 2019
February 3, 2020
March 31, 2020
June 30, 2020
July 24, 2020
August 11, 2020
January 2020 Notes
February 3, 2020
July 2020 Notes
July 30, 2020
Volatility
%
Risk-free rate
%
44.59
44.99
43.86
44.34
43.86
44.17
42.09
45.38
51.24
49.26
49.75
42.09
49.45
2.55
2.62
1.47
1.61
1.71
1.67
1.37
0.45
0.24
0.23
0.23
1.37
0.19
(vii)
The fair values of the 2019 Notes were determined using a binomial model with the key assumptions summarized in the below table. The volatility
was based on the implied historical volatility of certain comparable companies. The risk-free interest rate is equal to the yield, as of the respective
measurement dates, of a 5% coupon U.S. Treasury bill that is commensurate with the remaining period until the maturity of the 2019 Notes. The
bond yield was based on the yield of corporate bonds with comparable ratings.
Measurement date
November 2019 Notes
December 31, 2019
February 18, 2020
December 2019 Notes
December 31, 2019
February 18, 2020
Volatility
Risk-free rate
Bond yield
%
42.53
44.02
42.63
43.61
%
1.61
1.40
1.61
1.40
%
10.09
10.67
10.09
10.67
F-75
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
19
Ordinary shares
As of December 31, 2020 and 2021, the Company is authorized to issue 100,000,000 shares of US$0.001 par value per ordinary share, out of which 80,000,000
shares are Class A ordinary shares and 20,000,000 shares are Class B ordinary shares. The holders of Class A ordinary shares shall have one vote in respect of
each Class A ordinary share held and the holders of Class B ordinary shares shall have twenty votes in respect of each Class B ordinary share held.
At the time the Company adopted the 2010 Employee Share Option Plan (the “2010 Share Option Plan”) and 2018 Post IPO Share Incentive Plan, the
Company, together with the then shareholders, also decided to allot ordinary shares with par value of US$0.001 to Arda Holdings Limited (“Arda”), a British
Virgin Islands company owned by Sammy Hsieh, Co-founder and Director of the Company at no consideration. Arda will only hold these ordinary shares on
trust for the benefit of the employees who are under the 2010 Share Option Plan and 2018 Post IPO Share Incentive Plan and the dealing of these ordinary
shares is under the direction of the board of directors of the Company. The Company considered Arda to be a variable interest entity as this entity has no equity
at risk. The Company further considered that it is the primary beneficiary because the purpose of Arda is to hold treasury shares on behalf of the Company and
the dealings of those transactions are under the direction of the Company’s board of directors. Given the structure of this arrangement, while these ordinary
shares have been legally issued, they do not bear the attributes of unrestricted, issued and outstanding shares. Therefore, the ordinary shares issued to Arda are
accounted for as treasury shares of the Company until these ordinary shares are earned by the Company’s employees, officers, directors or consultants for
service provided to the Group. The Company allotted 627,811 shares during the year the 2010 Share Option Plan was adopted. No additional shares have been
allotted during the years ended December 31, 2019, 2020 and 2021 to Arda. Arda does not hold any other assets or liabilities as of December 31, 2020 and
2021, nor earn any income nor incur any expenses for the years ended December 31, 2019, 2020 and 2021.
F-76
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
20
Repurchase of shares
The board of directors of the Company authorized certain share repurchase programs in November 2018 (the “2018 Share Repurchase Program”), January 2020
(the “January 2020 Share Repurchase Program”), December 2020 (the “December 2020 Share Repurchase Program”) and December 2021 (the “December 2021
Share Repurchase Program”), respectively, as detailed in the below table.
Repurchase program
2018 Share Repurchase Program
January 2020 Share Repurchase Program
December 2020 Share Repurchase Program
December 2021 Share Repurchase Program
Maximum value of
ordinary shares or ADSs of
the Company to repurchase
10,000
10,000
25,000
20,000
Effective period
Period from November 28, 2018 to November 27,
2019
Period from December 30, 2019 to December 29,
2020
Period from December 30, 2020 to December 31,
2021
Year ending December 31, 2022
The share repurchases may be made on the open market at prevailing market prices, in negotiated transactions off the market, and/or in other legally permissible
means from time to time as market conditions warrant in compliance with applicable requirements of Rule 10b5-1 and/or Rule 10b-18 under the U.S. Securities
Exchange Act of 1934, as amended, at times and in such amounts as the Company deems appropriate.
The following table is a summary of the shares repurchased by the Company during 2019, 2020 and 2021 under the repurchase programs. All shares were
purchased through publicly purchasing from the open market.
Period
2018 Share Repurchase Program
- For the year ended December 31, 2019
January 2020 Share Repurchase Program
- For the year ended December 31, 2020
December 2020 Share Repurchase Program
- For the year ended December 31, 2020
- For the year ended December 31, 2021
F-77
Total number of
ADSs purchased
as part of the
publicly
announced plan
1,301,912
768,079
27,599
1,209,920
Average
price paid
per ADS
3.3857
7.0892
8.3686
8.8324
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
21
(a)
Share-based compensation
Share option plan
The Company’s 2010 Share Option Plan provides for the grant of incentive share options to the Company’s employees, officers, directors or consultants. The
Company’s board of directors administers the 2010 Share Option Plan, selects the individuals to whom options will be granted, determines the number of
options to be granted, and the term and exercise price of each option.
During the years ended December 31, 2019, 2020 and 2021, no share options were granted to non-employees, employees, officers and directors of the Group.
The following table summarizes the share option activities for the years ended December 31, 2019, 2020 and 2021:
At January 1, 2019
Exercised
Forfeited
At December 31, 2019
Vested and expected to vest at
December 31, 2019
Exercisable to vest at December 31, 2019
At January 1, 2020
Exercised
At December 31, 2020
Vested and expected to vest at
December 31, 2020
Exercisable to vest at December 31, 2020
At January 1, 2021
Exercised
At December 31, 2021
Vested and expected to vest at
December 31, 2021
Exercisable to vest at December 31, 2021
Number of
share
options
908,409
(135,281)
(105,261)
667,867
660,247
657,142
667,867
(235,765)
432,102
430,569
431,245
432,102
(117,788)
314,314
312,876
314,204
Weighted
average
exercise
price
US$
7.52
1.25
11.46
8.16
4.72
4.54
8.16
3.75
10.56
5.10
5.13
10.56
5.61
12.41
4.90
4.95
Weighted
average
grant date
fair value
US$
N/A
N/A
N/A
N/A
12.08
12.78
N/A
N/A
N/A
14.51
14.50
N/A
N/A
N/A
15.25
15.23
Weighted
average
remaining
contractual
life
years
6.27
N/A
N/A
5.27
Aggregate
intrinsic
value
US$’000
2,724
N/A
N/A
1,807
5.14
5.64
5.27
N/A
4.28
5.09
5.09
4.28
N/A
3.31
3.73
3.73
780
800
1,807
N/A
4,578
5,215
5,213
4,578
N/A
1,601
1,601
1,601
F-78
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
21
(a)
Share-based compensation (Continued)
Share option plan (Continued)
The aggregate intrinsic value in the table above represents the difference between the estimated fair values of the Company’s ordinary shares as of December
31, 2020 and 2021 and the exercise price.
All share-based payments to employees are measured based on their grant-date fair values. Compensation expense is recognized based on the vesting schedule
over the requisite service period. Total fair values of options vested and recognized as expenses for the years ended December 31, 2019, 2020 and 2021 were
US$784, US$107 and US$4, respectively.
As of December 31, 2019 and 2020, there were US$96 and US$4 of unrecognized share-based compensation expenses related to share options, which were
expected to be recognized over a weighted-average vesting period of 0.86 and 0.25 years, respectively. As of December 31, 2021, there were no unrecognized
share-based compensation expenses related to share options. To the extent the actual forfeiture rate is different from the Company’s estimate, the actual share-
based compensation related to these awards may be different from the expectation.
The binomial option pricing model is used to determine the fair value of the share options granted to employees and non-employees. There were no grant or
modification of share options during the years ended December 31, 2019, 2020 and 2021.
F-79
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
21
(b)
Share-based compensation (Continued)
Post-IPO share incentive plan
The Company’s post-IPO share incentive plan provides for the grant of incentive share options and RSUs to the Company’s employees, officers, directors or
consultants. The Company’s board of directors administers the post-IPO share incentive plan, selects the individuals to whom options and RSUs will be granted,
determines the number of options and RSUs to be granted, and the term and exercise price of each option and RSU.
During the years ended December 31, 2019, 2020 and 2021, the Company granted RSUs to non-employees, employees, officers and directors of the Group. The
following table summarizes the activity of the service-based RSUs for the year ended December 31, 2019, 2020 and 2021:
At January 1, 2019
Granted (with a vesting period of 1 to 4 years)
Vested
Forfeited (Note (ii))
At December 31, 2019
Expected to vest at December 31, 2019
At January 1, 2020
Granted (with a vesting period of 0 to 4 years)
Vested
Forfeited/expired (Note (ii))
At December 31, 2020
Expected to vest at December 31, 2020
At January 1, 2021
Granted (with a vesting period of 0 to 4 years)
Vested
Forfeited/expired (Note (ii))
At December 31, 2021
Expected to vest at December 31, 2021
Number of
RSUs
376,272
279,480
(167,833)
(24,373)
463,546
377,507
463,546
1,180,295
(962,606)
(46,730)
634,505
620,245
634,505
716,265
(1,049,007)
(74,186)
227,577
209,878
Weighted
average
grant date
fair value
8.02
3.79
10.25
7.56
5.52
7.57
5.52
7.83
6.55
7.26
8.11
8.83
8.11
15.73
11.32
12.73
17.65
19.07
Note:
(i)
(ii)
All share-based payments to employees are measured based on their grant-date fair values. Compensation expense is recognized based on the
vesting schedule over the requisite service period. Total fair values and intrinsic value of RSUs vested and recognized as expenses for the years
ended December 31, 2019, 2020 and 2021 were US$1,331, US$6,142 and US$11,965 respectively.
Forfeitures are estimated at the time of grant. If necessary, forfeitures are revised in subsequent periods if actual forfeitures differ from those
estimates. Based upon the Company’s expected forfeitures for RSUs granted, the directors of the Company estimated that its future forfeiture rate
would be 1% for employees and 0% for non-employees in 2019, 2020 and 2021, respectively.
F-80
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
21
(b)
Share-based compensation (Continued)
Post-IPO share incentive plan (Continued)
Note: (Continued)
(iii)
During the years ended December 31, 2019 and 2020, the Company has granted RSUs which are subject to certain market conditions based on
achievement of stock prices of the Company. The Company determines the fair value of these RSUs as of the date of grant or modification using
the Monte Carlo simulation model which utilizes multiple input variables to determine the stock-based compensation expense with the following
assumptions: historical volatility ranging from 37.36% to 62.89%, 0% dividend yield, and risk-free interest rates ranging from 0.1%% to 1.72%.
The historical volatility was based on the average volatility of the comparable companies for the most recent 1-year period as of the date of grant or
modification. The stock price projection for the Company assumes a 0% dividend yield. This is mathematically equivalent to reinvesting dividends
in the issuing entity over the performance period. The risk-free interest rate is equal to the yield, as of the measurement date, of the zero-coupon
U.S. Treasury bill that is commensurate with the remaining performance measurement period.
(c)
Issuance of warrants to an external consultant
Pursuant to the agreement executed between the Company and an external consultant ("Warrant Agreement"), the Company shall issue warrants to purchase up
to 4,651,162 ADSs ("Warrants") to the external consultant in exchange for its financial advisory services which the Warrants shall be vested upon the
completion of raising a minimum of US$20,000 by the Company through issuing convertible notes or any equivalent financial instruments. On December 9,
2019, the Company, based on the Warrant Agreement, issued the Warrants to the external consultant as the Company was able to successfully issue the
November 2019 Notes. The exercise period of the Warrants commences on December 16, 2020 at an exercise price of US$4.30 per ADS and will expire on
December 16, 2022. In accordance with ASC 718, the measurement date for the vested warrants was December 9, 2019. The warrants issued to the consultant
are classified as equity awards and measured based on the measurement date fair value of US$0.709 per warrant. During the years ended December 31, 2019,
2020 and 2021, no warrants were exercised.
Since all of the warrants granted were immediately vested, compensation expense of US$3,298 was immediately recognized with a corresponding credit to
additional paid-in capital during the year ended December 31, 2019.
The fair value of the warrants granted on December 9, 2019 was estimated by using the binomial option pricing model with the following assumptions:
Volatility
Risk-free interest rate
Expected dividend yield
Expected warrant life
Expected forfeiture rate
F-81
42.1%
1.6%
0.0%
3.0 years
0.0%
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
21
(d)
Share-based compensation (Continued)
Issuance of shares to Baozun
Pursuant to the share subscription agreement entered into bgetween Baozun Inc. and iClick (Note 1(d)), Baozun has subscribed for 649,349 newly issued Class
B ordinary shares. The Class B ordinary shares were issued to Baozun at US$26.52 per share, which was at discount as compared to the fair value of US$28.88
(i.e. based on the closing stock price as of the date of share issuance). The discount of US$1,530 represented an incentive to Baozun to enter into the strategic
cooperation framework agreement with the Company, which was recognized as share-based compensation expense in the consolidated statements of
comprehensive loss during the year ended December 31, 2021.
(e)
Total share-based compensation costs
Total share-based compensation costs recognized for the years ended December 31, 2019, 2020 and 2021 are as follows:
Cost of revenues
Research and development
Sales and marketing
General and administrative
Total
22
Other gains, net
Net exchange (loss)/gain
Forfeiture of advances from customers (Note (i))
Government subsidy income (Note (ii))
ADR reimbursement from depositary bank
Fair value gains/(losses) on short-term investments
Impairment on long-term investments
Fair value change in contingent consideration payable
Others
Total
For the years ended December 31,
2019
35
661
655
4,062
5,413
2020
5
92
2,707
3,445
6,249
For the years ended December 31,
2019
(410)
1,369
1,394
224
107
-
-
308
2,992
2020
(421)
1,245
3,063
251
1,404
-
(81)
391
5,852
2021
12
221
9,991
3,275
13,499
2021
622
1,654
3,281
410
(316)
(4,038)
418
172
2,203
Note:
(i)
(ii)
The forfeited advances from customers are recognized as other gains when the contractual obligation of the Company to provide the agreed
services no longer existed legally due to passage of time.
Government subsidy income mainly includes the wage subsidy from the Hong Kong government in 2020 and an additional 10% VAT super-credit
subsidy from the PRC government to offset against VAT payable for the period from April 1, 2019 to December 31, 2021.
F-82
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
23
(a)
Income tax
Cayman Islands and British Virgin Islands
Under the current tax laws of Cayman Islands, the Company and its subsidiaries are not subject to tax on income or capital gains. Besides, upon payment of
dividends by the Company to its shareholders, no Cayman Islands withholding tax will be imposed.
The Company's subsidiaries incorporated in the British Virgin Islands are not subject to income or capital gains taxes, estate duty, inheritance tax or gift tax. In
addition, payment of dividends to the shareholders of the Company's subsidiaries in the British Virgin Islands are not subject to withholding tax in the British
Virgin Islands.
(b)
Hong Kong profits tax
Entities incorporated in Hong Kong are subject to Hong Kong profits tax. Under the two- tiered profits tax rates regime, the first HK$2 million assessable
profits of the qualifying group company are subject to Hong Kong profits tax at a rate of 8.25% and the remaining profits are subject at a rate of 16.5% on the
estimated assessable profits. The profits of group entities not qualifying for the two-tiered profits tax rates regime will continue to be taxed at a flat rate of
16.5%.
(c)
PRC Enterprise Income Tax (“EIT”)
The Company’s subsidiaries, VIE and VIE’s subsidiaries in the PRC are governed by the Enterprise Income Tax Law (“EIT Law”). Pursuant to the EIT Law and
its implementation rules, enterprises in the PRC are generally subjected to tax at a statutory rate of 25%.
High and new technology enterprises (“HNTE”) will enjoy a preferential enterprise income tax rate of 15% under the EIT Law. Some of the Company’s
subsidiaries and a VIE’s subsidiary in the PRC are qualified as a HNTE under the EIT Law which are eligible for a preferential enterprise income tax rate of
15% for a period of three years so long as these entities obtain approval from relevant tax authority if they are profitable during the period.
In addition, according to the EIT Law and its implementation rules, foreign enterprises, which have no establishment or place in the PRC but derive dividends,
interest, rents, royalties and other income (including capital gains) from sources in the PRC shall be subject to PRC withholding tax (“WHT”) at 10% (a further
reduced WHT rate may be available according to the applicable double tax treaty or arrangement). The 10% WHT is applicable to any dividends to be
distributed from the Group’s PRC subsidiaries to the Group’s overseas companies unless otherwise exempted pursuant to applicable tax treaties or tax
arrangements between the PRC government and the government of other jurisdiction which the WHT is reduced to 5%.
Although there are undistributed earnings of the Company’s subsidiaries in the PRC that are available for distribution to the Company, the undistributed
earnings of the Company’s subsidiaries located in the PRC are considered to be indefinitely reinvested, because the Company does not have any present plan to
pay any cash dividends on its ordinary shares in the foreseeable future and intends to retain most of its available funds and any future earnings for use in the
operation and expansion of its business. Accordingly, no deferred tax liability has been accrued for the PRC dividend withholding taxes that would be payable
upon the distribution of those amounts to the Company as of December 31, 2020 and 2021. The undistributed earnings from the Company’s subsidiaries in the
PRC as of December 31, 2020 and 2021 of US$1,468 and US$1,324 would be due if these earnings were remitted as dividends as of December 31, 2020 and
2021. An estimated foreign withholding taxes of US$73 and US$66 would be due if these earnings were remitted as dividends as of December 31, 2020 and
2021, respectively.
F-83
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
23
(d)
Income tax (Continued)
Composition of income tax expense
The current and deferred portions of income tax expense included in the consolidated statements of comprehensive loss are as follows:
Current income tax expense
Deferred tax benefits
Income tax expense
(e)
Deferred tax assets and liabilities
2019
For the years ended December 31,
2020
2021
1,130
(1,083)
47
2,784
(1,151)
1,633
3,445
(905)
2,540
Deferred taxes were measured using the enacted tax rates for the periods in which they are expected to be reversed. The tax effects of temporary differences that
give rise to the deferred tax asset and deferred tax liability balances as of December 31, 2020 and 2021 are as follows:
Deferred tax assets
Tax losses carried forward (Note (i))
Share-based payments
Temporary difference on deferred income
Less: Valuation allowance (Note (ii))
Deferred tax liabilities
Acquired intangible assets
Outside basis difference (Note (iii))
Others
Note:
(i)
Tax loss carryforwards
As of December 31,
2020
2021
4,365
759
194
(4,365)
953
(13,585)
(542)
(29)
(14,156)
4,410
931
254
(4,410)
1,185
(12,993)
(356)
(29)
(13,378)
As of December 31, 2021, the Group had tax loss carryforwards of approximately US$21,694, which can be carried forward to offset future taxable
income. The net operating tax loss carryforwards will begin to expire as follows:
2022
2023
2024
2025
2026
Tax loss with no expiry
F-84
4,212
432
871
5,740
9,128
1,311
21,694
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
23
(e)
Income tax (Continued)
Deferred tax assets and liabilities (Continued)
Note: (Continued)
(i)
Tax loss carryforwards (Continued)
In accordance with PRC Tax Administration Law on the Levying and Collection of Taxes, the PRC tax authorities generally have up to five years
to claw back underpaid tax plus penalties and interest for PRC entities’ tax filings. In the case of tax evasion, which is not clearly defined in the
law, there is no limitation on the tax years open for investigation. Accordingly, the PRC entities’ tax years from 2017 to 2021 remain subject to
examination by the tax authorities. There were no ongoing examinations by tax authorities as of December 31, 2020 and 2021.
(ii)
Valuation allowance
Valuation allowance is provided against deferred tax assets when the Group determines that it is more likely than not that the deferred tax assets
will not be utilized in the future. In making such determination, the Group considered factors including future taxable income exclusive of
reversing temporary differences and tax loss carryforwards. Valuation allowance was provided for net operating loss carryforwards because it was
more likely than not that such deferred tax assets will not be realized based on the Group’s estimate of its future taxable income. If events occur in
the future that allow the Group to realize more of its deferred income tax than the presently recorded amounts, an adjustment to the valuation
allowances will result in a decrease in tax expense when those events occur.
Movement of valuation allowance is as follows:
Beginning balance
Additions
Reversals (Note)
Ending balance
Note:
2019
For the years ended December 31,
2020
2021
6,385
801
(1,263)
5,923
5,923
1,144
(2,702)
4,365
4,365
2,768
(2,723)
4,410
The reversals comprise tax loss carryforwards which have been utilized to offset taxable income during the years ended December 31, 2019, 2020
and 2021, respectively, and tax loss carryforwards which were expired in 2019, 2020 and 2021.
(iii)
Outside basis difference
The deferred tax liabilities are recorded for the undistributed earnings in the Group’s VIE and its subsidiaries in the PRC of US$2,169 and
US$1,422 as of December 31, 2020 and 2021, respectively.
F-85
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
23
(f)
Income tax (Continued)
Income tax reconciliation
Reconciliation between the expense of income taxes computed by applying the statutory tax rates to loss before income taxes and the actual provision for
income taxes is as follows:
Tax benefit calculated at statutory tax rates (Note i)
Effect of differences between statutory tax rates and
foreign effective tax rates
Non-taxable other income
Non-deductible expenses (Note ii)
Valuation allowance
Outside basis difference (Note iii)
Additional deduction of research and development expenses
(Note iv)
Others
Income tax expense
2019
For the years ended December 31,
2020
(2,599)
1,999
(235)
1,338
(462)
(62)
-
68
47
(3,291)
4,513
(627)
3,202
(1,558)
(400)
(270)
64
1,633
2021
(3,488)
1,746
(348)
4,783
44
(186)
(125)
114
2,540
Note:
(i)
(ii)
(iii)
(iv)
The Group’s major operation was conducted out of the PRC. Accordingly, the Group prepared its tax rate reconciliation starting with the PRC
statutory tax rate during the years ended December 31, 2019, 2020 and 2021.
