{"url_path":"/sec/cik-0001734262/10-k/2026/item-3","section_key":"item-3","section_title":"Item 3 ****KEY INFORMATION**","topic":"sec","document":{"doc_type":"20-F","doc_date":"2026-04-27","source_url":"https://www.sec.gov/Archives/edgar/data/1734262/0001104659-26-048866-index.html","accession_number":"0001104659-26-048866","cik":"0001734262","ticker":null,"issuer_name":"CooTek(Cayman)Inc.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1734262/0001104659-26-048866-index.html","primary_entity_key":"0001734262","primary_entity_name":"CooTek(Cayman)Inc."},"word_count":47809,"has_tables":true,"body_markdown":"**ITEM 3.****KEY INFORMATION**\n\n**Our Holding Company Structure and Contractual Arrangements with the VIEs**\n\nWe are a Cayman Islands holding company with no equity ownership in the variable interest entities (“VIEs”). Investors in our securities are purchasing equity interests in CooTek (Cayman) Inc., not in the VIEs or their subsidiaries that conduct our operations in mainland China. Our contractual arrangements with the VIEs may not be as effective as direct ownership in providing us with control over the VIEs, and investors may never hold equity interests in the VIEs.\n\nCooTek (Cayman) Inc. is not a Chinese operating company but a Cayman Islands holding company with no equity ownership in the VIEs. We conduct our operations in China through (i) our PRC subsidiaries, and (ii) the VIEs with which we have maintained contractual arrangements and the VIEs’ subsidiaries. PRC laws and regulations restrict and impose conditions on foreign investment in the provision of internet information services. Accordingly, we operate these businesses in mainland China through the VIEs and the VIEs’ subsidiaries, and rely on contractual arrangements among our PRC subsidiary, the VIEs and their nominee shareholders to control the business operations of the VIEs. Revenues contributed by the VIEs accounted for 18%, 6% and 4% of our total revenues for the years ended December 31, 2023, 2024 and 2025, respectively. As used in this annual report, “CooTek,” are to CooTek (Cayman) Inc., and “we,” “us,” “our company” or “our” are to CooTek (Cayman) Inc. and its subsidiaries, and in the context of describing our operations and consolidated financial information, the VIEs and the VIEs’ subsidiaries, including Shanghai Chubao (Cootek) Information Technology Co., Ltd., or Shanghai Chubao, Molihong (Shenzhen) Internet Technology Co., Ltd., or Molihong, and Shanghai Qinglin Network Technology Co., Ltd. or Qinglin in mainland China and their subsidiaries. Holders of our ADSs or ordinary shares hold equity interest in CooTek (Cayman) Inc., our Cayman Islands holding company, and do not have direct or indirect equity interests in the VIEs and their subsidiaries.\n\n3\n\n[Table of Contents](#TOC)\n\nThe following diagram illustrates our corporate structure, including our significant subsidiaries and other entities that are material to our business, as of the date of this annual report:\n\n​\n\nNotes:\n\n(1)Karl Kan Zhang, Susan Qiaoling Li, Michael Jialiang Wang, Jim Jian Wang and Haiyan Zhu are the beneficial owners of CooTek (Cayman) Inc., and each holds 25.0%, 21.94%, 21.94%, 13.12% and 18.0% of the equity interests in Shanghai Chubao, respectively. Karl Kan Zhang and Susan Qiaoling Li are our co-founders, directors and executive officers. Michael Jialiang Wang and Jim Jian Wang are former directors of our company. Haiyan Zhu is one of our early investors.\n\n(2)Karl Kan Zhang and an employee of our company hold 99% and 1% of the equity interests in Molihong, respectively.\n\n(3)Two of our former employees each hold 50% of the equity interests in Qinglin.\n\n4\n\n[Table of Contents](#TOC)\n\nA series of contractual agreements have been entered into by and among our PRC subsidiary, the VIEs and their respective shareholders, which include exclusive business cooperation agreement, exclusive purchase option agreement, loan agreement, equity agreement, power of attorney and spouse consent letters. Terms contained in each set of contractual arrangements with the VIEs and their respective shareholders are substantially similar. For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.”\n\nOur contractual arrangements with the VIEs may not be as effective as direct ownership in providing us with control over the VIEs. These arrangements have not been tested in a court of law, and uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. If we are unable to maintain effective control over the VIEs, our business operations could be materially and adversely affected.\n\nThere are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the VIEs and their nominee shareholders. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or any of the VIEs is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government determines that the contractual arrangements constituting part of the VIE structure do not comply with PRC regulations on foreign investment in internet and other related businesses, or if these regulations or their interpretation change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.”\n\nOur corporate structure is subject to risks associated with our contractual arrangements with the VIEs. Our contractual arrangements with the VIEs have not been tested in court to date. Investors may never directly hold equity interests in the VIEs. If the PRC government determines that our contractual arrangements with the VIEs do not comply with PRC regulatory restrictions on foreign investment in those industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. The PRC regulatory authorities could disallow the VIE structure, which would likely result in a material adverse change in our operations, and our securities may decline significantly in value or become worthless. Our holding company, our PRC subsidiaries and the VIEs, 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 VIEs and, consequently, significantly affect the financial performance of the VIEs and our company as a whole. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”\n\nPRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of such securities to significantly decline or be of little or no value. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our securities.”\n\nRisks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our securities. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.”\n\n5\n\n[Table of Contents](#TOC)\n\n**Permissions Required from the PRC Authorities for Our Operations**\n\nWe conduct our business primarily through our subsidiaries, the VIEs and the VIEs’ subsidiaries in China. Our operations in mainland China are governed by PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries, the VIEs and the VIEs’ subsidiaries have not obtained all the requisite licenses and permits from the PRC government authorities that are material for the business operations of our holding company, the VIEs and the VIEs’ subsidiaries in mainland China, including, among others, the internet publication service license, publication codes, and internet audio-visual program transmission license. Given the uncertainties of interpretation and implementation of laws and regulations and the enforcement practice by government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future. If we, our subsidiaries, the VIEs or the VIEs’ subsidiaries do not receive or maintain any necessary permissions or approvals, inadvertently conclude that such permissions or approvals are not required, or if applicable laws, regulations, or interpretations change and we are required to obtain such permissions or approvals in the future, we cannot assure you that we will be able to obtain the necessary permissions or approvals in a timely manner, or at all, and such approvals may be rescinded even if obtained. Any such circumstance could subject us to penalties, including fines, suspension of business and revocation of required licenses, significantly limit or completely hinder our ability to continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Our business is subject to complex and evolving laws, regulations and governmental policies in China and other countries and regions where we have business. Many of these laws, regulations and governmental policies are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, increased cost of operations, or declines in our growth or engagement, financial performance, or otherwise harm our business.”\n\nFurthermore, in connection with our historical issuance of securities to foreign investors, as of the date of this annual report, we, our PRC subsidiaries and the VIEs, (i) are not required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, (ii) are not required to go through cyber security review by the Cyberspace Administration of China, and (iii) have not received or were denied such requisite permissions by any PRC authority. As advised by our PRC legal counsel, JunHe LLP, under the currently effective PRC laws and regulations, we are not required to obtain any permission from or complete any filing with the CSRC or go through a cybersecurity review by the Cyberspace Administration of China for our historical issuance of securities to foreign investors.\n\nHowever, the PRC government has promulgated certain regulations and rules to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies and five supporting guidelines, effective March 31, 2023. On May 16, 2023, the CSRC promulgated another supporting guideline, Guidelines on Overseas Issuance and Listing of Global Depository Receipts by Domestically Listed Companies, which came into effect on the same date. According to these measures, mainland China companies that directly or indirectly offer or list their securities in an overseas market are required to file with the CSRC. An overseas listed company must also submit the filing with respect to its follow-on offerings, issuance of convertible corporate bonds and exchangeable bonds, and other equivalent offering activities, within a specific time frame requested under these measures. Therefore, we will be required to file with the CSRC for our overseas listing or offering of equity and equity linked securities in the future within the applicable scope of these measures. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of, report and filings with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings and listings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing and report process.”\n\n6\n\n[Table of Contents](#TOC)\n\n**The Holding Foreign Companies Accountable Act**\n\nPursuant to the Holding Foreign Companies Accountable Act, or the HFCAA, if the Securities and Exchange Commission, or the SEC, determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect or investigate completely registered public accounting firms headquartered in any jurisdiction. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F.\n\nEach year, the Public Company Accounting Oversight Board (“PCAOB”) determines whether it can inspect and investigate completely registered public accounting firms in mainland China and Hong Kong. If the PCAOB determines in the future that it no longer has full access, and we continue to use an auditor headquartered in such jurisdictions, we may again be identified as a Commission-Identified Issuer under the Holding Foreign Companies Accountable Act (“HFCAA”).If we are identified for two consecutive years, our securities may be prohibited from trading in the United States. See “Item 3. Key Information—Risk Factors—Risks Related to Doing Business in China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections” and “Item 3. Key Information—Risk Factors—Risks Related to Doing Business in China—Our securities may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The prohibition of trading in the securities, or the threat of the trading being prohibited, may materially and adversely affect the value of your investment.”\n\n**Cash and Asset Flows through Our Organization**\n\nWe do not have a formal cash management policy governing transfers of funds among our holding company, subsidiaries, and the VIEs. Cash transfers are conducted in accordance with applicable PRC laws and regulations, including restrictions imposed by the State Administration of Foreign Exchange (“SAFE”). As of December 31, 2025, no dividends or distributions have been made by our PRC subsidiaries or the VIEs to our Cayman Islands holding company. Any future transfers of funds are subject to regulatory approvals, restrictions on foreign exchange, and other limitations imposed by PRC laws.\n\nCooTek (Cayman) Inc. transfers cash to its wholly owned Hong Kong subsidiaries by making capital contributions or providing loans, and the Hong Kong subsidiaries transfer cash to the subsidiaries in mainland China by making capital contributions or providing loans to them. Because CooTek (Cayman) Inc. and Shanghai Chule control the VIEs through contractual arrangements, they are not able to make direct capital contribution to the VIEs and their subsidiaries. However, they may transfer cash to the VIEs by loans or by making payments to the VIEs for inter-group transactions.\n\nUnder the currently effective PRC laws and regulations, an offshore holding company may provide funding to its PRC subsidiaries mainly through capital contributions or loans, and to the VIEs and the VIEs’ subsidiaries only through loans. Capital contributions are subject to the requirement of making necessary filings in the foreign investment information reporting system and registration with the local counterpart of the State Administration for Market Regulation. Loans must be registered with the local counterpart of the State Administration of Foreign Exchange, or the SAFE.\n\n7\n\n[Table of Contents](#TOC)\n\nCooTek (Cayman) Inc. provided an aggregate amount of US$4.8 million, US$1.0 million and US$2.1 million as loan or capital investments to our intermediate holding companies and subsidiaries, and received an aggregate repayment of US$6.6 million, US$2.3 million and US$2.3 million in the years ended December 31, 2023, 2024 and 2025, respectively. Under the contractual arrangements with the VIEs, the VIEs are entitled to receive loans from Shanghai Chule for the provisions of certain support services to Shanghai Chule. For the year ended December 31, 2023, the VIEs made net repayment of loans of US$2.5 million to the WFOE. For the year ended December 31, 2024, the VIEs received net proceeds from loans of US$2.7 million from the WFOE. For the year ended December 31, 2025, the VIEs made net repayment of loans of US$0.6 million to the WFOE. The VIEs earned various revenues from the WFOE and other company subsidiaries, including advertising revenue, reimbursement of expenses, etc.\n\nFor the years ended December 31, 2023, 2024 and 2025, no dividends or distributions were made to CooTek (Cayman) Inc. by our subsidiaries. Under PRC laws and regulations, our PRC subsidiaries and the VIEs are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of mainland China is also subject to examination by the banks designated by SAFE. The amounts restricted include the paid-up capital and the statutory reserve funds of our PRC subsidiaries and the net assets of the VIEs in which we have no legal ownership, totaling to US$91 million as of December 31, 2025. For risks relating to the fund flows of our operations in China, see “Item 3. Key Information—Risk Factors—Risks Related to Our Corporate Structure—We may rely on dividends paid by our PRC subsidiary to fund cash and financing requirements. Any limitation on the ability of our PRC subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of the ADSs and our ordinary shares.”\n\nIn the years ended December 31, 2023, 2024 and 2025, no assets other than cash were transferred through our organization.\n\nCooTek (Cayman) Inc. has not declared or paid any cash dividends, nor does it have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. For more information, see “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For PRC and United States federal income tax considerations of an investment in our securities, see “Item 10. Additional Information—E. Taxation.”\n\n**Financial Information Related to the VIEs**\n\nThe following tables present the condensed consolidating schedule of financial position for CooTek (Cayman) Inc., its subsidiaries, and the VIEs as of the dates presented. References in the following tables to “WFOE” are to Shanghai Chule (CooTek) Information Technology Co., Ltd., our wholly owned PRC subsidiary and the primary beneficiary of the VIEs.\n\n8\n\n[Table of Contents](#TOC)\n\nSelected Condensed Consolidating Statements of Operations Data\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**For the Year Ended December 31, 2025**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Consolidated **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**CooTek **\n\n​\n\n**Other**\n\n​\n\n​\n\n​\n\n**Variable**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**(Cayman)**\n\n  ​ ​ ​\n\n**Company **\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Interest**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Consolidated **\n\n​\n\n​\n\n**Inc.**\n\n​\n\n**Subsidiaries**\n\n​\n\n**WFOE**\n\n​\n\n**Entities**\n\n​\n\n**Eliminations**\n\n​\n\n**Total**\n\n​\n\n​\n\n**(in US$)**\n\nThird-party revenues\n\n​\n\n—\n\n​\n\n20,667,394\n\n​\n\n231,849\n\n​\n\n813,477\n\n​\n\n—\n\n​\n\n21,712,720\n\nInter-company revenues(1)\n\n​\n\n—\n\n \n\n—\n\n \n\n530,173\n\n​\n\n—\n\n \n\n(530,173)\n\n \n\n—\n\nOther Inter-company services revenues\n\n​\n\n—\n\n \n\n—\n\n \n\n5,438,900\n\n​\n\n—\n\n \n\n(5,438,900)\n\n \n\n—\n\n**Total revenues**\n\n​\n\n**—**\n\n** **\n\n**20,667,394**\n\n** **\n\n**6,200,922**\n\n​\n\n**813,477**\n\n** **\n\n**(5,969,073)**\n\n** **\n\n**21,712,720**\n\nThird-party cost of revenues and operating expenses\n\n​\n\n(358,327)\n\n \n\n(15,138,501)\n\n \n\n(5,796,399)\n\n​\n\n(458,282)\n\n \n\n—\n\n \n\n(21,751,509)\n\nInter-company cost of revenues and operating expenses\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\n​\n\n(530,173)\n\n \n\n530,173\n\n \n\n—\n\nOther inter-company service fee(2)\n\n​\n\n—\n\n \n\n(5,438,900)\n\n \n\n—\n\n​\n\n—\n\n \n\n5,438,900\n\n \n\n—\n\n**Total cost of revenues and operating expenses**\n\n​\n\n**(358,327)**\n\n** **\n\n**(20,577,401)**\n\n** **\n\n**(5,796,399)**\n\n​\n\n**(988,455)**\n\n** **\n\n**5,969,073**\n\n** **\n\n**(21,751,509)**\n\nIncome (loss) from non-operations\n\n​\n\n4,740\n\n \n\n(473)\n\n \n\n583\n\n​\n\n(41,389)\n\n \n\n—\n\n \n\n(36,539)\n\n**(Loss) income before income taxes**\n\n​\n\n**(353,587)**\n\n** **\n\n**89,520**\n\n** **\n\n**405,106**\n\n​\n\n**(216,367)**\n\n** **\n\n**—**\n\n** **\n\n**(75,328)**\n\nEquity method loss\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\nEquity in income from subsidiaries\n\n​\n\n275,408\n\n \n\n188,739\n\n \n\n—\n\n​\n\n—\n\n \n\n(464,147)\n\n \n\n—\n\nShare of income from the VIEs\n\n​\n\n—\n\n \n\n—\n\n \n\n(216,367)\n\n​\n\n—\n\n \n\n216,367\n\n \n\n—\n\nIncome tax expense\n\n​\n\n—\n\n \n\n(2,851)\n\n \n\n—\n\n​\n\n—\n\n \n\n—\n\n \n\n(2,851)\n\n**Net (loss) income**\n\n​\n\n**(78,179)**\n\n** **\n\n**275,408**\n\n** **\n\n**188,739**\n\n​\n\n**(216,367)**\n\n** **\n\n**(247,780)**\n\n** **\n\n**(78,179)**\n\n*Notes:*\n\n(1)\n\nIt represents the inter-company revenue that the WFOE earned from the VIEs based on the Exclusive Business Cooperation Agreement.\n\n(2)\n\nIt represents the service fee that the WFOE charged the VIEs based on the Exclusive Business Cooperation Agreement.\n\n​\n\n9\n\n[Table of Contents](#TOC)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**For the Year Ended December 31, 2024**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Consolidated **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**CooTek **\n\n​\n\n**Other**\n\n​\n\n​\n\n​\n\n**Variable**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**(Cayman)**\n\n  ​ ​ ​\n\n**Company **\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Interest**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Consolidated **\n\n​\n\n​\n\n**Inc.**\n\n​\n\n**Subsidiaries**\n\n​\n\n**WFOE**\n\n​\n\n**Entities**\n\n​\n\n**Eliminations**\n\n​\n\n**Total**\n\n​\n\n​\n\n**(in US$)**\n\nThird-party revenues\n\n​\n\n—\n\n​\n\n27,520,332\n\n​\n\n933,277\n\n​\n\n1,865,207\n\n​\n\n—\n\n​\n\n30,318,816\n\nInter-company revenues(1)\n\n​\n\n—\n\n​\n\n—\n\n \n\n266,187\n\n​\n\n—\n\n \n\n(266,187)\n\n \n\n—\n\nOther Inter-company services revenues\n\n​\n\n—\n\n​\n\n—\n\n \n\n4,297,546\n\n​\n\n139,383\n\n \n\n(4,436,929)\n\n \n\n—\n\n**Total revenues**\n\n​\n\n**—**\n\n​\n\n**27,520,332**\n\n** **\n\n**5,497,010**\n\n​\n\n**2,004,590**\n\n** **\n\n**(4,703,116)**\n\n** **\n\n**30,318,816**\n\nThird-party cost of revenues and operating expenses\n\n​\n\n(362,239)\n\n​\n\n(21,885,476)\n\n \n\n(6,469,916)\n\n​\n\n(1,447,844)\n\n \n\n—\n\n \n\n(30,165,475)\n\nInter-company cost of revenues and operating expenses\n\n​\n\n—\n\n​\n\n—\n\n \n\n—\n\n​\n\n(266,187)\n\n \n\n266,187\n\n \n\n—\n\nOther inter-company service fee(2)\n\n​\n\n—\n\n​\n\n(4,297,546)\n\n \n\n(139,383)\n\n​\n\n—\n\n \n\n4,436,929\n\n \n\n—\n\n**Total cost of revenues and operating expenses**\n\n​\n\n**(362,239)**\n\n​\n\n**(26,183,022)**\n\n** **\n\n**(6,609,299)**\n\n​\n\n**(1,714,031)**\n\n** **\n\n**4,703,116**\n\n** **\n\n**(30,165,475)**\n\nIncome (loss) from non-operations\n\n​\n\n1,649\n\n​\n\n(40,660)\n\n \n\n(42,452)\n\n​\n\n687\n\n \n\n—\n\n \n\n(80,776)\n\n**(Loss) income before income taxes**\n\n​\n\n**(360,590)**\n\n​\n\n**1,296,650**\n\n** **\n\n**(1,154,741)**\n\n​\n\n**291,246**\n\n** **\n\n**—**\n\n** **\n\n**72,565**\n\nEquity method loss\n\n​\n\n—\n\n​\n\n—\n\n \n\n—\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\nEquity in income from subsidiaries\n\n​\n\n424,159\n\n​\n\n(866,840)\n\n \n\n—\n\n​\n\n—\n\n \n\n442,681\n\n \n\n—\n\nShare of income from the VIEs\n\n​\n\n—\n\n​\n\n—\n\n \n\n291,046\n\n​\n\n—\n\n \n\n(291,046)\n\n \n\n—\n\nIncome tax expense\n\n​\n\n—\n\n​\n\n(5,650)\n\n \n\n(3,146)\n\n​\n\n(200)\n\n \n\n—\n\n \n\n(8,996)\n\n**Net income (loss)**\n\n​\n\n**63,569**\n\n​\n\n**424,160**\n\n** **\n\n**(866,841)**\n\n​\n\n**291,046**\n\n** **\n\n**151,635**\n\n** **\n\n**63,569**\n\n*Notes:*\n\n(1)\n\nIt represents the inter-company revenue that the WFOE earned from the VIEs based on the Exclusive Business Cooperation Agreement.\n\n(2)\n\nIt represents the service fee that the WFOE charged the VIEs based on the Exclusive Business Cooperation Agreement.\n\n​\n\n10\n\n[Table of Contents](#TOC)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**For the Year Ended December 31, 2023**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Consolidated **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**CooTek **\n\n​\n\n**Other**\n\n​\n\n​\n\n​\n\n**Variable**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**(Cayman)**\n\n  ​ ​ ​\n\n**Company **\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Interest**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Consolidated **\n\n​\n\n​\n\n**Inc.**\n\n​\n\n**Subsidiaries**\n\n​\n\n**WFOE**\n\n​\n\n**Entities**\n\n​\n\n**Eliminations**\n\n​\n\n**Total**\n\n​\n\n​\n\n**(in US$)**\n\nThird-party revenues\n\n​\n\n—\n\n​\n\n20,607,850\n\n​\n\n5,615,844\n\n​\n\n5,752,574\n\n​\n\n—\n\n​\n\n31,976,268\n\nInter-company revenues(1)\n\n​\n\n—\n\n​\n\n296,126\n\n​\n\n129,445\n\n​\n\n—\n\n​\n\n(425,571)\n\n​\n\n—\n\nOther Inter-company services revenues\n\n​\n\n—\n\n​\n\n—\n\n​\n\n3,744,879\n\n​\n\n963,528\n\n​\n\n(4,708,407)\n\n​\n\n—\n\n**Total revenues**\n\n​\n\n**—**\n\n​\n\n**20,903,976**\n\n​\n\n**9,490,168**\n\n​\n\n**6,716,102**\n\n​\n\n**(5,133,978)**\n\n​\n\n**31,976,268**\n\nThird-party cost of revenues and operating expenses\n\n​\n\n(1,372,491)\n\n​\n\n(16,809,631)\n\n​\n\n(10,670,548)\n\n​\n\n(5,659,430)\n\n​\n\n—\n\n​\n\n(34,512,100)\n\nInter-company cost of revenues and operating expenses\n\n​\n\n—\n\n​\n\n—\n\n​\n\n—\n\n​\n\n(425,571)\n\n​\n\n425,571\n\n​\n\n—\n\nOther inter-company service fee(2)\n\n​\n\n—\n\n​\n\n(3,744,879)\n\n​\n\n(963,528)\n\n​\n\n—\n\n​\n\n4,708,407\n\n​\n\n—\n\n**Total cost of revenues and operating expenses**\n\n​\n\n**(1,372,491)**\n\n​\n\n**(20,554,510)**\n\n​\n\n**(11,634,076)**\n\n​\n\n**(6,085,001)**\n\n​\n\n**5,133,978**\n\n​\n\n**(34,512,100)**\n\n(Loss) income from non-operations\n\n​\n\n(7,491)\n\n​\n\n(391,019)\n\n​\n\n393,356\n\n​\n\n(34,118)\n\n​\n\n—\n\n​\n\n(39,272)\n\n**(Loss) income before income taxes**\n\n​\n\n**(1,379,982)**\n\n​\n\n**(41,553)**\n\n​\n\n**(1,750,552)**\n\n​\n\n**596,983**\n\n​\n\n**—**\n\n​\n\n**(2,575,104)**\n\nEquity method loss\n\n​\n\n—\n\n​\n\n—\n\n​\n\n—\n\n​\n\n—\n\n​\n\n—\n\n​\n\n—\n\nEquity in income from subsidiaries\n\n​\n\n(1,215,959)\n\n​\n\n(1,153,906)\n\n​\n\n—\n\n​\n\n—\n\n​\n\n2,369,865\n\n​\n\n—\n\nShare of income from the VIEs\n\n​\n\n—\n\n​\n\n—\n\n​\n\n596,983\n\n​\n\n—\n\n​\n\n(596,983)\n\n​\n\n—\n\nIncome tax expense\n\n​\n\n—\n\n​\n\n(20,501)\n\n​\n\n(336)\n\n​\n\n—\n\n​\n\n—\n\n​\n\n(20,837)\n\n**Net (loss) income**\n\n​\n\n**(2,595,941)**\n\n​\n\n**(1,215,960)**\n\n​\n\n**(1,153,905)**\n\n​\n\n**596,983**\n\n​\n\n**1,772,882**\n\n​\n\n**(2,595,941)**\n\n*Notes:*\n\n(1)\n\nIt represents the inter-company revenue that the WFOE earned from the VIEs based on the Exclusive Business Cooperation Agreement.\n\n(2)\n\nIt represents the service fee that the WFOE charged the VIEs based on the Exclusive Business Cooperation Agreement.\n\n​\n\n11\n\n[Table of Contents](#TOC)\n\nSelected Condensed Consolidating Balance Sheets Data\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**As of December 31, 2025**\n\n​\n\n​\n\n**CooTek **\n\n​\n\n**Other**\n\n​\n\n​\n\n​\n\n**Variable**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**(Cayman)**\n\n  ​ ​ ​\n\n**Company **\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Interest**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Consolidated **\n\n​\n\n​\n\n**Inc.**\n\n​\n\n**Subsidiaries**\n\n​\n\n**WFOE**\n\n​\n\n**Entities**\n\n​\n\n**Eliminations**\n\n​\n\n**Total**\n\n​\n\n​\n\n**(in US$)**\n\nCash and cash equivalents\n\n​\n\n1,006\n\n​\n\n2,732,518\n\n​\n\n176,960\n\n​\n\n582,328\n\n​\n\n—\n\n​\n\n3,492,812\n\nRestricted cash\n\n​\n\n—\n\n​\n\n20,000\n\n​\n\n73,768\n\n​\n\n205\n\n​\n\n—\n\n​\n\n93,972\n\nShort-term investments\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\nAccounts receivable, net\n\n​\n\n—\n\n \n\n1,730,620\n\n \n\n7,380\n\n​\n\n64,899\n\n \n\n—\n\n \n\n1,802,899\n\nPrepaid expenses and other current assets\n\n​\n\n—\n\n \n\n18,533\n\n \n\n36,159\n\n​\n\n658,004\n\n \n\n—\n\n \n\n712,696\n\nProperty and equipment, net\n\n​\n\n—\n\n \n\n—\n\n \n\n33,734\n\n​\n\n45,220\n\n \n\n—\n\n \n\n78,954\n\nIntangible assets, net\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\nLong-term investments\n\n​\n\n—\n\n \n\n—\n\n \n\n259,197\n\n​\n\n—\n\n \n\n—\n\n \n\n259,197\n\nAmount due from intercompany\n\n​\n\n—\n\n \n\n—\n\n \n\n78,458,357\n\n​\n\n168,877\n\n \n\n(78,627,234)\n\n \n\n—\n\nAdvances due from intercompany\n\n​\n\n121,376\n\n \n\n—\n\n \n\n6,600,510\n\n​\n\n—\n\n \n\n(6,721,886)\n\n \n\n—\n\nOperating lease right-of-use assets\n\n​\n\n—\n\n \n\n—\n\n \n\n126,419\n\n​\n\n165,651\n\n \n\n—\n\n \n\n292,070\n\nOther non-current assets\n\n​\n\n—\n\n \n\n53,416\n\n \n\n30,215\n\n​\n\n39,592\n\n \n\n—\n\n \n\n123,223\n\n**Total assets**\n\n​\n\n**122,382**\n\n** **\n\n**4,555,086**\n\n** **\n\n**85,802,700**\n\n​\n\n**1,724,776**\n\n** **\n\n**(85,349,120)**\n\n** **\n\n**6,855,823**\n\nAccounts payable\n\n​\n\n—\n\n \n\n1,691,988\n\n \n\n411,838\n\n​\n\n82,242\n\n \n\n—\n\n \n\n2,186,068\n\nShort-term bank borrowings\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\n​\n\n2,062,941\n\n \n\n—\n\n \n\n2,062,941\n\nAccrued salary and benefits\n\n​\n\n170,000\n\n \n\n4,243\n\n \n\n374,486\n\n​\n\n37,169\n\n \n\n—\n\n \n\n585,898\n\nAccrued expenses and other liabilities\n\n​\n\n100,571\n\n \n\n100,282\n\n \n\n750,925\n\n​\n\n226,214\n\n \n\n—\n\n \n\n1,177,992\n\nDeferred revenue\n\n​\n\n—\n\n \n\n695,966\n\n \n\n—\n\n​\n\n1,700\n\n \n\n—\n\n \n\n697,666\n\nOperating lease liabilities, current\n\n​\n\n—\n\n \n\n—\n\n \n\n59,446\n\n​\n\n77,893\n\n \n\n—\n\n \n\n137,339\n\nAmount due to intercompany\n\n​\n\n—\n\n \n\n—\n\n \n\n168,877\n\n​\n\n78,458,357\n\n \n\n(78,627,234)\n\n \n\n—\n\nAdvances due to intercompany\n\n​\n\n—\n\n \n\n149,547,079\n\n \n\n—\n\n​\n\n36,824,463\n\n \n\n(186,371,542)\n\n \n\n—\n\nDeficit in subsidiaries/the VIEs(1)\n\n​\n\n—\n\n \n\n1,941,231\n\n \n\n79,310,279\n\n​\n\n—\n\n \n\n(81,251,510)\n\n \n\n—\n\nOperating lease liabilities, non-current\n\n​\n\n—\n\n \n\n—\n\n \n\n67,570\n\n​\n\n88,538\n\n \n\n—\n\n \n\n156,108\n\n**Total liabilities**\n\n​\n\n**270,571**\n\n** **\n\n**153,980,789**\n\n** **\n\n**81,143,420**\n\n​\n\n**117,859,518**\n\n** **\n\n**(346,250,286)**\n\n** **\n\n**7,004,012**\n\n**Total shareholders’ equity (deficit)**\n\n​\n\n**(148,189)**\n\n** **\n\n**(149,425,703)**\n\n** **\n\n**4,659,279**\n\n​\n\n**(116,134,742)**\n\n** **\n\n**260,901,166**\n\n** **\n\n**(148,189)**\n\n**Total liabilities and shareholders’ equity (deficit)**\n\n​\n\n**122,382**\n\n** **\n\n**4,555,086**\n\n** **\n\n**85,802,699**\n\n​\n\n**1,724,776**\n\n** **\n\n**(85,349,120)**\n\n** **\n\n**6,855,823**\n\n*Note:*\n\n(1)\n\nDeficit in Subsidiaries/the VIEs represents the amounts of accumulated losses from subsidiaries/the VIEs that exceeding the investment’s carrying amounts and any additional financial support made in the form of intercompany loans and advances which are recorded as “Advances due from intercompany” in the Condensed Consolidating Statements of Balance Sheets.\n\n​\n\n12\n\n[Table of Contents](#TOC)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**As of December 31, 2024**\n\n​\n\n​\n\n**CooTek **\n\n​\n\n**Other**\n\n​\n\n​\n\n​\n\n**Variable**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**(Cayman)**\n\n  ​ ​ ​\n\n**Company **\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Interest**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Consolidated **\n\n​\n\n​\n\n**Inc.**\n\n​\n\n**Subsidiaries**\n\n​\n\n**WFOE**\n\n​\n\n**Entities**\n\n​\n\n**Eliminations**\n\n​\n\n**Total**\n\n​\n\n​\n\n**(in US$)**\n\nCash and cash equivalents\n\n​\n\n245,740\n\n​\n\n2,723,995\n\n​\n\n201,769\n\n​\n\n947,586\n\n​\n\n—\n\n​\n\n4,119,090\n\nRestricted cash\n\n​\n\n—\n\n​\n\n40,000\n\n​\n\n—\n\n​\n\n200\n\n​\n\n—\n\n​\n\n40,200\n\nShort-term investments\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\nAccounts receivable, net\n\n​\n\n—\n\n \n\n2,757,435\n\n \n\n39,620\n\n​\n\n63,482\n\n \n\n—\n\n \n\n2,860,537\n\nPrepaid expenses and other current assets\n\n​\n\n1,670\n\n \n\n302,901\n\n \n\n143,132\n\n​\n\n1,001,666\n\n \n\n—\n\n \n\n1,449,369\n\nProperty and equipment, net\n\n​\n\n—\n\n \n\n—\n\n \n\n50,152\n\n​\n\n—\n\n \n\n—\n\n \n\n50,152\n\nIntangible assets, net\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\nLong-term investments\n\n​\n\n—\n\n \n\n—\n\n \n\n253,443\n\n​\n\n—\n\n \n\n—\n\n \n\n253,443\n\nAmount due from intercompany\n\n​\n\n—\n\n \n\n—\n\n \n\n77,650,916\n\n​\n\n453,091\n\n \n\n(78,104,007)\n\n \n\n—\n\nAdvances due from intercompany\n\n​\n\n21,908\n\n \n\n—\n\n \n\n7,366,675\n\n​\n\n—\n\n \n\n(7,388,583)\n\n \n\n—\n\nOperating lease right-of-use assets\n\n​\n\n—\n\n \n\n—\n\n \n\n127,272\n\n​\n\n49,446\n\n \n\n—\n\n \n\n176,718\n\nOther non-current assets\n\n​\n\n—\n\n \n\n35,534\n\n \n\n—\n\n​\n\n—\n\n \n\n—\n\n \n\n35,534\n\n**Total assets**\n\n​\n\n**269,318**\n\n** **\n\n**5,859,865**\n\n** **\n\n**85,832,979**\n\n​\n\n**2,515,471**\n\n** **\n\n**(85,492,590)**\n\n** **\n\n**8,985,043**\n\nAccounts payable\n\n​\n\n—\n\n \n\n2,531,162\n\n \n\n160,225\n\n​\n\n769,037\n\n \n\n—\n\n \n\n3,460,424\n\nShort-term bank borrowings\n\n​\n\n—\n\n \n\n—\n\n \n\n2,504,034\n\n​\n\n—\n\n \n\n—\n\n \n\n2,504,034\n\nAccrued salary and benefits\n\n​\n\n250,000\n\n \n\n4,789\n\n \n\n471,720\n\n​\n\n49,609\n\n \n\n—\n\n \n\n776,118\n\nAccrued expenses and other liabilities\n\n​\n\n136,353\n\n \n\n164,858\n\n \n\n478,140\n\n​\n\n416,983\n\n \n\n—\n\n \n\n1,196,334\n\nDeferred revenue\n\n​\n\n—\n\n \n\n993,566\n\n \n\n—\n\n​\n\n9,013\n\n \n\n—\n\n \n\n1,002,579\n\nOperating lease liabilities, current\n\n​\n\n—\n\n \n\n—\n\n \n\n117,097\n\n​\n\n45,492\n\n \n\n—\n\n \n\n162,589\n\nAmount due to intercompany\n\n​\n\n—\n\n \n\n—\n\n \n\n453,091\n\n​\n\n77,650,916\n\n \n\n(78,104,007)\n\n \n\n—\n\nAdvances due to intercompany\n\n​\n\n—\n\n \n\n149,542,794\n\n \n\n—\n\n​\n\n35,035,374\n\n \n\n(184,578,168)\n\n \n\n—\n\nDeficit in subsidiaries/the VIEs(1)\n\n​\n\n—\n\n \n\n2,143,582\n\n \n\n76,425,579\n\n​\n\n—\n\n \n\n(78,569,161)\n\n \n\n—\n\nOperating lease liabilities, non-current\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\n​\n\n—\n\n \n\n—\n\n \n\n—\n\n**Total liabilities**\n\n​\n\n**386,353**\n\n** **\n\n**155,380,751**\n\n** **\n\n**80,609,886**\n\n​\n\n**113,976,424**\n\n** **\n\n**(341,251,336)**\n\n** **\n\n**9,102,078**\n\n**Total shareholders’ equity (deficit)**\n\n​\n\n**(117,035)**\n\n** **\n\n**(149,520,886)**\n\n** **\n\n**5,223,093**\n\n​\n\n**(111,460,953)**\n\n** **\n\n**255,758,746**\n\n** **\n\n**(117,035)**\n\n**Total liabilities and shareholders’ equity (deficit)**\n\n​\n\n**269,318**\n\n** **\n\n**5,859,865**\n\n** **\n\n**85,832,979**\n\n​\n\n**2,515,471**\n\n** **\n\n**(85,492,590)**\n\n** **\n\n**8,985,043**\n\n*Note:*\n\n(1)\n\nDeficit in Subsidiaries/the VIEs represents the amounts of accumulated losses from subsidiaries/the VIEs that exceeding the investment’s carrying amounts and any additional financial support made in the form of intercompany loans and advances which are recorded as “Advances due from intercompany” in the Condensed Consolidating Statements of Balance Sheets.\n\n​\n\n13\n\n[Table of Contents](#TOC)\n\nSelected Condensed Consolidating Cash Flows Data\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**For the Year Ended December 31, 2025**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Consolidated **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**CooTek **\n\n​\n\n**Other**\n\n​\n\n​\n\n​\n\n**Variable**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**(Cayman)**\n\n  ​ ​ ​\n\n**Company **\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Interest**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Consolidated **\n\n​\n\n​\n\n**Inc.**\n\n​\n\n**Subsidiaries**\n\n​\n\n**WFOE**\n\n​\n\n**Entities**\n\n​\n\n**Eliminations**\n\n​\n\n**Total**\n\n​\n\n​\n\n**(in US$)**\n\nProceeds of services charges from inter-companies(1)\n\n​\n\n—\n\n​\n\n—\n\n​\n\n5,918,515\n\n​\n\n—\n\n​\n\n(5,918,515)\n\n​\n\n—\n\nPayments of services charges to inter-companies(1)\n\n​\n\n—\n\n​\n\n(5,441,245)\n\n​\n\n—\n\n​\n\n(477,270)\n\n​\n\n5,918,515\n\n​\n\n—\n\nNet cash (used in) provided by transactions with third-parties\n\n​\n\n(429,976)\n\n​\n\n4,521,508\n\n​\n\n(4,750,374)\n\n​\n\n581,553\n\n​\n\n—\n\n​\n\n(77,289)\n\n**Net cash (used in) provided by operating activities**\n\n​\n\n**(429,976)**\n\n​\n\n**(919,737)**\n\n​\n\n**1,168,141**\n\n​\n\n**104,283**\n\n​\n\n**—**\n\n​\n\n**(77,289)**\n\nLoans to subsidiaries, primary beneficiary of the VIEs and the VIEs(2)\n\n​\n\n(2,136,760)\n\n​\n\n(2,498)\n\n​\n\n(5,726,705)\n\n​\n\n—\n\n​\n\n7,865,962\n\n​\n\n—\n\nRepayments of loans to subsidiaries, primary beneficiary of the VIEs and the VIEs(2)\n\n​\n\n2,322,002\n\n​\n\n5,615\n\n​\n\n6,289,631\n\n​\n\n—\n\n​\n\n(8,617,248)\n\n​\n\n—\n\nOther investing activities\n\n​\n\n—\n\n \n\n8,757\n\n \n\n1,625\n\n​\n\n(55,524)\n\n \n\n—\n\n \n\n(45,142)\n\n**Net cash provided by (used in) investing activities**\n\n​\n\n**185,242**\n\n** **\n\n**11,874**\n\n** **\n\n**564,551**\n\n​\n\n**(55,524)**\n\n** **\n\n**(751,285)**\n\n** **\n\n**(45,142)**\n\nNet proceeds of loans from subsidiaries, primary beneficiary of the VIEs and the VIEs(2)\n\n​\n\n—\n\n \n\n(185,242)\n\n \n\n2,498\n\n​\n\n(568,541)\n\n \n\n751,285\n\n \n\n—\n\nOther financing activities\n\n​\n\n—\n\n \n\n—\n\n \n\n(2,507,365)\n\n​\n\n2,017,682\n\n \n\n—\n\n \n\n(489,683)\n\n**Net cash (used in) provided by financing activities**\n\n​\n\n**—**\n\n** **\n\n**(185,242)**\n\n** **\n\n**(2,504,867)**\n\n​\n\n**1,449,141**\n\n** **\n\n**751,285**\n\n** **\n\n**(489,683)**\n\n*Notes:*\n\n(1)\n\nIt represents the elimination of payments and proceeds for the inter-company service charges at the consolidation level.\n\n(2)\n\nIt represents the elimination of loans among CooTek (Cayman) Inc., other company subsidiaries, the primary beneficiary of the VIEs and its subsidiaries, and the VIEs.\n\n​\n\n14\n\n[Table of Contents](#TOC)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**For the Year Ended December 31, 2024**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Consolidated **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**CooTek **\n\n​\n\n**Other**\n\n​\n\n​\n\n​\n\n**Variable**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**(Cayman)**\n\n  ​ ​ ​\n\n**Company **\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Interest**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Consolidated **\n\n​\n\n​\n\n**Inc.**\n\n​\n\n**Subsidiaries**\n\n​\n\n**WFOE**\n\n​\n\n**Entities**\n\n​\n\n**Eliminations**\n\n​\n\n**Total**\n\n​\n\n​\n\n**(in US$)**\n\nProceeds of services charges from inter-companies(1)\n\n​\n\n—\n\n​\n\n—\n\n​\n\n6,771,718\n\n​\n\n97,097\n\n​\n\n(6,868,815)\n\n​\n\n—\n\nPayments of services charges to inter-companies(1)\n\n​\n\n—\n\n​\n\n(4,333,379)\n\n​\n\n(97,097)\n\n​\n\n(2,438,339)\n\n​\n\n6,868,815\n\n​\n\n—\n\nNet cash (used in) provided by transactions with third-parties\n\n​\n\n(1,034,555)\n\n​\n\n8,854,730\n\n​\n\n(6,899,025)\n\n​\n\n(1,207,936)\n\n​\n\n—\n\n​\n\n(286,786)\n\n**Net cash (used in) provided by operating activities**\n\n​\n\n**(1,034,555)**\n\n​\n\n**4,521,351**\n\n​\n\n**(224,404)**\n\n​\n\n**(3,549,178)**\n\n​\n\n**—**\n\n​\n\n**(286,786)**\n\nLoans to subsidiaries, primary beneficiary of the VIEs and the VIEs(2)\n\n​\n\n(974,894)\n\n​\n\n(83,497)\n\n​\n\n(2,797,994)\n\n​\n\n—\n\n​\n\n3,856,385\n\n​\n\n—\n\nRepayments of loans to subsidiaries, primary beneficiary of the VIEs and the VIEs(2)\n\n​\n\n2,250,000\n\n​\n\n122,542\n\n​\n\n70,462\n\n​\n\n—\n\n​\n\n(2,443,004)\n\n​\n\n—\n\nOther investing activities\n\n​\n\n—\n\n \n\n74,574\n\n \n\n6,311\n\n​\n\n—\n\n \n\n—\n\n \n\n80,885\n\n**Net cash provided by (used in) investing activities**\n\n​\n\n**1,275,106**\n\n** **\n\n**113,619**\n\n** **\n\n**(2,721,221)**\n\n​\n\n**—**\n\n** **\n\n**1,413,381**\n\n** **\n\n**80,885**\n\nNet proceeds of loans from subsidiaries, primary beneficiary of the VIEs and the VIEs(2)\n\n​\n\n—\n\n \n\n(1,275,106)\n\n \n\n(39,045)\n\n​\n\n2,727,532\n\n \n\n(1,413,381)\n\n \n\n—\n\nOther financing activities\n\n​\n\n—\n\n \n\n—\n\n \n\n1,832,070\n\n​\n\n—\n\n \n\n—\n\n \n\n1,832,070\n\n**Net cash (used in) provided by financing activities**\n\n​\n\n**—**\n\n** **\n\n**(1,275,106)**\n\n** **\n\n**1,793,025**\n\n​\n\n**2,727,532**\n\n** **\n\n**(1,413,381)**\n\n** **\n\n**1,832,070**\n\n*Notes:*\n\n(1)\n\nIt represents the elimination of payments and proceeds for the inter-company service charges at the consolidation level.\n\n(2)\n\nIt represents the elimination of loans among CooTek (Cayman) Inc., other company subsidiaries, the primary beneficiary of the VIEs and its subsidiaries, and the VIEs.\n\n​\n\n15\n\n[Table of Contents](#TOC)\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**For the Year Ended December 31, 2023**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Consolidated **\n\n​\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**CooTek **\n\n​\n\n**Other**\n\n​\n\n​\n\n​\n\n**Variable**\n\n​\n\n​\n\n​\n\n​\n\n​\n\n  ​ ​ ​\n\n**(Cayman)**\n\n  ​ ​ ​\n\n**Company **\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Interest**\n\n  ​ ​ ​\n\n​\n\n  ​ ​ ​\n\n**Consolidated **\n\n​\n\n​\n\n**Inc.**\n\n​\n\n**Subsidiaries**\n\n​\n\n**WFOE**\n\n​\n\n**Entities**\n\n​\n\n**Eliminations**\n\n​\n\n**Total**\n\n​\n\n​\n\n**(in US$)**\n\nProceeds of services charges from inter-companies(1)\n\n​\n\n—\n\n​\n\n346,376\n\n​\n\n3,817,984\n\n​\n\n147,665\n\n​\n\n(4,312,025)\n\n​\n\n—\n\nPayments of services charges to inter-companies(1)\n\n​\n\n—\n\n​\n\n(3,494,124)\n\n​\n\n(147,665)\n\n​\n\n(670,236)\n\n​\n\n4,312,025\n\n​\n\n—\n\nNet cash used in transactions with third-parties\n\n​\n\n(605,882)\n\n​\n\n(759,437)\n\n​\n\n(2,727,283)\n\n​\n\n(2,468,077)\n\n​\n\n—\n\n​\n\n(6,560,679)\n\n**Net cash (used in) provided by operating activities**\n\n​\n\n**(605,882)**\n\n​\n\n**(3,907,185)**\n\n​\n\n**943,036**\n\n​\n\n**(2,990,648)**\n\n​\n\n**—**\n\n​\n\n**(6,560,679)**\n\nLoans to subsidiaries, primary beneficiary of the VIEs and the VIEs(2)\n\n​\n\n(4,819,580)\n\n​\n\n—\n\n​\n\n(2,514,928)\n\n​\n\n—\n\n​\n\n7,334,508\n\n​\n\n—\n\nRepayments of loans to subsidiaries, primary beneficiary of the VIEs and the VIEs(2)\n\n​\n\n6,607,179\n\n​\n\n2,251,945\n\n​\n\n5,027,890\n\n​\n\n—\n\n​\n\n(13,887,014)\n\n​\n\n—\n\nOther investing activities\n\n​\n\n—\n\n \n\n14,314\n\n \n\n672,083\n\n​\n\n273,659\n\n \n\n—\n\n \n\n960,056\n\n**Net cash provided by (used in) investing activities**\n\n​\n\n**1,787,599**\n\n** **\n\n**2,266,259**\n\n** **\n\n**3,185,045**\n\n​\n\n**273,659**\n\n** **\n\n**(6,552,506)**\n\n** **\n\n**960,056**\n\nNet proceeds of loans from subsidiaries, primary beneficiary of the VIEs and the VIEs(2)\n\n​\n\n—\n\n \n\n(1,787,599)\n\n \n\n(2,251,945)\n\n​\n\n(2,512,962)\n\n \n\n6,552,506\n\n \n\n—\n\nOther financing activities\n\n​\n\n(1,806,453)\n\n \n\n(573,483)\n\n \n\n(142,057)\n\n​\n\n564,757\n\n \n\n—\n\n \n\n(1,957,236)\n\n**Net cash (used in) provided by financing activities**\n\n​\n\n**(1,806,453)**\n\n** **\n\n**(2,361,082)**\n\n** **\n\n**(2,394,002)**\n\n​\n\n**(1,948,205)**\n\n** **\n\n**6,552,506**\n\n** **\n\n**(1,957,236)**\n\n*Notes:*\n\n(1)\n\nIt represents the elimination of payments and proceeds for the inter-company service charges at the consolidation level.\n\n(2)\n\nIt represents the elimination of loans among CooTek (Cayman) Inc., other company subsidiaries, the primary beneficiary of the VIEs and its subsidiaries, and the VIEs.\n\n**A.****[Reserved]**\n\n**B.****Capitalization and Indebtedness**\n\nNot applicable.\n\n**C.****Reasons for the Offer and Use of Proceeds**\n\nNot applicable.\n\n16\n\n[Table of Contents](#TOC)\n\n**D.****Risk Factors**\n\n**Summary of Risk Factors**\n\nOur business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects. All the operational risks associated with being based in and having operations in mainland China as discussed in relevant risk factors under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business” also apply to operations in Hong Kong. With respect to the legal risks associated with being based in and having operations in mainland China as discussed in relevant risk factors under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China,” the laws, regulations and the discretion of mainland China governmental authorities discussed in this annual report are expected to apply to mainland China entities and businesses, rather than entities or businesses in Hong Kong which operate under a different set of laws from mainland China. These risks are discussed more fully under “Item 3. Key Information—D. Risk Factors.”\n\nRisks Related to Our Business\n\n●If we fail to maintain or expand our active user base, our business, financial condition and operating results may be materially and adversely affected.\n\n●We generate a significant portion of our revenues from advertising. Our failure to attract or retain advertising customers, or a reduction in their spending with us, could seriously harm our business, operating results and growth prospects.\n\n●We depend on certain third-party advertising exchanges and agencies for a large portion of our mobile advertising revenues.\n\n●We rely on our business collaborations with third parties, including major digital distribution platforms, to maintain and expand our user base. Our failure to maintain good relationships with these business partners may materially and adversely affect our business and operating results.\n\n●We have been and may continue to be subject to notices or complaints alleging, among other things, our infringement of copyrights and delivery of illegal or inappropriate content through our products, which could lead to suspension or removal of such products from digital distribution platforms, a decrease of our user base, and a significantly adverse impact on our financial results and our reputation.\n\n●We are subject to a variety of laws and other obligations regarding cyber security and data protection in the PRC, and any failure to comply with applicable laws and obligations or exposure to government interference actions could have a material and adverse effect on our business, financial condition and operating results.\n\n●Our business is subject to complex and evolving laws, regulations and governmental policies in China and other countries and regions where we have business. Many of these laws, regulations and governmental policies are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, increased cost of operations, or declines in our growth or engagement, financial performance, or otherwise harm our business.\n\n●We had incurred declining revenue and negative working capital in the past, and we cannot assure you that we will sustain or improve profitability.\n\n17\n\n[Table of Contents](#TOC)\n\nRisks Related to Our Corporate Structure\n\n●We are a Cayman Islands holding company with no equity ownership in the VIEs and we conduct operations in China through (i) our PRC subsidiaries, and (ii) the VIEs with which we have maintained contractual arrangements and the VIEs’ subsidiaries. Holders of our ADSs or ordinary shares hold equity interest in CooTek (Cayman) Inc., our Cayman Islands holding company, and do not have direct or indirect equity interests in the VIEs or the VIEs’ subsidiaries. If the PRC government determines that the contractual arrangements constituting part of the VIE structure do not comply with PRC laws and regulations, or if these regulations or their interpretations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, and our securities may decline in value or become worthless if we are unable to assert our contractual control rights over the assets of the VIEs. Our holding company, the VIEs 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 VIEs and, consequently, significantly affect the financial performance of the VIEs and our company as a whole. The PRC regulatory authorities could disallow the VIE structure, which would likely result in a material adverse change in our operations, and our Class A ordinary shares or our securities may decline significantly in value or become worthless.\n\n●We rely on contractual arrangements with the VIEs and their respective shareholders for our operations in mainland China, which may not be as effective in providing operational control as direct ownership.\n\n●Any failure by the VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.\n\n●The shareholders of the VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business.\n\nRisks Related to Doing Business in China\n\n●Regulatory developments in mainland China may subject us to additional regulatory review and disclosure requirement, expose us to government interference, or otherwise restrict our ability to offer securities and raise capitals outside mainland China, all of which could materially and adversely affect our business and cause the value of our securities to significantly decline or become worthless. For more details, see “Risk Factors—Risks Relating to Doing Business in China—Regulatory developments in mainland China may subject us to additional regulatory review and disclosure requirement, expose us to government interference, or otherwise restrict our ability to offer securities and raise capitals outside China, all of which could materially and adversely affect our business and the value of our securities.”\n\n●Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our securities. For more details, see “Risk Factors—Risks Relating to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.”\n\n●The approval of, report and filings with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings and listings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing and report process. For more details, see “Risk Factors—Risks Relating to Doing Business in China—The approval of, report and filings with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings and listings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing and report process.”\n\n18\n\n[Table of Contents](#TOC)\n\n●The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections. For more details, see “Risk Factors—Risks Relating to Doing Business in China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.”\n\n●Our securities may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The prohibition of trading in the securities, or the threat of the trading being prohibited, may materially and adversely affect the value of your investment. For more details, see “Risk Factors—Risks Relating to Doing Business in China—Our securities may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The prohibition of trading in the securities, or the threat of the trading being prohibited, may materially and adversely affect the value of your investment.”\n\nRisks Related to Our ADSs or Ordinary Shares\n\n●The Depositary Bank has resigned and the Deposit Agreement has been terminated, resulting in the termination of our ADR program and ADS facility, which has had and may continue to have a material adverse effect on the liquidity and value of our securities and our ability to access the U.S. capital markets.\n\n●The termination of our ADS facility could adversely affect the liquidity and trading price of our securities, increase administrative burdens and costs for holders, and limit our ability to access the U.S. capital markets. 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.\n\n**Risks Related to Our Business**\n\nIf we fail to maintain or expand our active user base, our business, financial condition and operating results may be materially and adversely affected.\n\nThe size of our active user base with our products are critical to our success. Our portfolio products had an average of 0.4 million DAUs in December 2025, which decreased from 0.9 million DAUs in December 2024. We suspended and terminated the operations of several non-performing and under-performing utility mobile apps and mobile games globally, which led to such decrease in DAUs. Our financial performance has been and will continue to be significantly affected by our ability to grow and engage our active user base. In addition, we may fail to maintain or increase our user base or our users’ engagement if, among other things:\n\n●we fail to innovate or develop new products and services that provide content relevant to and satisfactory experience to, or are favorably received by, our users;\n\n●we fail to respond to or adopt evolving technologies for product development on a timely and cost-effective basis;\n\n●we fail to successfully market and monetize our existing and new mobile applications throughout their life cycles;\n\n●we fail to develop products that are compatible with existing or new mobile devices, mobile operating systems or their respective upgrades;\n\n●we fail to maintain or improve our technology infrastructure and security measures designed to protect our users’ personal privacy and cyber security;\n\n19\n\n[Table of Contents](#TOC)\n\n●we lose users to competing products and services or due to concerns related to personal privacy and cyber security or other reasons;\n\n●we fail to successfully implement our strategies related to the continued expansion of our global user base; or\n\n●we are required by existing or new laws, regulations or government policies to implement changes to our products or services that are adverse to our business.\n\nIf we are unable to maintain or increase our user base, our advertising services may become less attractive to our advertising customers, which may have a material and adverse impact on our business, financial condition and operating results.\n\nWe generate a significant portion of our revenues from advertising. Our failure to attract or retain advertising customers, or a reduction in their spending with us, could seriously harm our business, operating results and growth prospects.\n\nMobile advertising services have been contributing a significant portion of our revenues, accounting for 71.4%, 28.9% and 30.4% of our revenues in 2023, 2024 and 2025, respectively. Therefore, any failure to continue generating substantial revenue through our mobile advertising services could materially harm our business.\n\nAdvertisers purchase advertising services either directly from us or through third-party advertising exchanges and advertising agencies. Our advertising customers, including advertisers and advertising exchanges and agencies, typically do not have long-term contractual arrangements with us. They may be dissatisfied with our advertising services or perceive our advertising services as ineffective. Potential new customers may view our advertising services as unproven, and we may need to devote additional time and resources to convince them. In addition, new advertising formats emerge from time to time and customer preferences can change. We may not be able to adapt our products and services to future advertising formats or changing customer preferences on a timely and cost-effective basis, and any such adaption failure could materially and adversely affect our financial conditions, results of operations and prospects.\n\nWe compete for advertising customers not only with other providers of digital advertising spaces, but also with other types of platforms and advertising service providers such as newspapers, magazines, billboards, television and radio stations. Some of our competitors have access to considerably greater financial and other resources for expanding their product offerings and present considerable challenges to gaining and maintaining additional market share.\n\nIf we fail to deliver advertising services in an effective manner, or if our advertising customers believe that placing advertisements through our products and services does not generate a competitive return when compared to placing advertisements through our competitors’ products, they may not continue to do business with us or they may only be willing to advertise with us at reduced prices. If our existing advertising customers reduce or discontinue their advertising spending with us, or if we fail to attract new advertising customers, our business, financial condition and results of operations could be materially and adversely affected.\n\nWe depend on certain third-party advertising exchanges and agencies for a large portion of our mobile advertising revenues.\n\nWe generate a large portion of our mobile advertising revenues from a limited number of third-party advertising exchanges and advertising agencies in 2025. Our top two advertising customers, which are advertising exchanges, accounted for approximately 18.4% of our total revenues in 2025. Our dependence on a limited number of advertising exchange customers increases their bargaining power and the need for us to maintain good relationships with them. The major advertising customers we work with typically offer standard terms and conditions that govern their contractual relationships with us. We have entered into distribution cooperation agreements with AppLovin, the leading advertising exchange platform and our top advertising customer in overseas markets, for the cooperation in placing advertisements on our mobile apps. If any of these advertising customers we work with ceases to do business with us for any reason or alters its standard terms and conditions to our disadvantage, or if we fail to collect any significant amount of account receivables from these advertising customers timely, or at all, our business, financial conditions and operating results may be materially and adversely affected.\n\n20\n\n[Table of Contents](#TOC)\n\nWe rely on our business collaborations with third parties, including major digital distribution platforms, to maintain and expand our user base. Our failure to maintain good relationships with these business partners may materially and adversely affect our business and operating results.\n\nWe collaborate with various business partners to promote our products and enlarge our user base. We use third-party digital distribution platforms such as Apple App Store and Google Play, and various app stores operated by PRC mobile manufactures such as Oppo App Store, to distribute our mobile applications to users. We also advertise on third-party platforms, such as AppLovin and Facebook Ads, to acquire users. The promotion and distribution of our mobile applications are subject to such digital distribution platforms’ standard terms and policies for application developers, which are subject to the interpretation of, and frequent changes by, these platforms. In addition, our applications may be suspended by or removed from such platforms as a result of allegations or claims by third parties regardless of their merits. For instance, in July 2019, some of our global apps were disabled by Google from Google Play Store and Google Admob, and our access to Google Play Store and Google Admob was disabled too. See “—We have been and may continue to be subject to notices or complaints alleging, among other things, our infringement of copyrights and delivery of illegal or inappropriate content through our products, which could lead to suspension or removal of such products from digital distribution platforms, a decrease of our user base, and a significantly adverse impact on our financial results and our reputation.”\n\nIf we are unable to maintain good relationships with our business partners or the business of our business partners declines, the reach of our products and services may be adversely affected and our ability to maintain and expand our user base may decrease. Most of the agreements with our business partners, including digital distribution platforms, do not prohibit them from working with our competitors or from offering competing services. If our partner distribution platforms change their standard terms and conditions in a manner that is detrimental to our business, or if our business partners decide not to continue working with us or choose to devote more resources to supporting our competitors or their own competing products, we may not be able to find a substitute on commercially favorable terms, or at all, and our competitive advantages may be diminished.\n\nWe have been and may continue to be subject to notices or complaints alleging, among other things, our infringement of copyrights and delivery of illegal or inappropriate content through our products, which could lead to suspension or removal of such products from digital distribution platforms, a decrease of our user base, and a significantly adverse impact on our financial results and our reputation.\n\nWe use third-party digital distribution platforms such as Apple App Store and Google Play, and various app stores operated by PRC mobile manufactures such as Oppo App Store, to distribute our mobile applications to users. In the ordinary course of our business, we and digital distribution platforms have received, and may from time to time in the future receive, notices or complaints from third parties alleging that certain of our products infringe copyrights, deliver illegal, fraudulent, pornographic, violent, bullying or other inappropriate content, or otherwise fail to comply with applicable policies, rules and regulations. Upon receipt of such notices or complaints, those digital distribution platforms may suspend or remove such products from such platforms. The processes for appealing such suspensions and removals with those platforms could be time-consuming, and we cannot guarantee that our appeals will always prevail or that any such suspended or removed application will be made available again. Such suspensions and removals of our products could lead to a decrease of our user base and, if they occur frequently and/or in a large scale, could significantly adversely affect our reputation, business operation and financial performance. In our operating history, some of our global apps were disabled by Google from the Google Play Store and Google Admob, and this suspension led to the decrease in our DAUs of our portfolio products and negatively impact on our net revenues. There can be no assurance that our products will not be disabled by digital distribution platforms in the future. In addition to third-party digital distribution platforms, other third-party platforms may also receive, from time to time, notices or complaints from third parties alleging that certain of our products infringe copyrights, deliver illegal, fraudulent, pornographic, violent, bullying or other inappropriate content, or otherwise fail to comply with applicable policies, rules and regulations, consequently those digital distribution platforms may suspend or remove such products from their platforms and those third-party platforms may terminate their collaboration with us.