Non-deductible expenses were mainly related to allowance for credit losses, share-based compensation expenses, fair value losses on derivative
liabilities and fair value losses on convertible notes.
Outside basis difference is related to undistributed earnings in the Group’s VIE and its subsidiaries in the PRC (Note 23(e)(ii)).
According to a policy promulgated by the State Tax Bureau of the PRC and effective from 2008 onwards, companies engaged in research and
development activities are entitled to claim ranging from 150% to 175% of the research and development expenses so incurred in a period as tax
deductible expenses in determining its tax assessable profits for that period. Certain PRC subsidiaries of the Company have applied such additional
deduction for the year ended December 31, 2021.
F-86
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
24
Basic and diluted net loss per share
Basic and diluted net loss per share for the years ended December 31, 2019, 2020 and 2021 are calculated as follows:
Numerator:
Net loss attributable to ordinary shareholders of the Company
Numerator for basic and diluted net loss per share
Denominator:
Denominator for basic and diluted net loss per share - weighted
average shares outstanding
Basic net loss per share
Diluted net loss per share
For the years ended December 31,
2019
2020
2021
(9,603)
(9,603)
(12,618)
(12,618)
(13,631)
(13,631)
28,583,548
39,368,436
48,187,235
(0.34)
(0.34)
(0.32)
(0.32)
(0.28)
(0.28)
The share options, RSUs, warrants and convertible notes were excluded from the computation of diluted net loss per ordinary share for the years presented
because including them would have had an anti-dilutive effect.
The following ordinary share equivalents were excluded from the computation of diluted net loss per ordinary share for the years presented because including
them would have had an anti-dilutive effect:
Share options, RSUs and warrants – weighted average
(thousands)
Convertible notes – weighted average (thousands)
As of December 31,
2019
505
6,909
2020
2,998
-
2021
2,613
-
F-87
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
26
Segments
During the periods presented in these consolidated financial statements, the Group reports two operating segments: 1) Marketing Solutions, and 2) Enterprise
Solutions. The Enterprise Solutions segment primarily reflects the results of the Group’s SaaS products and services the Group named its pre-existing online
marketing service business as Marketing Solution business.
The table below provides a summary of the Group’s breakdown of net revenues by type of goods or services and operating segment results for the years ended
December 31, 2019, 2020 and 2021. The Group does not allocate any operating costs or assets to its business segments as the Group’s CODM does not use this
information to measure the performance of the operating segments. There was no significant transaction between reportable segments for the years ended
December 31, 2019, 2020 and 2021.
Net revenues:
Marketing Solutions
- Sales agent
- Cost-plus
- Specified actions
Enterprise Solutions
- SaaS products and services
Cost of revenues:
Marketing Solutions
- Specified actions
Enterprise Solutions
- SaaS products and services
Gross profit:
Marketing Solutions
- Sales agent
- Cost-plus
- Specified actions
Enterprise Solutions
- SaaS products and services
For the years ended December 31,
2019
2020
2021
6,563
17,146
165,263
188,972
10,436
199,408
5,834
26,738
193,280
225,852
28,893
254,745
4,195
26,062
212,353
242,610
65,092
307,702
(139,976)
(172,917)
(194,912)
(2,727)
(142,703)
(8,565)
(181,482)
(23,637)
(218,549)
6,563
17,146
25,287
48,996
7,709
56,705
5,834
26,738
20,363
52,935
20,328
73,263
4,195
26,062
17,441
47,698
41,455
89,153
The Group currently does not allocate assets to all of its segments, as its CODM does not use such information to allocate resources or evaluate the performance
of the operating segments.
F-88
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
26
Segments (Continued)
Revenue generated for the respective countries are summarized as follows:
PRC
Hong Kong
Others
The Group’s long-lived assets are located in the following countries:
PRC
Hong Kong
27
(a)
Commitments and contingencies
Capital commitments
Capital expenditures contracted for are analyzed as follows:
Contracted but not provided for
Leasehold improvements
(b)
Litigation
For the years ended December 31,
2019
2020
2021
175,970
22,567
871
199,408
214,444
40,197
104
254,745
254,874
52,599
229
307,702
As of December 31,
2020
2021
671
442
1,113
1,230
701
1,931
As of December 31,
2020
2021
151
-
In the ordinary course of the business, the Group is subject to periodic legal or administrative proceedings. As of December 31, 2021 the Group is not a party to
any legal or administrative proceedings which will have a material adverse effect on the Group’s business, financial position, results of operations and cash
flows.
28
(a)
Subsequent event
Acquisition of non-controlling interests of Changyi
As of December 31, 2021, Changyi was a partially-owned subsidiary of the Company. In March 2022, the Company has entered into an agreement with other
shareholders of Changyi to acquire all their equity interests in Changyi at (i) cash consideration of RMB6,000,000, and (ii) share consideration of 3,091,327
ADSs of the Company. Upon completion of this transaction, Changyi will become a wholly-owned subsidiary of the Company. The transaction will not change
the Company’s control over Changyi and will be accounted for as a transaction with non-controlling interests.
F-89
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
29
Restricted net assets
Relevant PRC laws and regulations permit payments of dividends by the Group’s subsidiaries, VIE and its subsidiaries incorporated in the PRC only out of their
retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. In addition, the Group’s subsidiaries and the VIE in the
PRC are required to annually appropriate 10% of their net after-tax income to the statutory general reserve fund prior to payment of any dividends, unless such
reserve funds have reached 50% of their respective registered capital. As a result of these and other restrictions under PRC laws and regulations, the Group’s
subsidiaries, VIE and its subsidiaries incorporated in the PRC are restricted in their ability to transfer a portion of their net assets to the Company either in the
form of dividends, loans or advances. There are no significant differences between U.S. GAAP and PRC accounting standards in connection with the reported
net assets of the legally owned subsidiaries in the PRC and the VIE. Even though the Company currently does not require any such dividends, loans or advances
from the PRC entities for working capital and other funding purposes, the Company may in the future require additional cash resources from them due to
changes in business conditions, to fund future acquisitions and development, or merely to declare and pay dividends or distributions to our shareholders. Except
for the above, there is no other restriction on use of proceeds generated by the Group’s subsidiaries, VIE and its subsidiaries to satisfy any obligations of the
Company.
Furthermore, cash transfers from the Company’s PRC subsidiaries to their parent companies outside of China are subject to PRC government control of
currency conversion. Shortages in the availability of foreign currency at the time of requesting such conversion may temporarily delay the ability of the PRC
subsidiaries and consolidated affiliated entities to remit sufficient foreign currency to pay dividends or other payments to the Company, or otherwise satisfy their
foreign currency denominated obligations.
As of December 31, 2020 and 2021, the total restricted net assets of the Company’s subsidiaries and OptAim VIE incorporated in the PRC and subjected to
restriction amounted to approximately US$68,233 and US$69,749, respectively. Except for the above there is no other restriction on the use of proceeds
generated by the Company’s subsidiaries, VIE and VIE’s subsidiaries to satisfy any obligations of the Company.
F-90
iCLICK INTERACTIVE ASIA GROUP LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$’000, except share data and per share data, or otherwise noted)
ADDITIONAL INFORMATION: CONDENSED FINANCIAL STATEMENTS OF PARENT COMPANY
Rules 12-04(a) and 4-08(e)(3) of Regulation S-X require condensed financial information as to the financial position, cash flows and results of operations of a
parent company as of and for the same periods for which the audited consolidated financial statements have been presented when the restricted net assets of the
consolidated subsidiaries together exceed 25% of consolidated net assets as of the end of the most recently completed fiscal year.
The following condensed financial statements of the Company have been prepared using the same accounting policies as set out in the Company’s consolidated
financial statements except that the Company used the equity method to account for its investment in its subsidiaries, VIE and VIE’s subsidiaries. Such
investment is presented on the separate condensed balance sheets of the Company as “Investment in subsidiaries, VIE and VIE’s subsidiaries” and
“Accumulated losses in excess of investment in subsidiaries, VIE and VIE’s subsidiaries.” The Company, its subsidiaries, VIE and VIE’s subsidiaries were
included in the consolidated financial statements whereby the inter-company balances and transactions were eliminated upon consolidation. The Company’s
share of income from its subsidiaries, VIE and VIE’s subsidiaries is reported as share of income from subsidiaries, VIE and VIE’s subsidiaries in the condensed
financial statements.
The Company is a Cayman Islands company and, therefore, is not subjected to income taxes for all years presented. The footnote disclosures contain
supplemental information relating to the operations of the Company and, as such, these statements should be read in conjunction with the notes to the
consolidated financial statements of the Company. Certain information and footnote disclosures normally included in financial statements prepared in
accordance with U.S. GAAP have been condensed or omitted.
As of December 31, 2020 and 2021, there were no material commitments or contingencies, significant provisions for long-term obligations or guarantees of the
Company, except for those which have been separately disclosed in the consolidated financial statements, if any.
Inter-company charges, share-based compensation and other miscellaneous expenses for the years ended December 31, 2019, 2020 and 2021, which were
previously recognized at the parent company level, had been pushed down to the WFOE/VIE level given the majority of services were provided to the
WFOE/VIE entities.
The condensed financial statements of the parent company should be read in conjunction with the Company’s consolidated financial statements and the
accompanying notes thereto. For purposes of these condensed financial statements, the Company’s wholly owned and majority owned subsidiaries are recorded
based upon its proportionate share of the subsidiaries’ net assets (similar to presenting them on the equity method).
F-91
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONDENSED BALANCE SHEETS
AS OF DECEMBER 31, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Assets
Current assets
Cash and cash equivalents
Time deposits
Restricted cash
Other current assets
Total current assets
Non-current assets
Deferred tax assets
Investments in subsidiaries, VIE and VIE’s subsidiaries *
Other long-term investments
Investment in an equity investee
Total non-current assets
Total assets
Liabilities and shareholders’ equity
Current liability
Accrued liabilities and other current liabilities
Total current liability
Non-current liability
Other liabilities
Total non-current liability
Total liabilities
Commitments and contingencies
Shareholders’ equity
Ordinary shares
Treasury shares
Other shareholders’ equity
Total shareholders’ equity
Total liabilities and shareholders’ equity
As of December 31,
2020
2021
402
46
5,266
1,095
6,809
194
278,874
1,522
460
281,050
287,859
7,627
7,627
8,130
8,130
15,757
-
46
(10,341)
282,397
272,102
287,859
789
-
3,657
549
4,995
254
285,824
510
354
286,942
291,937
7,126
7,126
459
459
7,585
-
48
(20,908)
305,212
284,352
291,937
* Total current assets and total non-current assets as of December 31, 2020 have been revised to adjust for an amount by US$162,486 to classify “investments in subsidiaries,
VIE and VIE’s subsidiaries” under non-current assets from “amounts due from subsidiaries” under current assets as presented in previously issued consolidated financial
statements included in 2020 Form 20-F. In the opinion of management, the adjustment is immaterial. The impact of the revisions is eliminated in consolidation. There is no
impact on the previously reported consolidated financial position, results of operations or cash.
F-92
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONDENSED STATEMENTS OF COMPREHENSIVE LOSS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Operating expenses
General and administrative expenses
Total operating expenses
Operating loss
Other gains/(losses), net
Fair value losses on derivative liabilities
Fair value gains/(losses) on convertible notes
Share of profits from subsidiaries, VIE and VIE’ subsidiaries
Loss before share of losses from an equity investee and income
tax expense
Share of losses from an equity investee
Income tax expense
Net loss attributable to iClick Interactive Asia Group Limited’s
ordinary shareholders
Net loss attributable to iClick Interactive Asia Group Limited
Other comprehensive (loss)/income:
Foreign currency translation adjustment, net of tax
Comprehensive loss attributable to iClick Interactive Asia Group
Limited
For the years ended December 31,
2019
2020
(12,064)
(12,064)
(12,064)
285
-
133
2,519
(9,127)
(408)
(68)
(9,603)
(9,603)
(1,612)
(13,598)
(13,598)
(13,598)
(409)
(11,466)
(4,433)
17,477
(12,429)
(111)
(78)
(12,618)
2021
(17,574)
(17,574)
(17,574)
(242)
-
-
4,406
(13,410)
(107)
(114)
(13,631)
(12,618)
(13,631)
5,001
3,340
(11,215)
(7,617)
(10,291)
F-93
iCLICK INTERACTIVE ASIA GROUP LIMITED
CONDENSED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021
(US$’000, except share data and per share data, or otherwise noted)
Cash flows from operating activities
Net cash used in operating activities*
Cash flows from investing activities
Purchase of other long-term investments
Investment in an equity investee
(Purchase)/redemption of time deposits
Capital contribution to subsidiaries*
Refund from subsidiaries of capital contribution *
Acquisition of subsidiaries
Net cash provided by/(used in) investing activities*
Cash flows from financing activities
Proceeds from issuance of shares upon private placements and follow
on offering
Proceeds from exercise of share options
Proceeds from issuance of convertible notes, net of transaction
expenses
Redemption of convertible notes
Repurchase of ordinary shares
Purchase of interests in subsidiaries from non-controlling interests
Net proceeds from issuance of ordinary shares upon subscription from Baozun Inc.
Net cash provided by financing activities
Net increase/(decrease) in cash and cash equivalents and
restricted cash
2019
For the years ended December 31,
2020
2021
(4,252)
(3,461)
(3,217)
(1,000)
(566)
(301)
(19,129)
33,127
-
12,131
-
315
28,742
(11,265)
(4,414)
-
-
13,378
(19)
(412)
255
(77,655)
-
(959)
(78,790)
71,917
1,305
19,184
(15,196)
(5,677)
(7,003)
-
64,530
21,257
(17,721)
-
-
46
(53)
-
(4,982)
(4,989)
-
661
-
-
(10,687)
-
17,010
6,984
(1,222)
* Net cash used in operating activities and net cash provided by/used in investing activities for the years ended December 31, 2019 and 2020 have been revised to adjust for
amounts by US$13,998 and US$77,655, respectively, to revise "capital contribution to subsidiaries" and "refund from subsidiaries of capital contribution" to investing
activities from operating activities as presented in previously issued consolidated financial statements included in 2019 and 2020 Form 20-F. In the opinion of management,
the adjustment is immaterial. The impact of the revisions is eliminated in consolidation. There is no impact on the previously reported consolidated financial position, results
of operations or cash.
F-94
Exhibit 4.1
Exclusive Business Cooperation Agreement
This Exclusive Business Cooperation Agreement (hereinafter referred to as “this Agreement”) is entered into by and between the parties below on November 1, 2021 in the
People’s Republic of China (“China”):
Party A:
iClick Data Technology (Beijing) Limited (爱点击（北京）数据科技有限公司), a limited liability company that is incorporated and exists under the laws of China, with
its registered office at Room 708, 7th Floor, Block B, HuaTeng Century Headquarters, Gaobeidian, Chaoyang District, Beijing;
Party B:
Beijing OptAim Network Technology Co., Ltd. (北京智云众网络科技有限公司) , a limited liability company that is incorporated and exists under the laws of China, with
its registered office at Room 053, B2 Floor, No. 89, North Third Ring Road, Haidian District, Beijing; and
Zhiyunzhong (Shanghai) Technology Co., Ltd. (指匀众（上海）科技有限公司) , a limited liability company that is incorporated and exists under the laws of China, with
its registered office at Room CB1109, Layer 1, Hongmei South Road, No.1755, Minhang District, Shanghai.
Party A and Party B are referred to individually as a “Party” or collectively as the “Parties”.
Whereas,
1.
2.
3.
Party A is a wholly foreign-owned enterprise that is incorporated in China and possesses necessary resources for network technology, communication technologies,
transfer of technologies, technical consulting, technical services, technical trainings, advertisement design, manufacturing, agency and releasing, sales of
independently-developed software products, enterprise marketing planning, enterprise management consulting, and business information consulting;
Party B are domestic companies incorporated in China;
Party A agrees to utilize its advantages in human resources, technologies, and information to provide Party B with exclusive technical services, technical consulting,
and other services in relation to computer software production and development (see the following for the specific scope), and Party B agrees to accept such services
provided by Party A or a third party appointed by Party A according to the provisions of this Agreement.
Therefore, Party A and Party B conclude the following agreement upon consensus through negotiation:
1
1.1
Provision of Services by Party A
According to the terms and conditions of this Agreement, Party B hereby appoints Party A as its exclusive service provider to provide Party B with all-
round business support, technical services, and consulting services during the term hereof. Specifically, these services include all or a part of the services within the
business scope of Party B which are subject to the decision of Party A from time to time, including but not limited to transfer of technologies, technical consulting,
technical services, technical trainings, advertisement design, manufacturing, agency and releasing, enterprise marketing planning, enterprise management
consulting, and business information consulting (the “Services”).
Exhibit 4.1
1.2
Party B agree to accept the consulting and services rendered by Party A. Party B further agree that, unless Party A gives prior written consent, Party B shall not
accept any consulting and/or services rendered by any third party or cooperate with any third party with respect to the matters provided in this Agreement within the
term of this Agreement. Party A may appoint other parties (who may enter into certain agreements described in Clause 1.3 of this Agreement with Party B) to
provide the consulting and/or services hereunder to Party B.
1.3
Ways of Service Provision
1.3.1
1.3.2
1.3.3
Party A and Party B agree that, the Parties may directly or through their respective related parties conclude other technical service agreements and
consulting service agreements within the term of this Agreement, to specify the contents, ways, personnel, and charges of specific technical services and
consulting services.
For performing this Agreement, Party A and Party B agree that, the Parties may conclude intellectual property (including but not limited to software,
trademarks, patents, know-how, etc.) licensing agreements directly or through their respective related parties during the term of this Agreement, which shall
allow Party B to use the related intellectual properties of Party A when Party B’s business requires.
For performing this Agreement, Party A and Party B agree that, the Parties may conclude equipment or plant lease agreements directly or through their
respective related parties during the term of this Agreement, which shall allow Party B to use the equipment or plants of Party A according to the
requirements of Party B’s business.
1.3.4
Party A may subcontract a part of the services to be provided to Party B under this Agreement to a third party at its own discretion.
1.3.5
Party B hereby grants Party A an irrevocable exclusive right to purchase, whereby Party A may, to the extent permitted by laws and regulations of China,
purchase at its option any part or all of the assets and business from Party B at the lowest price permitted by laws of China. At that time, the Parties shall
conclude a separate asset or business transfer contract to specify the terms and conditions of such asset transfer.
2
Calculation of Service Fees, Terms of Payment, Financial Statements, Audit, and Taxation
Exhibit 4.1
2.1
2.2
2.3
2.4
The Parties agree that Party B shall pay 100% of its net income to Party A for the services provided by Party A as the service fees (the “Service Fees”). The Service
Fees shall be paid on a monthly basis. During the term of this Agreement, Party A has the right to adjust such Service Fees at its own discretion without the consent
of Party B. Party B shall (a) provide Party A with its management statement and business data of each month, which shall state Party B’s net income of the month
(the “Monthly Net Income”); and (b) pay 100% of its monthly net income to Party A (the “Monthly Payment”), within thirty (30) days from the last day of such
month. Party A shall issue invoices of the technical service fees within seven (7) working days upon receipt of the aforesaid management statements and business
data. Party B shall pay such amounts as stated on the invoices within seven (7) working days upon receipt of the aforesaid invoices. All payments shall be remitted
into the bank account designated by Party A or paid to such account by other means approved by the Parties. The Parties agree that Party A may notify Party B of
changes to such payment instructions from time to time.
Party B shall, within ninety (90) days upon the end of each fiscal year, (a) provide Party A with its financial statements of the current fiscal year, which shall be
audited and certified by an independent certified accountant approved by Party A, and (b) if the audited financial statements show that the total monthly payments
made by Party B to Party A within this fiscal year is insufficient in any way, pay the shortfall amount to Party A.
Party B shall prepare its financial statements to the satisfaction of Party A according to the requirements of laws and commercial practices.
When Party A gives a notice five (5) working days in advance, Party B shall allow Party A and/or its appointed auditor to audit Party B’s relevant account books
and records and photocopy the required account books and records at the principal office of Party B, so as to verify the income of Party B and the accuracy of its
statements.
2.5
The Parties to this Agreement shall bear their respective tax burdens incurred from execution of this Agreement.
3
3.1
3.2
Intellectual Properties, Non-disclosure, and Non-competition
Party A is entitled to exclusive proprietary rights and interests in all rights, titles, interests, and intellectual properties arising from or created by performance of this
Agreement, including but not limited to copyrights, patents, patent applications, trademarks, software, know-how, business secrets, and others, whether they are
developed by Party A or Party B.
The Parties acknowledge that any oral or written information exchanged between them in connection with this Agreement is confidential. Each Party shall keep
such information confidential, and may not disclose such information to any third party without the written consent of other Party, except for any information
(a) which is or becomes publicly available not through disclosure by the receiving Party; (b) which is required by applicable laws or any rules of stock exchange to
disclose; or (c) which is required to be disclosed by either Party to its legal or financial consultant in connection with the transaction hereunder, provided that such
consultant is subject to any confidentiality obligation similar to that set forth herein. If the personnel or institutions employed or engaged by either Party disclose
any confidential information, it will be deemed disclosure by such Party, and such Party shall be liable for breach of this Agreement. This Article 3.2 shall survive
the termination of this Agreement for whatever reasons.
Exhibit 4.1
3.3
Party B shall not (directly or indirectly) be engaged in business other than that specified in Party B’s business license and business certificate. Party B shall not be
directly or indirectly engaged in business competing with Party A’s business in China, including investing in entities engaged in any business competing with Party
A’s business, or in any business other than that approved by Party A in writing.
3.4
The Parties agree that, this Article 3 shall survive the modification, rescission or termination of this Agreement.
4
4.1
Representations and Warranties
Party A represents and warrants as follows:
4.1.1
Party A is a company legally incorporated and existing under the laws of China.
4.1.2
Party A’s execution and performance of this Agreement are within its corporate capacity and its scope of business. Party A has taken necessary corporate
actions and has been duly authorized and obtained the consents and approvals from third parties and government agencies, and Party A will not violate the
laws or other restrictions that bind upon or affect Party A.
4.1.3
This Agreement constitutes legal, valid, and binding obligations of Party A and such obligations are enforceable in accordance with the provisions of this
Agreement.
4.2
Party B represents and warrants as follows:
4.2.1
Party B is companies legally incorporated and existing under the laws of China.
4.2.2
Party B’s execution and performance this Agreement are within their corporate capacities and their scopes of businesses. Party B have taken necessary
corporate actions and have been duly authorized and obtained the consents and approvals from third parties and government agencies, and Party B will not
violate the laws or other restrictions that bind upon or affect Party B.
4.2.3
This Agreement constitutes legal, valid, and binding obligations of Party B and such obligations are enforceable against Party B.
Exhibit 4.1
5
5.1
6
6.1
6.2
6.3
7
7.1
7.2
Effectiveness and Term
This Agreement is executed and comes into force on such date as stated in the beginning of this Agreement. This Agreement will be permanently in force until Party
A decides in writing to terminate this Agreement in accordance with this Agreement or unless the laws of China otherwise provide.
Termination
To the maximum extent permitted by the laws of China, if the business period of any Party expires during the term of this Agreement, such Party shall timely renew
its business period, so that this Agreement will continue to be in force and performed. If such Party’s application for renewal of business period is not approved by
any competent authority, this Agreement will terminate upon the expiry of this Party’s business period.
When this Agreement terminates, the Parties’ rights and obligations under Article 3, Article 7, and Article 8 shall survive.
Early termination of this Agreement for any reason shall not exempt any Party from its obligations to make payments hereunder due prior to the termination of this
Agreement (including but not limited to service fees) or from any liability for breach of this Agreement accrued prior to the termination of this Agreement. Any
payable service fees incurred prior to the termination of this Agreement shall be paid to Party A within fifteen (15) working days from the termination date of this
Agreement.
Governing Laws, Dispute Resolution and Changes to Laws
The execution, effectiveness, interpretation, performance, amendment, and termination of this Agreement and dispute resolution under this Agreement shall be
governed by the laws of China.
Where any dispute arising from interpretation and performance of the provisions of this Agreement, the Parties shall settle such dispute through consultation in good
faith. Where the Parties fail to reach any agreement with respect to the dispute resolution within thirty (30) days after any Party requests for resolution of such
dispute through consultation, either Party may submit the dispute to China International Economic and Trade Arbitration Commission for arbitration in accordance
with the arbitration rules in force. The place of arbitration shall be Beijing and the language of arbitration shall be Chinese. The award shall be final and binding on
the Parties.
Exhibit 4.1
7.3
8
8.1
8.2
8.3
9
9.1
Where any dispute arising from interpretation and performance of this Agreement or any other dispute is under arbitration, the Parties hereto shall continue to
exercise their respective rights and perform their respective obligations under this Agreement, except for the issues in dispute.
Liability for Breach and Indemnity
Where Party B substantially violates any provision under this Agreement, Party A has the right to terminate this Agreement and/or claim for damages against Party
B. This Article 8.1 shall not preclude Party A’s any other right under this Agreement.
Unless otherwise provided by the laws of China, Party B has no right to terminate or rescind this Agreement under any circumstances.
Party B shall indemnify Party A and hold Party A harmless from any loss, damage, liability, or expenses incurred from any litigation, claim or other requests against
Party A arising from or caused by the consulting and services that Party A provides to Party B upon the latter’s demand, unless such loss, damage, liability or
expenses are caused by intentional misconduct of Party A.
Notice
All notices and other communications required or permitted hereunder shall be sent to the following addresses by personal delivery, postage-prepaid registered mail,
commercial express delivery or fax. A confirmation shall be sent by email with respect to each notice. Such notices shall be deemed validly delivered according to
the following provisions:
9.1.1 Where a notice is sent by personal delivery, express delivery or postage-prepaid registered mail, it will be deemed delivered when the notice is sent to or
rejected at the designated address of the recipient.
9.1.2 Where a notice is sent by fax, it will be deemed delivered when the notice is transmitted successfully, evidenced by the automatically-generated
transmission confirmation message.
9.2
For the purpose of notice, addresses of the Parties are as follows:
Party A: iClick Data Technology (Beijing) Limited (爱点击（北京）数据科技有限公司)
Address: Room 708, 7th Floor, Block B, HuaTeng Century Headquarters, Gaobeidian, Chaoyang District, Beijing
Addressee: Tang Jian (唐健)
Tel: 010-85402700
Party B: Beijing OptAim Network Technology Co., Ltd. (北京智云众网络科技有限公司)
Address: Room 053, B2 Floor, No. 89, North Third Ring Road, Haidian District, Beijing
Addressee: Tang Jian (唐健)
Tel: 010-85402700
Exhibit 4.1
Party B: Zhiyunzhong (Shanghai) Technology Co., Ltd. (指匀众（上海）科技有限公司)
Address: Room CB1109, Layer 1, Hongmei South Road, No.1755, Minhang District, Shanghai
Addressee: Tang Jian (唐健)
Tel: 021-61139062
9.3
Either Party may change its address for notice by sending a notice to other Parties according to the provisions of this Article 9.
10
Transfer
10.1 Without the written consent of Party A in advance, Party B shall not transfer their rights and obligations under this Agreement to any third party.
10.2
Party B agree that, Party A may transfer its rights and obligations under this Agreement to any third party by notifying Party B of such transfer in writing in
advance, without further consent of Party B.
11
Severability
If one or more provisions hereof are decided as invalid, illegal or unenforceable in any respect according to any laws or regulations, the validity, legality
or enforceability of other provisions hereof shall not be affected or prejudiced in any respect. The Parties shall negotiate in good faith to strive to replace
such invalid, illegal or unenforceable provisions with any valid provisions to the maximum extent permitted by laws and expected by the Parties, so that
the economic effect of such valid provisions shall be similar to that of such invalid, illegal or unenforceable provisions as much as possible
12
Amendments and Supplementations
Any amendment and supplementation to this Agreement shall be made in writing. Amendment agreements and supplemental agreements executed by the
Parties in relation to this Agreement shall constitute an integral part of this Agreement and shall have the same legal force as that of this Agreement.
13
Language and Counterparts
This Agreement is made in two counterparts, and each Party holds one. Both counterparts shall have equal legal force.
[The remainder of this page is intentionally left blank.]
In witness whereof, the Parties have caused their authorized representatives to execute this Exclusive Business Cooperation Agreement on the date first written above for
their joint observance.
Exhibit 4.1
Party A: iClick (Beijing) Data Technology Co., Ltd.
(爱点击（北京）数据科技有限公司)
By:
Name:
Title:
/s/ Tang Jian
Tang Jian (唐健)
Legal Representative
Party B: Beijing OptAim Network Technology Co., Ltd.
(北京智云众网络科技有限公司)
By:
Name:
Title:
/s/ Tang Jian
Tang Jian (唐健)
Legal Representative
Party B: Zhiyunzhong (Shanghai) Technology Co., Ltd.
(指匀众（上海）科技有限公司)
By:
Name:
Title:
/s/ Tang Jian
Tang Jian (唐健)
Legal Representative
Exhibit 4.2
This Third Amended and Restated Exclusive Option Agreement (hereinafter referred to as “this Agreement”) is made by the Parties below on November 1, 2021 in Beijing,
the People’s Republic of China (“China”):
Third Amended and Restated Exclusive Option Agreement
Party A:
iClick Data Technology (Beijing) Limited (爱点击（北京）数据科技有限公司), a limited liability company incorporated and existing under the laws of
China, with its registered office at Room 708, 7th Floor, Block B, HuaTeng Century Headquarters, Gaobeidian, Chaoyang District, Beijing;
Party B:
Tang Jian (唐健), a Chinese citizen with the ID No. 432922197608190035; and
Party C:
Beijing OptAim Network Technology Co., Ltd. (北京智云众网络科技有限公司), a limited liability company incorporated and existing under the laws of
China, with its registered office at Room 053, B2 Floor, No. 89, North Third Ring Road, Haidian District, Beijing.
In this Contract, Party A, Party B, and Party C are hereinafter referred to individually as a “Party” and collectively as the “Parties”.
Whereas,
Party B holds 100% of the equity interest in Party C;
Party B intends to grant Party A the irrevocable and exclusive option to purchase all the equity interest in Party C;
OptAim (Beijing) Information Technology Co., Ltd. (智云众（北京）信息技术有限公司), Party C, Tang Jian, Shen Ming and Li Wei entered into the Amended
and Restated Exclusive Option Agreement (“Original Agreement”) on July 24, 2015, which granted Party A an irrevocable and exclusive option to purchase the
entire equity of Party C; each of Tang Jian, Shen Ming and Li Wei respectively entered into the Equity Transfer Agreement of Beijing OptAim Network Technology
Co., Ltd. with Jiao Jie on July 24, 2015, according to which Tang Jian transferred his 2.3% equity in Party C to Jiao Jie, Shen Ming transferred his 23.7% equity in
Party C to Jiao Jie, and Li Wei transferred her 25% equity in Party C to Jiao Jie; Tang Jian and Jiao Jie entered into the Transfer Agreement in August 2021,
according to which Jiao Jie transferred her 51% equity in Party C to Tang Jian.
The Parties, upon consensus through negotiation, agree to amend and restate the Original Agreement. This Agreement, upon execution by the Parties, will replace
the Original Agreement, the provisions of this Agreement will apply to the matters under the Original Agreement, and the Original Agreement will terminate; with
respect to termination of the Original Agreement, OptAim (Beijing) Information Technology Co., Ltd., Party C, Tang Jian and Jiao Jie entered into the Termination
Agreement on the date of execution of this Agreement; Party A, Party C, and Zhiyunzhong (Shanghai) Technology Co., Ltd. ( 指 匀 众 （ 上 海 ） 科 技 有 限 公
司) entered into the Exclusive Business Cooperation Agreement (the “Exclusive Business Cooperation Agreement”) on November 1, 2021. Party A signed and
entered into the Third Amended and Restated Equity Pledge Agreement (“Equity Pledge Agreement”) with Party B and Party C on November 1, 2021. Tang
Jian signed the Power of Attorney for granting authority to Party A on November 1, 2021 (“Power of Attorney”, together with the Exclusive Business Cooperation
Agreement, the Equity Pledge Agreement, and this Agreement, collectively referred to as “Control Agreements”).
Exhibit 4.2
Therefore, upon mutual negotiation and consensus, the Parties have reached the following agreement:
1.
1.1
Sale and Purchase of Equity Interest
Grant of Option
Party B hereby irrevocably grants Party A an irrevocable and exclusive option (“Equity Interest Purchase Option”) to purchase, or designate one or more persons
(each, a “Nominee”, who shall be approved by shareholders of Party A) to purchase the equity interest in Party C held by Party B now or in the future once or at
multiple times at any time in part or in whole at Party A’s sole and absolute discretion and at the price described in Article 1.3 herein. Except for Party A and the
Nominee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B. Party C hereby
agrees to the grant by Party B of the Equity Interest Purchase Option to Party A. The term “person” as used herein and in this Agreement shall refer to individuals,
corporations, joint ventures, partnerships, enterprises, trusts or non-corporate organizations.
For avoidance of doubt, Party A may exercise any right hereunder, including the Equity Interest Purchase Option, at any time upon execution and effectiveness of
this Agreement. To the full extent permitted by the laws of China, when Party B is died or loses his/her capacity for civil conduct, Party A has the right to exercise
the rights hereunder, including the Equity Interest Purchase Option, against Party B or his/her lawful successors or agents.
1.2
Steps for Exercise of Equity Interest Purchase Option
Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written notice to Party B
(“Equity Interest Purchase Option Notice”), specifying (a) Party A’s or its Nominees’ decision to exercise the Equity Interest Purchase Option; (b) the portion of
equity interests to be purchased by Party A or its Nominee(s) from Party B (“Purchased Equity Interest”); and (c) the date of purchasing the Purchased Equity
Interest/the date of transfer of the Purchased Equity Interest.
Exhibit 4.2
1.3
Equity Interest Purchase Price and Payment
Unless appraisal is required by the laws of China at the time when Party A exercises the Equity Interest Purchase Option, the purchase price of the Purchased Equity
Interest (“Equity Interest Purchase Price”) shall be RMB 100 or the lowest price permitted by the laws of China. Party A shall pay the Equity Interest Purchase
price to the designated account of Party B within seven (7) days from the date when the Purchased Equity Interest are officially transferred to Party A, with
necessary taxes on the Equity Interest Purchase Price deducted or withheld in accordance with the laws of China.
1.4
Transfer of Purchased Equity Interest
For each exercise of the Equity Interest Purchase Option:
1.4.1
1.4.2
1.4.3
1.4.4
Party B shall cause Party C to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B’s transfer of the
Purchased Equity Interest to Party A and/or its Nominee(s);
Party B shall obtain written statements from other shareholder of Party C giving consent to the transfer of the Purchased Equity Interest to Party A
and/or its Nominee(s) and waiving any right of first refusal related thereto.
Party B shall execute an equity interest transfer contract with respect to each transfer (each referred to as a “Transfer Contract”) with Party A and/or the
Nominee (if applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Purchased
Equity Interest;
The relevant Parties shall execute all the other necessary contracts, agreements or documents (including but not limited to amendments to articles of
associations of companies), obtain all necessary government licenses and permits (including but not limited to business licenses of companies), and take
all necessary actions to transfer valid ownership of the Purchased Equity Interest to Party A and/or the Nominee, unencumbered by any security interests
and to cause Party A and/or the Nominee to become the registered owner of the Purchased Equity Interest. For the purpose of this Article 1.4.4 and this
Agreement, “security interests” shall include securities, mortgages, third party’s rights or interests, any stock options, acquisition right, right of first
refusal, right to offset, ownership retention, or other security arrangements. For the purpose of clarity, such security interests shall exclude any security
interest created under this Agreement, Party B’s Equity Pledge Agreement, and Party B’s Power of Attorney. “Party B’s Equity Pledge Agreement” as
used in this Article 1.4.4 and this Agreement shall refer to the Third Amended and Restated Equity Pledge Agreement executed by Party A, Party B, and
Party C on November 1, 2021 and any modification, amendment, or restatement thereto. “Party B’s Power of Attorney” as used in this Article 1.4.4 and
this Agreement shall refer to the Power of Attorney executed by Tang Jian (唐健) on November 1, 2021 to grant Party A the power of attorney and any
modification, amendment, or restatement thereto.
Exhibit 4.2
2.
2.1
Covenants
Covenants regarding Party C
Party B (as the shareholders of Party C) and Party C hereby covenant as follows:
2.1.1
2.1.2
2.1.3
2.1.4
2.1.5
2.1.6
2.1.7
Without the prior written consent of Party A, they shall not in any manner supplement, change, or amend the articles of association or bylaws of Party C,
increase or decrease its registered capital, or change its structure of registered capital in other manners;
They shall maintain Party C’s corporate existence in accordance with good financial and business standards and practices, prudently and effectively
operate its business and handle its affairs, and cause Party C to perform the obligations under the Exclusive Business Cooperation Agreement concluded
on November 1, 2021;
Without the prior written consent of Party A, they shall not, at any time following the date hereof, sell, transfer, mortgage, or dispose of in any manner
the legal or beneficial interest in any asset, business or revenues of Party C or allow the creation of any security interest thereon;
After the legal liquidation as described in Article 3.6, Party B will pay any residual value collected on the basis of non-two-way payment to Party A in
full amount or cause such payment. If such payment is prohibited by the laws of China, Party B shall make such payment to Party A or the party
designated by Party A to the extent permitted by the laws of China;
Without the prior written consent of Party A, they shall not incur, inherit, guarantee or permit the existence of any debt, except (i) debts incurred in the
ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A’s written consent has been obtained;
They shall always operate all of Party C’s businesses during the ordinary course of business to maintain the asset value of Party C and refrain from any
action/omission that may affect Party C’s operating status and asset value;
Without the prior written consent of Party A, they shall not cause Party C to execute any major contract, except the contracts concluded in the ordinary
course of business (for purpose of this Article 2.1.7, a contract with a price exceeding RMB 100,000 shall be deemed a major contract);
2.1.8
Without the prior written consent of Party A, they shall not cause Party C to provide any person with any loan or credit or security in any form;
Exhibit 4.2
2.1.9
2.1.10
2.1.11
2.1.12
2.1.13
2.1.14
2.1.15
They shall provide Party A with information on Party C’s business operations and financial condition at Party A’s request;
If requested by Party A, they shall take out and maintain insurance in respect of Party C’s assets and business from an insurance carrier acceptable to
Party A, in an amount and type of coverage typical for companies that operate similar businesses;
Without the prior written consent of Party A, they shall not cause or permit Party C to merge, consolidate with, acquire or invest in any person, or cause
or permit Party C to sell its assets whose value is more than RMB 100,000;
They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration, or administrative proceedings relating to
Party C’s assets, business, or revenue;
To maintain the ownership by Party C of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate
actions, and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;
Without the prior written consent of Party A, they shall ensure that Party C shall not in any manner distribute dividends to its shareholders, provided that
upon Party A’s written request, Party C shall immediately distribute all distributable profits to its shareholders;
At the request of Party A, they shall appoint any person designated by Party A as the director of Party C and/or dismiss the incumbent directors of Party
C ; and
2.1.16
Unless otherwise required by laws of China, Party C shall not be dissolved or liquidated without prior written consent of Party A.
2.2
Acknowledgements and Covenants of Party B
Party B hereby acknowledges that:
2.2.1
To the maximum extent allowed by the laws of China, any equity interest that Party B holds now or in future in Party C is not community property or
inheritable property of Party B, and Party B shall not assume debt settlement liability or security liability for any third party with the equity interest
he/she hold in Party C. Where such equity interests are divided, transferred, or inherited for any reason, the successor(s) or assignee(s) shall execute all
documents required by Party A (including but not limited to this Agreement, the Equity Pledge Agreement, and the Power of Attorney).
Party B hereby covenants as follows:
2.2.2
Without the prior written consent of Party A, Party B shall not sell, transfer, mortgage, or dispose of in any other manner any legal or beneficial interest
in the equity interests in Party C held by Party B, or allow the creation of any security interest thereon, except for the pledge created on these equity
interests in accordance with Party B’s Equity Pledge Agreement;
Exhibit 4.2
2.2.3
2.2.4
2.2.5
2.2.6
2.2.7
2.2.8
2.2.9
2.2.10
Party B shall not require Party C to distribute dividends or make profit distribution in any other manner in respect of the equity interest in Party C that
Party B holds, propose any matter in relation thereto for approval at the shareholders’ meeting, or vote for such matter proposed for approval at the
shareholders’ meeting. Where Party B receives any revenue, profit distribution, or dividend from Party C, Party B shall immediately pay such revenue,
profit distribution, or dividend to Party A or the designated party of Party A or transfer to their accounts as the service fees payable from Party C to
Party A under the Exclusive Business Cooperation Agreement for the interest of Party C to the extent permitted by the laws of China;
Party B shall cause the shareholders’ meeting and/or the board of directors of Party C not to approve the sale, transfer, mortgage or disposition in any
other manner of any legal or beneficial interest in the equity interests in Party C held by Party B, or allow the creation of any security interest thereon,
without the prior written consent of Party A, except for the pledge created on these equity interests in accordance with Party B’s Equity Pledge
Agreement;
Party B shall cause the shareholders’ meeting or the board of directors of Party C not to approve the merger or consolidation with any person, or the
acquisition of or investment in any person, without the prior written consent of Party A;
Party B shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration, or administrative proceedings relating to
the equity interests in Party C held by Party B;
Party B shall cause the shareholders’ meeting or the board of directors of Party C to vote their approval of the transfer of the Purchased Equity Interest
as set forth in this Agreement and to take any and all the other actions that may be requested by Party A;
To maintain Party B’s ownership of his/her equity interests in Party C, Party B shall execute all necessary or appropriate documents, take all necessary
or appropriate actions, and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;
Party B shall appoint any nominee of Party A as director of Party C, at the request of Party A;
At the request of Party A at any time, Party B shall promptly and unconditionally transfer their equity interests in Party C to Party A’s Nominee in
accordance with the Equity Interest Purchase Option under this Agreement, and Party B hereby waives the right of first refusal to the respective equity
interest transferred by another existing shareholder of Party C (if any); and
Exhibit 4.2
2.2.11
Party B shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by Party B, Party C and Party A,
perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. If
Party B retains any additional rights other than those provided for under this Agreement, Party B’s Equity Pledge Agreement, and the Power of Attorney
issued to Party A as the beneficiary, Party B shall not exercise such rights unless otherwise directed by Party A in writing.
3.
Representations and Warranties
Party B and Party C hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the Purchased
Equity Interest that:
They have the authority to enter into and deliver this Agreement and any share transfer contracts to which they are parties concerning the Purchased Equity Interest
to be transferred thereunder, and to perform their obligations under this Agreement and any transfer contract. Party B and Party C agree to execute transfer contracts
consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the transfer contracts to which they
are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;
The execution and delivery of this Agreement or any transfer contract and the obligations under this Agreement or any transfer contract shall not: (i) cause any
violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party C; (iii) cause the
violation of any contracts or instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to
which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continuing effectiveness of any licenses or
permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions on any licenses or permits issued to either of
them;
Party B has a good and merchantable title to the equity interests in Party C they hold. Except for Party B’s Equity Pledge Agreement, Party B has not placed any
security interest on such equity interests;
Party C has a good and merchantable title to all of its assets and has not created any security interest on the aforementioned assets;
Party C does not have any outstanding debts, except (i) the debts incurred in the ordinary course of business; and (ii) the debts disclosed to Party A for which Party
A’s written consent has been obtained;
3.1
3.2
3.3
3.4
3.5
Exhibit 4.2
3.6
3.7
3.8
Where Party C is dissolved or liquidated in accordance with the requirements of the laws of China, Party C shall sell all of its assets to Party B or other qualified
subject designated by Party A to the extent permitted by laws of China and at the lowest price permitted by the laws of China. Party C, subject to the applicable laws
of China in force, will exempt Party A or its designated qualified subject from any obligation of payment incurred therefrom; any proceeds obtained from any of
such transactions, subject to the applicable laws of China in force, shall be paid to Party A or any qualified subject designated by Party A as a part of the service fees
under the Exclusive Business Cooperation Agreement;
Party C has complied with all laws and regulations of China applicable to asset acquisitions; and
There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party C, assets of Party C or Party C.