\n\nWe have international operations and plan to continue maintaining our global presence. We may face challenges and risks presented by our global operations, which may have a material and adverse impact on our business and operating results.\n\nWe are headquartered in mainland China and provide our products and services to a global user base. We intend to continue our international business operations and develop products for global users. The headquarters of our major advertising customers are located in China and the United States and therefore a majority of our mobile advertising revenues in 2023, 2024 and 2025 were derived from China and the United States.\n\n21\n\n[Table of Contents](#TOC)\n\nWe believe the sustainable growth of our business depends on our ability to increase the penetration of our products in both developed and emerging markets. Our continued international operations and global expansion may expose us to a number of challenges and risks, including:\n\n●challenges in developing successful products and localized adaptions, and implementing effective marketing strategies that respectively target mobile internet users and advertising customers from various countries and with a diverse range of preferences and demands;\n\n●difficulties in managing and overseeing global operations and in affording increased costs associated with doing business in multiple international locations;\n\n●local competitions;\n\n●difficulties in integrating and managing potential foreign acquisitions or investments;\n\n●compliance with applicable laws and regulations in various countries worldwide, including, but not limited to, internet content requirements, cyber security and data privacy requirements, intellectual property protection rules, exchange controls, and cash repatriation restrictions;\n\n●fluctuations in currency exchange rates;\n\n●political, social or economic instability in markets or regions in which we operate; and\n\n●compliance with statutory equity requirements and management of tax consequences.\n\nOur business, financial condition and results of operations may be materially and adversely affected by these challenges and risks associated with our global operations.\n\nOur product development and monetization strategies are highly dependent on our technology capabilities and infrastructure. If the amount of user data generated on our products declines, or if we fail to enhance or upgrade our technologies at a competitive pace, the effectiveness of our business model may be harmed and our operating results may be materially and severely affected.\n\nWe depend on our technological capabilities and infrastructure to analyze our users’ preferences and needs and to generate valuable user insights. Active users of our products generate a large amount of data across our applications and in a variety of use cases on a daily basis. The data generated by our users lays the foundation for us to build our user profiles. By analyzing such user data with our big data analytics and other technologies, we aim to understand our users’ interests and needs for content in order to develop products that deliver content catering to their interests and needs. Therefore, the effectiveness of our product development and monetization strategies is dependent on our ability to obtain and process data and to refine the algorithms used in processing such data. If we fail to maintain and expand the user base of our products to continually generate large amounts of user data, or if we fail to keep up with the rapid development and upgrade of big data analytics and other technologies on a timely and cost-effective basis, we may not be able to effectively grow and monetize our products, and our business and operating results may be materially and adversely affected.\n\nWe may not be able to grow our revenue or user base or to achieve the effectiveness of our monetization.\n\nOver the past three years, we have experienced fluctuations in DAUs and MAUs of our portfolio products. During the same periods, our net revenues decreased from US$32.0 million in 2023 to US$30.3 million in 2024, and further to US$21.7 million in 2025. Our mobile advertising revenue decreased from US$22.8 million in 2023 to US$8.8 million in 2024, and further decreased to US$6.6 million in 2025. We may not be able to successfully grow our user base in future periods.\n\nIn addition, growing our revenue in the future depends on successfully building our portfolio products. In 2022 and 2023, we monetized our user base primarily through mobile advertising, which contributed a majority of our revenues in years. In 2024 and 2025, we monetize our user base primarily through in-app purchase. Most of the revenues were generated from our portfolio products in 2025, in particular our online literature products and mobile games. If we are unable to build new products which are attractive to users, our ability to effectively monetize our services and grow our revenues may be materially impacted.\n\n22\n\n[Table of Contents](#TOC)\n\nWe have been diversifying our monetization with our online literature products and mobile games. In 2021, we started the IP operations based on original content on Fengdu Novel, including licensing e-books, cooperating with audio book publishers to produce audio books of original literature on Fengdu Novel, and short drama production. In addition to in-app advertising, we allow users to make in-app purchases to unlock special features or tools in our mobile games and extra content in our online literature products.\n\nHowever, we cannot assure you that we can successfully implement the existing commercialization strategies to sustainably generate growing revenues, or that we will be able to develop new commercialization strategies to grow our revenues. If our strategic initiatives do not enhance our ability to monetize or enable us to develop new commercialization approaches, we may not be able to maintain or increase our revenues or recover any associated costs. In addition, we may introduce new products and services to expand our revenue streams, including products and services with which we have little or no prior development or operating experience. If these new or enhanced products or services fail to engage users, content creators or business partners, we may fail to diversify our revenue streams or generate sufficient revenues to justify our investments and costs, and our business and operating results may suffer as a result.\n\nIf we fail to correctly anticipate user preferences and develop and commercialize new products and services, we may fail to attract or retain existing users, the lifecycles of our mobile applications may end prematurely and our operating results may be materially and adversely affected.\n\nOur success depends on our ability to maintain, grow and monetize our user base, which in turn depends on our ability to continually develop and commercialize new mobile applications, introduce new features or functions to our existing mobile applications and provide users with high-quality content and an enjoyable user experience. This is particularly important since the mobile internet industry is characterized by fast and frequent changes, including rapid technological evolution, shifting user demands, frequent introductions of new products and services, and constantly evolving industry standards, operating systems and practices. We have launched over 220 portfolio products as of December 31, 2025. In December 2025, the user base of our portfolio products reached an average of 0.4 million DAUs. We intend to continue implementation of our business plan to focus our resources on our more profitable business, including our internally developed casual games and online literature, in order to enlarge our active user base. Our ability to roll out new or enhanced products and services depends on a number of factors, including our timely and successful research and development efforts as well as correctly analyzing and predicting users’ interests and demands for content using our big data analytical capabilities. If we fail to correctly analyze and predict users’ interests and demands for content, fail to cater to the anticipated needs and preferences of users, or fail to provide a superior user experience, our existing and new mobile applications may suffer from reduced user traffic or be unsuccessful in the market and our user base may decrease, which in turn may impact our ability to earn advertising revenue. There can be no assurance that our new products and services will generate revenues or profits and we may not be able to recoup the investments and expenditures involved in such development. Our results may also experience significant fluctuations as we continue to invest in the development of new products and services.\n\nIn addition, as a result of rapidly evolving user preferences, our existing mobile applications may reach the end of their lifecycles prematurely. There can be no assurance that we will be able to correctly predict the lifecycles of our new mobile applications, our estimates regarding the lifecycles of our existing mobile applications may turn out to be incorrect, and our business, financial condition and results of operations may be materially and adversely affected.\n\n23\n\n[Table of Contents](#TOC)\n\nWe generate a considerable portion of our advertising revenues through in-app advertisements in our mobile games. If we do not deliver new games to the market, or if users prefer our competitors’ products or services over those we provide, our operating results may be materially and adversely affected.\n\nWe generate a considerable portion of our advertising revenues through in-app advertisements in our mobile games. Game is a highly competitive and dynamic industry, and our future success depends not only on the popularity of our existing mobile games but also, in a large part, on our ability to develop and introduce new games that are attractive to our customers. To achieve this, we need to anticipate and effectively adapt to rapidly changing user tastes and preferences and technological advances. The development of new games can be very difficult and requires high levels of innovation and significant investments. We will continue to focus on developing our own proprietary games. We may decide to cease to operate or develop any game that is no longer profitable. If our mobile games are not as attractive as users expect, we may lose our existing or fail to attract new users. As a result, our ability to increase our revenues from mobile games and our margins and prospects may be materially and adversely affected. We embarked on a number of new initiatives in 2025, including our emphasis on interactive story game series and other engaging art designs. Since these initiatives have been implemented for a limited period of time and are not yet at scale, it is difficult for us to evaluate the effect, if any, they will bring to our financial prospects. We cannot reasonably predict the future trends of our revenues from mobile games or our total revenues.\n\nThere is no assurance that any new game that we introduce from time to time, could become widely accepted by the users and the market. We may incur losses and experience net cash outflow from operating activities, decrease in cash and cash equivalents balance and net current liabilities if we fail to introduce popular games or products which gain substantial market acceptance. In addition, products offered by our competitors may take a larger share of the market than we anticipate, which could cause revenues generated by our mobile games to fall below expectations. Our competitors may develop more successful games, or offer similar games pursuant to payment models viewed as offering a better value than we do. Any such negative development may materially and adversely affect our business, financial condition and results of operations.\n\nWe need to continue to develop and release upgrades to our new mobile games. We cannot assure you that we will be able to identify appropriate games, or that we can maintain the expected life span of our new mobile games. If we are not able to develop, acquire or license additional, attractive mobile games with strong or lasting appeal to users, our business, financial condition and results of operations may be materially and adversely affected.\n\nWe had incurred declining revenue and negative working capital in the past, and we cannot assure you that we will sustain or improve profitability.\n\nYou should not rely on our revenues or gross profit from any previous period as an indication of our future revenues. Our revenues might decline, or the growth rate of our revenues may slow down for a number of reasons, including declined demand for our products and services, increasing competition, emergence of alternative business models, changes in regulations and government policies, changes in general economic conditions as well as other risks described in this annual report.\n\nOur revenue declined from US$32.0 million in 2023 to US$30.3 million in 2024, and further to US$21.7 million in 2025. We incurred a negative cash flows from operating activities of US$0.1 million in 2025. We incurred a deficit in working capital of US$0.7 million and an accumulated deficit of US$216.9 million as of December 31, 2025. These adverse conditions indicate that there is substantial doubt about our ability to continue as a going concern.\n\nOur ability to continue as a going concern is dependent on our ability to successfully execute our business plan including the implementation of a balanced development approach between growth and profitability and an effective financial management which can contribute to the optimization of the operating cost and expense structure. Management plans to address these conditions through cost control initiatives, optimization of product portfolio, and potential financing arrangements. However, there can be no assurance that these plans will be successful.\n\nFor a detailed discussion, please see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources.”\n\n24\n\n[Table of Contents](#TOC)\n\nWe cannot assure you that we will be able to generate net income or positive cash flows from operations in the future. Our future revenue growth and profitability will depend on a variety of factors, many of which are beyond our control. These factors include market acceptance of our products, effectiveness of our monetization strategy, our ability to control cost and expenses and to manage our growth effectively, market competition, macroeconomic and regulatory environment. We also expect to continue to make investments in research and development, which will place significant demands on our management and our operational and financial resources. Expansion may increase the complexity of our business, and we may encounter various difficulties. We may fail to develop and improve our operational, financial and managerial controls, enhance our financial reporting systems and procedures, recruit, train and retain skilled professional personnel, or maintain customer satisfaction to effectively support and manage our growth. If we invest substantial time and resources to expand our operations but fail to manage the growth of our business and capitalize on our growth opportunities effectively, we may not be able to achieve profitability, and our business, financial condition, results of operations, liquidity and prospects would be materially and adversely affected.\n\nOur consolidated financial statements for the year ended December 31, 2025 included in this annual report beginning on page F-1 have been prepared based on the assumption that we will continue on a going concern basis. The auditors of our consolidated financial statements for the year ended December 31, 2025 have included in their audit reports an explanatory paragraph relating to substantial doubt about our ability to continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business.\n\nIf we fail to control our content-related costs, lack popular literacy content that can be monetized, fail to acquire various forms of copyrights of such literacy content for monetization, or fail to attract and retain signed authors or maintain the business relationships with the key authors and third party content providers, our online literature products and their profitability will be materially and adversely affected.\n\nPopular and quality content is the core driver and foundation of our online literature products. The content costs have been material along with our efforts to enrich content of Fengdu Novel and Readict by signing more authors and to deepen the cooperation with more third party content providers globally. In 2023, 2024 and 2025, content costs constituted 27.9%, 16.4% and 14.6% of our total cost of revenues, respectively. We generally license the copyright of the content published on our Fengdu Novel and Readict on an exclusive basis with our signed authors, either at fixed prices or pursuant to revenue-sharing arrangements, under which the authors will receive royalties based on sales and other forms of monetization of their works. We also license the copyright of the content published on our platform generally on a non-exclusive basis with other authors, publishers or content providers. As the market further develops, the expectation of copyright owners for compensation may continue to rise, as such, they may demand higher licensing fees, and our content costs may increase as we enrich our content library.\n\nMoreover, we rely primarily on our signed authors to create original literature works. We may not be able to attract or retain signed authors by offering more competitive and favorable terms than our competitors in online literature sector or higher licensing fees that our signed authors may request. In addition, even if our signed authors agree to create content exclusively for us for a certain period of time, we cannot control their productivity or the quality of their works produced within such term. Furthermore, any disputes or legal proceedings with our signed authors, especially the best-selling signed authors that create popular or high-quality literature works, may disrupt our business relationships with them. Therefore, we cannot assure you that we will retain sufficient online literature works with monetization value or control a broad range of copyrights for high quality literature works. If we fail to provide popular or quality literature on Fengdu Novel and Readict, we may fail to attract or retain active users and the monetization potential of this product could be materially and adversely affected. If we lack popular literature content that can be monetized or fail to acquire a broad range of copyrights of literature works for monetization, our business and operating results could be materially and adversely affected.\n\nOur financial results and cash flows may be adversely affected by our continued cost-control initiatives.\n\nWe have been implementing cost-control initiatives, including decreases in sales and marketing expenses, research and development expenses, and general and administrative expenses. The decrease in sales and marketing expenses is in line with the continuous transition of our strategy in relation to the acquisition of new users and retention of existing users, which resulted in a reduction of the user acquisition costs. However, such cost-control measure, in the short term, may negatively affect our ability to acquire new users and to retain existing users, which may in turn result in a decrease in our revenues and disruptions to our operations and adversely affect our business, financial condition or results of operations. Any future contribution of cost-control measures to our profitability will be influenced by the actual savings achieved and by our ability to sustain these ongoing efforts.\n\n25\n\n[Table of Contents](#TOC)\n\nFurthermore, in transitioning into our focus on mobile games and online literature, we expect to incur higher development, operation and potential acquisition costs in order to keep pace with the new market and technology needs in this industry. As a result, our cost-control initiatives to increase efficiency of user retention and management and improve our operational performance may not prove to be effective in the short term and we may experience losses in connection with our business strategies.\n\nWe may require additional financing in the future to meet our business requirements. Such capital raising may be costly, difficult or not possible to obtain and, if obtained, could significantly dilute current stockholders’ equity interests or increase our debt service obligations.\n\nWe may continue to experience a material decrease in our cash and cash equivalents balance. We may require additional cash resources to fund our working capital and expenditure needs, such as content investment, sales and marketing expenses, product development expenses and investment or acquisition transactions. Although we may attempt to raise funds through bank loans, additional financing may not be available to us on terms acceptable us or at all or such resources may not be received in a timely manner. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or to discontinue certain operations, scale back or discontinue the development of new business lines, reduce headcount, sell assets, file for bankruptcy, reorganize, merge with another entity or cease operations.\n\nOur advertising services may display advertisements when our products are in use, or insert promoted marketing messages into users’ feeds, which may negatively affect user experience and may lead to a decline in user engagement and, in turn, a reduction in revenues generated from our advertising services.\n\nWe primarily generate revenues by distributing advertisements to targeted audience through our products. Advertisements are displayed in various formats when users launch or exit our products, in our theme stores or in-app stores, and in customized news feeds, among others. See “Item 4. Information on the Company—B. Business Overview—Monetization.” It is important for us to balance the frequency, prominence, size and content of advertisements that we display against ensuring a favorable user experience of our products. If our users find the advertisements displayed irrelevant, disturbing or negatively affecting their user experience of our products, they may become less engaged or stop using our products altogether. Furthermore, if advertisements contain controversial, false or misleading content, or the marketing messages we display or the products or services we advertise result in negative emotions or associations in our users, the user experience of our products could be diminished, our financial results could suffer and our reputation could be damaged. If we are unable to deliver advertisements in a way that is acceptable or favorable to our users, our users may not maintain the current level of engagement, and our advertising customers may perceive our advertising services as ineffective in generating a competitive return for them. As a result, our revenues may decline and our business, financial conditions and operating results may be materially and adversely affected.\n\nWe are subject to a variety of laws and other obligations regarding cyber security and data protection in the PRC, and any failure to comply with applicable laws and obligations or exposure to government interference actions could have a material and adverse effect on our business, financial condition and operating results.\n\nWe are subject to PRC laws relating to the collection, use, sharing, retention, security, and transfer of confidential and private information, such as personal information and other data. The cyber security legal regime in mainland China is relatively new and evolving rapidly, and their interpretation and enforcement involve significant uncertainties. As a result, it may be difficult to determine what actions or omissions may be deemed to be in violations of applicable laws and regulations in certain circumstances.\n\n26\n\n[Table of Contents](#TOC)\n\nUnder the current PRC cyber security laws, personal information and important data collected and generated by a “critical information infrastructure operator” in the course of its operations in mainland China must be stored in mainland China, and if a “critical information infrastructure operator” purchases internet products and services that affects or may affect national security, it should be subject to cyber security review by the Cyberspace Administration of China. As advised by our PRC counsel, the exact scope of “critical information infrastructure operators” under the current regulatory regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement of these laws. The current PRC cyber security laws have established more stringent requirements applicable to operators of computer networks, especially to operators of networks which involve critical information infrastructure. The current PRC cyber security laws also contain an overarching framework for regulating Internet security, protection of private and sensitive information, and safeguards for national cyberspace security and provisions for the continued government regulation of the Internet and content available in mainland China. Because of their exceptional breadth in scope, ambiguous requirements and broadly defined terminology, there is substantial uncertainty as to the potential impact of such laws on our operations in mainland China, particularly in relation to the safeguarding of user information.\n\nOn December 28, 2021, the Cyberspace Administration of China and other 12 government authorities published the Measures for Cyber Security Review, effective on February 15, 2022, which provides that critical information infrastructure operators purchasing network products and services, and internet platform operators engaging in data processing activities that affect or may affect national security must apply with the Cyber Security Review Office for a cyber security review. However, the scope of operators of “critical information infrastructure” under the current regulatory regime remains unclear and is subject to the decisions of competent PRC regulatory authorities. The Measures for Cyber Security Review also required internet platform operators processing over one million users’ personal information, if seeking for listing abroad, to apply for a cyber security review with the Cyber Security Review Office. We cannot guarantee you that we will not be subject to cyber security review for our future capital raising activities, or that new rules or regulations promulgated in the future, if any, will not impose additional compliance requirements on us.\n\nOn September 24, 2024, the State Council issued the Regulations on Network Data Security Management, taking effect on January 1, 2025, under which, national security review shall be conducted where network data processing activities carried out by a network data processor affect or may affect national security.\n\nWe cannot assure you that we will not be subject to PRC regulatory inspection and/or review relating to cyber security, especially when there remains significant uncertainty as to the scope and manner of the regulatory enforcement and/or the possible government interference that we may be exposed to. If we become subject to cyber security inspection and/or review by the Cyberspace Administration of China or other PRC authorities or are required by them to take any specific actions, it could cause suspension or termination of the future offering of our securities, disrupt our operations, result in negative publicity regarding our company, and divert our managerial and financial resources. We may also be subject to fines or other penalties, which could materially and adversely affect our business, financial condition and operating results. Furthermore, as the legal and regulatory framework for the protection of information in cyberspace in the PRC continues to evolve, we may be required to adjust our business practices or incur additional operating expenses, which may adversely affect our operating results and financial condition. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Personal Privacy and Data Protection.”\n\nData privacy concerns relating to our products and current practices may, particularly in light of increased regulatory scrutiny of and user expectations regarding the processing, collection, use, storage, dissemination, transfer and disposal of user data, require changes to our business practices and may result in declines in user growth or engagement, increased costs of operations and threats of lawsuits, enforcement actions and related liabilities, including financial penalties.\n\nCompanies’ practices regarding collection, use, retention, transfer, disclosure and security of user data have been, and continue to be, the subject of enhanced regulations and increased public scrutiny. The regulatory frameworks regarding privacy issues in many jurisdictions are constantly evolving and can be subject to significant changes from time to time, and therefore we may not be able to comprehensively assess the scope and extent of our compliance responsibility at a global level. Moreover, certain of our users, particularly those in the United States and Europe, may have strong expectations for the level of privacy afforded to their personal data and the content of their communications. Further, the developing requirements around clear and prominent privacy notices (including in the context of obtaining informed and specific consent to the collection and processing of personal data, if applicable) can potentially deter users from consenting to certain uses of their personal information. In general, negative publicity of us or our industry regarding actual or perceived violations of our users’ privacy-related rights may also impair users’ trust in our privacy practices and make them reluctant to give their consent to share their data with us.\n\n27\n\n[Table of Contents](#TOC)\n\nMany jurisdictions, including the United States, continue to consider the need for greater regulation or reform to the existing regulatory framework. 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 cyber security requirements for personal information. Additionally, the U.S. federal and state governments will likely continue to consider the need for greater regulation aimed at restricting certain uses of personal data for targeted advertising. California enacted the California Consumer Privacy Act, which creates individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. This act, which went into effect on January 1, 2020, requires covered companies to provide disclosures to California consumers, and provides such consumers ways to opt-out of certain sales of personal information. This act provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. This act may increase our compliance costs and potential liability. Some observers have noted that this act could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.\n\nIn the European Union, the General Data Protection Regulation which came into effect on May 25, 2018, increased our burden of regulatory compliance and requires us to change certain of our privacy and cyber security practices in order to achieve compliance. The General Data Protection Regulation applies to any company established in the European Union as well as any company outside the European Union that processes personal data in connection with the offering of goods or services to individuals in the European Union or the monitoring of their behavior. The General Data Protection Regulation implements more stringent operational requirements for processors and controllers of personal data, including, for example, requiring expanded disclosures about how personal information is to be used, limitations on retention of information, mandatory data breach notification requirements, and higher standards for data controllers to demonstrate that they have obtained either valid consent or have another legal basis in place to justify their data processing activities. The General Data Protection Regulation 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 General Data Protection Regulation, fines of up to 20 million euros or up to 4% of the total worldwide annual turnover of the preceding financial year, whichever is higher, may be assessed for noncompliance, which significantly increases our potential financial exposure for non-compliance. However, with limited precedence on the interpretation and application of the regulation and limited guidance from EU regulators, the application of the General Data Protection Regulation to the provision of internet services remains unsettled. The Company has adopted policies and procedures in compliance with the General Data Protection Regulation, however, such policies and procedures may need to be updated when additional information concerning the best practices is made available through guidance from regulators or published enforcement decisions.\n\nOutside of the United States and the European Union, 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 data relating to resident individuals in data centers outside the jurisdiction. The proliferation of such laws within jurisdictions and countries in which we operate may result in conflicting and contradictory requirements.\n\n28\n\n[Table of Contents](#TOC)\n\nIn order for us to maintain or become compliant with applicable laws as they come into effect, it may require substantial expenditures on resources to continually evaluate our policies and processes and adapt to new requirements that are or become applicable to us. Complying with any additional or new regulatory requirements on a jurisdiction-by-jurisdiction basis would impose significant burdens and costs on our operations or may require us to alter our business practices. While we strive to protect our users’ privacy and cyber security and to comply with material data protection laws and regulations applicable to us, it is possible that our practices are, and will continue to be, inconsistent with certain regulatory requirements. Our international business expansion could be adversely affected if these laws and regulations are interpreted or implemented in a manner that is inconsistent with our current business practices or that requires changes to these practices. In particular, the large amount of user data generated on and collected from our products has been, and will continue to be, critical for our business model, including to enable us to understand our users’ interests and demands for content, improve their user experience with our products and services and deliver targeted advertising. Therefore, if these laws and regulations materially limit our ability to collect and use our users’ data, our ability to continue our current operations without modification, develop new services or features of the products and expand our user base will be impaired. Any of our failure or perceived failure to comply with applicable data privacy laws and regulations, including in relation to the collection of necessary end-user consents and providing end-users with sufficient information with respect to our use of their personal data may result in fines and penalties imposed by regulators, governmental enforcement actions (including enforcement orders requiring us to cease collecting or processing data in a certain way), litigation and/or adverse publicity. Proceedings against us, regulatory, civil or otherwise, could force us to spend money and devote resources in the defense or settlement of, and remediation related to, such proceedings. Furthermore, any of the foregoing consequences could damage our reputation and discourage current and potential users from using our mobile applications. In addition, as users’ expectations and regulatory attitudes with respect to personal privacy and cyber security continue to evolve, future regulations on the extent to which personal information and user-generated data we are allowed to use or share with third parties may adversely affect our ability to leverage and derive economic value from the data that our users generate and share with us, which may limit our ability to carry out targeted advertising and thereby result in a decline in the mobile advertising revenues upon which our revenues are dependent.\n\nIf we fail to obtain or maintain the requisite licenses and approvals, or if we are required to apply for new licenses and approvals which are time-consuming or costly to obtain, our business and operating results may be materially and adversely affected.\n\nThe internet industry, including the mobile internet industry, is highly regulated in mainland China. The VIEs are required to obtain and maintain applicable licenses and approvals from different regulatory authorities in order to provide their current services to our users. If we fail to obtain or maintain any of the required licenses or approvals, make any necessary filings, or otherwise fail to comply with the applicable laws and regulations, we may be subject to various penalties, such as confiscation of revenues that were generated through the unlicensed internet or mobile activities, the imposition of fines and the discontinuation or restriction of our operations. Any such penalties may disrupt our business operations and materially and adversely affect our business, financial condition and operating results.\n\n29\n\n[Table of Contents](#TOC)\n\nThe operations of our game mobile apps may require us to apply for additional license and permits. Under regulations issued by the State Administration of Press, Publication, Radio, Film and Television, the publication of each online game requires its approval. As of the date of this annual report, we have not obtained approvals from the State Administration of Press, Publication, Radio, Film and Television or its successor for all of the online games we operate in mainland China. After the re-organization of State Administration of Press, Publication, Radio, Film and Television, we shall apply with the National Administration of Press and Publication for the approvals for publishing our games. In the past years since April 2018, as the National Administration of Press and Publication at the national level has delayed and suspended its review and issuance of publication for online games from time to time, it is difficult to obtain game publication codes in a timely manner or at all. Any delay in game registration or obtaining game publication codes could negatively affect the operation results of our games. Pursuant to the Notice to Adjust the Scope of Online Culture Operation Permit Approval and to Further Regulate the Approval Work released in May 2019, the Ministry of Culture and Tourism no longer assumes the responsibility to regulate online game industry, and the provincial counterparts of the Ministry of Culture and Tourism would no longer grant Online Culture Operation Permit covering the business scope of using the information network to operate online games. However, the licenses granted by the Ministry of Culture and Tourism before this notice will remain valid until the expiration dates of these licenses. On December 22, 2023, the National Press and Publication Administration promulgated the draft Measures for the Administration of Online Games, which provide that the national publishing regulatory authority oversees online game publishing activities nationwide while local authorities at county level and above are responsible for supervision within their respective administrative regions. As of the date of this annual report, the draft has not been formally adopted. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Online Games.” If we are unable to obtain the online culture operating license, the internet publication service license and publication codes, our ability to introduce, launch, operate and promote new games or games may be adversely affected, and our financial condition and operating results could be adversely affected. In addition, we cannot assure you that we can obtain the approvals from the National Administration of Press and Publication or complete the filings with the governmental authorities for all games we operate in a timely manner or at all, which could adversely and materially impact our ability to introduce new games, the timetable to launch new games and our business growth. If any future regulations or restrictive rules in this regard are promulgated, we are not sure whether these rules or regulations would negatively impact our operations, including by increasing our compliance costs, implementing additional requirements to obtain licenses or permits, and negatively impacting our ability to launch and operate new games.\n\nMoreover, the provisions of online games and online literature are deemed to be internet publication activities. According to the Administrative Measures for Internet Publication Services jointly issued by the State Administration of Press, Publication, Radio, Film and Television and the Ministry of Industry and Information Technology in 2016, we may be required to obtain an internet publication service license for the provisions of online games and online literature. According to the Notice on Administration of Mobile Game Publishing Services issued by the State Administration of Press, Publication, Radio, Film and Television in 2016, we may be required to obtain publishing and authorization codes for the online games. As of the date of this annual report, we have not obtained the internet publication service license or the publication codes for all of the online games we operate in mainland China. In the event of failure to obtain these licenses and approvals, an operator may face heavy penalties, such as being ordered by the regulatory authority to shut down services and delete all relevant internet publications. The regulatory authority may also confiscate all of such operator’s illegal income as well as major equipment and specialized tools used in illegal publishing activities. If the illegal income exceeds RMB10,000, such operator may face a fine of five to ten times of such illegal income; and if the illegal income is less than RMB10,000, such operator may face a fine of less than RMB50,000. Such operator may also bear civil liability if its operation has infringed on other persons’ legal rights and interests. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Internet Publication Services.”\n\n30\n\n[Table of Contents](#TOC)\n\nOn October 25, 2019, the National Administration of Press and Publication issued the Notice on Preventing Minor’s Addiction to Online Games, which requires all online gamers to register accounts with their valid identity information and all game companies to stop providing game services to users who fail to do so. On October 16, 2023, the Standing Committee of the National People’s Congress issued the Regulations on the Protection of Minors in Cyberspace, effective on January 1, 2024, and on April 26, 2024, the Standing Committee of the National People’s Congress issued the Law of the PRC on the Protection of Minors (2024 Revision), effective on April 26, 2024. These laws and regulations require online games service providers to request minors to register and log into online games with their valid identity information. In addition, pursuant to the Notice of on Further Strengthening Regulation to Effectively Prevent Online Gaming Additions among Minors, which became effective on September 1, 2021, all online games are required to be connected to the online game anti-fatigue compliance system and a real-name registration system of the National Press and Publication Administration of China. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Related to Anti-fatigue System, Real-name Registration System and Parental Guardianship Project.” We are compliant with the current real-name registration system requirements for all our mobile games with in-app purchase functions. However, we have yet achieved such compliance for our other mobile games. The PRC government may further tighten the real-name registration requirements or require us to implement a more thorough compulsory real-name registration system for all users on our platform in the future, in which case we will need to upgrade our system or purchase services from third-party service providers and incur additional costs in relation thereto. If we were required to implement a more rigid real-name registration system for users on our platform, potential users may be deterred from registering with our platform, which may in turn negatively affect the growth of our user base and business prospects.\n\nOur business is subject to complex and evolving laws, regulations and governmental policies in China and other countries and regions where we have business. Many of these laws, regulations and governmental policies are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, increased cost of operations, or declines in our growth or engagement, financial performance, or otherwise harm our business.\n\nWe are subject to a variety of laws and regulations that involve matters important to or may otherwise impact our business, including, but not limited to, privacy and data protection, rights of publicity, content, intellectual property, advertising, marketing, distribution, cyber security, data retention and deletion, national security, electronic contracts and other communications, competition, consumer protection, telecommunications, taxation, and economic or other trade prohibitions or sanctions.\n\nBecause our products and services are used worldwide, one or more other jurisdictions may claim that we are required to comply with their laws based on the location of our offices and staff, commercial operations, equipment or our users. Foreign laws and regulations can impose different obligations or be more restrictive than those in the PRC. It may be difficult to determine what actions or omissions may be deemed to be violations of applicable laws and regulations in certain circumstances.\n\nPRC and foreign laws and regulations are constantly evolving and can be subject to significant change from time to time. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving mobile internet industry in which we operate, and may be interpreted and applied inconsistently from country to country and inconsistently with our current policies and practices. New laws and regulations may require us to obtain new license and permits, or take certain actions that may adversely affect the industry that we operate in and our business operations. Complying with new laws and regulations could cause us to incur substantial costs or require us to change our business practices in a manner materially adverse to our business. There can be no assurance that we will not be found in violation of any future laws and regulations or violation of any of the laws and regulations currently in effect due to changes in the authorities’ implementation or interpretation of such laws and regulations.\n\nIf we fail to timely address all the change in policy or to obtain and maintain approvals, licenses or permits required for our business, or to comply with laws and regulations, we could be subject to liabilities, fines, penalties and operational disruptions, or we could be required to modify our business model, which could materially and adversely affect our growth and financial performance, including, but not limited to, our profitability, the trading price of our listed securities and our valuation. See also “—Risks Relating to Our Business—If we fail to obtain or maintain the requisite licenses and approvals, or if we are required to apply for new licenses and approvals which are time-consuming or costly to obtain, our business and operating results may be materially and adversely affected.”\n\n​\n\n31\n\n[Table of Contents](#TOC)\n\nIf we fail to prevent security breaches, cyber-attacks or other unauthorized access to our systems or our users’ data, we may be exposed to significant consequences, including legal and financial exposure and loss of users, and our reputation, business and operating results may be materially and adversely affected.\n\nWe collect, store, transmit and process a large volume of personal and other sensitive data generated by our users through their interactions with our products. Although we have taken various security measures and adopted robust internal policies to protect our users’ personal privacy and cyber security, we may nevertheless be exposed to risks of security breaches or unauthorized access to or cyber-attacks on our systems or the data we store. Given the size of our user base, and the types and volume of personal data on our systems, we believe that we may be a particularly attractive target for security breaches and cyber-attacks. Our efforts to protect our data may be unsuccessful due to software “bugs,” system errors or other technical deficiencies, mistakes or malfeasance of our employees or contractors, vulnerabilities of our vendors and service providers, or other cyber security-related vulnerabilities. Any failure to prevent or mitigate security breaches, cyber-attacks or other unauthorized access to our systems or disclosure of our users’ data, including personal information, could result in loss or misuse of such data, interruptions to the services we provide, diminished user experience, loss of user confidence and trust in our products, impairment of our network and technological infrastructure, and harm to our reputation and business, significant legal and financial exposure and potential lawsuits brought by private individuals or regulators. We have invested and will continue to devote resources to maintain strong security protections that shield our systems and our users’ data against bugs, theft, misuse or security vulnerabilities or breaches. Although we have developed systems and processes that are designed to prevent and detect security breaches and protect our users’ data, we cannot guarantee that such measures will be sufficient defenses against the evolving techniques used to obtain unauthorized access, disable or degrade services or sabotage systems. In addition, as our data centers and servers are dispersed around the world, we may incur significant costs in protecting them against, or remediating, security breaches and cyber-attacks.\n\nOur products and internal systems rely on software that is highly technical, and if it contains undetected errors or vulnerabilities, our business could be adversely affected.\n\nOur products and internal systems rely on numerous proprietary and licensed software that is highly technical and complex. In addition, our products and internal systems depend on the ability of certain software to encrypt, store, retrieve, process, and manage large amounts of data. The software on which we rely now or in the future may contain undetected errors, bugs, or vulnerabilities that may not be discovered until after the source code is released and examined. Errors, vulnerabilities, or other design defects within the software on which we rely may result in a negative experience for users of our products, delay product introductions or enhancements, compromise our ability to protect the data of our users and/or our intellectual property or lead to reductions in our ability to provide some or all of our services. In addition, any errors, bugs, vulnerabilities, or defects discovered in the software on which we rely, and any associated degradations or interruptions of service, could result in damage to our reputation, loss of users, loss of revenue, or liability for damages, any of which could materially and adversely affect our business and operating results.\n\nThe industry in which our business operates is highly competitive. If we fail to compete effectively, our business will suffer.\n\nWe face intense competition in every aspect of our business, including competition for users, usage time, advertising customers, technology, and highly skilled employees. Our portfolio products compete with applications of the same or a similar kind. Our Fengdu Novel competes with other leading free online literature applications in the Chinese market including Fanqie Novel and Qimao Novel. Our Readict competes with other online literature applications in the global market including Goodnovel and Dreame. Our mobile game products such as Hey Beauty and Merge Lover compete primarily with other mobile games developed by companies such as WebEye and Magic Tavern. In addition, we compete with all major internet companies for user attention and advertising spend.\n\n32\n\n[Table of Contents](#TOC)\n\nWe compete with other developers of mobile applications for users, usage time and advertising customers on the basis of quality, features, availability and ease of use of products and services, and the number and quality of advertising distribution channels. We also compete with other developers for talented employees with technological expertise that is crucial for the sustained development of successful products and services. Our competitors may operate with more efficient business models and cost structures. They may prove more adaptable to new technological and other market developments than we are. Many of our competitors are larger and more established companies and may have significantly more financial, technological, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sales and support of their products and services. They may allow our competitors to respond to new or emerging technologies and changes in market requirements better than we can. Our competitors may also develop products, features, or services that are similar to ours or that achieve greater market acceptance. These products, features, and services may undertake more far-reaching and successful product development efforts or marketing campaigns. As a result, our competitors may acquire and engage users at the expense of our user growth or engagement, which may seriously harm our business. If we cannot effectively compete, our user engagement may decrease, which could make us less attractive to users, advertisers and seriously harm our business and have a material and adverse impact on our business, operating results and growth potential.\n\nUser growth and engagement depend upon effective interoperation of our products with mobile devices, operating systems and standards that we do not control.\n\nOur products and services are available across a variety of mobile devices and mobile operating systems. In order to deliver high quality products and services to a broad spectrum of mobile internet users, it is important for our products and services to work well with a range of mobile devices, operating systems, networks and standards that we do not control, including Android and iOS operating systems. Any changes in such devices or operating systems that degrade the functionality of our products and services would affect our users’ experience with our products. If we fail to develop relationships with the key participants in the mobile internet industry and mobile advertising industry, or if we fail to maintain the effective interoperation of our products and services with these mobile devices, operating systems, networks and standards, our user growth and user engagement could be harmed, and our business and operating results could be adversely affected.\n\nAny significant decline in the overall popularity of the Android or iOS ecosystem or devices could materially and adversely affect the demand for, and revenues generated from, our mobile applications. There can be no assurance that these operating systems will grow in the future and at what growth rate. Any other operating system for mobile devices may replace the existing operating systems and decrease their popularity, especially considering the constantly evolving nature of the mobile internet industry. To the extent that our mobile applications continue to mainly support Android devices and iOS devices, our mobile business could be vulnerable to any decline in popularity of these devices and their operating systems. In addition, any changes, bugs, or technical issues in these operating systems may degrade our products’ functionality and limit our ability to deliver, target, or measure the effectiveness of ads, or to charge fees related to our delivery of ads, which may have an adverse impact on our business and operating results.\n\n33\n\n[Table of Contents](#TOC)\n\nWe may be held liable for information or content displayed on, distributed by, retrieved from or linked to the mobile applications integrated into our products, which may adversely impact our brand image and materially and adversely affect our business and operating results.\n\nWe may display third-party content, such as videos, pictures, books, articles and other works, on our mobile applications without the explicit consent from such third party, and we may further explore market opportunities in the content-related business. Our users may misuse our products to disseminate content that contains inappropriate, fraudulent or illegal information or that infringes the intellectual property rights of third parties. We have implemented control measures and procedures to detect and block inappropriate, fraudulent or illegal content uploaded to or disseminated through our products, particularly those that violate our user agreements or applicable laws and regulations. However, such procedures may not be sufficient to block all such content due to the large volume of third-party content. Despite the procedures and measures we have taken, if the content displayed on our products are found to be fraudulent, illegal or inappropriate, we may suffer a loss of users and damage to our reputation. In response to any allegations of fraudulent, illegal or inappropriate activities conducted through our mobile applications or any negative media coverage about us, government authorities may intervene and hold us liable for non-compliance with laws and regulations concerning the dissemination of information on the internet and subject us to administrative penalties or other sanctions, such as requiring us to restrict or discontinue certain features and services provided by our mobile applications or to temporarily or permanently disable such mobile applications. If any of such events occurs, our reputation and business may suffer and our operating results may be materially and adversely affected.\n\nWe may not be able to prevent unauthorized use of our intellectual property, which could harm our business and competitive position.\n\nWe regard our patents, copyrights, trademarks, trade secrets, and other intellectual property as critical to our business. Unauthorized use of our intellectual property by third parties may adversely affect our business and reputation. We rely on a combination of intellectual property laws and contractual arrangements to protect our proprietary rights. It is often difficult to register, maintain, and enforce intellectual property rights in countries with less developed regulatory regimes or inconsistent and unreliable enforcement mechanisms. Sometimes laws and regulations are subject to interpretation and enforcement and may not be applied consistently due to the lack of clear guidance on statutory interpretation. In addition, our contractual agreements may be breached by our counterparties, and there may not be adequate remedies available to us for any such breach. Accordingly, we may not be able to effectively protect our intellectual property rights or to enforce our contractual rights in China and other jurisdictions in which we operate. Detecting and preventing any unauthorized use of our intellectual property is difficult and costly and the steps we have taken may be inadequate to prevent infringement or misappropriation of our intellectual property. In the event that we resort to litigation to enforce or protect our intellectual property rights, such litigation could result in substantial costs and a diversion of our managerial and financial resources. We can provide no assurance that we will prevail in such litigation. For a detailed description of such a litigation, see “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” In addition, our trade secrets may be leaked or otherwise become available to, or be independently discovered by, our competitors.