4.
Effective Date
This Agreement shall become effect as of the date of official execution of this Agreement by the Parties and shall remain effective until all the equity interests held
by Party B in Party C have been legally transferred to Party A or its Nominee in accordance with this Agreement.
5.
5.1
Governing Law and Dispute Resolution
Governing Law
The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed
by the formally published and publicly available laws of China.
5.2
Methods of Dispute Resolution
Any dispute arising out of interpretation and performance of this Agreement shall be first settled by the Parties through friendly consultation. If the dispute cannot
be settled within thirty (30) days after any Party requests other Parties to settle such dispute through consultation, any Party may submit the dispute to China
International Economic and Trade Arbitration Commission to be arbitrated in accordance with rules of arbitration in force. The place of arbitration shall be Beijing
and the language of arbitration shall be Chinese. The arbitration award shall be final and binding on the Parties.
6.
Taxes and Fees
Each Party shall pay any and all transfer and registration taxes, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in
connection with the preparation and
Exhibit 4.2
execution of this Agreement and the transfer contracts, as well as the consummation of the transactions contemplated under this Agreement and the transfer
contracts.
7.
7.1
Notices
All notices and other communications required or permitted hereunder shall be sent to the following addresses by personal delivery, postage-prepaid registered mail,
commercial express delivery or fax. A confirmation shall be sent by email with respect to each notice. Such notices shall be deemed validly delivered according to
the following provisions:
7.1.1
7.1.2
Where a notice is sent by personal delivery, express delivery or postage-prepaid registered mail, it will be deemed delivered when the notice is sent to or
rejected at the designated address of the recipient; and
Where a notice is sent by fax, it will be deemed delivered when the notice is transmitted successfully, evidenced by the information of transmission
confirmation automatically generated.
7.2
For the purpose of notice, addresses of the Parties are as follows:
Party A: iClick Data Technology (Beijing) Limited (爱点击（北京）数据科技有限公司)
Address: Room 708, 7th Floor, Block B, HuaTeng Century Headquarters, Gaobeidian, Chaoyang District, Beijing
Addressee: Tang Jian (唐健)
Tel: 010-85402787
Party B: Tang Jian (唐健)
Address: No. 2#1504, North Fourth Ring Road, No. 106, Chaoyang District, Beijing
Tel: 010-58733487
Party C: Beijing OptAim Network Technology Co., Ltd. (北京智云众网络科技有限公司)
Address: Room 053, B2 Floor, No. 89, North Third Ring Road, Haidian District, Beijing
Addressee: Tang Jian (唐健)
Tel: 010-85402700
7.3
Any Party may at any time changes its address for notices by a notice delivered to other Parties in accordance with the provisions herein.
8.
Confidentiality
The Parties acknowledge that any oral or written information exchanged between them in connection with this Contract is confidential. Each Party shall keep such
information confidential, and may not disclose such information to any third party without the written consent of other Parties, except for any information (a) which
is or becomes publicly available not through disclosure by the receiving Party; (b) which is required by applicable laws or any rules of stock exchange to disclose;
Exhibit 4.2
or (c) which is required to be disclosed by either Party to its legal or financial consultant in connection with the transaction hereunder, provided that such consultant
is subject to any confidentiality obligation similar to that set forth herein. If the personnel or institutions employed or engaged by either Party disclose any
confidential information, it will be deemed disclosure by such Party, and such Party shall be liable for breach of this Contract. This Article 8 shall survive the
termination of this Contract for whatever reasons.
9.
Further Undertakings
The Parties agree to promptly execute documents that are reasonably required for or are desirous to the implementation of the provisions and purposes of this
Agreement and take further actions that are reasonably required for or are desirous to the implementation of the provisions and purposes of this Agreement.
10.
Liability for Breach of this Agreement
10.1 Where Party B or Party C materially breaches any term under this Agreement, Party A shall have the right to terminate this Agreement and/or claim damages
against Party B or Party C; this Article 10 shall not prejudice any other rights of Party A hereunder;
10.2
Unless otherwise specified by laws, Party B or Party C has no right to terminate or rescind this Agreement under any circumstances.
11.
Miscellaneous
11.1
Amendment, Modification, and Supplementation
Any amendment, modification, and supplementation to this Agreement shall be made by execution of a written agreement by the Parties.
11.2
Entire Agreement
Except for the amendments, modifications, or supplementations made in writing after the execution of this Agreement, this Agreement shall constitute the entire
agreement by and among the Parties hereto with respect to the subject matter hereof, and shall supersede all prior oral and written consultations, representations, and
contracts reached with respect to the subject matter of this Agreement.
11.3
Headings
The headings of this Agreement are for convenience only, and shall not be used to interpret, explain, or otherwise affect the meanings of the provisions of this
Agreement.
11.4
Language and Copies
Exhibit 4.2
This Agreement is written in Chinese and is made in four (4) counterparts, and each Party executing this Agreement will hold one (1). All copies are of the same
legal force.
11.5
Severability
If one or more provisions hereof are decided as invalid, illegal or unenforceable in any respect according to any laws or regulations, the validity, legality or
enforceability of other provisions hereof shall not be affected or prejudiced in any respect. The Parties shall negotiate in good faith to strive to replace such invalid,
illegal or unenforceable provisions with any valid provisions to the maximum extent permitted by laws and expected by the Parties, so that the economic effect of
such valid provisions shall be similar to that of such invalid, illegal or unenforceable provisions as much as possible.
11.6
Successors
This Agreement shall be binding on and shall inure to the benefit of the respective successors of the Parties and the permitted assignees of such Parties.
11.7
Survival
11.7.1
Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the
expiration or early termination thereof.
11.7.2
The provisions of Articles 5, 7, 8, and this Article 11.8 shall survive the termination of this Agreement.
11.8 Waiver
Any Party may waive the terms and conditions of this Agreement, provided that such waiver must be provided in writing and shall require the signatures of the
Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any
similar breach in other circumstances.
[The remainder of this page is intentionally left blank]
In witness whereof, the Parties and/or their respective legal representatives have executed this Third Amended and Restated Exclusive Option Agreement as of the date first
written above.
Exhibit 4.2
Party A: iClick Data Technology (Beijing) Limited (爱点击（北京）数据科技有限公司)
/s/ Tang Jian
By:
Name: Tang Jian (唐健)
Title: Legal Representative
Third Amended and Restated Exclusive Option Agreement – Signature Page
In witness whereof, the Parties and/or their respective legal representatives have executed this Third Amended and Restated Exclusive Option Agreement as of the date first
written above.
Exhibit 4.2
Party B
By:
/s/ Tang Jian
Name:
Tang Jian (唐健)
Third Amended and Restated Exclusive Option Agreement – Signature Page
Exhibit 4.2
In witness whereof, the Parties and/or their respective legal representatives have executed this Third Amended and Restated Exclusive Option Agreement as of the date first
written above.
Exhibit 4.2
Party C： Beijing OptAim Network Technology Co., Ltd. (北京智云众网络科技有限公司)
/s/ Tang Jian
By:
Name: Tang Jian (唐健)
Title: Legal Representative
Third Amended and Restated Exclusive Option Agreement – Signature Page
Exhibit 4.2
This Third Amended and Restated Equity Pledge Agreement (the “Contract”) is made by the following parties in Beijing on November 1, 2021.
Third Amended and Restated Equity Pledge Agreement
Party A:
iClick Data Technology (Beijing) Limited (爱点击（北京）数据科技有限公司), a limited liability company incorporated and existing under the laws of China, with its
registered office at Room 708, 7th Floor, Block B, HuaTeng Century Headquarters, Gaobeidian, Chaoyang District, Beijing and its legal representative Tang Jian (唐健);
Exhibit 4.3
(hereinafter referred to as the “Pledgee”)
Party B:
Tang Jian (唐健), a Chinese citizen, having his ID No. 432922197608190035;
(hereinafter referred to as the “Pledgor”)
Party C: Beijing OptAim Network Technology Co., Ltd. (北京智云众网络科技有限公司), a limited liability company organized and existing according to China laws,
having its registered address at Room 053, B2 Floor, No. 89, North Third Ring Road, Haidian District, Beijing, and its legal representative Tang Jian (唐健).
For purpose of this Agreement, the Pledgee, the Pledgor and Party C are hereinafter referred to individually as a “Party”, and collectively as the “Parties”.
Whereas,
1.
2.
The Pledgor is a citizen of the People’s Republic of China (“China”). Party C is a limited liability company who was registered in Beijing, China. The Pledgor is the
sole shareholder of Party C. The capital contribution is RMB 10 million, and Tang Jian (唐健) holds 100% equity in Party C. Party C acknowledges the rights and
obligations of the Pledgor and the Pledgee hereunder, and agrees to provide any assistance required for registration of the Pledge.
The Pledgee is a wholly foreign-owned enterprise registered in Beijing, China. The Pledgee, Zhiyunzhong (Shanghai) Technology Co., Ltd. (指匀众（上海）科技
有限公司) and Party C entered into an Exclusive Business Cooperation Agreement (“Exclusive Business Cooperation Agreement”) on November 1, 2021. The
Pledgee, the Pledgor, and Party C entered into the Exclusive Option Agreement (“Exclusive Option Agreement”) on November 1, 2021. The Pledgor signed the
Power of Attorney to grant authority to the Pledgee on November 1, 2021 (the “POA”, together with the Exclusive Business Cooperation Agreement, the Exclusive
Option Agreement and this Agreement as the “Control Agreements”).
Exhibit 4.3
3.
4.
5.
The Pledgor hereby creates a pledge over his equity in Party C for performance of the obligations under the Exclusive Business Cooperation Agreement, the
Exclusive Option Agreement, the POA and this Agreement, to ensure the Pledgee to collect all due amounts payable by Party C, including but not limited to the
consulting and service fee, and to secure performance by Party C and the Pledgor of other obligations under the Exclusive Business Cooperation Agreement, the
Exclusive Option Agreement, the POA and this Agreement.
OptAim (Beijing) Information Technology Co., Ltd., Party C, Tang Jian and Jiao Jie (焦捷) entered into the Amended and Restated Equity Pledge Agreement
(“Original Agreement”) on June 24, 2015, whereby Tang Jian and Jiao Jie created a pledge over their entire equity in Party C.
The shareholding of Party C was changed in August, 2021, and Tang Jian acquired 100% equity in Party C after such change. The Parties agree to amend and restate
the Original Agreement upon negotiation and consensus. This Agreement, once signed by the Parties, shall replace the Original Agreement. The matters under the
Original Agreement shall be governed by this Agreement, and the Original Agreement shall terminate.
1.
Definitions
Unless this Agreement provides otherwise, the terms below shall have the following meanings:
1.1
1.2
1.3
1.4
1.5
“Pledge” means the security interest created by the Pledgor in favor of the Pledgee according to Article 2 hereof, that is, the precedential rights of the
Pledgee to be satisfied by the proceeds obtained from exchange, auction or sale of the Equity.
“Equity” means the entire equity interest held or to be acquired by the Pledgor in Party C according to Article 2.1 hereof.
“Pledge Period” means the period specified in Article 3 hereof.
“Contractual Obligations” means all obligations assumed by the Pledgor and Party C under the Exclusive Business Cooperation Agreement, the Exclusive
Option Agreement, the POA and this Agreement, including but not limited to the consulting and service fees due and payable to the Pledgee according to
the Exclusive Business Cooperation Agreement, whether on the specified due date, through prepayment or otherwise.
“Secured Debts” means all the direct, indirect and consequential losses and the loss of expected benefit incurred by the Pledgee for any event of default of
the Pledgor and/or Party C. The basis of any amount of such losses includes but is not limited to the reasonable business plan and profit forecast of the
Pledgee, and all costs and expenses incurred by the Pledgee for enforcing any Contractual Obligations of the Pledgor and/or Party C.
1.6
“Events of Default” means the circumstances set forth in Article 7 hereof.
Exhibit 4.3
1.7
“Default Notice” means the notice issued by the Pledgee according hereto to announce any event of default.
2.
Pledge
2.1
2.2
2.3
2.4
2.5
To secure the timely and complete performance of the Contractual Obligations and repayment of the Secured Debts by the Pledgor and Party C, the Pledgor
hereby creates a first-rank pledge in favor of the Pledgee over his Equity in Party C (including the registered capital (capital contribution) held by the
Pledgor in Party C) and the related interest in such Equity, and other registered capital (capital contribution) to be acquired by the Pledgor and the related
equity interest therein (“Equity”). As of execution hereof, the Equity over which the Pledgor creates the Pledge is 100% equity he holds in Party C, and the
corresponding capital contribution amount in Party C’s registered capital is RMB 10 million, accounting for 100% in the registered capital.
The Parties understand and agree that the monetary valuation arising from or relating to the Secured Debts is changing and floating until the closing date (as
defined below).
If any of the following circumstances (“Closing Causes”) occurs, the value of the Secured Debts shall be determined according to the total amount of the
due and outstanding Secured Debts owed to the Pledgee on the date of such Closing Cause or the date immediately before that date (“Fixed Debts”):
(a)
(b)
(c)
(d)
Any Control Agreement other than this Agreement is terminated according its relevant provisions;
Any Event of Default under Article 7 hereof occurs and is not resolved, which causes the Pledgee to deliver a Default Notice to relevant Pledgor
according to Article 7.3 hereof;
The Pledgee, upon due investigation, reasonably believes that the Pledgor and/or Party C has become or may be insolvent; or
Any other events which fix the Secured Debts according to relevant laws of China.
For the avoidance of any doubt, the date on which the Closing Cause occurs is the closing date (“Closing Date”). The Pledgee may elect to realize the
Pledge according to Article 8 hereof on or after the Closing Date.
During the Pledge Period, the Pledgee is entitled to receive the dividend or bonus. The Pledgor may only receive the dividend or bonus with the prior
written consent of the Pledgee. At the request of the Pledgee, the dividend or bonus received by the Pledgor shall, after deducting the individual income tax
payable by the Pledgor, be (1) deposited in the account designated by the Pledgee, supervised by the Pledgee, and used to secure the Contractual
Obligations and discharge the Secured Debts in the first place; or (2) without violating any China laws, presented to the Pledgee or any person designated
by the Pledgee unconditionally and for no consideration.
Exhibit 4.3
2.6
2.7
The Pledgor may make additional capital contribution to Party C only when the Pledgee agrees in writing in advance. The additional capital contribution
made to the company’s registered capital shall become part of the Equity subject to the Pledge.
If Party C is required to be dissolved or liquidated according to any mandatory provisions of China laws, at the request of the Pledgee, any interest received
by the Pledgor from Party C after completion of the dissolution or liquidation procedure according to law shall be (1) deposited in the account designated
by the Pledgee, supervised by the Pledgee, and used to secure the Contractual Obligations and discharge the Secured Debts in the first place; or (2) without
violating any China laws, presented to the Pledgee or any person designated by the Pledgee unconditionally and for no consideration.
3.
Pledge Period
3.1
The Pledge shall become effective when it is registered with the administration for industry and commerce at the place of Party C (“Registration
Authority”), and remain valid until the last installment of the Contractual Obligations and the Secured Debts secured by the Pledge are fulfilled or repaid
fully (“Pledge Period”). The Parties agree that after the execution of this Agreement the Pledgor and Party A shall immediately submit an application to the
Registration Authority for creation registration of the equity pledge according to the Measures for the Registration of Equity Pledge at Administrations for
Industry and Commerce. The Parties further agree to complete the registration of equity pledge and obtain the registration notice from the Registration
Authority within fifteen (15) days after the Registration Authority accepts the above application. The Parties jointly acknowledge that to go through the
equity pledge registration procedure, the Parties shall submit this Agreement or an Equity Pledge Agreement signed in the form required by the
administration for industry and commerce at the place of Party C and truly representing the Equity’s information hereunder (“Registered Pledge
Agreement”) to the administration for industry and commerce. Any matter not covered by the Registered Pledge Agreement shall be subject to this
Agreement. The Pledgor and Party C shall submit all required documents and go through all required procedures according to China laws and regulations
and various requirements of the administration for industry and commerce, and ensure the equity pledge is registered as soon as possible after the
submission of application.
3.2
During the Pledge Period, if Party C fails to perform any Contractual Obligation or repay any Secured Debt hereunder, the Pledgee has the right (but is not
obligated to) dispose of the Pledge according to the provisions hereof.
Exhibit 4.3
4.
Custody of Records of the Equity subject to Pledge
4.1
4.2
Within three (3) days from the date of signing this Agreement, Party C shall issue the register of shareholders and the capital contribution certificate
recording the Pledge in the form and substance set forth in Exhibit 1 hereto.
The Pledgor shall deliver the register of shareholders and the capital contribution certificate recording the Pledge (and other documents reasonably required
by the Pledgee, including but not limited to the equity registration notice issued by the administration for industry and commerce) to the Pledgee for
custody on the date when the Pledge is registered and created. The pledgee shall keep such documents during the whole Pledge Period set forth herein.
5.
Representations and Warranties of the Pledgor and Party C
The Pledgor represents and warrants to the Pledgee as follows:
5.1
5.2
5.3
5.4
The Pledgor is the sole legal and beneficial owner of the Equity, and has lawful, complete and full ownership to the Equity he holds except as otherwise
stipulated in any other agreement signed by the Pledgor and the Pledgee.
The Pledgee is entitled to dispose of and transfer the Equity according to the provisions hereof.
Except for the Pledge, the Pledgor has not created any security interest or other encumbrance over the Equity, no dispute exists over the ownership to the
Equity, and the Equity is not subject to any actual or threatened attachment or other legal procedures, and may be pledged or transferred according to the
laws to which it is subject.
The Pledgor’s execution hereof and exercise of any right or performance of any obligations hereunder will not violate any laws, regulations, any agreement
or contract to which the Pledgor is a party, or any covenants made by the Pledgor to any third party.
5.5
All documents, materials, statements and certificates provided by the Pledgor to the Pledgee are accurate, true, complete and valid.
Party C represents and warrants to the Pledgee as follows:
5.6
Party C is a limited liability company organized and validly existing according to China laws who has separate legal personality and full and independent
legal status and capacity to execute, deliver and perform this Agreement.
5.7
This Agreement is duly executed by Party C, and constitutes the lawful, valid and binding obligations of Party C.
Exhibit 4.3
5.8
5.9
5.10
5.11
5.12
Party C has the full internal power and authority to enter into and deliver this Agreement and all other documents relating to the transaction contemplated
hereunder, and has the full power and authority to complete such transaction.
There is no major security interest or other encumbrances over the assets of Party C which may affect the rights and interests of the Pledgee in the Equity,
including but not limited to any assignment of Party C’s intellectual property or other asset with a value of not less than RMB 100,000, or any
encumbrances on the title or use right of such assets.
There is no pending or, to the knowledge of Party C, threatened litigation, arbitration or other legal procedure against the Equity, Party C or its assets before
any court or arbitral tribunal, or any pending or, to the knowledge of Party C, threatened administrative procedure or penalty of any governmental authority
or administrative body against the Equity, Party C or its assets, which may have material adverse effect on Party C’s economic condition or the Pledgor’s
ability to perform any obligations hereunder or to assume the responsibility of security.
Party C hereby agrees to be jointly and severally liable to the Pledgee for the representations and warranties made by the Pledgor hereunder.
Party C hereby warrants to the Pledgee that the above representations and warranties shall be true and correct at any time before the Contractual Obligations
are fully performed or the Secured Debts are fully repaid, and shall be fully complied with.
6.
Covenants and Further Agreements of the Pledgor and Party C
The Pledgor covenants and further agrees as follow:
6.1
During the term of this Agreement, the Pledgor hereby convents that he shall
6.1.1
6.1.2
6.1.3
not attempt or permit others to attempt to transfer the Equity in whole or in part, or create or permit existence of any security interest or other
encumbrance which may affect the Pledgee’s rights and interests in the Equity without the prior written consent of the Pledgee, except for
performing the Option Contract signed between the Pledgor, Pledgee and Party C on the date of this Agreement;
comply with the provisions of all laws and regulations applicable to the Pledge, and present to the Pledgee any notice, order or suggestion issued
or made by any competent authority (or any other authorities) with respect to the Pledge within 5 days of receiving such notice, order or
suggestion, and comply with such notice, order or suggestion or submit any objection and statement on the above notice, order or suggestion at
the reasonable request or with the consent of the Pledgee;
Immediately notify the Pledgee of any event or notice received by him which may have effect on any rights of the Pledgee in the Pledge or part of
the Pledge, and any event or notice received by him which may have effect on any warranty or other obligations of the Pledgor arising from this
Agreement.
Exhibit 4.3
6.2
6.3
6.4
6.5
6.6
6.7
The Pledgor agrees that he or his successors or representatives, or any other persons may not discontinue or interrupt, through any legal procedure, any right
in the Pledge acquired by the Pledgee hereunder.
In order to protect or perfect any security interest hereunder, the Pledgor hereby covenants that he will execute and promote other parties interested in the
Pledge to execute all certificates, agreements, deeds and/or undertakings required by the Pledgee. The Pledgor further covenants that he will take and
promote other parties interested in the Pledge to take other actions required by the Pledgee, to facilitate the Pledgee to exercise any right or authority
granted to it hereunder, and will enter into all relevant documents with the Pledgee or any nominee of the Pledgee (whether an individual or legal person)
with respect to the ownership to the Equity. The Pledgor covenants that he will provide the Pledgee with all notices, orders and decisions relating to the
Pledge as requested by the Pledgee within a reasonable period.
The Pledgor hereby undertakes to the Pledgee that he will comply with and perform all warranties, covenants, agreements, representations and conditions
hereof. If any Pledgor fails to perform any of such warranties, covenants, agreements, representations and conditions in whole or in part, the Pledgor shall
compensate for all losses thus incurred by the Pledgee.
If any court or other governmental department takes any compulsory measures on the Equity subject to Pledge hereunder, the Pledgor shall use his best
efforts to lift such compulsory measures, including but not limited to providing other security to the court or taking other measures.
If the value of the Equity is possible to reduce which may endanger the Pledgee’s rights, the Pledgee may request the Pledgor to provide additional
mortgage or other security. If the Pledgor fails to so provide, the Pledgee may auction or sell the Equity at any time, and use the proceeds from such auction
or sale to prepay the Secured Debts or lodge the proceeds. The Pledgor shall be liable for all costs thus incurred.
Without the Pledgee’s prior written consent, the Pledgor and/or Party C may not increase, reduce or transfer (or assist others to increase, reduce or transfer)
the registered capital of Party C (or his capital contribution in Party C), or create (or assist others to create) any encumbrances over the registered capital or
capital contribution. Subject to the preceding sentence, any equity in Party C registered or acquired by the Pledgor after the date hereof is referred to as
“Additional Equity”. The Pledgor and Party C shall immediately enter into a supplementary equity pledge agreement in connection with the Additional
Equity with the Pledgee when the Pledgor acquires such Additional Equity, promote Party C’s board of directors and shareholders’ meeting to approve such
supplementary equity pledge agreement, and provide the Pledgee with all documents required for the supplementary equity pledge agreement, including but
not limited to: (a) the original capital contribution certificate of the Additional Equity issued by Party C; and (b) the copies of the capital verification report
of the Additional Equity issued by the Chinese certified public account. The Pledgor and Party C shall go through the pledge creation registration of such
Additional Equity according to Article 3.1 hereof.
Exhibit 4.3
6.8
6.9
Unless the Pledgee gives any prior written instructions to the contrary, the Pledgor and/or Party C agree that if all or part of the Equity is transferred
between the Pledgor and any third party (“Equity Transferee”) in violation of this Agreement (including severance and succession), the Pledgor and/or
Party C shall ensure the Equity Transferee to unconditionally accept the Pledge and go through the required formality of changing pledge registration
(including but not limited to signing relevant documents) to ensure the existence of the Pledge.
If the Pledgee provides any loan to Party C, the Pledgor and/or Party C agree to create a pledge over the Equity in favor of the Pledgee to further secure
such loan, and go through relevant formalities according to the requirements of laws, regulations and local practices (if any), including but not limited to
signing relevant documents and going through the registration formality of creation (or change) of pledge.
Party C covenants and further agrees as follows:
6.10
If any third person’s consent, permission, waiver or authorization, or any approval, permission, or exemption of any governmental authority, or any
registration or recording formalities with any governmental authority (if legally required) is required to execute and perform this Agreement, or to create the
Equity Pledge hereunder, Party C shall use its best effort to obtain such consent, permission, waiver, authorization, exemption, registration or recording, and
keep them fully valid during the term of this Agreement.
6.11 Without prior written consent of the Pledgee, Party C will not assist or permit the Pledgor to create any new pledge or other security interest over the Equity
or to transfer the Equity.
6.12
Party C agrees to strictly comply with the obligations under Article 6.7, 6.8 and 6.9 hereof with the Pledgor.
6.13 Without prior written consent of the Pledgee, Party C shall not transfer Party C’s assets or create or permit existence of any security interest or other
encumbrances which may affect the Pledgee’s rights and interests in the Equity over Party C’s assets, including but not limited to any transfer of any Party
C’s intellectual property or other assets with an amount of not less than RMB 100,000, or creation of any encumbrances on the title or use right of such
assets.
6.14
In case that any legal litigation, arbitration or other claim occurs, and may have adverse effect on Party C, the Equity or the Pledgee’s interest under the
Control Agreements, Party C shall notify the Pledgee in writing as soon as possible, and take all necessary measures to ensure the Pledgee’s pledge interest
in the Equity at the reasonable request of the Pledgee.
Exhibit 4.3
6.15
6.16
6.17
6.18
6.19
Party C may not carry out or permit any activities or actions that may have adverse effect on the Pledgee’s interest under the Control Agreements or on the
Equity.
Party C shall provide the Pledgee with the financial statements for the previous calendar quarter in the first month of the current calendar quarter, including
but not limited to the balance sheet, income statement and cash flow statement.
Party C undertakes to take all necessary measures and execute all necessary documents at the reasonable request of the Pledgee, to ensure the pledge
interest of the Pledgee in the Equity and the exercise and realization of such interest.
If the exercise of the Pledge hereunder causes transfer of any part of the Equity, Party C undertakes to take all measures to complete such transfer.
Party B shall ensure and shall promote Party C’s other shareholder to ensure Party C to complete the registration formality of extending business period
three (3) months before expiration of Party C’s business period, so that this Agreement continues to be effective.
7.
Events of Default
7.1
The following circumstances shall be deemed Events of Default hereunder:
7.1.1
7.1.2
7.1.3
7.1.4
7.1.5
7.1.6
Party C fails to fully pay the consulting and service fee under the Exclusive Business Cooperation Agreement, or fails to repay the loan, or
breaches any obligations under the Control Agreements;
Any representations or warranties made by the Pledgor under Article 5 hereof contain any material misrepresentation or mistake, and/or the
Pledgor breaches any warranties in Article 5 hereof;
The Pledgor or Party C fails to complete the pledge registration with the Registration Authority according to Article 3.1 hereof;
The Pledgor or Party C violates any provisions hereof;
Except as expressly provided in Article 6.1.1, the Pledgor transfers or intends to transfer or waives the Equity subject to Pledge, or assigns the
Equity subject to Pledge without the Pledgee’s written consent;
Any loans, warranties, indemnifications, covenants or other debts or liabilities owed by the Pledgor to any third party (1) are required to be
prepaid or performed early owing to the Pledgor’s breach of contract; or (2) have become due but are not repaid or performed in a timely manner;
Exhibit 4.3
7.1.7
7.1.8
7.1.9
7.1.10
7.1.11
Any approval, license, permission or authorization required for this Agreement to remain enforceable, lawful and valid is revoked, suspended,
invalidated or changed materially;
The promulgation of any applicable laws makes this Agreement illegal or the Pledgor unable to perform any obligations hereunder;
Any adverse change to the property owned by the Pledgor makes the Pledgee believe that the Pledgor’s ability to perform any obligation
hereunder has been affected;
The successor or trustee of Party C is able to perform only part of the payment obligation under the Exclusive Business Cooperation Agreement,
or refuses to perform any of such obligation; and
Any other circumstance where the Pledgee is or may be unable to exercise any right of the Pledge, including but not limited to the death or loss of
capacity of the Pledgor;
7.2
7.3
The Pledgor shall immediately notify in writing the Pledgee of any of the above circumstances specified in Article 7.1 or any event which may cause the
above circumstances.
Unless the Events of Default specified in Article 7.1 hereof have been corrected to the satisfaction of the Pledgee within thirty (30) days after the Pledgee
notifies thereof, the Pledgee may send a Default Notice to the Pledgor when or after the Events of Default occur, and require the Pledgor to pay
immediately all due and outstanding amounts under the Control Agreements and all other amounts payable to the Pledgee, and/or repay the loan and/or
dispose of the Pledge according to Article 8 hereof.
8.
Exercise of Pledge
8.1
8.2
8.3
8.4
The Pledgor may not transfer the Equity in Party C without the written consent of the Pledgee.
The Pledgee may send a Default Notice to the Pledgor when it exercises the Pledge.
Subject to Article 7.3 hereof, the Pledgee may exercise the right to enforce the Pledge at any time when or after it sends out the Default Notice according to
Article 7.2 hereof. Once the Pledgee elects to enforce the Pledge, the Pledgor shall not own any rights or interests relating to the Equity.
In case of any default, to the extent permitted by and subject to applicable laws, the Pledgee is entitled to dispose of the Equity subject to Pledge. The
proceeds received by the Pledgee for exercising the Pledge, after repaying the Secured Debts, shall be paid to the Pledgor or other persons entitled to the
remaining amount, if any, without any interest.
Exhibit 4.3
8.5
8.6
When the Pledgee disposes of the Pledge according to this Agreement, the Pledgor and Party C shall provide necessary assistance so that the Pledgee may
enforce the Pledge according to this Agreement.
The Pledgor shall assume all expenses, taxes and legal costs relating to creation of Equity Pledge hereunder and realization of the Pledgee’s rights, except
for those to be assumed by the Pledgee according to laws.
9.
Transfer
9.1
9.2
9.3
9.4
9.5
The Pledgor may not transfer or delegate any right or obligation hereunder without the prior written consent of the Pledgee.
This Agreement shall be binding upon and inure to the benefit of the Pledgor and his respective successors and permitted assigns.
The Pledgee may transfer all or any rights or obligations under the Exclusive Business Cooperation Agreement to any nominee (individual or legal person)
at any time. In such case, the transferee shall have the rights and obligations of the Pledgee under this Agreement, as if it is an original party hereto. When
the Pledgee transfers its rights and obligations under the Exclusive Business Cooperation Agreement, at the request of the Pledgee, the Pledgor shall enter
into relevant agreement or other document with respect to such transfer.
Where the Pledgee is replaced by others owing to any transfer abovementioned, at the request of the Pledgee, the Pledgor shall enter into a new pledge
agreement with the new pledgee on the same terms and conditions as those set forth herein.
The Pledgor shall strictly comply with this Agreement and other contracts signed with the Parties or a Party jointly or individually, including the Exclusive
Option Contract and the POA granted to the Pledgee, perform the obligations hereunder and thereunder, and may not take any action/forbearance that may
affect the validity and enforceability hereof or thereof. Unless the Pledgee instructs in writing, the Pledgor may not exercise any remaining rights in the
Equity pledged hereunder.
10.
Termination
When the Exclusive Business Cooperation Agreement is fully performed and the consulting and service fee thereunder is fully paid, and when the obligations of
Party C under other Control Agreements are terminated, this Agreement shall terminate. The Pledgee shall try to cancel or terminate this Agreement as soon as
reasonably and practically possible.
Unless the law provides otherwise, in no event will the Pledgor or Party C have the right to terminate or rescind this Agreement.
Exhibit 4.3
11.
Formality fee and other expenses
Party C shall assume all costs and expenses relating to this Agreement, including but not limited to the attorney’s fee, cost of production, stamp tax and other taxes
and expenses. If applicable laws require the Pledgee to assume certain taxes and expenses, the Pledgor shall promote Party C to reimburse fully such taxes and
expenses paid by the Pledgee.
12.
Confidentiality
The Parties acknowledge that any oral or written information exchanged between them in connection with this Agreement is confidential. Each Party shall keep
such information confidential, and may not disclose such information to any third party without the written consent of other Parties, except for any information
(a) which is or becomes publicly available not through disclosure by the receiving Party; (b) which is required by applicable laws or any rules of stock exchange to
disclose; or (c) which is required to be disclosed by either Party to its legal or financial consultant in connection with the transaction hereunder, provided that such
consultant is subject to any confidentiality obligation similar to that set forth herein. If the personnel or institutions employed or engaged by either Party disclose
any confidential information, it will be deemed disclosure by such Party, and such Party shall be liable for breach of this Agreement. This Article 12 shall survive
the termination of this Agreement for whatever reasons.
13.
Governing Law and Dispute Resolution
13.1
13.2
The execution, validity, interpretation and performance hereof and the resolution of any dispute hereunder shall be governed by the publicly available laws
officially promulgated by China. Any matters not covered by such laws shall be governed by the international legal principles and practices.
If any dispute arises from interpretation or performance of any provisions hereof, the Parties shall resolve such dispute in good faith through negotiation. If
the Parties fail to reach a consensus on the solution of such dispute within 30 days after either Party requests for negotiation, either Party may refer the
dispute to China International Economic and Trade Arbitration Commission for arbitration according to the currently effective arbitration rules of the
Commission. The arbitration shall be carried out in Chinese in Beijing. The arbitral award shall be conclusive and binding upon the Parties in question.
13.3 When any dispute arises from interpretation or performance of this Agreement or the dispute is in arbitration, the Parties hereto shall continue to exercise
their rights and perform their obligations hereunder other than those in dispute.
14.
Notice
14.1
All notices and other communications required or permitted hereunder shall be sent to the following addresses by personal delivery, postage-prepaid
registered mail, commercial express delivery or fax. A confirmation shall be sent by email with respect to each notice. Such notices shall be deemed validly
delivered according to the following provisions:
14.1.1 Where a notice is sent by personal delivery, express delivery or postage-prepaid registered mail, it will be deemed delivered when the notice is
sent to or rejected at the designated address of the recipient.
14.1.2 Where a notice is sent by fax, it will be deemed delivered when the notice is transmitted successfully, evidenced by the information of
Exhibit 4.3
transmission confirmation automatically generated.
14.2
For the purpose of notice, the addresses of the Parties are as follows:
Party A: iClick Data Technology (Beijing) Limited (爱点击（北京）数据科技有限公司)
Address: Room 708, 7th Floor, Block B, HuaTeng Century Headquarters, Gaobeidian, Chaoyang District, Beijing
Addressee: Tang Jian (唐健)
Tel: 010-85402787
Party B: Tang Jian (唐健)
Address: No. 2#1504, North Fourth Ring Road, No. 106, Chaoyang District, Beijing
Tel: 010-58733487
Party C: Beijing OptAim Network Technology Co., Ltd. (北京智云众网络科技有限公司)
Address: Room 053, B2 Floor, No. 89, North Third Ring Road, Haidian District, Beijing
Addressee: Tang Jian (唐健)
Tel: 010-85402700
14.3
Either Party may change its address for notice by sending a notice to other Parties according to the provisions of this Article 14.
15.
Severability
If any or several provisions hereof are decided as invalid, illegal or unenforceable in any respect according to any laws or regulations, the validity, legality or
enforceability of other provisions hereof shall not be affected or prejudiced in any respect. The Parties shall negotiate in good faith to strive to replace such invalid,
illegal or unenforceable provisions with any valid provisions to the maximum extent permitted by laws and expected by the Parties, so that the economic effect of
such valid provisions shall be similar to that of such invalid, illegal or unenforceable provisions as much as possible.
Exhibit 4.3
16.
Exhibits
The exhibits hereto are an integral part of this Agreement.
17.
Effectiveness
17.1
17.2
17.3
This Agreement shall become effective when the Parties duly sign it.
Any amendment to, modification of or supplementation to this Agreement shall be made in writing, and become effective when the Parties sign or seal and
when the governmental registration procedure (if applicable) is completed.
This Agreement is made in four (4) counterparts. Each signing Party shall hold one (1) counterpart, and one (1) counterpart shall be submitted to the
Registration Authority. The counterparts of this Agreement shall have equal legal force.
18.
Entire Agreement
Except for the written amendment, supplementation or modification made after execution of this Agreement, this Agreement shall constitute the entire agreement
between the Parties with respect to the subject matter hereof, and shall replace all previous oral or written negotiations, representations or contracts reached between
the Parties with respect to the subject matter hereof.
[The remainder of this page is intentionally left blank]
In witness whereof, the Parties and/or their legal representatives have signed this Third Amended and Restated Equity Pledge Agreement on the date first written above for
their joint observance.
Exhibit 4.3
Party A: iClick Data Technology (Beijing) Limited (爱点击（北京）数据科技有限公司)
/s/ Tang Jian
By:
Name: Tang Jian (唐健)
Title: Legal Representative
Third Amended and Restated Equity Pledge Agreement- Signature Page
Exhibit 4.3
In witness whereof, the Parties and/or their legal representatives have signed this Third Amended and Restated Equity Pledge Agreement on the date first written above for
their joint observance.
Exhibit 4.3
Party B:
By:
/s/ Tang Jian
Name:
Tang Jian (唐健)
Third Amended and Restated Equity Pledge Agreement- Signature Page
Exhibit 4.3
In witness whereof, the Parties and/or their legal representatives have signed this Third Amended and Restated Equity Pledge Agreement on the date first written above for
their joint observance.
Exhibit 4.3
Party C： Beijing OptAim Network Technology Co., Ltd. (北京智云众网络科技有限公司)
/s/ Tang Jian
By:
Name: Tang Jian (唐健)
Title: Legal Representative
Third Amended and Restated Equity Pledge Agreement- Signature Page
Exhibit 4.3
Exhibit 1
Beijing OptAim Network Technology Co., Ltd.
Register of Shareholders and Capital Contribution Certificate Recording the Pledge
Register of Shareholders of Beijing OptAim Network Technology Co., Ltd.
The shareholder and relevant information of Beijing OptAim Network Technology Co., Ltd. (the “Company”) are as follows:
Exhibit 4.3
Name of shareholder
Type of shareholder
Capital
amount
contribution
Type
of
contribution
capital
Shareholding percentage Domicile
Capital
certificate No.
contribution
Registr
of pled
Tang Jian
Natural person
RMB10 million
Cash
100%
No. 2021-1
No. 2#1504, North
Fourth Ring Road,
No. 106, Chaoyang
District, Beijing
Tang
has crea
pledge
his
equity
Compan
favor
iClick
Techno
(Beijing
Limited
Beijing OptAim Network Technology Co., Ltd.
(北京智云众网络科技有限公司) (seal)
Legal representative (signature):
Issuance date: , , 2021
Exhibit 4.3
Beijing OptAim Network Technology Co., Ltd.
Shareholder Capital Contribution Certificate
(No. 2021-1)
1. Company’s full name: Beijing OptAim Network Technology Co., Ltd. (北京智云众网络科技有限公司)
2. Company’s address: Room 053, B2 Floor, No. 89, North Third Ring Road, Haidian District, Beijing
3. Company’s date of establishment: September 7, 2012
4. Company’s registered capital: RMB10 million
5. Company’s shareholder: Tang Jian is the shareholder of this Company, who holds 100% equity in the Company (corresponding to the contribution of RMB10 million in
the registered capital, RMB1 million has been paid up), and is entitled to the shareholders’ rights set forth in the Company’s articles of association.
6. Equity pledge: The 100% equity held by Tang Jian in the Company has been pledged in favor of iClick Data Technology (Beijing) Limited 爱点击（北京）数据科技有
限公司).
Beijing OptAim Network Technology Co., Ltd.
(北京智云众网络科技有限公司) (seal)
Legal representative (signature):
Issuance date: , , 2021
Power of Attorney
Exhibit 4.4
Date: November 1, 2021
The undersigned, Tang Jian (唐健) , a citizen of the People’s Republic of China (“China”) with Chinese ID No. 432922197608190035 and the holder of 100% of the entire
registered capital (“My Shareholding”) in Beijing OptAim Network Technology Co., Ltd. ( 北 京 智 云 众 网 络 科 技 有 限 公 司 ) (the “Domestic Company”), hereby
irrevocably authorizes iClick Data Technology (Beijing) Limited ( 爱 点 击 （ 北 京 ） 数 据 科 技 有 限 公 司 ) (the “Wholly Foreign-owned Enterprise”) to exercise the
following rights relating to My Shareholding during the term of this Power of Attorney:
The Wholly Foreign-owned Enterprise is hereby authorized to act on my behalf as my exclusive agent and attorney with respect to all matters concerning My Shareholding,
including without limitation: (1) proposing, convening, and attending meetings of shareholders of the Domestic Company; (2) exercising all shareholder’s rights and
shareholder’s voting rights that I am entitled to under the laws of China and articles of association of the Domestic Company, including but not limited to the sale, transfer,
pledge or disposition of My Shareholding in part or in whole; and (3) nominating, designating, and/or appointing legal representatives (chairperson), directors, supervisors,
chief executive officer (or manager), and other officers of the Domestic Company on my behalf (if I have such power).
Without limiting the generality of the power granted hereunder, the Wholly Foreign-owned Enterprise shall have the power and authority under this Power of Attorney to
perform on my behalf the terms and conditions of the Amended and Restated Equity Pledge Contract and the Amended and Restated Exclusive Option Contract executed on
the same date of this Power of Attorney, to which I am a party, or execute other documents required to be executed under the aforesaid contracts, including but not limited to
the transfer contract (to which I am required to be a Party) as agreed in the Amended and Restated Exclusive Option Contract executed on my behalf.
The Wholly Foreign-owned Enterprise has the right to re-authorize or assign the rights relating to the aforesaid matters to any other person or entity at its own discretion
without giving prior notice to me or obtaining my consent.
This Power of Attorney will come into force on the date of execution. Provided that I am the shareholder of the Domestic Company, this Power of Attorney shall be
irrevocably and continuously effective, unless the Wholly Foreign-owned Enterprise otherwise instructs in writing. Once the Wholly Foreign-owned Enterprise notifies me
in writing of termination of this Power of Attorney in part or in whole, I will immediately revoke the entrustment and authorization previously granted to the Wholly
Foreign-owned Enterprise and execute a power of attorney of the same format as this Power of Attorney, to grant other person nominated by the Wholly Foreign-owned
Enterprise the same authorization and entrustment as those contained in this Power of Attorney.
This Power of Attorney shall be binding on my successors and assigns and I will cause my successors (if applicable) and assigns to sign a similar power of attorney.
During the validity term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to the Wholly Foreign-owned
Enterprise through this Power of Attorney, and shall not exercise such rights by myself.
[The remainder of this page is intentionally left blank]
In witness whereof, I execute this Power of Attorney on such date first given above.
Exhibit 4.4
By:
/s/ Tang Jian
Name:
Tang Jian (唐健)
Power of Attorney–Tang Jian (唐健) -Signature Page
Exhibit 4.4
Spouse Consent
Exhibit 4.5
November 1, 2021
The undersigned, Fan Xinyu (ID No. 210804198009141067) hereby represents that (a) I am the legal spouse of Tang Jian (唐健) ; (b) I unconditionally and irrevocably agree
that Tang Jian executes the following documents (hereinafter referred to as “Transaction Documents”) on November 1, 2021, and (c) I agree to the disposal of the equity
interest of Beijing OptAim Network Technology Co., Ltd. (北京智云众网络科技有限) (“Domestic Company”) held by Tang Jian and registered in his name in accordance
with the provisions of the following documents:
(1)
(2)
(3)
Third Amended and Restated Equity Pledge Agreement executed by iClick Data Technology (Beijing) Limited (爱点击（北京）数据科技有限公司) (“BJWFOE”),
Domestic Company, and the shareholder of the Domestic Company;
Third Amended and Restated Exclusive Option Agreement executed by BJWFOE, Domestic Company, and the shareholder of Domestic Company; and
Power of attorney executed by Tang Jian, authorizing BJWFOE to exercise his rights as the shareholder of Domestic Company.