\n\nWe may be subject to intellectual property infringement lawsuits which could be expensive to defend and may result in our payment of substantial damages or licensing fees, disruption to our product and service offerings, and reputational harm.\n\nThe success of our business relies on the quality of our products, which in turn depends on the underlying software and related technology, such as big data analytics. The protection of such software and related technologies primarily relies on intellectual property rights including patents and trade secrets. Meanwhile, for the purpose of our business expansion, we may from time to time display third-party content, such as videos, pictures, books, articles and other works, on our mobile applications without acquiring the explicit consent from such third party. Third parties, including our competitors, may assert claims against us for alleged infringements of their patents, copyrights, trademarks, trade secrets and internet content.\n\n34\n\n[Table of Contents](#TOC)\n\nThe lengthy application procedures of software-related patents may lead to uncertainty on our intellectual property rights to our internally developed software because it increases the likelihood that there are pending patent applications whose priority dates pre-date the development of our own software that is identical or substantially similar to the software subject of the pending patent application. We have been subject to patent disputes, and expect that we may increasingly be subject to patent infringement claims as our products and monetization model expand in market share, scope and complexity. Claims have been threatened and brought against us for alleged copyright or trademark infringements based on the nature and content of information that we or third parties, including our users, generated and posted in our products. In addition, we may in the future be subject to actions alleging that certain content we have generated or third-party content that we have made available within our products and services violates the applicable laws in China or other jurisdictions.\n\nIntellectual property claims against us, whether meritorious or not, are time consuming and costly to resolve, could divert management attention away from our daily business, could require changes of the way we do business or develop our products, could require us to enter into costly royalty or licensing agreements or to make substantial payments to settle claims or satisfy judgments, and could require us to cease conducting certain operations or offering certain products in certain areas or generally. We do not conduct comprehensive patent searches to determine whether the technologies used in our products infringe upon patents held by others. In addition, product development is inherently uncertain in a rapidly evolving technological environment in which there may be numerous patent applications pending, many of which are confidential when filed, with regard to similar technologies. While we believe that our products do not infringe in any material respect upon any intellectual property rights of third parties, we cannot be certain that this is the case.\n\nIn addition, in any potential dispute involving our patents or other intellectual property, our advertising customers and business partners could also become the target of litigation. We have certain contractual obligations to indemnify our advertising customers and the mobile device manufacturers that pre-install our products on their devices for liability that they may incur based on third-party claims of intellectual property infringement for the use of our products or technology. Many of our collaboration contracts with mobile device manufacturers provide for a cap on our indemnity obligations. In addition, in the event of any such claims, our advertising customers or business partners may decide not to use our products in the future, which could harm our financial condition and operating results.\n\nFinally, we may also face infringement claims from the employees, consultants, agents and outside organizations we have engaged to develop our technology. While we have sought to protect ourselves against such claims through contractual means, there can be no assurance that such contractual provisions are adequate, and any of these parties might claim full or partial ownership of the intellectual property in the technology that they were engaged to develop for us.\n\n35\n\n[Table of Contents](#TOC)\n\nPending or future litigation could have a material and adverse impact on our financial condition and operating results.\n\nWe have been, and may continue to be, subject to lawsuits brought by our competitors, individuals or other entities against us. For example, in June 2020, a mobile device manufacturer sued us for unfair competition, alleging that one of our mobile applications had interfered with the normal use of their devices by ways of pop-up advertisements, and claimed for stopping the act and compensation of RMB4,900,000. The first-instance judgment was made in March 2021, which ordered the suspension of pop-up advertisements and awarded RMB3,000,000 to the plaintiff. After filing an appeal, we entered into a settlement agreement with the plaintiff, pursuant to which we need to provide compensation to the plaintiff of RMB1,485,955. We may also in the future be involved in legal proceedings between us and the mobile device manufactures who had contractual arrangements with us with respect to the pre-installation of our products on their mobile devices. In addition, we have been involved in lawsuits brought by our competitors alleging the infringement of intellectual property from time to time. See “—We may be subject to intellectual property infringement lawsuits which could be expensive to defend and may result in our payment of substantial damages or licensing fees, disruption to our product and service offerings, and reputational harm.”\n\nWhere we can make a reasonable estimate of the liability relating to pending litigation against us and can determine that an adverse liability resulting from such litigation is probable, we record a related contingent liability. As additional information becomes available, we assess the potential liability and revise estimated liability as appropriate. However, due to the inherent uncertainties of litigation, the amount of our estimated liability may be inaccurate, in which case our financial condition and results of operation may be adversely affected. In addition, the outcomes of actions we institute may not be successful or favorable to us. Lawsuits against us may also generate negative publicity that significantly harms our reputation, which in turn may adversely affect our user base and adverting customer base. In addition to the related cost, managing and defending litigation and related indemnity obligations can significantly divert our management’s attention from operating our daily business. We may also need to pay damages or settle lawsuits with substantial amounts of cash, which may adversely affect our cash flow and financial conditions. While we do not believe that any currently pending proceedings are likely to have a material adverse effect on our business, financial condition, results of operations and cash flows, if there were adverse determinations in legal proceedings against us, we could be required to pay substantial monetary damages or to materially alter our business practices, which could have an adverse effect on our financial condition and results of operations and cash flows.\n\nSome of our mobile applications contain open source software, which may pose risks to our proprietary software.\n\nWe use open source software in our products and services and expect to continue to use open source software in the future. The terms of many open source licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that such licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to sell or distribute our mobile applications. Additionally, we may from time to time face threats or claims from third-parties claiming ownership of, or demanding release of, the alleged open source software or derivative works we developed using such software, which could include our proprietary source code, or otherwise seeking to enforce the terms of the applicable open source license. These threats or claims could result in litigation and could require us to make our source code freely available, purchase a costly license or cease offering the implicated mobile applications unless and until we can re-engineer them to avoid infringement. Such a re-engineering process could require significant additional research and development resources, and we may not be able to complete it successfully. In addition to risks related to license requirements, our use of certain open source software may lead to greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or controls on the origin of the software. Additionally, because any software source code we contribute to open source projects is publicly available, our ability to protect our intellectual property rights with respect to such software source code may be limited or lost entirely, and we are unable to prevent our competitors or others from using such contributed software source code. Any of these risks could be difficult to eliminate or manage and, if not addressed, could adversely affect our business, financial condition and operating results.\n\n36\n\n[Table of Contents](#TOC)\n\nPotential issues in the adoption and use of artificial intelligence in our product offerings may result in reputational harm or liability.\n\nWe are building artificial intelligence, or AI, into many of our product offerings. We employ AI generated content tools that use machine learning algorithms to create content automatically in mobile game art design and creating novel outlines. We have also developed an AI and data-driven system to enable the authors on our online literature platform to produce more suitable content for our users and continually adapt to changing demand based on data feedback. As with many disruptive innovations, AI presents risks and challenges that could affect its adoption, and, therefore, our business. AI algorithms may be flawed. Datasets may be insufficient or contain biased information. Our or other parties’ inappropriate or controversial data practices could impair the acceptance of our AI solutions. The use of AI generated content tools may result in copyright and other legal issues and our AI generated content related offerings may not be able to compete against that of our competitors. These deficiencies could undermine the decisions, predictions, or analysis that AI applications produce, subjecting us to legal liability, and brand or reputational harm. In addition, some AI scenarios present ethical issues. If we offer AI related products that are controversial because of their impact on human rights, privacy, employment, or other social issues, we may experience reputational harm or be exposed to liability.\n\nThe regulatory and legal framework on generative AI is evolving rapidly and may not sufficiently cover all aspects of the research, development, and application of generative AI in mainland China. Before the year of 2022, the regulations related to generative AI were also provided in other regulations and rules of Internet information services dispersedly. However, PRC government authorities have gradually accelerated the pace of legislation for generative AI related technologies including algorithm recommendation and deep synthesis recently. Since the end of 2021, PRC government authorities released the Administration Provisions on Algorithmic Recommendation of Internet Information Services and the Administrative Provisions on Deep Synthesis of Internet Information Services successively. On July 10, 2023, the Cyberspace Administration of China published the Provisional Administrative Measures for Generative Artificial Intelligence Services, effective on August 15, 2023. These measures apply to the use of generative AI that is offered to the public within the territory of China. Providers of generative AI are required to adopt measures to filter any inappropriate content created by generative AI, optimize algorithms to prevent the generation of such content, apply to the Cyberspace Administration of China for a security assessment before offering any generative AI service to the public at large, and protect data submitted by end users. A provider of generative AI that violates the requirements under these measures will be penalized in accordance with regulations, or receive warnings, be ordered to take corrective actions, suspend services, or pay fines, or be held criminally liable. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Generative AI.” However, since these laws and regulations are still relatively new and significant uncertainties exist with respect to the interpretation and implementation of such laws and regulations, we cannot assure whether we will be able to comply with the requirements of such laws and regulations in a timely manner or at all. If we are unable to obtain the necessary approvals or if we have any dispute with any third party relating to intellectual property or data security, our business operation may be adversely affected.\n\n37\n\n[Table of Contents](#TOC)\n\nA severe or prolonged downturn in the Chinese or global economy could materially and adversely affect our business and financial condition.\n\nThe global macroeconomic environment still faces numerous challenges. The growth rate of the Chinese economy has been slowing since 2010 and the Chinese population began to decline in 2022. The Federal Reserve and other central banks outside of China have raised interest rates. The Russia-Ukraine conflict, the Hamas-Israel conflict and the attacks on shipping in the Red Sea have heightened geopolitical tensions across the world. The impact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus to inflation more generally. There have also been concerns about the relationship between China and other countries which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to a wide range of issues including trade policies, treaties, government regulations and tariffs. Economic conditions in China are sensitive to global economic conditions, as well as changes in economic and political policies and the expected or perceived overall economic growth rate in China. In addition, advertising customers and their advertising and marketing budgets may be sensitive to changes in macroeconomic conditions. If macroeconomic conditions deteriorate, advertisers’ businesses may be directly hit, which may in turn lead to decreased advertising and marketing budgets. As a result, any severe or prolonged slowdown in the global or Chinese economy may materially and adversely affect our business, results of operations and financial condition.\n\nChanges in international trade policies and international barriers to trade or the escalation of trade tensions may have an adverse effect on our business.\n\nInternational trade disputes could result in tariffs and other protectionist measures that could adversely affect our business. Tariffs could increase our operating costs as well as the cost of the goods and products which could affect our customer’s discretionary spending level. In addition, any escalation in existing trade tensions or the advent of a trade war, or news and rumors of the escalation of a potential trade war, could affect consumer confidence and have a material adverse effect on our business, results of operations and, ultimately, the trading price of our securities.\n\nPolitical tensions between the United States and China have escalated due to, among other things, the COVID-19 outbreak, the PRC National People’s Congress’ passage of Hong Kong national security legislation, sanctions imposed by the U.S. Department of Treasury on certain officials of the Hong Kong Special Administrative Region and the central government of the PRC, and the executive orders issued by U.S. President in August 2020 and the new executive order issued by the U.S. President in June 2021 which sought or seek to prohibit certain transactions with, or equity investment in, certain Chinese companies and their respective subsidiaries. In addition, on December 31, 2020, the New York Stock Exchange commenced proceedings to delist securities of three major telecommunications service providers in China in light of an executive order prohibiting any transaction in publicly traded securities of certain China-based companies by any U.S. person. We have been closely monitoring policies in the United States designed to restrict certain Chinese companies from supplying or operating in the U.S. market. However, it remains unclear what additional actions, if any, will be taken by the U.S. or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the United States, tax policy related to international commerce, or other trade matters. If any new tariffs, legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or, in particular, if the U.S. government takes retaliatory trade actions due to the recent U.S.-China trade tensions, such changes could have an adverse effect on our business, financial condition and results of operations.\n\nLikewise, we are monitoring policies in the United States that are aimed at restricting U.S. persons from investing in or supplying certain Chinese companies. The United States and various foreign governments have imposed controls, license requirements and restrictions on the import or export of technologies and products (or voiced the intention to do so). For instance, the United States is in the process of developing new export controls with respect to “emerging and foundational” technologies, which may include certain AI and semiconductor technologies. In addition, the U.S. government may potentially impose a ban prohibiting U.S. persons from making investments in or engaging in transactions with certain Chinese companies. Measures such as these could deter suppliers in the United States and/or other countries that impose export controls and other restrictions from providing technologies and products to, making investments in, or otherwise engaging in transactions with Chinese companies. As a result, Chinese companies would have to identify and secure alterative supplies or sources of financing, while they may not be able to do so in a timely manner and at commercially acceptable terms, or at all. In addition, Chinese companies may have to limit and reduce their research and development and other business activities, or cease conducting transactions with parties, in the United States and other countries that impose export controls or other restrictions. Like other Chinese companies, our business, financial condition and results of operations could be adversely affected as a result.\n\n38\n\n[Table of Contents](#TOC)\n\nIf relations between China and the United States deteriorate, our business, results of operations and financial condition could be adversely affected.\n\nAt various times during recent years, the United States and China have had significant disagreements over monetary, economic, political and social issues, and future relations between these two countries may deteriorate. Changes in political conditions and changes in the state of China-U.S. relations are difficult to predict and could adversely affect our business, results of operations and financial condition. In addition, because of our extensive operations in the Chinese market, any deterioration in political or trade relations might cause a public perception in the United States or elsewhere that might cause our products to become less attractive. We cannot predict what effect any changes in China-U.S. relations may have on our ability to access capital or effectively do business in China or the United States. Moreover, any political or trade controversies between the United States and China, whether or not directly related to our business, could cause investors to be unwilling to hold or buy our securities and consequently cause the trading price of our securities to decline.\n\nOur business depends on a number of key employees, including our executive officers and other employees with key technical skills and knowledge. If we fail to hire, retain, or motivate our key employees, our business and operating results may be materially and adversely affected.\n\nWe depend on the continued contributions of our executive officers and other key employees, including those with key technological expertise, many of whom are difficult to replace. Any loss of the services of any of our senior management or other key employees could harm our business. Competition for qualified employees in and outside China is intense. Some of the companies with which we compete for experienced employees may have greater resources than we do and may be able to offer more attractive terms of employment. Our future success is dependent on our ability to attract a significant number of qualified employees and retain our existing key employees. If our key employees cease to work for us, our business may be materially and adversely affected and we may incur additional expenses to recruit, train and retain qualified personnel to replace them.\n\nAlthough we have entered into confidentiality and non-compete agreements with our key employees, our key employees may join our competitors or form a competing business. If any dispute arises between our current or former officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all. We commit significant time and other resources to training our employees, which increases their value to competitors if they subsequently leave us for our competitors.\n\nOur failure to effectively manage our growth or implement our business strategies may harm our business and operating results.\n\nManaging our growth requires allocation of valuable management time and resources, and significant expenditures. As part of our strategy, we intend to continue making investments to expand our user base, strengthen our research and development efforts, enhance our ability to deliver highly targeted content, and expand our product offering in the global market. To execute our business plan and growth strategy, we need to continually improve our operational and financial systems, procedures and controls, and hire, train, manage and maintain good relations with our employees. Continued growth could also strain our ability to maintain reliable service levels for our users, advertising customers and business partners. We have limited operational experience in managing the business at the current scale and we cannot assure you we will be able to successfully grow our user base in the future.\n\n39\n\n[Table of Contents](#TOC)\n\nFrom time to time we may conduct strategic investments and acquisitions, which may require significant management attention, disrupt our business and adversely affect our financial conditions.\n\nWe may take advantage of opportunities to invest in or acquire additional businesses, services, assets or technologies. For example, we have invested several game studios in China and overseas during the past, including Smillage, a game studio that has created popular games such as Catwalk Beauty, Truth Runner and Love Fantasy. However, we may fail to select appropriate investment or acquisition targets, or we may not be able to negotiate optimal arrangements, including arrangements to finance any acquisitions. Acquisitions and the subsequent integration of new assets and businesses into our own could require significant management attention and could result in a diversion of resources away from our existing business. Investments and acquisitions could result in the use of substantial amounts of cash, increased leverage, potentially dilutive issuances of equity securities, goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential liabilities of the acquired business. In addition, the invested or acquired assets or businesses may not generate the financial results we expect. Moreover, the costs of identifying and consummating these transactions may be significant. In addition to obtaining the necessary corporate governance approvals, we may also need to obtain approvals and licenses from government authorities for the acquisitions and investments to comply with applicable laws and regulations, which could result in increased costs and delays.\n\nWe rely on our assumptions and estimates to calculate certain key operating metrics. Any real or perceived inaccuracies in our calculations may harm our reputation and negatively affect our business.\n\nThe numbers of daily and monthly active users of our products are calculated using our internal data that has not been independently verified. While these numbers are based on what we believe to be reasonable calculations for the applicable periods of measurement, there are inherent challenges in accurately measuring usage and user engagement across our large user base. For example, we treat each mobile device or each application on a mobile device as a separate user for purposes of calculating our DAUs and MAUs, and we may not be able to distinguish individual users who use multiple applications from us or have multiple mobile devices. Accordingly, the calculations of our active users may not accurately reflect the actual number of people using our products.\n\nWe regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy. Our measures of user growth and user engagement may differ from estimates published by third parties or from similarly titled metrics used by our competitors due to differences in methodology. If our advertising customers, business partners or investors do not perceive our user metrics to be accurate representations of our user base or user engagement, or if we discover material inaccuracies in our user metrics, our reputation may be harmed and our advertising customers and business partners may be less willing to allocate their spending or resources to our products, which could negatively affect our business and operating results.\n\nOur operating results are subject to seasonal fluctuations due to a number of factors, any of which could adversely affect our business and operating results.\n\nWe are subject to seasonality and other fluctuations in our business. Revenues from our mobile advertising services, which constituted a significant portion of our revenues in 2025, are affected by seasonality in advertising spending in both international and China markets. We believe that such seasonality in advertising spending affects our quarterly results, partially resulting in the significant growth in our mobile advertising revenues between the first and the third quarters but a decline from the third quarter to the fourth quarter. Our operating results for one or more future quarters or years may fluctuate or fall below the expectations of securities analysts and investors. In such event, the trading price of the securities may fluctuate.\n\nThe successful operation of our business depends upon the performance and reliability of the internet infrastructure in China and in other countries as well as the safety of our network and infrastructure.\n\nOur growth and expansion will depend in part on the reliability of state-owned telecommunications services providers in China and similar providers in other countries in maintaining and expanding internet and telecommunications infrastructure, standards, protocols, and complementary products and services.\n\n40\n\n[Table of Contents](#TOC)\n\nAlmost all access to the internet in China is offered through China Mobile, China Unicom and China Telecom, which are under the administrative control and regulatory supervision of the Ministry of Industry and Information Technology. We rely on the internet infrastructure of China Mobile, China Unicom, and China Telecom to provide bandwidth and transmit data. Although the Chinese government has announced plans to develop China’s national information infrastructure, this infrastructure may not be developed in time or at all, and the existing internet infrastructure in China may not be able to support the continued growth of internet usage. In addition, it is unlikely that we will have access to alternative networks and services on a timely basis, if at all, in the event of any infrastructure disruption or failure.\n\nIn addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be materially and adversely affected. Furthermore, if internet access fees or other charges to internet users increase, some users may be prevented from accessing the mobile internet and thus cause the growth of mobile internet users to decrease, which may in turn adversely affect our ability to continue to expand our user base.\n\nOur IT systems and content delivery network are also vulnerable to damage or interruption as a result of fire, floods, earthquakes, power losses, telecommunication failures, undetected errors in software, computer viruses, hacking or other attempts to harm our IT systems. We may experience service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes and cybersecurity-related threats, if we fail to address these issues promptly and in a way satisfactory to our users, our user experience may be negatively affected, which in turn may have a material and adverse effect on our reputation and business.