I acknowledge that I am not entitled to any right or interest with respect to the equity interest of the Domestic Company and I undertake that I will not assert any claim with
respect to the equity interests of such Domestic Company. I further acknowledge that performance of the Transaction Documents and further amendments or termination of
such documents by Tang Jian do not require my authorization or consent.
I undertake to execute all necessary documents and take all necessary actions to ensure proper performance of the Transaction Documents (as amended from time to time).
I agree and undertake that, if I acquire any equity interests of the Domestic Company for any reason, I will be bound by the Transaction Documents (as amended from time
to time) and abide by the obligations under such Transaction Documents (as amended from time to time) as the shareholder of the Domestic Company. For this purpose,
upon the request of BJWFOE, I will execute the written documents whose formats and contents are fundamentally similar to the Transaction Documents (as amended from
time to time).
/s/ Fan Xinyu
(Signature of the Spouse)
Date: November 1, 2021
REGISTRATION RIGHTS AGREEMENT
Exhibit 4.10
REGISTRATION RIGHTS AGREEMENT, dated as of January 26, 2021 (this “Agreement”), by and between iClick Interactive Asia
Group Limited, a Cayman Islands exempted company (the “Company”), and Baozun Inc., a Cayman Islands exempted company (the
“Investor”).
WHEREAS, the Company entered into a share subscription agreement with the Investor dated January 26, 2021 relating to the
subscription of the Company’s Shares (as defined below) (the “Share Subscription Agreement”).
WHEREAS, certain selling shareholder(s) of the Company entered into a share purchase agreement with the Investor dated January
26, 2021 relating to the purchase of the Company’s American depositary shares (“ADSs”), two ADSs representing one Class A Share (the
“Share Purchase Agreement”, together with the Share Subscription Agreement, the “Equity Agreements”).
WHEREAS, in connection with the purchase of the Shares and ADSs by the Investor pursuant to the Equity Agreements, the
Company and the Investor wish to execute this Agreement.
NOW, THEREFORE, in consideration of the premises and the covenants hereinafter contained and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties intending to be legally bound hereby, it is agreed as
follows:
1.
Definitions.
The following terms shall have the meanings ascribed to them below:
“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under
common Control with such Person.
“Agreement” has the meaning set forth in the preamble hereof.
“Applicable Securities Laws” means (i) with respect to any offering of securities in the United States, or any other act or omission
within that jurisdiction, the securities Law of the United States, including the Exchange Act and the Securities Act, and any applicable securities
Laws of any state of the United States, and (ii) with respect to any offering of securities in any jurisdiction other than the United States, or any
related act or omission in that jurisdiction, the applicable securities Laws of that jurisdiction.
“Arbitrator” has the meaning set forth in Section 7.4(i) hereof.
“Commission” means (i) with respect to any offering of securities in the United States, the Securities and Exchange Commission of
the United States or any other federal agency at the time administering the Securities Act, and (ii) with respect to any offering of securities in a
jurisdiction other than the United States, the regulatory body of the jurisdiction with authority to supervise and regulate the offering and sale of
securities in that jurisdiction.
“Company” has the meaning set forth in the preamble hereof.
“Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies
of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, which power or authority
shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than fifty percent (50%) of
the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the composition of a majority of the
board of directors of such Person; the term “Controlled” has the meaning correlative to the foregoing.
“Equity Securities” means any Ordinary Shares and/or Ordinary Share Equivalents of the Company.
“Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
“Form F-3” means Form F-3 promulgated by the Commission under the Securities Act or any successor form or substantially
similar form then in effect.
“Governmental Authority” means any nation or government or any federation, province or state or any other political subdivision
thereof; any entity, authority or body exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to
government, including any government authority, agency, department, board, commission or instrumentality of the PRC, the Cayman Islands or
any other country, or any political subdivision thereof, any court, tribunal or arbitrator, and any self-regulatory organization.
“Governmental Order” means any applicable order, ruling, decision, verdict, decree, writ, subpoena, mandate, precept, command,
directive, consent, approval, award, judgment, injunction or other similar determination or finding by, before or under the supervision of any
Governmental Authority.
“Group Companies” or “Group” means, collectively, the Company together with its Subsidiaries and the consolidated affiliated
entities, and each Person (other than a natural person) that is, directly or indirectly, Controlled by any of the foregoing, including but not limited
to each joint venture in which any of the foregoing holds more than fifty percent (50%) of the voting power.
“HKIAC” has the meaning set forth in Section 7.4(i) hereof.
“Holders” means the Investor who is a holder of Registrable Securities and its permitted transferees that become parties to this
Agreement from time to time.
“Hong Kong S.A.R.” means the Hong Kong Special Administrative Region.
“Initiating Holders” means, with respect to a request duly made under or Section 2.1 or Section 2.2 to Register any Registrable
Securities, the Holders initiating such request.
2
“Law” or “Laws” means any constitutional provision, statute, ordinance or other law, rule, regulation, official policy or
interpretation of applicable Governmental Authority and any Governmental Order in the jurisdiction of incorporation of each Group Company
and where they ordinarily conduct their business, including without limitation, the Cayman Islands, the Hong Kong S.A.R. and the PRC.
“Majority-in-Interest” means an interest in the voting securities of a Person that exceeds 50% of such voting securities of such
Person.
“Maximum Number of Securities” has the meaning set forth in Section 2.4 hereof.
“Ordinary Share Equivalents” means the Class B ordinary shares of the Company that are convertible into Ordinary Shares.
“Ordinary Shares” means the Company’s Class A ordinary shares, par value US$0.001 per share.
“Parties” has the meaning set forth in the preamble hereof.
“Person” means any individual, corporation, partnership, limited partnership, proprietorship, association, limited liability company,
firm, trust, estate or other enterprise or entity.
“PRC” means the People’s Republic of China, but solely for the purposes of this Agreement and the other Transaction Documents,
excluding the Hong Kong S.A.R., the Macau Special Administrative Region and the islands of Taiwan.
“Registrable Securities” shall mean (a) any and all Ordinary Shares held by a Holder at any time on or after the date hereof and (b)
any securities issuable or issued or distributed in respect of any of the Ordinary Shares identified in clause (a) by way of stock dividend or stock
split or in connection with a combination of shares, recapitalization, reorganization, merger, consolidation or otherwise.
“Registration” means a registration effected by preparing and filing a Registration Statement and the declaration or ordering of the
effectiveness of that Registration Statement; and the terms “Register” and “Registered” have meanings concomitant with the foregoing.
“Registration Statement” means a registration statement prepared on Form F-1, F-2, F-3, S-1, S-2 or S-3 under the Securities Act
(including, without limitation, Rule 415 under the Securities Act), or on any comparable form in connection with registration in a jurisdiction
other than the United States.
“Securities Act” means the United States Securities Act of 1933, as amended.
“Shares” means the Ordinary Shares and the Class B ordinary shares of the Company.
3
“Subsidiary” means, with respect to any specified Person, any Person of which the specified Person, directly or indirectly, owns or
Controls more than fifty percent (50%) of the issued share capital, voting interests or registered capital.
“U.S.” means the United States of America.
“Violation” has the meaning set forth in Section 5.1(i) hereof.
2.
Demand Registration.
2.1.
Registration Other Than on Form F-3 or Form S-3. Subject to the terms of this Agreement, any Holder(s) that individually or
jointly hold at least five percent (5%) of the voting power of the then outstanding Shares may request the Company in writing that the Company
effect a Registration. Upon receipt of such a request, the Company shall (x) promptly give written notice of the proposed Registration to all
other Holders and (y) as soon as practicable, use its reasonable best efforts to cause the Registrable Securities specified in the request, together
with any Registrable Securities of any Holder who requests in writing to join such Registration within fifteen (15) days after the Company’s
delivery of written notice, to be Registered. The Company shall be obligated to effect no more than two (2) Registrations pursuant to this
Section 2.1 that have been declared and ordered effective; provided that if the sale of all of the Registrable Securities sought to be included
pursuant to this Section 2.1 is not consummated for any reason other than due to the action or inaction of the Holders including Registrable
Securities in such Registration, such Registration shall not be deemed to constitute one of the Registration rights granted pursuant to this
Section 2.1.
Registration on Form F-3 or Form S-3. Subject to the terms of this Agreement, if the Company qualifies for registration on Form
2.2.
F-3 or Form S-3 (or any comparable form for Registration in a jurisdiction other than the United States), any Holder may request the Company
to file, in any jurisdiction in which the Company has had a registered underwritten public offering, a Registration Statement on Form F-3 or
Form S-3 (or any comparable form for Registration in a jurisdiction other than the United States), including without limitation any registration
statement filed under the Securities Act providing for the registration of, and the sale on a continuous or a delayed basis by the Holders of, all of
the Registrable Securities pursuant to Rule 415 under the Securities Act and/or any similar rule that may be adopted by the Commission. Upon
receipt of such a request, the Company shall (i) promptly give written notice of the proposed Registration to all other Holders and (ii) as soon as
practicable, use its reasonable best efforts to cause the Registrable Securities specified in the request, together with any Registrable Securities of
any Holder who requests in writing to join such Registration within fifteen (15) days after the Company’s delivery of written notice, to be
Registered and qualified for sale and distribution in such jurisdiction. The Company shall be obligated to effect no more than two (2)
Registrations that have been declared and ordered effective within any twelve (12)-month period pursuant to this Section 2.2; provided that if
the sale of all of the Registrable Securities sought to be included pursuant to this Section 2.2 is not consummated for any reason other than due
to the action or inaction of the Holders including Registrable Securities in such Registration, such Registration shall not be deemed to constitute
one of the Registration rights granted pursuant to this Section 2.2.
4
2.3.
Right of Deferral.
(i)
The Company shall not be obligated to Register or qualify Registrable Securities pursuant to this Section 2:
(a)
if, within ten (10) days of the receipt of any request of the Holders to Register any Registrable Securities under
Section 2.1 or Section 2.2 the Company gives notice to the Initiating Holders of its bona fide intention to effect the filing for its own
account of a Registration Statement pertaining to Ordinary Shares within sixty (60) days of receipt of that request; provided, that the
Company is actively employing in good faith its reasonable best efforts to cause that Registration Statement to become effective
within sixty(60) days of receipt of that request; provided, further, that the Holders are entitled to join such Registration subject to
Section 3 (other than a registration of securities in a transaction under Rule 145 of the Securities Act or with respect to an employee
benefit plan);
(b)
during the period starting with the date of filing by the Company of, and ending six (6) months following the
effective date of, any Registration Statement pertaining to Ordinary Shares of the Company; provided, that the Holders are entitled to
join the Registration effected pursuant to such Registration Statement subject to Section 3 (other than a registration of securities in a
transaction under Rule 145 of the Securities Act or with respect to an employee benefit plan); or
(c)
in any jurisdiction in which the Company would be required to execute a general consent to service of process in
effecting such Registration or qualification, unless the Company is already subject to service of process in such jurisdiction.
(ii)
If, after receiving a request from Holders pursuant to Section 2.1 or Section 2.2 hereof, the Company furnishes to the
Holders a certificate signed by the chief executive officer of the Company stating that, in the good faith judgment of the Board, it would be
materially detrimental to the Company or its members for a Registration Statement to be filed in the near future, then the Company shall have
the right to defer such filing for the period during which such filing would be materially detrimental, provided, that the Company may not
utilize this right and/or the deferral right contained in this clause (ii) for more than forty-five (45) days on any one occasion or for more than a
total of ninety (90) days during any twelve (12) month period; provided, further, that the Company may not Register any other of its securities
during such period (except for Registrations contemplated by Section 3.4).
Underwritten Offerings. If, in connection with a request to Register Registrable Securities under Section 2.1 or Section 2.2, the
2.4.
Initiating Holders seek to distribute such Registrable Securities in an underwritten offering, they shall so advise the Company as a part of the
request, and the Company shall include such information in the written notice to the other Holders described in Section 2.1 and Section 2.2. In
such event, the right of any Holder to include its Registrable Securities in such Registration shall be conditioned upon such Holder’s
participation in such underwritten offering and the inclusion of such Holder’s Registrable Securities in the underwritten offering (unless
otherwise mutually agreed by a Majority-in-Interest of the Initiating Holders and such Holder, taken together) to the extent provided herein. All
5
Holders proposing to distribute their securities through such underwritten offering shall enter into an underwriting agreement in customary form
with the underwriter or underwriters of internationally recognized standing selected for such underwritten offering by the Company and
reasonably acceptable to the holders of a majority of the voting power of all Registrable Securities proposed to be included in such
Registration. Notwithstanding any other provision of this Agreement, if the managing underwriter advises the Company in writing that, in its
opinion, the number of securities to be included in such offering is greater than the total number of securities which can be sold therein without
having a material adverse effect on the distribution of such securities or otherwise having a material adverse effect on the marketability thereof
(the “Maximum Number of Securities”), then the Company shall include in such Registration the Registrable Securities that the participating
Holders have requested to be registered thereunder only to the extent the number of such Registrable Securities does not exceed the Maximum
Number of Securities. If such amount exceeds the Maximum Number of Securities, the number of Registrable Securities included in such
Registration shall be allocated among all the participating Holders on a pro rata basis (based on the number of Registrable Securities held by
each participating Holder). If the amount of such Registrable Securities does not exceed the Maximum Number of Securities, the Company
may include in such Registration any Ordinary Shares of the Company and other Ordinary Shares held by other security holders of the
Company, as the Company may in its discretion determine or be obligated to allow, in an amount which together with the Registrable Securities
included in such Registration shall not exceed the Maximum Number of Securities. Any Registrable Securities excluded or withdrawn from
such underwritten offering shall be withdrawn from Registration. To facilitate the allocation of shares in accordance with the above provisions,
the Company or the underwriters may round the number of shares allocated to a Holder to the nearest one hundred (100) shares.
3.
Piggyback Registrations.
Registration of the Company’s Securities. Subject to the terms of this Agreement, if the Company proposes to Register for its own
3.1.
account any of its Equity Securities, or for the account of any holder (other than a Holder) of Equity Securities any of such holder’s Equity
Securities, in connection with the public offering of such securities (except as set forth in Section 3.4), the Company shall promptly give each
Holder written notice of such Registration and, upon the written request of any Holder given within fifteen (15) days after delivery of such
notice, the Company shall use its reasonable best efforts to include in such Registration any Registrable Securities thereby requested to be
Registered by such Holder. If a Holder decides not to include all or any of its Registrable Securities in such Registration by the Company, such
Holder shall nevertheless continue to have the right to include any Registrable Securities in any subsequent Registration Statement or
Registration Statements as may be filed by the Company, all upon the terms and subject to the conditions set forth herein.
3.2.
Right to Terminate Registration. The Company shall have the right to terminate or withdraw any Registration initiated by it under
Section 3 prior to the effectiveness of such Registration, whether or not any Holder has elected to participate therein. The expenses of such
withdrawn Registration shall be borne by the Company in accordance with Section 4.3.
6
3.3.
Underwriting Requirements.
(i)
In connection with any offering involving an underwriting of the Company’s Equity Securities, the Company shall not be
required to Register the Registrable Securities of a Holder under this Section 3 unless such Holder’s Registrable Securities are included in the
underwritten offering and such Holder enters into an underwriting agreement in customary form with the underwriter or underwriters of
internationally recognized standing selected by the Company and setting forth such terms for the underwritten offering as have been agreed
upon between the Company and the underwriters. In the event the managing underwriter of such underwritten offering advises in writing that,
in its opinion, the number of Registrable Securities requested to be included in the Registration in addition to the securities being registered by
the Company or such other holder would be greater than the, Maximum Number of Securities (having the same meaning as defined in Section
2.4), then:
(a)
in the event the Company initiated Registration, the Company shall include in such Registration first, the
securities the Company proposes to register and second, the securities of all other selling security holders, including the participating
Holders, to be included in such Registration in an amount which together with the securities the Company proposes to register, shall
not exceed the Maximum Number of Securities, such amount to be allocated among such selling security holders on a pro rata basis
(based on the number of securities of the Company held by each such selling security holder);
(b)
in the event any holder of securities of the Company initiated the Registration, the Company shall include in
such Registration first, the securities such initiating security holder proposes to register, and the securities of any other selling
security holders (including participating Holders), in an amount which together with the securities the initiating security holder
proposes to register, shall not exceed the Maximum Number of Securities, such amount to be allocated among such selling security
holders on a pro rata basis (based on the number of securities of the Company held by each such selling security holder) and second,
any securities the Company proposes to register, in an amount which together with the securities the initiating security holder and the
other selling security holders propose to register, shall not exceed the Maximum Number of Securities. To facilitate the allocation of
shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to a
Holder to the nearest one hundred (100) shares.
(ii)
If any Holder disapproves of the terms of any underwriting; the Holder may elect to withdraw therefrom by written notice
to the Company and the underwriters delivered at least ten (10) days prior to the effective date of the Registration Statement. Any Registrable
Securities excluded or withdrawn from the underwritten offering shall be withdrawn from the Registration. Notwithstanding the foregoing, the
Company shall not be required to pay for any expenses of any Registration proceeding begun pursuant to Section 2.1 or Section 2.2 if the
Registration request is subsequently withdrawn at the request of the Holders of a majority of the Registrable Securities to be registered (in
which case all participating Holders shall bear such expenses pro rata based upon the number of Registrable Securities that were to be included
in the withdrawn registration), unless such withdrawal is due to an action or inaction of the Company or an event outside of the reasonable
control of such Holders.
7
3.4.
Exempt Transactions. The Company shall have no obligation to Register any Registrable Securities under this Section 3 in
connection with a Registration by the Company (i) relating solely to the sale of securities to participants in a Company share plan; (ii) relating to
a corporate reorganization or other transaction under Rule 145 of the Securities Act (or comparable provision under the Laws of another
jurisdiction, as applicable); (iii) on any form that does not include substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities; or (iv) relating to a registration in which the only Ordinary Shares being
registered are Ordinary Shares issuable upon conversion of debt securities that are also being registered.
4.
Registration Procedures.
4.1.
Registration Procedures and Obligations. If as a result of any action, proposed action or request by a Holder, the Company is
required to Register any Registrable Securities held by the Holders under the Securities Act with the Commission, the Company shall, as
expeditiously as reasonably possible:
(i)
Prepare and file with the Commission a Registration Statement with respect to those Registrable Securities and use its
reasonable best efforts to cause that Registration Statement to become effective, and, upon the request of the Holders holding a majority of the
Registrable Securities Registered thereunder, keep the Registration Statement effective for up to one hundred and eighty (180) days or, if earlier,
until the distribution thereunder has been completed; provided however, that (a) such one hundred and eighty (180) day period shall be extended
for a period of time equal to the period any Holder refrains from selling any Registrable Securities included in such Registration at the written
request of the underwriter(s) for such Registration, and (b) in the case of any Registration of Registrable Securities on Form F-3 or Form S-3
that are intended to be offered on a continuous or delayed basis, subject to compliance with applicable rules promulgated by the Commission,
such one hundred and eighty (180) day period shall be extended, if necessary, to keep the Registration Statement or such comparable form, as
the case may be, effective until all such Registrable Securities are sold;
(ii)
Prepare and file with the Commission amendments and supplements to that Registration Statement and the prospectus
used in connection with the Registration Statement as may be necessary to comply with the provisions of Applicable Securities Laws with
respect to the disposition of all securities covered by the Registration Statement;
(iii)
Furnish to the Holders the number of copies of a prospectus, including a preliminary prospectus, required by Applicable
Securities Laws, and any other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned
by them;
(iv)
Use its reasonable best efforts to Register and qualify the securities covered by the Registration Statement under the
securities Laws of any jurisdiction, as reasonably requested by the Holders, provided, that the Company shall not be required to qualify to do
business or file a general consent to service of process in any such jurisdiction;
8
(v)
In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in
customary form, with the managing underwriter(s) of the offering;
(vi)
Promptly notify each Holder of Registrable Securities covered by the Registration Statement at any time when a
prospectus relating thereto is required to be delivered under Applicable Securities Laws of (a) the issuance of any stop order by the
Commission, or (b) the happening of any event or the existence of any condition as a result of which any prospectus included in the Registration
Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the circumstances under which they were made, or if in the opinion of
counsel for the Company it is necessary to supplement or amend such prospectus to comply with law, and at the request of any such Holder
promptly prepare and furnish to such Holder a reasonable number of copies of a supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to the purchasers of such securities, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the
circumstances under which they were made or such prospectus, as supplemented or amended, shall comply with law;
(vii)
Furnish, at the request of any Holder requesting Registration of Registrable Securities in an underwritten offering
pursuant to this Agreement, on the date that such Registrable Securities are delivered for sale in connection with a Registration pursuant to this
Agreement, (i) an opinion, dated the date of the sale, of the counsel representing the Company for the purposes of the Registration, in form and
substance as is customarily given to underwriters in an underwritten public offering; and (ii) a comfort letter dated the date of the sale, from the
independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to the underwriters;
(viii)
Otherwise comply with all applicable rules and regulations of the Commission to the extent applicable to the applicable
registration statement and use its reasonable best efforts to make generally available to its security holders (or otherwise provide in accordance
with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Act, no later than forty-five (45)
days after the end of a twelve (12) month period (or ninety (90) days, if such period is a fiscal year) beginning with the first month of the
Company’s first fiscal quarter commencing after the effective date of such registration statement, which statement shall cover such twelve (12)
month period, subject to any proper and necessary extensions; and
(ix)
securities are then traded.
Take all reasonable action necessary to list the Registrable Securities on the primary exchange on which the Company’s
4.2.
Information from Holder. It shall be a condition precedent to the obligations of the Company to take any action pursuant to this
Agreement with respect to the Registrable Securities of any selling Holder that such Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method of disposition of such securities as shall be required to effect the
Registration of such Holder’s Registrable Securities.
9
4.3.
Expenses of Registration. All expenses, other than the underwriting discounts and selling commissions applicable to the sale of
Registrable Securities pursuant to this Agreement (which shall be borne by the Holders requesting Registration on a pro rata basis in proportion
to their respective numbers of Registrable Securities sold in such Registration), incurred in connection with Registrations, filings or
qualifications pursuant to this Agreement, including (without 1imitation) all Registration, filing and qualification fees, printers’ and accounting
fees, professional fees and disbursements of counsel for the Company and reasonable fees and disbursement of one counsel for all selling
Holders, shall be borne by the Company.