\n\nWe currently rely on Tencent Cloud and Huoshan Cloud for a majority of our computing, storage, bandwidth and other services both in and outside of China. Any transition of the cloud services to other cloud providers would be difficult to implement and will cause us to incur significant time and expense. Any significant disruption of or interference with our use of existing cloud service providers would negatively impact our operation and our business would be seriously harmed. If our users or partners are not able to access our mobile platform through Tencent Cloud and Huoshan Cloud or encounter difficulties in doing so, we may lose users, partners or revenues. The level of service provided by Tencent Cloud and Huoshan Cloud may also impact the usage of and our users’ and partners’ satisfaction with our mobile platform and could seriously harm our business and reputation. If Tencent Cloud and Huoshan Cloud experience interruptions in service regularly or for a prolonged basis, or other similar issues, our business would be seriously harmed. Hosting costs will also increase as our user base and user engagement grows and may seriously harm our business if we are unable to grow our revenues faster than the cost of utilizing the services of Tencent Cloud and Huoshan Cloud or similar service providers.\n\nUsers of our mobile applications may employ existing or new technologies to block advertisements we place, which may limit our ability to generate revenues from our advertising services.\n\nExisting or new technologies that can disable the display of our advertisements may impair the growth of our mobile advertising business. Most of our revenues are derived from fees paid to us by advertising exchange customers based on the effective price per impression, which is impacted by the number of our users’ valid clicks, conversions, impressions delivered or other measurable results. If technologies capable of blocking advertisements on our products are adopted by a significant number of our users, we may not be able to continue delivering such advertisements to our users and our revenues may decrease. In addition, advertisers may choose not to advertise on or through our products in light of the perceived use by our users of advertisement-blocking measures, which may adversely affect our business and growth prospects.\n\n41\n\n[Table of Contents](#TOC)\n\nIf we fail to detect click-through fraud, we could lose the confidence of our advertisers and our revenues may decline as a result.\n\nOur business is exposed to the risk of click-through fraud on our mobile applications. Click-through fraud occurs when a person clicks an advertisement we display for a reason other than to view the underlying content of such advertisement. If we fail to detect significant fraudulent click-throughs or otherwise are unable to prevent significant fraudulent activity, the affected advertisers may experience a reduced return on their investment in our mobile advertising services and may lose confidence in the integrity of our systems. As a result, we may have to issue refunds to our advertisers and we may be unable to retain existing advertising customers and attract new advertising customers for our advertising services, and our mobile advertising revenues may decline. In addition, affected advertisers may commence legal action against us for claims related to click-through fraud. Any such claims or similar claims, regardless of their merit, could be time-consuming and costly for us to defend against and could also adversely affect our brand and operating results.\n\nOur business emphasizes rapid innovation and prioritizes the growth in user base and cultivation of pan-entertainment products. That strategy may produce results that do not align with investors’ expectation and our stock price may be negatively affected as a result.\n\nOur growth depends on our ability to actively develop and launch new and innovative products and services. We intend to quickly adapt our products to changes in market trends and user needs, but we have no control over whether these adaptions will be well received by our users, advertising customers or business partners, and may result in unintended outcomes or consequences. We prioritize the growth in user base and cultivation of pan-entertainment products. For example, we monitor how our delivery of advertisements on our products affects our users’ experience with the products and we may decide to decrease the number of advertisements placed on our products to ensure our users’ satisfaction and retention with our products. This could result in a loss of advertising customers and negatively impact our mobile advertising revenue. Our decisions may not be consistent with the short-term expectations of investors and may not produce the long-term benefits that we expect, in which case the maintenance and growth of our user base, our relationships with advertising customers, and our business and operating results could be adversely and materially harmed.\n\nWe have granted, and may continue to grant, options, restricted shares units and other types of share-based incentive awards, which may result in increased share-based compensation expenses.\n\nWe adopted a stock incentive plan in 2012 and a share incentive plan in 2018, as amended from time to time, for the purpose of granting share-based compensation awards to our directors, officers, employees and advisors to incentivize their performance and align their interests with ours. Expenses associated with share-based compensation have affected our net income and may reduce our net income in the future, and any additional securities issued pursuant to share-based incentive awards will dilute the ownership interests of our shareholders, including holders of the ADSs. On November 6, 2018, our board of directors approved an option modification to reduce the exercise price of certain options granted under our 2012 Plan to employees. Other terms of the share options granted remain unchanged. The modification resulted in incremental compensation costs of US$ 0.3 million, which is amortized over the remaining vesting period of the modified options, ranging from 2018 to 2021. We believe the granting of share-based incentive awards is of significant importance to our ability to attract and retain key employees, and we plan to grant share-based incentive awards in the future. As a result, our share-based compensation expenses may increase, which may have an adverse effect on our results of operations.\n\n42\n\n[Table of Contents](#TOC)\n\nIf we fail to build, maintain and enhance our brands, or if we incur a disproportionate amount of expenses pursuing this effort, our business, operating results and prospects may be materially and adversely affected.\n\nWe believe that maintaining and enhancing our brand is critical to expanding our user base and number of advertising customers. We also believe that maintaining and enhancing our brand will depend largely on our ability to continue to provide useful, reliable, trustworthy, and innovative products, which we may not be able to do successfully in the future. We will also continue to experience media, legislative, or regulatory scrutiny of our decisions regarding user privacy, content, advertising, and other issues, which may adversely affect our reputation and brands. We also may fail to respond expeditiously to the sharing and uploading of objectionable content on our products and services or objectionable practices by advertising customers, or may fail to otherwise address user concerns, which could erode confidence in our brands. In addition, maintaining and enhancing our brands may require us to make substantial investments and these investments may not be successful. We promote our brand and products through online advertising networks and platforms, which primarily include AppLovin and Facebook Ads. These branding and marketing efforts may not result in increased user traffic in a cost-effective way. If we fail to successfully promote and maintain our brands or if we incur excessive expenses in this effort, our business and financial results may be adversely affected. In addition, any negative publicity in relation to our mobile applications, regardless of its veracity, could harm our brands and reputation and, in turn, our business and financial results.\n\nIf we fail to maintain an effective system of internal control, we may be unable to accurately report our operating results, meet our reporting obligations or prevent fraud.\n\nOur management has concluded that our internal control over financial reporting was effective as of December 31, 2025 in accordance with the standards established by the PCAOB. However, we and our independent registered public accounting firm identified one significant deficiency as of December 31, 2025. As defined in the standards established by the PCAOB, a “significant deficiency” is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of financial reporting.\n\nThe significant deficiency that has been identified relates to our insufficient formal risk assessment process and monitoring activities. Following the identification of the material weakness and significant deficiency, we have taken measures and plan to continue to take measures to remediate these control deficiencies. See “Item 15. Controls and Procedures—(b) Management’s Annual Report on Internal Control Over Financial Reporting.” The significant deficiency, if not remediated timely, may lead to material misstatements in our consolidated financial statements.\n\nNeither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting material weaknesses and other deficiencies in our internal control over financial reporting. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional deficiencies may have been identified.\n\nWe are subject to reporting obligations under the U.S. securities laws. The SEC adopted rules pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 requiring every public company to include a management report on such company’s internal control over financial reporting in its annual report, which contains management’s assessment of the effectiveness of our internal control over financial reporting. We ceased to be an “emerging growth company” as such term is defined under the JOBS Act since December 31, 2023. Once we cease to be a non-accelerated filer as such term is defined under Rule 12b-2 under the Exchange Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the requirements differently from us. We may be unable to timely complete our evaluation testing and any required remediation.\n\n43\n\n[Table of Contents](#TOC)\n\nDuring the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Generally, if we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our securities. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to regulatory investigations and civil or criminal sanctions.\n\nNon-compliance on the part of third parties with whom we conduct business could disrupt our business and adversely affect our financial conditions and operating results.\n\nWe may be implicated by the non-compliant or improper activities of our users, advertising customers and business partners. For example, we may be involved in litigation related to user-generated content uploaded to our mobile applications. See also “—We may be held liable for information or content displayed on, distributed by, retrieved from or linked to the mobile applications integrated into our products, which may adversely impact our brand image and materially and adversely affect our business and operating results.” Similarly, we may also be subject to disputes related to advertisements displayed on our mobile applications. Although we have adopted a comprehensive internal control and screening procedure over the content of advertisements, a third party may find advertisements displaying on our mobile applications improper or illegal, and may take actions against us over such advertisements. We incurred costs of US$1.7 million to compensate victims of the alleged illegal advertisements for our failure to supervise advertising contents displayed on our platform in compliance with PRC laws and regulations. Besides, we may be subject to disputes related to certain alleged illegal act of our customers, the advertising service fees paid by the customers to us in the course of normal advertising business may be deemed to involve illegal funds and be confiscated. A local authority had frozen our bank accounts with a total balance of US$21.7 million as of December 31, 2020 in connection with an investigation related to an alleged illegal act of certain customers in 2020, which were unfrozen in 2021.\n\nIn addition, we may be impacted by lawsuits against our business partners, such as mobile devices manufacturers that have contractual arrangements with us. Although we have no control over the design, system, network or standard of the manufacturing of smartphones by these business partners, any lawsuits against them claiming infringement of intellectual property and any cessation of handset production resulting from such lawsuits may interrupt our collaborative operations and result in the reduction of our delivery of products and services to potential users.\n\nWe lease premises and may not be able to fully control the rental costs, quality, maintenance and our leasehold interest in these premises, nor can we guarantee that we will be able to successfully renew or find suitable premises to replace our existing premises upon expiration of the existing leases.\n\nWe lease all premises used in our operations from third parties and we require the landlords’ cooperation to effectively manage the condition of such premises, buildings and facilities. In the event that the condition of the office premises, buildings and facilities deteriorates, or if any or all of our landlords fail to properly maintain and renovate such premises, buildings or facilities in a timely manner or at all, the operation of our offices could be materially and adversely affected. In addition, with respect to our leased premises, at the end of each lease term, we may need to negotiate an extension of the lease when the lease expires. If we are unable to successfully extend or renew our leases upon expiration of the current term on commercially reasonable terms or at all, we may be forced to relocate our offices, or the rental costs may increase significantly.\n\nMoreover, certain lessors have not provided us with valid ownership certificates or authorizations of sublease for our leased properties. Under PRC laws and regulations, if the lessors are unable to obtain certificate of title because such real estates were built illegally or failed to pass the inspection, such lease contracts may be recognized as void. In addition, if our lessors are not the owners of the properties and they have not obtained consents from the owners or their lessors or permits from the government authorities, our leases could be invalidated. If this occurs, we may have to renegotiate the leases with owners or parties who have the right to lease the properties, and the terms of the new leases may be less favorable to us.\n\n44\n\n[Table of Contents](#TOC)\n\nAs of the date of this annual report, we are not aware of any material claims or actions being contemplated or initiated by government authorities, property owners or any other third parties with respect to our leasehold interests in or use of such properties. However, we cannot assure you that our use of such leased properties will not be challenged. In the event that our use of properties is successfully challenged, we may be subject to fines and forced to relocate the affected operations. In addition, we may become involved in disputes with the property owners or third parties who otherwise have rights to or interests in our leased properties. We can provide no assurance that we will be able to find suitable replacement sites on terms acceptable to us on a timely basis, or at all, or that we will not be subject to liabilities resulting from third parties’ challenges on our use of such properties. As a result, our business operations may be interrupted, and our financial condition and results of operations may be adversely affected.\n\nWe have limited business insurance coverage. Any interruption of our business may result in substantial costs to us and the diversion of our resources, which could have an adverse effect on our financial condition and operating results.\n\nThere are currently limited options of insurance products available in China. Consistent with customary industry practice in China, our business insurance is limited and we do not carry business liability or disruption insurance to cover our operations. We have determined that the costs of insuring for related risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to obtain or maintain such insurance. Any uninsured damage to our systems or disruption of our business operations could require us to incur substantial costs and divert our resources, which could have an adverse effect on our financial condition and results of operations.\n\nWe face risks related to natural disasters, health epidemics.\n\nOur business could be materially and adversely affected by natural disasters, health epidemics or other public safety concerns affecting the PRC, and particularly Shanghai. Natural disasters may give rise to server interruptions, breakdowns, system failures, website or app failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware, as well as adversely affecting our ability to operate our website or apps and provide services. Our business could also be adversely affected if our employees are affected by health epidemics, such as new variants of COVID-19 or outbreaks of other diseases. In addition, our results of operations could be adversely affected to the extent that any health epidemic harms the Chinese economy in general. Our headquarters are located in Shanghai, where most of our directors and management and many of our employees currently reside. Most of our system hardware and back-up systems are hosted in facilities located in Shanghai. Consequently, if any natural disasters, health epidemics or other public safety concerns were to affect Shanghai, our operation may experience material disruptions, which may materially and adversely affect our business, financial condition and results of operations.\n\n​\n\n45\n\n[Table of Contents](#TOC)\n\n**Risks Related to Our Corporate Structure**\n\nIf the PRC government determines that the contractual arrangements constituting part of the VIE structure do not comply with PRC regulations on foreign investment in internet and other related businesses, or if these regulations or their interpretation change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.\n\nCurrent PRC laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies that engage in internet and other related businesses, including the provision of internet information services. Specifically, foreign ownership of an internet information services provider may not exceed 50%, with limited exemptions in sectors such as e-commerce. We are a company incorporated in the Cayman Islands and Shanghai Chule (CooTek) Information Technology Co., Ltd., which we refer to as Shanghai Chule or the WFOE, is our wholly owned PRC subsidiary and therefore is considered as a foreign-invested enterprise. To comply with PRC laws and regulations, we conduct our business in mainland China through the VIEs, based on a series of contractual arrangements by and among Shanghai Chule, the VIEs and their respective shareholders, and the VIEs’ subsidiaries. As a result of these contractual arrangements, we exert control over the VIEs and consolidate or combine their operating results in our financial statements under U.S. GAAP. The VIEs hold the licenses, approvals and certain key assets that are essential for our business operations. For a detailed discussion of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.”\n\nIn the opinion of our PRC counsel, JunHe LLP, based on its understanding of the PRC laws and regulations, (i) the ownership structures of the VIEs in mainland China and the PRC subsidiary that have entered into contractual arrangements with the VIEs comply with all existing PRC laws and regulations; and (ii) the contractual arrangements among our PRC subsidiary, the VIEs and their respective shareholders are valid and binding under the existing PRC laws and regulations.\n\nHowever, we are a Cayman Islands holding company with no equity ownership in the VIEs and we conduct our operations in China through (i) our PRC subsidiaries, and (ii) the VIEs with which we have maintained contractual arrangements and the VIEs’ subsidiaries. Investors in our securities thus are not purchasing equity interest in our PRC operating entities but in our Cayman Islands holding company. If the PRC government determines that contractual arrangements constituting part of the VIE structure do not comply with PRC regulatory restrictions on foreign investment in those industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations, and our securities may decline in value or become worthless if we are unable to assert our contractual control rights over the assets of the VIEs. We may not be able to repay our outstanding indebtedness, and our shares may decline in value or become worthless, if we are unable to assert our contractual control rights over the assets of our PRC affiliated entities, which contributed to 4.8% of our net revenues in 2025. Our holding company in the Cayman Islands, the VIEs, and investors of our company face uncertainties about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of the VIEs and our company as a group.\n\nOur PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules; accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel. It is uncertain whether any other new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or any of the VIEs are found in violation of any PRC laws or regulations or if the contractual arrangements among Shanghai Chule, the VIEs and their respective shareholders are determined as illegal or invalid by the PRC court, arbitral tribunal or regulatory authorities, the governmental authorities would have broad discretion in dealing with such violation, including, without limitation:\n\n●revoke our business and operating licenses;\n\n●levy fines on us;\n\n●confiscate any of our income that they deem to be obtained through illegal operations;\n\n●require us to discontinue or restrict operations;\n\n●restrict our right to collect revenues;\n\n46\n\n[Table of Contents](#TOC)\n\n●block our mobile applications;\n\n●require us to restructure the operations in such a way as to compel us to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and assets;\n\n●impose additional conditions or requirements with which we may not be able to comply; or\n\n●take other regulatory or enforcement actions against our company that could be harmful to our business.\n\nThe imposition of any of these penalties may result in a material and adverse effect on our ability to conduct the business. In addition, if the imposition of any of these penalties causes us to lose the rights to direct the activities of the VIEs or the right to receive their economic benefits, we would no longer be able to consolidate the VIEs. We do not believe that any penalties imposed or actions taken by the PRC government would result in the liquidation of our company, Shanghai Chule, or the VIEs.\n\nAlthough we believe we, our PRC subsidiaries and the VIEs comply with current PRC laws and regulations, we cannot assure you that the PRC government would agree that our contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. The PRC government has broad discretion in determining rectifiable or punitive measures for non-compliance with or violations of PRC laws and regulations. If the PRC government determines that we or the VIEs do not comply with any applicable laws, it could revoke the VIEs’ business and operating licenses, require the VIEs to discontinue or restrict the VIEs’ operations, restrict the VIEs’ rights to collect revenues, block the VIEs’ websites, require the VIEs to restructure operations, impose additional conditions or requirements with which the VIEs may not be able to comply, impose restrictions on the VIEs’ business operations or on their customers, or take other regulatory or enforcement actions against the VIEs that could be harmful to their business. Any of these or similar occurrences could significantly disrupt our or the VIEs’ business operations or restrict the VIEs from conducting a substantial portion of their business operations, which could materially and adversely affect the VIEs’ business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of any of the VIEs that most significantly impact its economic performance, and/or our failure to receive the economic benefits from any of the VIEs, we may not be able to consolidate these entities in our consolidated financial statements in accordance with U.S. GAAP, and our securities may decline in value or become worthless.\n\nWe rely on contractual arrangements with the VIEs and their respective shareholders for our operations in mainland China, which may not be as effective in providing operational control as direct ownership.\n\nDue to the PRC restrictions or prohibitions on foreign ownership of internet and other related businesses in mainland China, we operate our business in mainland China through the VIEs, in which we have no ownership interest. We rely on a series of contractual arrangements with the VIEs and their respective shareholders, including the powers of attorney, to control and operate their business.\n\nOur ability to control the VIEs depends on the powers of attorney, pursuant to which Shanghai Chule can vote on all matters requiring shareholder approval in the VIEs.\n\nWe believe these powers of attorney are legally enforceable but may not be as effective as direct equity ownership. These contractual arrangements are intended to provide us with effective control over the VIEs and allow us to obtain economic benefits from them. See “Item 4. Information on the Company—C. Organizational Structure” for further details.\n\n47\n\n[Table of Contents](#TOC)\n\nAlthough we have been advised by our PRC counsel, JunHe LLP, that the contractual arrangements among our PRC subsidiary, the VIEs and their respective shareholders are valid and binding under existing PRC laws and regulations, these contractual arrangements may not be as effective in providing control over the VIEs as direct ownership. If the VIEs or their shareholders fail to perform their respective obligations under the contractual arrangements, we may incur substantial costs and expend substantial resources to enforce our rights. All of these contractual arrangements are governed by and interpreted in accordance with PRC laws, and disputes arising from these contractual arrangements will be resolved through arbitration in mainland China. Such disputes do not include claims arising under the United States federal securities laws and therefore these arbitration provisions do not prevent you from pursuing claims arising under the United States federal securities laws. See “—Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.” There are very few precedents and little official guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC law. There remain significant uncertainties regarding the ultimate outcome of arbitration should legal action become necessary. These uncertainties could limit our ability to enforce these contractual arrangements. In addition, arbitration awards are final and can only be enforced in courts in mainland China through arbitration award recognition proceedings, which could cause additional expenses and delays. In the event we are unable to enforce these contractual arrangements or we experience significant delays or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over our affiliated entities and may lose control over the assets owned by the VIEs. As a result, we may be unable to consolidate the VIEs in our consolidated financial statements, our ability to conduct our business may be negatively affected, and our business operations could be severely disrupted, which could materially and adversely affect our results of operations and financial condition.\n\nAny failure by the VIEs or their shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.\n\nIf the VIEs or their shareholders fail 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 law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if the shareholders of the VIEs were to refuse to transfer their equity interest in the VIEs to us or our designee when we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, we may have to take legal actions to compel them to perform their contractual obligations.\n\nAll the agreements under our contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in mainland China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. See “—Risks Related to Doing Business in China—Uncertainties with respect to the PRC legal system could adversely affect us.” Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC law, and as a result it may be difficult to predict how an arbitration panel would view such contractual arrangements. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Additionally, under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in courts in mainland China through arbitration award recognition proceedings, which would require additional expenses and delay.\n\nThe VIEs hold certain assets that are important to our business operations. Under our contractual arrangements, the shareholders of the VIEs may not voluntarily liquidate the VIEs or approve them to sell, transfer, mortgage or dispose of their assets or legal or beneficial interests exceeding certain threshold in the business in any manner without our prior consent. However, in the event that the shareholders breach this obligation and voluntarily liquidate the VIEs, or the VIEs declare bankruptcy, or all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business operations, which could materially and adversely affect our business, financial condition and results of operations. Furthermore, if the VIEs undergo a voluntary or involuntary liquidation proceeding, their shareholders or unrelated third-party creditors may claim rights to some or all of their assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.\n\n48\n\n[Table of Contents](#TOC)\n\nContractual arrangements we have entered into with the VIEs and their respective shareholders may be subject to scrutiny by the PRC tax authorities. A finding that we owe additional taxes could significantly reduce our consolidated net income and the value of your investment.\n\nPursuant to applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We may be subject to adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among our PRC subsidiary, the VIEs and their shareholders are not on an arm’s length basis and therefore constitute favorable transfer pricing. As a result, the PRC tax authorities could require that the VIEs adjust its taxable income upward for PRC tax purposes. Such an adjustment could adversely affect us by increasing the VIEs’ tax expenses without reducing the tax expenses of our PRC subsidiary, subjecting the VIEs to late payment fees and other penalties for under-payment of taxes, and resulting in our PRC subsidiary’s loss of its preferential tax treatment. Our consolidated results of operations may be adversely affected if the VIEs’ tax liabilities increase or if it is subject to late payment fees or other penalties.\n\nIf the chops of our PRC subsidiary, the VIEs, are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised.\n\nIn mainland China, a company chop or seal serves as the legal representation of the company towards third-parties even when unaccompanied by a signature. Each legally registered company in mainland China is required to maintain a company chop, which must be registered with the local Public Security Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes. The chops of our PRC subsidiary, the VIEs are generally held securely by personnel we designate or approve in accordance with our internal control procedures. To the extent those chops are not kept safe, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so.\n\nThe shareholders of the VIEs may have potential conflicts of interest with us, which may materially and adversely affect our business.\n\nThe shareholders of certain VIEs include Karl Kan Zhang, Susan Qiaoling Li, Michael Jialiang Wang, Jim Jian Wang and Haiyan Zhu. Karl Kan Zhang and Susan Qiaoling Li are our co-founders, directors and executive officers. Michael Jialiang Wang and Jim Jian Wang are former directors of our company. Haiyan Zhu is one of our early investors.\n\nConflicts of interest may arise between the roles of these persons as shareholders, directors or officers of our company and as shareholders of the VIEs. We rely on these individuals to abide by the laws of the Cayman Islands, which provide that our directors and officers owe a fiduciary duty to our company to act in good faith and in the best interest of our company and not to use their positions for personal gain. The shareholders of the VIEs have executed powers of attorney to appoint Shanghai Chule, our PRC subsidiary, or a person designated by Shanghai Chule to vote on their behalf and exercise voting rights as shareholders of the VIEs. We cannot assure you that when conflicts arise, shareholders of the VIEs will act in the best interest of our company or that conflicts will be resolved in our favor. If we cannot resolve any conflicts of interest or disputes between us and these shareholders, we would have to rely on legal proceedings, which may be expensive, time-consuming and disruptive to our operations. There is also substantial uncertainty as to the outcome of any such legal proceedings.\n\nWe may rely on dividends paid by our PRC subsidiary to fund cash and financing requirements. Any limitation on the ability of our PRC subsidiary to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of the ADSs and our ordinary shares.\n\nWe are a holding company, and we may rely on dividends to be paid by our PRC subsidiary for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to the holders of the ADSs and our ordinary shares and service any debt we may incur. If our PRC subsidiary incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.\n\n49\n\n[Table of Contents](#TOC)\n\nUnder PRC laws and regulations, our wholly owned subsidiary in the PRC, Shanghai Chule, may pay dividends only out of its accumulated 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 after-tax profits each year, after making up previous years’ accumulated losses, if any, to fund certain statutory reserve funds, until the aggregate amount of such a fund reaches 50% of its registered capital. The PRC company could distribute the remaining after-tax profits after making up losses and funding reserve funds in accordance with the provisions of the PRC Company Law.\n\nAny limitation on the ability of our wholly owned PRC subsidiary 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. See also “—Risks Related to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC ‘resident enterprise,’ which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.”\n\nSubstantial uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure and business operations.\n\nThe National People’s Congress approved the Foreign Investment Law on March 15, 2019, and the State Council approved the Regulation on Implementing the Foreign Investment Law on December 12, 2019, effective from January 1, 2020. The Supreme People’s Court of China issued a judicial interpretation on the Foreign Investment Law on December 26, 2019, effective from January 1, 2020, to ensure fair and efficient implementation of the Foreign Investment Law. According to this judicial interpretation, courts in mainland China shall not, among other things, support contracted parties to claim foreign investment contracts in sectors not on the Special Administrative Measures (Negative List) for Access to Foreign Investment (2024 Revision) as void because the contracts have not been approved or registered by administrative authorities. The Foreign Investment Law grants national treatment to foreign invested enterprises, except for those operating in “restricted” or “prohibited” industries in the “negative list,” where if a foreign invested enterprise proposes to conduct business in an industry subject to foreign investment “restrictions” in the “negative list,” the foreign invested enterprise must go through a pre-approval process with the Ministry of Commerce. The internet content service, internet audio-visual program services and online culture activities that we conduct through the VIEs are subject to foreign investment restrictions set forth in this negative list. The Foreign Investment Law and the Regulation on Implementing the Foreign Investment Law embody 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.\n\nHowever, uncertainties still exist in relation to their interpretation. For instance, under the Foreign Investment Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entities in mainland China. Though it 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 the future. 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 State Council to provide for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether our contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations. 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.\n\n50\n\n[Table of Contents](#TOC)\n\n**Risks Related to Doing Business in China**\n\nRegulatory developments in mainland China may subject us to additional regulatory review and disclosure requirement, expose us to government interference, or otherwise restrict our ability to offer securities and raise capitals outside China, all of which could materially and adversely affect our business and the value of our securities.\n\nAs substantially all of our daily operations are conducted in mainland China, we are subject to PRC laws relating to, among others, cyber security and restrictions over foreign investments in value-added telecommunications services. Specifically, 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 provided by our users. These PRC laws apply not only to third-party transactions, but also to transfers of information among us, our PRC subsidiary and the VIEs, and other parties with which we have commercial relations. These 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.\n\nThe regulatory developments in mainland China, in particular with respect to restrictions on China-based companies raising capital offshore, including through the variable interest entities structure, or the VIE structure, and the government-led cyber security reviews of certain companies with the VIE structure, may lead to additional regulatory review in mainland China over our financing and capital raising activities in the United States. In addition, we may become subject to industry-wide regulations that may be adopted by the PRC authorities, which may have the effect of limiting our product and service offerings, restricting the scope of our operations in mainland China, or causing the suspension or termination of our business operations in mainland China entirely, all of which will materially and adversely affect our business, financial condition and results of operations. We may have to adjust, modify, or completely change our business operations in response to adverse regulatory changes or policy developments, and we cannot assure you that any remedial action we adopt can be completed in a timely, cost-efficient, or liability-free manner or at all.\n\nOn June 10, 2021, the Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, which took effect on September 1, 2021. The PRC Data Security Law, among other things, provides for a security review procedure for the data activities that may affect national security. Furthermore, on December 28, 2021, the Cyberspace Administration of China and other 12 government authorities published the Measures for Cyber Security Review, effective from February 15, 2022, which provided that critical information infrastructure operators that procure internet products and services, and internet platform operators engaging in data processing activities, must be subject to the cyber security review if their activities affect or may affect national security. The measures further stipulate that internet platform operators holding over one million users’ personal information shall apply with the Cyber Security Review Office for a cyber security review before any public offering at a foreign stock exchange. On July 30, 2021, the State Council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to the Regulations on Protection of Critical Information Infrastructure, critical information infrastructure shall mean any important network facilities or information systems of the important industry or field such as public communication and information service, energy, communications, water conservation, finance, public services, e-government affairs and national defense science, which may endanger national security, people’s livelihood and public interest in case of damage, function loss or data leakage. In addition, the administration departments of each critical industry and sector shall be responsible to formulate eligibility criteria and determine the critical information infrastructure operator in the respective industry or sector. The operators shall be informed about the final determination as to whether they are categorized as critical information infrastructure operators. On July 7, 2022, the Cyberspace Administration of China published the Measures for the Security Assessment of Cross-Border Data Transfer, which came into effect on September 1, 2022, and provided that certain types of data processors transferring important data or personal information collected and generated during operations within the territory of the PRC to an overseas recipient must apply for security assessment of cross-border data transfer.\n\nAs of the date of this annual report, no detailed rules or implementation has been issued by any administration departments and we have not been informed as a critical information infrastructure operator by any governmental authorities. Furthermore, the exact scope of “critical information infrastructure operators” under the current regulatory regime remains unclear, and the PRC governmental authorities may have wide discretion in the interpretation and enforcement of these laws. Therefore, it is uncertain whether we would be deemed as a critical information infrastructure operator under PRC law. We cannot predict the impact of the measures, if any, at this stage, and we will closely monitor and assess any development in the rule-making process.\n\n51\n\n[Table of Contents](#TOC)\n\nFurthermore, the Standing Committee of the National People’s Congress passed the PRC Personal Information Protection Law, effective from November 1, 2021, which required each general network operator to obtain a personal information protection certification issued by recognized institutions in accordance with the Cyberspace Administration of China regulation before such information can be transferred out of mainland China. PRC Personal Information Protection Law provides special rules for processing sensitive personal information. Sensitive personal information refers to personal information that, once leaked or illegally used, could easily lead to the infringement of human dignity or harm to the personal or property safety of an individual, including biometric recognition, religious belief, specific identity, medical and health, financial account, personal whereabouts and other information of an individual, as well as any personal information of a minor under the age of 14. An information processor is allowed to process personal information only if it has a specific purpose and processing personal information is necessary for that purpose, and it has implemented strict measures to protect personal information. A personal information processor shall inform the individual of the necessity of processing such sensitive personal information and the impact thereof on the individual’s rights and interests. As uncertainties remain regarding the interpretation and implementation of the PRC Personal Information Protection Law, we cannot assure you that we will comply with the PRC Personal Information Protection Law in all respects and our current practice of collecting and processing sensitive personal information may be ordered to be rectified or terminated by regulatory authorities. We may also become subject to fines and other penalties which may have material adverse effect on our business, operations and financial condition.\n\nIt also remains uncertain whether the future regulatory changes would impose additional restrictions on companies like us. If we are not able to comply with the cyber security and data privacy requirements in a timely manner, or at all, we may be subject to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant operations, or removal of our app from the application stores, among other sanctions, which could materially and adversely affect our business and results of operations. As of the date of this annual report, we have not been involved in any investigations on cyber security review made by the Cyberspace Administration of China on such basis, and we have not received any inquiry, notice, warning, or sanctions in such respect.\n\nUncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.\n\nThe PRC legal system is based on written statutes and court decisions 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.\n\nFrom time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC judicial and administrative authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be difficult to predict the outcome of a judicial or administrative proceeding. 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, but which may have retroactive effect. As a result, we may not always be aware of any potential violation of these policies and rules. Such unpredictability towards our contractual, property (including intellectual property) and procedural rights could adversely affect our business and impede our ability to continue our operations.\n\nThe PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our securities.\n\nWe conduct operations in China through (i) our PRC subsidiaries and (ii) the VIEs with which we have maintained contractual arrangements and the VIEs’ subsidiaries in mainland China. Our operations in mainland China are governed by PRC laws and regulations. The PRC government has significant oversight and discretion over the conduct of our business, and it may influence our operations, which could result in a material adverse change in our operation and/or the value of our securities. The PRC government has promulgated certain regulations and rules to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers in recent years. Any such actions could significantly limit or completely hinder our ability to continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline, or become worthless. Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC government affecting our business.\n\n52\n\n[Table of Contents](#TOC)\n\nThe approval of, report and filings with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings and listings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing and report process.\n\nRegulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC persons or entities to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and our offshore offerings may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in mainland China, restrictions or limitations on our ability to pay dividends outside of mainland China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.\n\nThe PRC government authorities have promulgated certain regulations and rules to exert more oversight and control over securities offerings and other capital markets activities that are or have been conducted overseas and foreign investment in China-based companies like us.\n\nOn July 6, 2021, the PRC government authorities issued Opinions on Strictly Cracking Down Illegal Securities Activities in Accordance with the Law. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies.\n\nOn February 17, 2023, the CSRC issued Trial Administrative Measures of Overseas Securities Offerings and Listings by Domestic Companies and five supporting guidelines, with effect from March 31, 2023. According to these measures, mainland China companies that directly or indirectly offer or list their securities in an overseas market are required to file with the CSRC. An overseas listed company must also submit the filing with respect to its follow-on offerings, issuance of convertible corporate bonds and exchangeable bonds, and other equivalent offering activities, within a specific time frame requested under these measures. An overseas listed company is also required to report material events to the CSRC within three working days after the occurrence and announcement of certain events, including, among other things, the change of control, investigation or penalties imposed by relevant authorities, the conversion of listing status or the transfer of listing board. Failure to comply with the filing requirements under these measures may result in warnings, forced corrections and fines. The responsible persons, controlling shareholder(s) and actual controller(s) may face a warning and fines. These measures have no retroactive effect and thus are not applicable to our listing and offering prior to the promulgation. We cannot assure you that we would be able to complete such filing or procedure for our future offering or listing, if any, and fully comply with these measures on a timely basis, if at all. For details, please see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to M&A and Overseas Listing.”\n\nIf we fail to file with the CSRC in a timely manner or at all, for any future listing or offering (including, among others, follow-on offerings, issuance of convertible corporate bonds and exchangeable bonds, and other equivalent offering activities) pursuant to these measures due to our contractual arrangements, our ability to raise or utilize funds could be materially and adversely affected, and we may even need to unwind our contractual arrangements or restructure our business operations to rectify the failure to complete the filings. There remain substantial uncertainties as to the interpretation, application, and enforcement of these measures and how they will affect our operations and our future financing.\n\nOn February 24, 2023, the CSRC and the other authorities issued the Provisions on Strengthening the Confidentiality and Archives Administration of Overseas Securities Issuance and Listing by Domestic Companies, with effect from March 31, 2023. A domestic company shall first obtain approval from competent authorities and file with the secrecy administrative department at the same level, if it plans to, either directly or through its overseas listed entity, publicly disclose or provide any documents and materials that contain state secrets or working secrets of government agencies. Any domestic enterprises must seek the consent of the CSRC or administrative authorities before cooperating with overseas securities regulators or securities authorities in inspections or investigations, or providing documents and materials for such cooperation.\n\n53\n\n[Table of Contents](#TOC)\n\nOn September 6, 2024, the National Development and Reform Commission and the Ministry of Commerce jointly issued the Special Administrative Measures (Negative List) for Foreign Investment Access (2024 Version), which became effective on November 1, 2024. Pursuant to these measures, if a PRC company engaging in the prohibited business stipulated in this negative list seeks an overseas offering and listing, it shall obtain the approval from the competent governmental authorities. Besides, according to the further explanation of the National Development and Reform Commission, the foreign investors of the direct overseas offering and listing company shall not be involved in the company’s operation and management, and their shareholding percentages shall be subject, mutatis mutandis, to the regulations on the domestic securities investments by foreign investors. There remain substantial uncertainties as to the interpretation and implementation of these new requirements, and it is unclear as to whether and to what extent listed companies like us will be subject to these new requirements. If we are required to comply with these requirements and fail to do so on a timely basis, if at all, our business operation, financial conditions and business prospect may be adversely and materially affected.\n\nIn addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. We may be required to obtain regulatory approvals from the Cyberspace Administration of China or complete filing procedures with CSRC or any other PRC governmental authorities for our future offshore offerings and listings. We cannot assure you that we will be able to obtain such approvals in a timely manner, or at all, and such approvals may be rescinded even if obtained. Any failure to obtain or delay in obtaining such approval or completing such filing procedures for our future offshore offerings or listings, or a rescission of any such approval or filing we obtained, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to seek CSRC approval or filing or other government authorization for our future offshore offerings and listings. These regulatory authorities may impose fines and penalties on our operations in mainland China, limit our ability to pay dividends outside of mainland China, limit our operating privileges in mainland China, delay or restrict the repatriation of the proceeds from our future offshore offerings and listings into mainland China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our listed securities. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our future offshore offerings and listings before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities.\n\nContent posted or displayed on our platform may be found objectionable by PRC regulatory authorities and may subject us to penalties and other severe consequences.\n\nThe PRC government has adopted regulations governing internet and wireless access and the distribution of information over the internet and wireless telecommunication networks. Under these regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet or wireless networks content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent or defamatory. Furthermore, internet content providers are also prohibited from displaying content that may be deemed by government authorities as “socially destabilizing” or leaking “state secrets” of the PRC. Failure to comply with these requirements may result in the revocation of licenses to provide internet content or other licenses, the closure of the concerned platforms and reputational harm. The operator may also be held liable for any censored information displayed on or linked to their platform. For a detailed discussion, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Cyber Security.”\n\nWe operate a number of portfolio products in China, including Fengdu Novel. We have implemented procedures to monitor the content displayed on our products in order to comply with laws and regulations. However, it may not be possible to determine in all cases the types of content that could result in our liability as a distributor of such content and, if any of the content posted or displayed on our products is deemed by the PRC government to violate any content restrictions, we would not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations.\n\n54\n\n[Table of Contents](#TOC)\n\nWe may also be subject to potential liability for any unlawful actions by our users on our products. It may be difficult to determine the type of content or actions that may result in liability to us and, if we are found to be liable, we may be prevented from operating our business in China. Moreover, the costs of compliance with these regulations may continue to increase as a result of more content being made available by an increasing number of users of our platform, which may adversely affect our results of operations. Although we have adopted internal procedures to monitor content and to remove offending content once we become aware of any potential or alleged violation, we may not be able to identify all the content that may violate laws and regulations or third-party intellectual property rights. Even if we manage to identify and remove offensive content, we may still be held liable. For example, on September 19, 2022, a local branch of the Ministry of Culture and Tourism imposed a fine of RMB10,000 on Shanghai Dengyong Information Technology Co., Ltd. for providing online publication to the public without any internet publication service license on Fengdu Novel. We cannot assure you that our business and operations will be immune from government actions or sanctions in the future. To the extent that PRC regulatory authorities find any content displayed on our platform objectionable, they may require us to limit or eliminate the dissemination of such content on our platform in the form of take-down orders or otherwise. In addition, these laws and regulations are subject to interpretation by the authorities, and it may not be possible to determine in all cases the types of content that could result in our liability as a platform operator.\n\nAdvertisements shown on our platform may subject us to penalties and other administrative actions.\n\nUnder PRC advertising laws and regulations, we are obligated to monitor the advertising content shown on our platform to ensure that such content is true and accurate and in full compliance with applicable laws and regulations. Advertisements shall not hinder public order, violate social morality or contain illegal contents, including, but not limited to, obscenity, pornography, gambling, superstition, terror and violence contents. Otherwise, the administration of market regulation may (i) order to stop publishing of the advertisement and; (ii) confiscate the advertising fees; (iii) impose a penalty ranging from RMB200,000 to RMB1,000,000; or (iv) in serious cases, cancel the business license and cancel the registration certificate for publishing advertisements. In addition, where a special government review is required for specific types of advertisements prior to internet posting, such as advertisements relating to pharmaceuticals, medical instruments, agrochemicals and veterinary pharmaceuticals, we are obligated to confirm that such review has been performed and approval has been obtained. Violation of these laws and regulations may subject us to penalties, including fines, confiscation of our advertising income, orders to cease dissemination of the advertisements and orders to publish an announcement correcting the misleading information. In circumstances involving our serious violations, PRC governmental authorities may force us to terminate our advertising operations.\n\nWhile we have made significant efforts to ensure that the advertisements shown on our platform are in full compliance with applicable PRC laws and regulations, we cannot assure you that all the content contained in such advertisements or offers is true and accurate as required by the advertising laws and regulations or otherwise in full compliance with applicable PRC laws and regulations, especially given the uncertainty in the interpretation of these PRC laws and regulations. If we are found to be in violation of applicable PRC advertising laws and regulations, we may be subject to penalties and our reputation may be harmed, which may negatively affect our business, financial condition, and results of operations and prospects. Although the advertisements displayed on our platform may not directly contain sensitive or illegal contents, including, but not limited to, gambling and pyramid selling, the advertisers may use inducing words to indirectly attract advertisement viewers to participate in gambling, pyramid selling, or other illegal activities. If we receive a complaint that any superficially compliant advertisement is linked to one or more webpages that feature non-compliant advertising content, we will remove the related advertisement. Although our agreements with the advertising agencies provide that the advertisements provided by the advertisers shall comply with the requirements of laws and regulations, we cannot control or supervise advertising contents and the linked webpages all the time. Therefore, we cannot guarantee you that all of the advertisements displayed on our platform will comply with laws and regulations.