5.
5.1.
Registration-Related Indemnification.
Company Indemnity.
(i)
To the maximum extent permitted by Law, the Company will indemnify and hold harmless each Holder, such Holder’s
officers, directors, any underwriter (as defined in the Securities Act) and each Person, if any, who controls (as defined in the Securities Act)
such Holder or underwriter, against any losses, claims, damages or liabilities(joint or several) to which they may become subject under Laws
which are applicable to the Company and relate to action or inaction required of the Company in connection with any Registration,
qualification, or compliance, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon
any of the following statements, omissions or violations (each a “Violation”): (a) any untrue statement of a material fact contained in such
Registration Statement, on the effective date thereof (including any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto), or (b)the omission to state in the Registration Statement, on the effective date thereof (including any
preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto), a material fact required to be stated
therein or necessary to make the statements therein not misleading. The Company will reimburse each such Holder, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage,
liability or action.
(ii)
The indemnity agreement contained in this Section 5.1 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonably
withheld or delayed), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it
arises solely out of or is solely based upon a Violation that occurs in reliance upon and in conformity with written information furnished for use
in connection with such Registration by any such Holder, underwriter or controlling person. Further, the foregoing indemnity agreement with
respect to any preliminary prospectus shall not inure to the benefit of any Holder or other aforementioned person, or any person controlling such
Holder, from whom the person asserting any such losses, claims, damages or liabilities purchased shares in the offering, if a copy of the most
current prospectus was not sent or given by or on behalf of such Holder or other aforementioned person to such person, if required by Law to
have been so delivered, at or prior to the written confirmation of the sale of the shares to such person, and if the prospectus (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim, damage or liability.
10
5.2.
Holder Indemnity.
(i)
To the maximum extent permitted by Law, each selling Holder that has included Registrable Securities in a Registration
will, severally and not jointly, indemnify and hold harmless the Company, its directors, officers, any underwriter, any other Holder selling
securities in connection with such Registration and each Person, if any, who controls (within the meaning of the Securities Act) the Company,
such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may
become subject, under Applicable Securities Laws, or any rule or regulation promulgated under Applicable Securities Laws, insofar as such
losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and
only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder for use in
connection with such Registration; and each such Holder will reimburse any Person intended to be indemnified pursuant to this Section 5.2 for
any legal or other expenses reasonably incurred by such Person in connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity contained in this Section 5.2 shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld or delayed).
(ii)
5.3.
Notice of indemnification Claim. Promptly after receipt by an indemnified party under or Section 5.1 or Section 5.2 of notice of the
commencement of any action (including any governmental action), such indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under Section 5.1 or Section 5.2 deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory to the indemnifying parties. An
indemnified party (together with all other indemnified parties that may be represented without conflict by one counsel) shall have the right to
retain one separate counsel, with the reasonably incurred fees and expenses to be paid by the indemnifying party, if representation of such
indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party, to the extent so prejudiced, of any liability to the indemnified party under this Section 5, but the omission to
deliver written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under
this Section 5.
5.4.
Contribution. If any indemnification provided for in Section 5.1 or Section 5.2 is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss, liability, claim, damage or expense referred to herein, the indemnifying party, in
lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a result of
such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party, on the
one hand, and of the indemnified party, on the other, in connection with the statements or omissions that
11
resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the
indemnified party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or
omission.
Underwriting Agreement. To the extent that the provisions on indemnification and contribution contained in the underwriting
5.5.
agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
5.6.
Registrable Securities in a Registration Statement under this Agreement.
Survival. The obligations of the Company and Holders under this Section 5 shall survive the completion of any offering of
6.
Additional Registration-Related Undertakings.
Reports under the Exchange Act. Where necessary and with a view to making available to the Holders the benefits of Rule 144
6.1.
promulgated under the Securities Act and any comparable provision of any Applicable Securities Laws that may at any time permit a Holder to
sell securities of the Company to the public without Registration or pursuant to a Registration on Form F-3 or Form S-3 (or any comparable
form in a jurisdiction other than the United States), the Company agrees to:
(i)
make and keep public information available, as those terms are understood and defined in Rule 144 (or comparable
provision, if any, under Applicable Securities Laws in any jurisdiction where the Company’s securities are listed), at all times following ninety
(90) days after any Registration Statement covering securities of the Company shall have become effective;
(ii)
file with the Commission in a timely manner all reports and other documents required of the Company under all
Applicable Securities Laws; and
(iii)
at any time following ninety (90) days after any Registration Statement covering securities of the Company shall have
become effective, promptly furnish to any Holder holding Registrable Securities, upon request (a) a written statement by the Company that it
has complied with the reporting requirements of all Applicable Securities Laws at any time after it has become subject to such reporting
requirements or, at any time after so qualified, that it qualifies as a registrant whose securities may be resold pursuant to Form F-3 or Form S-3
(or any form comparable thereto under Applicable Securities Laws of any jurisdiction where the Company’s securities are listed), (b) a copy of
the most recent annual or quarterly report of the Company and such other reports and documents as filed by the Company with the Commission,
and (c) such other information as may be reasonably requested in availing any Holder of any rule or regulation of the Commission, that permits
the selling of any such securities without Registration or pursuant to Form F-3 or Form S-3 (or any form comparable thereto under Applicable
Securities Laws of any jurisdiction where the Company’s Securities are listed); provided that the Company shall not
12
be required to furnish to any Holder any document that is publicly available at the time of such request.
6.2.
Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the
prior written consent of a Majority-in-Interest of the Holders, enter into any agreement with any holder or prospective holder of any securities of
the Company giving such holder or prospective holder any registration rights the terms of which are more favorable taken as a whole than the
registration rights granted to the Holders unless the Company shall also give such rights to the Holders.
6.3.
“Market Stand-Off” Agreement. Each Holder agrees, if so required by the managing underwriter(s), that it will not during the
period commencing on the date of the final prospectus relating to an underwritten offering and ending on the date specified by the Company and
the managing underwriter (such period not to exceed ninety (90) days from the date of such final prospectus) (i) lend, offer, pledge, hypothecate,
hedge, sell, make any short sale of, loan, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Equity Securities (other than those
included in such offering) or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic
consequences of ownership of the Equity Securities, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery
of Equity Securities or such other securities, in cash or otherwise; provided, that (x) all directors, officers and all other holders of at least one
percent (1%) of the outstanding share capital of the Company must be bound by restrictions at least as restrictive as those applicable to any such
holder pursuant to this Section 6.3, (y) this Section 6.3 shall not apply to the extent that any other members of the Company subject to
substantially similar restrictions are released, and (z) the lockup agreements shall permit such holders to transfer their Registrable Securities to
their respective Affiliates so long as the transferee enters into the same lockup agreement. The underwriters in connection with the underwritten
offering are intended third party beneficiaries of this Section 6.3 and shall have the right, power and authority to enforce the provisions hereof
as though they were a party hereto. In order to enforce the foregoing covenant, the Company may place restrictive legends on the certificates
and impose stop-transfer instructions with respect to the Registrable Securities of each shareholder (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such period.
Termination. The registration rights set forth in Section 2 and Section 3 of this Agreement shall terminate with respect to any
6.4.
Holder, the date on which such Holder and its permitted transferee hold less than five percent (5%) of the voting power of the then outstanding
Shares. This Agreement shall terminate with respect to any Holder when (a) such Holder no longer holds any Registrable Securities and (b) the
Company is no longer obligated to take any action at the request of such Holder pursuant to Section 2 and Section 3; provided that Section 5 of
this Agreement shall survive any such termination.
6.5.
Exercise of Ordinary Share Equivalents. Notwithstanding anything to the contrary provided in this Agreement, the Company shall
have no obligation to Register Registrable Securities which, if constituting Ordinary Share Equivalents, have not been exercised, converted or
exchanged, as applicable, for Ordinary Shares.
13
7.
Miscellaneous.
7.1.
Further Assurances. Upon the terms and subject to the conditions herein, each of the Parties hereto agrees to use its reasonable best
efforts to take or cause to be taken all action, to do or cause to be done, to execute such further instruments, and to assist and cooperate with the
other Parties hereto in doing, all things necessary, proper or advisable under applicable Laws or otherwise to consummate and make effective, in
the most expeditious manner practicable, the transactions contemplated by this Agreement and, to the extent reasonably requested by another
Party, to enforce rights and obligations pursuant hereto.
7.2.
Assignments and Transfers; No Third Party Beneficiaries. Except as otherwise provided herein, this Agreement and the rights
and obligations of the Parties hereunder shall inure to the benefit of, and be binding upon, their respective successors, assigns and legal
representatives, but shall not otherwise be for the benefit of any third party. This Agreement and the rights and obligations of any party
hereunder shall not otherwise be assigned without the mutual written consent of the other Parties; provided that the Investor may assign its
rights and obligations to an Affiliate without consent of the other Parties.
7.3.
without regard to principles of conflicts of laws.
Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York
7.4.
Dispute Resolution.
(i)
Any dispute, controversy, difference or claim arising out of or relating to this Agreement, including the existence, validity,
interpretation, performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it
shall be referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (“HKIAC”) under the
HKIAC Administered Arbitration Rules in force when the notice of arbitration is submitted. The seat of arbitration shall be Hong Kong. The
official language of the arbitration shall be English and the arbitration tribunal shall consist of three (3) arbitrators (each, an “Arbitrator”). The
claimant shall nominate one (1) Arbitrator; the respondent shall nominate one (1) Arbitrator; and a third Arbitrator will be nominated jointly by
the first two Arbitrators and shall serve as chairman of the arbitration tribunal.
(ii)
Any party may seek interim injunctive relief, provisional rulings or other interim relief from a court of competent
jurisdiction, both before and after the Arbitrators have been appointed, at any time up until the arbitrators have made their final award.
(iii)
The award rendered by the arbitral tribunal shall be final and binding on the parties. Judgment on the award may be
entered in any court of competent jurisdiction.
(iv)
Each Party agrees that money damages may not be a sufficient remedy for any breach of this Agreement by the other
Party and that the injured Party shall be entitled to seek, and the other Party will not oppose the granting of, equitable relief, including injunction
and specific performance, in the event of any such breach, in addition to all other remedies available to the injured party at law or in equity.
14
7.5.
Notices. Any notice required or permitted pursuant to this Agreement shall be given in writing and shall be given either personally
or by sending it by next-day or second-day courier service, fax, electronic mail or similar means to the address as shown below the signature of
such party on the signature page of this Agreement (or at such other address as such party may designate by fifteen (15) days’ advance written
notice to the other parties to this Agreement given in accordance with this Section 7.5. Where a notice is sent by next-day or second-day courier
service, service of the notice shall be deemed to be effected by properly addressing, pre-paying and sending by next-day or second-day service
through an internationally-recognized courier a letter containing the notice, with a confirmation of delivery, and to have been effected at the
expiration of two days after the letter containing the same is sent as aforesaid. Where a notice is sent by fax or electronic mail, service of the
notice shall be deemed to be effected by properly addressing, and sending such notice through a transmitting organization, with a written
confirmation of delivery, and to have been effected on the day the same is sent as aforesaid.
7.6.
be entitled to reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such Party may be entitled.
Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing Party shall
7.7.
Rights Cumulative. Each and all of the various rights, powers and remedies of a Party hereto will be considered to be cumulative
with and in addition to any other rights, powers and remedies which such Party may have at law or in equity in the event of the breach of any of
the terms of this Agreement. The exercise or partial exercise of any right, power or remedy will neither constitute the exclusive election thereof
nor the waiver of any other right, power or remedy available to such Party.
7.8.
Shareholding. If the Holder or its Affiliates do not have a Schedule 13D with respect to the Shares on file with the SEC, upon the
written request of the Company, each Holder agrees to promptly advise the Company in writing as to the number of Registrable Securities then
beneficially owned by such Holder.
7.9.
Severability. In case any provision of the Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or impaired thereby. If, however, any provision of this Agreement
shall be invalid, illegal, or unenforceable under any applicable Law in any jurisdiction, it shall, as to such jurisdiction, be deemed modified to
conform to the minimum requirements of such Law, or, if for any reason it is not deemed so modified, it shall be invalid, illegal, or
unenforceable only to the extent of such invalidity, illegality, or limitation on enforceability without affecting the remaining provisions of this
Agreement, or the validity, legality, or enforceability of such provision in any other jurisdiction.
Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may
7.10.
be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of each
Party. Any amendment or waiver effected in accordance with this paragraph shall be binding upon each of the Parties hereto.
15
7.11.
No Presumption. The Parties acknowledge that any applicable Law that would require interpretation of any claimed ambiguities in
this Agreement against the Party that drafted it has no application and is expressly waived. If any claim is made by a Party relating to any
conflict, omission or ambiguity in the provisions of this Agreement, no presumption or burden of proof or persuasion will be implied because
this Agreement was prepared by or at the request of any Party or its counsel.
7.12.
No Waiver. Failure to insist upon strict compliance with any of the terms, covenants, or conditions hereof will not be deemed a
waiver of such term, covenant, or condition, nor will any waiver or relinquishment of, or failure to insist upon strict compliance with, any right,
power or remedy hereunder at any one or more times be deemed a waiver or relinquishment of such right, power or remedy at any other time or
times.
Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to any Party under this Agreement,
7.13.
upon any breach or default of any other Party under this Agreement, shall impair any such right, power or remedy of such non-breaching or
non-defaulting Party nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar
breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any Party of any breach or
default under this Agreement, or any waiver on the part of any Party of any provisions or conditions of this Agreement, must be in writing and
shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise
afforded to any Party, shall be cumulative and not alternative.
Headings and Subtitles; Interpretation. The titles and subtitles used in this Agreement are used for convenience only and are not
7.14.
to be considered in construing or interpreting this Agreement. Unless a provision hereof expressly provides otherwise: (i) the term “or” is not
exclusive; (ii) words in the singular include the plural, and words in the plural include the singular; (iii) the terms “herein”, “hereof’, and other
similar words refer to this Agreement as a whole and not to any particular section, subsection, paragraph, clause, or other subdivision; (iv) the
term “including” will be deemed to be followed by”, but not limited to,”; (v) the masculine, feminine, and neuter genders will each be deemed
to include the others; (vi) the terms “shall”, “will”, and “agrees” are mandatory, and the term “may” is permissive; (vii) the term “day” means
“calendar day”.
7.15.
Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Facsimile and emailed copies of signatures shall be deemed to be originals for
purposes of the effectiveness of this Agreement.
7.16.
Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the Parties with regard to
the subject matter hereof and thereof, and supersedes all other agreements between or among any of the Parties with respect to the subject
matter hereof. After the execution and delivery of this Agreement, to the extent that there is any conflict between
16
this Agreement and any provision of any other agreement, arrangement or understanding between the Company and the Investor, the terms and
conditions of this Agreement shall prevail.
7.17.
availability of any rights under this Agreement.
Aggregation of Stock. All Shares held or acquired by any Affiliates shall be aggregated together for the purpose of determining the
[The remainder of this page has been intentionally left blank.]
17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
COMPANY:
ICLICK INTERACTIVE ASIA GROUP LIMITED
By:
Name:
Title:
/s/ Terence Li
Terence Li
CFO
Address: ***
Email:
***
[Signature Page to Registration Rights Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.
INVESTOR:
Baozun Inc.
By:
Name:
Title:
/s/ Arthur Yu
Arthur Yu
Chief Financial Officer
Address:
***
Email:
***
[Signature Page to Registration Rights Agreement]
Exhibit 4.11
Strategic Cooperation Framework Agreement
Between
Baozun Inc.
And
iClick Interactive Asia Group Limited
Dated January 26, 2021
This STRATEGIC COOPERATION FRAMEWORK AGREEMENT (this “Agreement”), dated as of January 26, 2021, is made by and
between:
Baozun Inc., a Cayman Islands exempted company (together with its consolidated subsidiaries and variable interest entity and its
(1)
subsidiaries, “Baozun”); and
iClick Interactive Asia Group Limited, a Cayman Islands exempted company (together with its consolidated subsidiaries and variable
(2)
interest entity and its subsidiaries, “iClick”).
Baozun and iClick are each referred to herein as a “Party,” and collectively as the “Parties.”
WHEREAS:
Baozun is a leader and a pioneer in the brand e-commerce service industry in China;
iClick is a leading independent online marketing and enterprise data solutions provider in China;
Baozun and iClick intends to sign this Agreement to initiate business cooperation in connection with the Cooperation Business (as defined
below) to integrate resources and leverage the strength of each Party; and
The Parties acknowledge and agree that this Agreement only provides the framework for the business cooperation and supports between the
Parties, of which details are subject to discussion, agreement and implementation by the Parties after execution of this Agreement in compliance
with applicable law and regulation.
NOW, THEREFORE, the Parties agree as follows:
1. Definitions.
(1)
(2)
“Affiliate” means, with respect to a Person, any other Person that, directly or indirectly, Controls, is Controlled by or is under
common Control with such Person.
“Annual Gross Merchandise Value” or “Annual GMV” means total amounts of forecasted gross merchandise value for any
business in relation to Tencent’s e-commerce business of a brand partner within a specific year.
(3)
“Category A Brand Partners” means brand partners whose Annual GMV equals to or exceeds RMB30 million.
(4)
“Category B Brand Partners” means brand partners whose Annual GMV is less than RMB10 million.
(5)
“Category C Brand Partners” means brand partners whose Annual GMV equals to or exceed RMB10 million but is less than
RMB30 million.
2
(6)
“Control” of a given Person means the power or authority, whether exercised or not, to direct the business, management and policies
of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, which power or
authority shall conclusively be presumed to exist upon possession of beneficial ownership or power to direct the vote of more than
fifty percent (50%) of the votes entitled to be cast at a meeting of the members or shareholders of such Person or power to control the
composition of a majority of the board of directors of such Person; the term “Controlled” has the meaning correlative to the
foregoing.
(7)
“Person” means any individual, firm, corporation, partnership, proprietorship, association, limited liability company, firm, union,
trust or estate or any other enterprise or entity or organization whether or not having separate legal existence.
(8)
“Cooperation Business” means business on Tencent’s e-commerce ecosystem.
(9)
“Force Majeure” means occurrence of any event after the date of this Agreement which interferes with the performance of all or
any part of this Agreement by any of the Parties and is beyond the control, unavoidable, insurmountable, unresolvable by any of the
Parties, and unforeseeable upon execution of this Agreement. Such event includes, among others, earthquake, typhoon, floods,
pandemics, wars, international or domestic traffic interruption, breakdown of power, network, computer, communications and other
systems, strikes (including lock-outs or industrial disturbances), labor disputes, government actions, orders from international or
domestic courts. For avoidance of any doubt, such event will not constitute Force Majeure under this Agreement unless it is beyond
the control of, unavoidable, insurmountable and unresolvable by the Parties.
(10) “Period of Cooperation” means the period from the date of this Agreement to the third anniversary of the execution of this
Agreement.
(11) “Tencent” means Tencent Holdings Limited and its consolidated subsidiaries and variable interest entities and its subsidiaries.
2. CONSENSUS BETWEEN BAOZUN AND ICLICK
2.1. Baozun and iClick share the same view on the huge potential for future growth of Tencent’s e-commerce ecosystem. The Parties have
reached a consensus to form a business cooperation relating to Cooperation Business pursuant to the terms set forth in this Agreement to
achieve a win-win situation during the Period of Cooperation.
2.2. Baozun and iClick shall cooperate to develop a full-cycle closed-loop e-commerce service model, based on the Software-as-a-Service
(“SaaS”), covering but not limited to system development, IT services, digital marketing, stores operation, customer services and
warehousing and fulfillment services to better serve potential brand partners.
3
2.3. Baozun and iClick will continue to maintain the cooperation relationship with their existing brand partners, respectively, and agree to
discuss in good faith with each other on the future cooperation with such clients according to the terms set forth in this Agreement.
3. COOPERATION BUSINESS AND ALLOCATION OF RESPONSIBILITIES
In connection with the Cooperation Business, the Parties agree as follows:
3.1. Establishing E-commerce Platform. iClick will be responsible to offer SaaS-based IT and system solutions (“E-commerce Platform
Setup Services”) for any client who plans to establish its e-commerce infrastructure in the Tencent’s ecosystem. E-commerce Platform
Setup Services include but are not limited to:
a.
b.
c.
d.
e.
store setup system;
WeCom/WeChat-based Social CRM system;
Tencent’s ecosystem-based customer data platform;
marketing automation system; and
additional customization and technology implementation services (“Additional Services”) based on the aforementioned
SaaS products.
Notwithstanding any of the foregoing, Baozun will reserve its rights to provide Additional Services for brand partners if so required by
such brand partners; the exercise of such rights shall be subject to prior consultation with iClick, and Baozun will communicate with
iClick in advance in good faith regarding the detailed arrangement in connection with these Additional Services.
3.2. Online Operation and Services. Baozun will be responsible to provide online operation and services (“Online Operation and Services”)
for clients to fulfill clients’ demand in order generation and order fulfillment in Tencent’s ecosystem on the basis of online transactions.
Online Operation and Services include but are not limited to:
a.
b.
c.
d.
e.
performance-based advertising;
online-store operation, including product and consumer operations;
customer service;
warehousing and fulfillment; and
back-end systems, such as OMS, WMS, ROSS, selling machines and other retail operation tools.
4
3.3.
Jointly Developing Traffic Platforms within Tencent’s Ecosystem. Baozun and iClick shall work together to build traffic platforms
jointly owned by Baozun and iClick within Tencent’s ecosystem. The purpose of such platform is to integrate the public traffic accessible
to Baozun and iClick, and complement it with private traffic of the platforms jointly owned by Baozun and iClick to attract new and
existing brand partners to Tencent’s ecosystem and achieve economies of scales. Leveraging effective utilization of the consumer data
collected from multiple channels by both Parties in full compliance with applicable laws and regulations, this platform is expected to
benefit brand customers with effective allocation and distribution of traffic.
4. COOPERATION MECHANISM
4.1. Business Cooperation Arrangements
a.
b.
c.
d.
Creation of Solution Package. Baozun and iClick shall work closely to create a full-cycle closed-loop solution package to
be delivered to potential brand partners.
Routine Communication. Baozun and iClick shall each designate a working team with at least two key members to
maintain a bi-weekly communication mechanism and, to the extent permitted by applicable laws and regulations, subject to
any confidentiality obligations, transparently share potential projects and clients pipeline in the ecosystem of Tencent with
each other; any such confidentiality obligations to any third party shall be agreed by the relevant Party with such third party
in good faith.
Client Arrangements. Baozun shall lead the business development, cooperation and negotiation and execution of business
agreements with Category A Brand Partners in connection with the Cooperation Business, while iClick shall lead the
business development, cooperation and negotiation and execution of business agreements with Category B Brand Partners
in connection with the Cooperation Business. Baozun will also take the lead, in principle, in the aforementioned activities
with Category C Brand Partners in connection with the Cooperation Business and will discuss with iClick in a good faith
on relevant arrangements.
Subcontractor Arrangement. To the extent permitted by applicable laws and regulations, subject to any confidentiality
obligations, Baozun and iClick both agree to share relevant opportunities and discuss in good faith with the other Party on
the subcontracting arrangements if any of them signs any agreements with clients in relation to the services or products
included in the Cooperation Business unless otherwise required by the brand partner(s); any such confidentiality
obligations to any third party shall be agreed by the relevant Party with such third party in good faith. Specifically:
1)
Baozun shall subcontract E-commerce Platform Setup Services to iClick if Baozun signs any services agreements
in connection with the Cooperation Business.
5
2)
iClick shall subcontract Online Operation and Services to Baozun if iClick signs any service agreements in
connection with the Cooperation Business.
4.2. Technology Integration and Cooperation
a.
b.
Baozun and iClick IT teams shall routinely work together to open the application programming interfaces (“API”) in order
to integrate the front-end and back-end operating systems in the Cooperation Business. iClick shall be mainly responsible
for the development of SaaS-based front-end functions, and Baozun shall be mainly responsible for development of back-
end functions in relation to the order-based transaction, generation and fulfillment platform.
Reserved Rights. To ensure the integration of future developed technologies, functions or platforms, to the extent permitted
by applicable laws and regulations, subject to any confidentiality obligations, Baozun is entitled to the rights to review and
provide advice to any technologies or tools developed by iClick in relation to the services or products provided in this
Agreement; any such confidentiality obligations to any third party shall be agreed by the relevant Party with such third
party in good faith.
4.3. Establishment of Platform Jointly Owned by the Parties. Baozun and iClick shall work closely on the research and development for
purposes of establishing any platform in connection with the Cooperation Business that will be jointly owned by Baozun and iClick in the
future. The platform may include but is not limited to:
a.
b.
c.
d.
traffic management and targeted advertising platform, primarily based on Tencent’s ecosystem;
efficient management, use and distribution mechanisms formulated and used for Cooperation Business with respect to
traffic acquired by Parties, individually or jointly, through purchase, low-cost business development, testing, offline-to-
online flows, in full compliance with applicable laws and regulations;
effective approaches researched and developed to optimizing the use of consumer data collected from multiple channels by
both Parties in full compliance with applicable laws and regulations, which will guide the targeted advertising described in
paragraph 4.3(a) and improve the data insights in connection with paragraph 3.1(c); and
reasonable, legal data application strategies and guidelines that are researched and established by Parties in compliance
with industry standards and applicable laws and regulations, which will guide the implementation of 4.3(c).
6
5. Other Covenants
Both Parties agree to make best efforts to negotiate in good faith on the provisions in Sections 2, 3 and 4 of this Agreement. The details to
execute and implement such provisions may be provided in any supplemental or ancillary agreement to ensure operation by both Parties in
accordance with and for purpose of this Agreement. If any provision set forth in Section 2, 3 and 4 of this Agreement needs to be amended due
to reasonable causes, both Parties also agree to negotiate and discuss in good faith.
The Parties shall cooperate to ensure compliance with applicable laws and regulations in the operation of the Cooperation Business. Each Party
shall obtain and maintain all licenses and approvals required to operate the Cooperation Business.
6. Non-disclosure and Use of Information
The Parties acknowledge and agree that any oral or written information exchanged between each other in connection with this Agreement and
the existence and any content of this Agreement are confidential and shall be kept in confidence by each Party, and may not be disclosed to any
third party without prior written consent of the other Party, except for: (1) any information which has been available to the general public not
disclosed by the receiving Party or any of its Affiliates; (2) any information required for disclosure by any applicable law, competent
government agency, stock exchange, exchange rules or guidelines, under which circumstance and to the extent permitted by law, the disclosing
Party will notify the other Party in advance so that the Parties will reach agreement regarding the scope and content of such disclosure; or (3)
any information provided by any Party to its legal or financial advisor on as-need basis, provided that such legal or financial advisor will also
comply with non-disclosure provisions similar to this Section. The Parties agree to use the confidential information provided by the other Party
only in connection with this Agreement and, at the request of the providing Party, destroy or return such confidential information upon the
termination of this Agreement. Any Party will be liable for breach of this Section by any Party’s Affiliate, any employee of such Affiliate or any
of its advisors which breach will be deemed breach by such Party. This Section 6 shall survive any termination or expiration of this Agreement
for any reason.
7.
Taxes
Each Party will bear any and all of its own taxes arising from execution and performance of this Agreement.
8. Representations and Warranties
8.1. Each Party represents and warrants to the other Party that:
a.
b.
It is a company duly incorporated and validly existing;
It has the power to enter into this Agreement, and its authorized representative has the full authority to execute this
Agreement on its behalf;
7
c.
d.
Other than submissions to the U.S. Securities and Exchange Commission and, with respect to Baozun, the Hong Kong
Stock Exchange, no filing with or notice with any government agency, and no license, consent, permit or any other
approval from any government agency or any third party is required in connection with its execution, delivery and
performance of this Agreement; and
It is capable to perform its obligations under this Agreement, and such performance shall not violate any provision of its
articles of association or any other organizational document.
8.2.
8.3.
If any legal document signed by it prior to the date of this Agreement has any conflict with any term of this Agreement, it will notify the
other Party in writing so that the Parties may resolve such conflict amicably and through good faith negotiations. It will also be liable to
the extent of the Indemnity Cap (as defined in Section 10 of this Agreement) for any loss incurred by the other Party arising from such
conflict.
If any consent, agreement or approval from any third party is found necessary during its performance of this Agreement, it will notify the
other Party in writing within 30 days and make best efforts to obtain such consent, agreement or approval; if such consent, agreement or
approval fails to be obtained within a reasonable period, it will provide a resolution for such issue acceptable to the other Party.
9.
Force Majeure and Limited Liabilities
Any delay in performance of this Agreement arising from any Force Majeure event will not constitute breach of this Agreement by any of the
Parties. Neither Party will be liable for any damages arising thereof, provided such Party will make efforts to eliminate the cause of such delay
and exert commercially reasonable efforts (including without limitation seeking and using any alternative ways and methods) to eliminate any
damage caused by such Force Majeure event, and notify the other Party of the occurrence and the potential damages of such Force Majeure
within 15 business days (excluding the day of notice) when the elements of such Force Majeure are eliminated. During delayed performance of
this Agreement, the Party encountering the Force Majeure event will implement reasonable alternatives or take any other commercially
reasonable action to facilitate performance of its obligations under this Agreement until such delay is eliminated.
10. Breach Liability
10.1. Any of the Parties (the “Indemnifying Party”) shall indemnify and hold the other Party and its respective directors, officers, employees,
Affiliates, agents, auditors, or advisors (collectively, the “Indemnified Party”) harmless from and against any losses, claims, damages,
judgments, fines, obligations, expenses and liabilities of any kind or nature whatsoever, including but not limited to any investigative,
legal and other expenses incurred in connection with, and any amounts paid in settlement of, any pending or threatened legal action or
proceeding, and any taxes or levies that may be payable by such person by reason
8
of the indemnification of any indemnifiable loss hereunder (collectively, “Losses”) resulting from or arising out of: (i) the breach of any
representation or warranty of the Indemnifying Party contained in this Agreement or in any schedule or exhibit hereto; or (ii) the violation
or nonperformance, partial or total, of any covenant or agreement of the Indemnifying Party contained in this Agreement for reasons
other than gross negligence, fraud or willful misconduct of the Indemnified Party. In calculating the amount of any Losses of the
Indemnified Party hereunder, there shall be subtracted the amount of any insurance proceeds and third-party payments, if any, that have
been actually and irrevocably received by the Indemnified Party with respect to such Losses.
10.2. If any third-party shall notify the Indemnified Party in writing with respect to any matter involving a claim by such person (a “Third Party
Claim”) which the Indemnified Party believes would give rise to a claim for indemnification against the Indemnifying Party under this
Section 10, then the Indemnified Party shall promptly (i) notify the Indemnifying Party thereof in writing within thirty (30) days of
receipt of notice of such claim and (ii) transmit to the Indemnifying Party a written notice (“Claim Notice”) describing in reasonable
detail the nature of the Third Party Claim, a copy of all papers served with respect to such claim, if any, and the basis of the Indemnified
Party’s request for indemnification under this Agreement.
10.3. Upon receipt of a Claim Notice with respect to a Third Party Claim, the Indemnifying Party shall have the right to assume the defense of
any Third Party Claim by, within thirty (30) days of receipt of the Claim Notice, notifying the Indemnified Party in writing that the
Indemnifying Party elects to assume the defense of such Third Party Claim, and upon delivery of such notice by the Indemnifying Party,
the Indemnifying Party shall have the right to fully control and settle the proceeding, provided, that, any such settlement or compromise
shall be permitted hereunder only with the written consent of the Indemnified Party, which consent shall not be unreasonably withheld or
delayed.
10.4. If requested by the Indemnifying Party, the Indemnified Party shall, at the sole cost and expense of the Indemnifying Party, cooperate
reasonably with the Indemnifying Party and its counsel in contesting any Third Party Claim which the Indemnifying Party elects to
contest, including the making of any related counterclaim against the person asserting the Third Party Claim or any cross complaint
against any person. The Indemnified Party shall have the right to receive copies of all pleadings, notices and communications with
respect to any Third Party Claim, other than any privileged communications between the Indemnifying Party and its counsel, and shall be
entitled, at its sole cost and expense, to retain separate co-counsel and participate in, but not control, any defense or settlement of any
Third Party Claim assumed by the Indemnifying Party pursuant to Section 10.3.
10.5. In the event of a Third Party Claim for which the Indemnifying Party elects not to assume the defense or fails to make such an election
within thirty (30) days of its receipt of the Claim Notice, the Indemnified Party may, at its option, defend, settle, compromise or pay such
action or claim at the expense of the Indemnifying Party; provided, that, any such settlement or compromise shall be permitted hereunder
only with the written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
9
10.6. In the event the Indemnified Party should have a claim against the Indemnifying Party hereunder which does not involve a Third Party
Claim, the Indemnified Party shall promptly transmit to the Indemnifying Party a written notice (the “Indemnity Notice”) describing in
reasonable detail the nature of the claim, the Indemnified Party’s best estimate of the amount of Losses attributable to such claim and the
basis of the Indemnified Party’s request for indemnification under this Agreement. If the Indemnifying Party does not notify the
Indemnified Party within thirty (30) days from its receipt of the Indemnity Notice that the Indemnifying Party disputes such claim, the
Indemnifying Party shall be deemed to have accepted and agreed with such claim.
10.7. Notwithstanding the foregoing, the Indemnifying Party shall have no liability (for indemnification or otherwise) with respect to any
Losses, singly or in the aggregate, in excess of the aggregate indemnity cap of US$3 million (the “Indemnity Cap”).
10.8. This Section 10 will be included in any agreement made between any Party and any of its Affiliates in connection with this Agreement.
For the avoidance of doubt, any indemnity included in such agreements will be subject to the Indemnity Cap.
11. Governing Law and Dispute Resolution
11.1. Execution, validity, interpretation, performance, amendment and termination of this Agreement and resolution of any dispute arising
thereof shall be governed by the laws of Hong Kong without regard to principles of conflicts of laws.
11.2. Any dispute, controversy, difference or claim arising out of or relating to this Agreement, including the existence, validity, interpretation,
performance, breach or termination thereof or any dispute regarding non-contractual obligations arising out of or relating to it shall be
referred to and finally resolved by arbitration administered by the Hong Kong International Arbitration Centre (“HKIAC”) under the
HKIAC Administered Arbitration Rules in force when the notice of arbitration is submitted. The seat of arbitration shall be Hong Kong.
The official language of the arbitration shall be English and the arbitration tribunal shall consist of three (3) arbitrators (each, an
“Arbitrator”). The claimant shall nominate one (1) Arbitrator; the respondent shall nominate one (1) Arbitrator; and a third Arbitrator will
be nominated jointly by the first two Arbitrators and shall serve as chairman of the arbitration tribunal. If the first two Arbitrators fail to
nominate the third Arbitrator within 10 days after receipt of a Party’s nomination of the third Arbitrator, the Chair or co-Chair of HKIAC
shall nominate the third Arbitrator.
11.3. Any Party may seek interim injunctive relief, provisional rulings or other interim relief from a court of competent jurisdiction, both
before and after the Arbitrators have been appointed, at any time up until the Arbitrators have made their final award.
11.4. The award rendered by the arbitral tribunal shall be non-appealable, final, binding and conclusive on the Parties. Judgment on the award
may be entered in any court of competent jurisdiction.
10
11.5. Each Party agrees that money damages may not be a sufficient remedy for any breach of this Agreement by the other Party and that the
injured Party shall be entitled to seek, and the other Party will not oppose the granting of, equitable relief, including injunction and
specific performance, in the event of any such breach, in addition to all other remedies available to the injured party at law or in equity.
11.6. During arbitration of any dispute arising from interpretation or performance of this Agreement, other than the matter under dispute, each
Party shall continue to have all of its rights and obligations under this Agreement.
12. Miscellaneous
12.1. Any amendment or supplement to this Agreement shall be made in writing. Any amendment or supplement hereto duly executed by the
Parties will be an integral part of and have the same effect with this Agreement.
12.2. Without prior written consent of the other Party, neither Party may transfer any of its rights and obligations under this Agreement to any
third party, except that it may delegate its Affiliate to perform its obligations under this Agreement.
12.3. Unless otherwise provided, during the term of this Agreement, neither Party may make any negative comment on the other Party,
including without limitation any comment regarding corporate image, branding, product design, development, application, business
strategy and all other corporate or product information of the other Party.
12.4. This Agreement shall be effective upon its execution by the parties and effective during the Period of Cooperation. Once effective, this
Agreement will constitute the entire agreement and understanding between the Parties in respect of the subject matter under this
Agreement, and supersede any and all agreements and understanding, oral or written, made by the Parties prior to the date of this
Agreement.
12.5. This Agreement shall terminate (i) automatically at the end of the third anniversary of the date of this Agreement or (ii) immediately
upon written notice of termination by the non-defaulting Party due to the non-completion of the subscription and issuance of iClick
shares to Baozun pursuant to the terms of a share subscription agreement dated the date hereof between the Parties hereto.
12.6. If any provision herein is held invalid, illegal or unenforceable, it will not affect the validity, legality or enforceability of the remainder of
this Agreement. The Parties shall negotiate in good faith to address such invalid, illegal or unenforceable provision with the view to
realizing the original business intent as much as possible.
[Signature Pages Follow]
11
written.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement effective as of the date first above
Baozun Inc.
/s/ Vincent Wenbin Qiu
By:
Name:Vincent Wenbin Qiu
Title: Chief Executive Officer
[Signature Page to Strategic Cooperation Framework Agreement]
written.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement effective as of the date first above
iClick Interactive Asia Group Limited
/s/ Jian Tang
By:
Name:Jian Tang
Title: CEO
[Signature Page to Strategic Cooperation Framework Agreement]
List of Subsidiaries of iClick Interactive Asia Group Limited
Exhibit 8.1
Name
Optimix Media Asia Limited
iClick Interactive Asia Limited
Digital Marketing Group Limited
Tetris Media Limited
iClick Interactive (Singapore) Pte. Ltd.
Performance Media Group Limited
iClick Data Technology (Beijing) Limited
Tetris Information Technology (Shanghai) Co., Ltd
Diablo Holdings Corporation
Harmattan Capital Holdings Corporation
China Search (Asia) Limited
Search Asia Technology (Shenzhen) Co., Ltd.
CMRS Group Holding Limited
Beyond Digital Solutions Limited
CMRS Digital Solutions Limited
CruiSo Digital Solutions Limited
CruiSo Directions Limited
SociaLink Consultancy Limited
Guangzhou Kushu Information Technology Co., Ltd.
Optimal Power Limited
Dragon Force Global Limited
Full Lucky International Limited
Turbo Summit Holdings Limited
HBV Changyi Company Limited
RC Changyi Company Limited
Tetris (Shanghai) Data Technology Co., Ltd
OptAim Limited
OptAim (HK) Limited
OptAim (Beijing) Information Technology Co., Ltd.
Anhui Zhiyunzhong Information Technology Co., Ltd.
Beijing OptAim Network Technology Co., Ltd.
Zhiyunzhong (Shanghai) Technology Co., Ltd.
Shanghai Myhayo Technology Co., Ltd.
Anhui Myhayo Technology Co., Ltd.
Changyi (Shanghai) Information Technology Ltd.
Xi'an Changzhan Information Technology Ltd.
(1) VIE.
(2) VIE’s subsidiary.
Subsidiaries
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
80%
100%
100%
100%
100%
100%
100%
100%
100%(1)
100%(2)
37%(2)
37%(2)
60%
60%
Place of Incorporation
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Singapore
Hong Kong
People’s Republic of China
People’s Republic of China
British Virgin Islands
British Virgin Islands
Hong Kong
People’s Republic of China
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
Hong Kong
People’s Republic of China
British Virgin Islands
British Virgin Islands
Hong Kong
Hong Kong
British Virgin Islands
British Virgin Islands
People’s Republic of China
Cayman Islands
Hong Kong
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
People’s Republic of China
Exhibit 12.1
I, Jian Tang, certify that:
Certification by the Principal Executive Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
1.
2.
3.
4.
I have reviewed this annual report on Form 20-F of iClick Interactive Asia Group Limited;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the company as of, and for, the periods presented in this report;
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined 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)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by this annual report that
has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.
5.
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s
auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the company’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial
reporting.
Date: April 29, 2022
By:
Name:
Title:
/s/ Jian Tang
Jian Tang
Chief Executive Officer
Exhibit 12.2
I, David Zhang, certify that:
Certification by the Principal Financial Officer
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
1.
2.
3.
4.
I have reviewed this annual report on Form 20-F of iClick Interactive Asia Group Limited;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in
light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the company as of, and for, the periods presented in this report;
The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined 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)
(b)
(c)
(d)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that
material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during
the period in which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles;
Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that
has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting.
5.
The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s
auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to
adversely affect the company’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial
reporting.
Date: April 29, 2022
By:
Name:
Title:
/s/ David Zhang
David Zhang
Chief Financial Officer
Certification by the Principal Executive Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.1
In connection with the annual report of iClick Interactive Asia Group Limited (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, Jian Tang, Chief Executive Officer of the 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 to my 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 operations of the Company.
Date: April 29, 2022
By:
Name:
Title:
/s/ Jian Tang
Jian Tang
Chief Executive Officer
Certification by the Principal Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 13.2
In connection with the annual report of iClick Interactive Asia Group Limited (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, David Zhang, Chief Financial Officer of the 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 to my 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 operations of the Company.
Date: April 29, 2022
By:
Name:
Title:
/s/ David Zhang
David Zhang
Chief Financial Officer
Office:
Mobile:
Email:
+852 2801 6066
+852 9718 8740
rthorp@tta.lawyer
iClick Interactive Asia Group Limited
15/F Prosperity Millennia Plaza
663 King’s Road
Quarry Bay
Hong Kong S.A.R.
Dear Sirs,
iClick Interactive Asia Group Limited
Exhibit 15.1
29 April 2022
We have acted as legal advisers as to the laws of the Cayman Islands to iClick Interactive Asia Group Limited, a Cayman Islands exempted company incorporated with
limited liability (the “Company”), in connection with the filing by the Company with the United States Securities and Exchange Commission (the “SEC”) of an annual
report on Form 20-F for the year ended 31 December 2021 (“Form 20-F”).
We hereby consent to the reference of our name under the headings, “Item 10. Additional Information—E.Taxation—Cayman Islands Taxation” in the Form 20-F, and
further consent to the incorporation by reference of the summaries of our opinions under these captions into iClick Interactive Asia Group Limited’s registration statement on
Form S-8 (File No. 333-225568) that was filed on 12 June 2018, Form S-8 (File No. 333-227747) that was filed on 9 October 2018, Form S-8 (File No. 333-253596) that
was filed on 26 February 2021 and Form F-3 (File No. 333-257407) that was filed on 25 June 2021.
Yours faithfully
/s/ Travers Thorp Alberga
TRAVERS THORP ALBERGA
Exhibit 15.2
April 29, 2022
iClick Interactive Asia Group Limited
15/F, Prosperity Millennia Plaza
663 King’s Road, Quarry Bay
Hong Kong S.A.R., People’s Republic of China
Dear Sir/Madam:
We consent to the reference to our firm under the headings “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure”, “Item 3. Key
Information—D. Risk Factors—Risks Related to Doing Business in China”, “Item 4. Information On the Company—B. Business Overview—Regulation—Regulations on
Foreign-related Surveys Measures” “Item 4. Information On the Company—C. Organizational Structure” in the Annual Report of iClick Interactive Asia Group Limited on
Form 20-F for the year ended December 31, 2021, which will be filed with the Securities and Exchange Commission in the month of April 29, 2022.
In giving such consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or
under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.
Yours faithfully,
/s/ Jingtian & Gongcheng
Jingtian & Gongcheng
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-225568, 333-227747 and 333-253596) and the Registration
Statement on Form F-3 ( No. 333-257407) of iClick Interactive Asia Group Limited of our report dated April 29, 2022 relating to the consolidated financial statements and
the effectiveness of internal control over financial reporting, which appears in this Form 20-F.
Exhibit 15.3
/s/ PricewaterhouseCoopers
Hong Kong
April 29, 2022