\n\n55\n\n[Table of Contents](#TOC)\n\nIn April 2015, the Standing Committee of the National People’s Congress promulgated the PRC Advertising Law, effective on September 1, 2015, and amended on October 26, 2018 and April 29, 2021. According to the Advertising Law, advertisements shall not have any false or misleading content, or defraud or mislead consumers. Furthermore, an advertisement will be deemed as a “false advertisement” if any of the following situations exist: (i) the advertised product or service does not exist; (ii) there is any inconsistency that has a material impact on the decision to purchase in what is included in the advertisement with the actual circumstances with respect to the product’s performance, function, place of production, usage, quality, specification, ingredient, price, producer, term of validity, sales condition and honors received, among others, or the service’s content, provider, form, quality, price, sales condition, and honors received, among others, or any commitments, among others, made on the product or service; (iii) using fabricated, forged or unverifiable scientific research results, statistical data, investigation results, excerpts, quotations or other information as supporting material; (iv) effect or results of using the good or receiving the service are fabricated; or (v) other circumstances where consumers are defrauded or misled by any false or misleading content.\n\nThe laws and regulations of advertising are relatively new and evolving and there is substantial uncertainty as to the interpretation of “false advertisement” by the State Administration for Market Regulation (formerly known as the State Administration for Industry and Commerce). If any of the advertisements that we publish is deemed to be a “false advertisement” by the State Administration for Market Regulation or its local branch, we could be subject to various penalties, such as discontinuation of publishing this advertisement, imposition of fines and obligations to eliminate any adverse effects incurred by such false advertisement, revocation of our business license and other approvals, rejection of our other advertisement examination application, or even criminal liabilities under circumstances of serious violations. For detailed descriptions, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Advertising Services.” We have received and may continue to receive administrative penalties from local branch of the State Administration for Market Regulation for illegal or inappropriate content and false advertisements placed on our mobile apps. Any resulting penalties may disrupt our business and materially adversely affect our results of operations and financial conditions.\n\nUnder the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise,” which could result in unfavorable tax consequences to us and our shareholders and have a material adverse effect on our results of operations and the value of your investment.\n\nUnder the PRC Enterprise Income Tax Law, which became effective in January 2008 and most recently amended in December 2018, an enterprise established outside mainland China with “de facto management bodies” within mainland China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. In 2009, the State Administration of Taxation issued the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprise on the Basis of De Facto Management Bodies, 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 mainland China. In 2011, the State Administration of Taxation issued the Administrative Measures for Enterprise Income Tax of Chinese-Controlled Offshore Incorporated Resident Enterprises (Trial), as amended in 2018, to provide more guidance on the implementation of the notice. The administrative measures clarified certain issues in the areas of resident status determination, post-determination administration and competent tax authorities’ procedures.\n\nAccording to this notice, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be considered as a PRC tax resident enterprise by virtue of having its “de facto management body” in mainland China and will be subject to PRC enterprise income tax on its worldwide income only if all of the following conditions are met: (a) the senior management and core management departments in charge of its daily operations function have their presence mainly in mainland China; (b) its financial and human resources decisions are subject to determination or approval by persons or bodies in mainland China; (c) its major assets, accounting books, company seals, and minutes and files of its board and shareholders’ meetings are located or kept in mainland China; and (d) more than half of the enterprise’s directors or senior management with voting rights habitually reside in mainland China. These administrative measures specify that when provided with a copy of Chinese tax resident determination certificate from a resident Chinese controlled offshore incorporated enterprise, the payer should not withhold 10% income tax when paying the Chinese-sourced dividends, interest, royalties, etc. to the Chinese controlled offshore incorporated enterprise.\n\n56\n\n[Table of Contents](#TOC)\n\nAlthough this notice and these administrative measures only apply to offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups and not those controlled by PRC individuals or foreigners, the determination criteria set forth therein may reflect the State Administration of Taxation’s general position on how the term “de facto management body” could be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, individuals or foreigners.\n\nIn addition, the State Administration of Taxation issued the Announcement of the State Administration of Taxation on Issues concerning the Determination of Resident Enterprises Based on the Standards of Actual Management Institutions in January 2014 to provide more guidance on the implementation of the Notice Regarding the Determination of Chinese-Controlled Overseas Incorporated Enterprises as PRC Tax Resident Enterprise on the Basis of De Facto Management Bodies. This bulletin further provides that, among other things, an entity that is classified as a “resident enterprise” in accordance with the circular shall file the application for classifying its status of residential enterprise with the local tax authorities where its main domestic investors are registered. From the year in which the entity is determined to be a “resident enterprise,” any dividend, profit and other equity investment gain shall be taxed in accordance with the enterprise income tax law and its implementing rules.\n\nAlthough our offshore holding entity is not controlled by PRC enterprises or a PRC enterprise group, our revenues are primarily generated from business operations conducted in PRC, and we cannot rule out the possibility that the PRC tax authorities determine that we or any of our non-PRC subsidiaries is a PRC resident enterprise for PRC enterprise income tax purposes, which could subject our company or any of our non-PRC subsidiaries to PRC tax at a rate of 25% on its worldwide income, which could materially reduce our net income. In addition, we may also be subject to PRC enterprise income tax reporting obligations.\n\nIf the PRC tax authorities determine that our company is a PRC resident enterprise for PRC enterprise income tax purposes, gains realized on the sale or other disposition of ADSs or ordinary shares may be subject to PRC tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. Any such tax may reduce the returns on your investment in the securities.\n\nThere are significant uncertainties under the PRC Enterprise Income Tax Law relating to the withholding tax liabilities of our PRC subsidiary, and dividends payable by our PRC subsidiary to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.\n\nUnder the PRC Enterprise Income Tax Law and its implementation rules, the profits of a foreign-invested enterprise generated through operations, which are distributed to its immediate holding company outside mainland China, will be subject to a withholding tax rate of 10.0%. Pursuant to a special arrangement between Hong Kong and mainland China, such rate may be reduced to 5.0% if a Hong Kong resident enterprise owns more than 25.0% of the equity interest in the PRC company. Our current PRC subsidiary is wholly owned by our Hong Kong subsidiary, CooTek Hong Kong Limited. Accordingly, this Hong Kong subsidiary may qualify for a 5.0% tax rate in respect of distributions from its PRC subsidiary. Under the Notice of the State Administration of Taxation on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated on February 20, 2009, the taxpayer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These conditions include: (1) the taxpayer must be the beneficial owner of the dividends, and (2) the corporate shareholder to receive dividends from the PRC subsidiary must have continuously met the direct ownership thresholds during the 12 consecutive months preceding the receipt of the dividends. Further, the State Administration of Taxation promulgated the Notice on How to Understand and Recognize the “Beneficial Owner” in Tax Treaties in 2009, most recently amended on February 3, 2018, and effective from April 1, 2018, which sets forth several non-rebuttable presumptions to be a “beneficial owner,” and certain detailed factors in determining the “beneficial owner” status.\n\nEntitlement to a lower tax rate on dividends according to tax treaties or arrangements between the PRC central government and governments of other countries or regions is subject to Administrative Measures on Entitlement of Non-residents to Treatment under Tax Treaties, which provide that non-resident enterprises are not required to obtain pre-approval from the tax authority in order to enjoy the reduced withholding tax. Instead, non-resident enterprises and their withholding agents may, by internal assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the tax authorities. As a result, we cannot assure you that we will be entitled to any preferential withholding tax rate under tax treaties for dividends received from our PRC subsidiary.\n\n​\n\n57\n\n[Table of Contents](#TOC)\n\nWe face uncertainty with respect to indirect transfer of equity interests in PRC resident enterprises by their non-PRC holding companies.\n\nWe face uncertainties regarding the reporting on and consequences of previous private equity financing transactions involving the transfer and exchange of shares in our company by non-resident investors.\n\nIn February 2015, the State Administration of Taxation issued the Bulletin on Issues of Enterprise Income Tax on Indirect Transfers of Assets by Non-PRC Resident Enterprises, as amended in 2017. Pursuant to this bulletin, an “indirect transfer” of assets, including equity interests in a PRC resident enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct transfer of PRC taxable assets, if such arrangement does not have a reasonable commercial purpose and was established for the purpose of avoiding payment of PRC enterprise income tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax. According to this bulletin, “PRC taxable assets” include assets attributed to an establishment in mainland China, immovable properties located in mainland China, and equity investments in PRC resident enterprises, in respect of which gains from their transfer by a direct holder, being a non-PRC resident enterprise, would be subject to PRC enterprise income taxes. When determining whether there is a “reasonable commercial purpose” of the transaction arrangement, features to be taken into consideration include: whether the main value of the equity interest of the offshore enterprise derives from PRC taxable assets; whether the assets of the offshore enterprise mainly consist of direct or indirect investment in mainland China or if its income mainly derives from mainland China; whether the offshore enterprise and its subsidiaries directly or indirectly holding PRC taxable assets have real commercial nature which is evidenced by their actual function and risk exposure; the duration of existence of the business model and organizational structure; the replicability of the transaction by direct transfer of PRC taxable assets; and the tax situation of such indirect transfer and applicable tax treaties or similar arrangements. In respect of an indirect offshore transfer of assets of a PRC establishment, the resulting gain is to be included with the enterprise income tax filing of the PRC establishment or place of business being transferred, and would consequently be subject to PRC enterprise income tax at a rate of 25%. Where the underlying transfer relates to the immovable properties located in mainland China or to equity investments in a PRC resident enterprise, which is not related to a PRC establishment or place of business of a non-resident enterprise, a PRC enterprise income tax of 10% would apply, subject to available preferential tax treatment under applicable tax treaties or similar arrangements, and the party who is obligated to make the transfer payments has the withholding obligation. Where the payor fails to withhold any or sufficient tax, the transferor is required to declare and pay such tax to the tax authority by itself within the statutory time limit. Late payment of applicable tax will subject the transferor to default interest. This bulletin does not apply to transactions of sale of shares by investors through a public stock exchange where such shares were acquired from a transaction through a public stock exchange.\n\nThere is uncertainty as to the application of this bulletin. 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 if our company is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions under this bulletin. In 2014, we repurchased certain number of ordinary shares in CooTek (Cayman) Inc. from an existing shareholder for the consideration of US$9.3 million. The existing shareholder undertook to make the necessary tax filings in relation to this repurchase by herself and to indemnify us against any losses arising from the failure to make such tax filings. However, we cannot assure you that, if the existing shareholder fails to make necessary tax filings, the tax authority would not require us to make such tax filings and even subject us to fines. As of the date of this annual report, we have neither received any notice of warning nor been subject to any penalties or other disciplinary action from the government authorities regarding such tax filing. For transfer of shares in our company by investors that are non-PRC resident enterprises, our PRC subsidiary may be requested to assist in the filing under this bulletin. As a result, we may be required to expend valuable resources to comply with this bulletin or to request the 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.\n\n58\n\n[Table of Contents](#TOC)\n\nMainland China’s 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 mainland China.\n\nThe Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors and other regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors require that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the National People’s Congress in August 2007 and last amended on June 24, 2022, and the Provisions of the State Council on the Thresholds for Declaring Concentration of Business Operators, promulgated by the State Council on August 3, 2008 and last amended on January 22, 2024 require that transactions which are deemed concentrations and involve parties with specified turnover thresholds (i.e., (i) during the previous fiscal year, the total global turnover of all undertakings participating in the concentration exceeded RMB12 billion, and at least two of these undertakings each had a turnover of more than RMB800 million within China; or (ii) during the previous fiscal year, the total turnover within China of all the undertakings participating in the concentration exceeded RMB4 billion, and at least two of these undertakings each had a turnover of more than RMB800 million within China) must be cleared by the Ministry of Commerce before they can be completed. In addition, in February 2011, the General Office of the State Council promulgated a Notice on Establishing the Security Review System for Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, which officially established a security review system for mergers and acquisitions of domestic enterprises by foreign investors. Further, in August 2011, the Ministry of Commerce promulgated the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors to implement this notice. Under this notice, a security review is required for mergers and acquisitions by foreign investors having “national defense and security” concerns and mergers and acquisitions by which foreign investors may acquire the “de facto control” of domestic enterprises with “national security” concerns. Under the Regulations on Implementation of Security Review System for the Merger and Acquisition of Domestic Enterprises by Foreign Investors, the Ministry of Commerce will focus on the substance and actual impact of the transaction when deciding whether a specific merger or acquisition is subject to security review. If the Ministry of Commerce decides that a specific merger or acquisition is subject to security review, it will submit it to the Inter-Ministerial Panel, an authority established under the notice led by the National Development and Reform Commission and the Ministry of Commerce under the leadership of the State Council, to carry out security review. The regulations prohibit foreign investors from bypassing the security review by structuring transactions through trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. There is no explicit provision or official interpretation stating that the merging or acquisition of a company engaged in the internet information services, online games, online audio-visual program services and related businesses requires security review, and there is no requirement that acquisitions completed prior to the promulgation of the Security Review Circular are subject to the Ministry of Commerce review. In addition, on December 19, 2020, the National Development and Reform Commission and the Ministry of Commerce promulgated the Measures for Security Review of Foreign Investment, which took effect on January 18, 2021. Under these measures, investment in certain key areas which results in acquiring the actual control of the assets is required to obtain approval from designated governmental authorities in advance.\n\nIn the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce or its local counterparts may delay or inhibit our ability to complete such transactions. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, the Ministry of Commerce or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in mainland China, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited.\n\n​\n\n59\n\n[Table of Contents](#TOC)\n\nPRC regulations relating to offshore investment activities by PRC residents may limit our PRC subsidiary’s ability to increase their registered capital or distribute profits to us or otherwise expose us to liability and penalties under PRC law.\n\nIn July 2014, the SAFE promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37. SAFE Circular 37 requires PRC residents or entities to register with SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. In addition, such PRC residents or entities must update their SAFE registrations when the offshore special purpose vehicle undergoes material events relating to any change of basic information (including change of such PRC citizens or residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. According to the Notice on Further Simplifying and Improving Policies for the Foreign Exchange Administration of Direct Investment released on February 13, 2015, by the SAFE, as amended in 2019, local banks will examine and handle foreign exchange registration for overseas direct investment, including the initial foreign exchange registration and amendment registration, under SAFE Circular 37 from June 1, 2015.\n\nIf our shareholders who are PRC residents or entities do not complete their registration with the local SAFE branches, our PRC subsidiary may be prohibited from distributing their profits and proceeds from any reduction in capital, share transfer or liquidation to us, and we may be restricted in our ability to contribute additional capital to our PRC subsidiary. Moreover, failure to comply with the SAFE registration described above could result in liability under PRC laws for evasion of applicable foreign exchange restrictions.\n\nKarl Kan Zhang, Susan Qiaoling Li, Michael Jialiang Wang, Jim Jian Wang and Haiyan Zhu, who directly or indirectly hold shares in CooTek (Cayman) Inc. and who are PRC residents, have completed the SAFE registration in connection with our financings and have committed to update their registration filings with SAFE when any changes should be registered under SAFE Circular 37. However, we may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that are required to make such registrations, and we cannot compel our beneficial owners to comply with SAFE registration requirements. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents or entities have complied with, and will in the future make or obtain any applicable registrations or approvals required by, SAFE regulations. Failure by such shareholders or beneficial owners to comply with SAFE regulations, or our failure to amend the foreign exchange registrations of our PRC subsidiary, could subject us to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiary’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.\n\nFailure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.\n\nPursuant to SAFE Circular 37, PRC residents who participate in share incentive plans in overseas non-publicly listed companies due to their position as director, senior management or employees of the PRC subsidiaries of the overseas companies may submit applications to SAFE or its local branches for the foreign exchange registration with respect to offshore special purpose companies. Our directors, executive officers and other employees who are PRC residents and who have been granted options may follow SAFE Circular 37 to apply for the foreign exchange registration before our company becomes an overseas listed company. In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly Listed Companies. Under these notices and other rules and regulations, PRC residents who participate in stock incentive plan in an overseas publicly listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. We and our PRC employees who have been granted stock options are subject to these regulations. We have completed such SAFE registrations for our PRC stock option holder employees in March 2019. However, we cannot assure you that we will be able to complete the registration for new employees who participate in such stock incentive plan in the future in a timely manner or at all. Failure of our PRC stock option holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute dividends to us, or otherwise materially adversely affect our business.\n\n60\n\n[Table of Contents](#TOC)\n\nPRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using the proceeds of our overseas offerings to make loans to our PRC subsidiary and the VIEs, or to make additional capital contributions to our PRC subsidiary.\n\nWe are an offshore holding company conducting our operations in China through our PRC subsidiary and the VIEs and the VIEs’ subsidiaries. We may make loans to our PRC subsidiary and the VIEs, or we may make additional capital contributions to our PRC subsidiary, or we may establish new PRC subsidiary and make capital contributions to these new PRC subsidiaries, or we may acquire offshore entities with business operations in mainland China in an offshore transaction.\n\nMost of these ways are subject to PRC regulations and approvals. For example, loans we make to our wholly owned PRC subsidiary to finance its activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE. If we decide to finance our wholly owned PRC subsidiary by means of capital contributions, these capital contributions are subject to the requirement of making necessary filings with the Ministry of Commerce and registration with other governmental authorities in mainland China. Due to the restrictions imposed on loans in foreign currencies extended to any PRC domestic companies, we are not likely to make such loans to the VIEs, which are PRC domestic companies. Further, we are not likely to finance the activities of the VIEs by means of capital contributions due to regulatory restrictions relating to foreign investment in PRC domestic enterprises engaged in internet information services, online games, online audio-visual program services and related businesses.\n\nThe SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming the Administration of Foreign Exchange Settlement of Capital of Foreign-invested Enterprises, effective in June 2015, according to which the flow and use of the RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company is regulated such that RMB capital may not be used for the issuance of RMB entrusted loans, the repayment of inter-enterprise loans or the repayment of banks loans that have been transferred to a third party. Although this notice allows RMB capital converted from foreign currency-denominated registered capital of a foreign-invested enterprise to be used for equity investments within mainland China, it also reiterates the principle that RMB converted from the foreign currency-denominated capital of a foreign-invested company may not be directly or indirectly used for purposes beyond its business scope. SAFE promulgated the Notice of the State Administration of Foreign Exchange on Reforming and Standardizing the Foreign Exchange Settlement Management Policy of Capital Account, effective in June 2016, which changes the prohibition against using RMB capital converted from foreign currency-denominated registered capital of a foreign-invested company to issue RMB entrusted loans to a prohibition against using such capital to issue loans to non-associated enterprises. These notices may significantly limit our ability to transfer any foreign currency we hold, including the net proceeds from our overseas offerings, to our PRC subsidiary, which may adversely affect our liquidity and our ability to fund and expand our business in mainland China. On October 23, 2019, SAFE issued Notice of the State Administration of Foreign Exchange on Further Promoting the Facilitation of Cross-border Trade and Investment, which allows non-investment foreign-invested enterprises to use their capital funds to make equity investments in mainland China; *provided* that such investments do not violate the Negative List and the target investment projects are genuine and in compliance with PRC laws. The interpretation and implementation of this notice are subject to uncertainties.\n\nIn light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans we make to our PRC subsidiary or with respect to future capital contributions we make to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we received from our initial public offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.\n\nFluctuation in the value of the RMB may have a material adverse effect on the value of your investment.\n\nThe conversion of Renminbi into other currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against other currencies, at times significantly and unpredictably. The value of Renminbi against 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 Renminbi will not appreciate or depreciate significantly in value against the U.S. dollars in the future. It is difficult to predict how market forces or government policies may impact the exchange rate between Renminbi and other currencies in the future.\n\n61\n\n[Table of Contents](#TOC)\n\nA certain percentage of our costs, expenses and revenues are denominated in RMB. Any significant depreciation of the RMB may materially adversely affect the value of, and any dividends payable on, our securities in U.S. dollars. To the extent that we need to convert U.S. dollars we received from our initial public offering into RMB for our operations, appreciation of the RMB against the U.S. dollars would have an adverse effect on the RMB amount we would receive from the conversion. Conversely, if we decide to convert our RMB into U.S. dollars for the purpose of paying dividends on our ordinary shares or ADSs or for other business purposes, appreciation of the U.S. dollars against the RMB would have an adverse effect on the U.S. dollars amount available to us.\n\nVery limited hedging options are available in mainland 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. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.\n\nThe PRC government’s significant oversight and discretion over our business operation could result in a material adverse change in our operations and the value of our securities.\n\nWe conduct our operations in China through (i) our PRC subsidiaries, and (ii) the VIEs with which we have maintained contractual arrangements and the VIEs’ subsidiaries. Our operations in mainland China are governed by PRC laws and regulations. The PRC government has significant oversight and discretion over the conduct of our business, and it may influence our operations, which could result in a material adverse change in our operation and the value of our securities. Also, the PRC government has promulgated certain regulations and rules to exert more oversight and control over offerings that are conducted overseas and foreign investment in China-based issuers. 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 our securities to significantly decline or become worthless. In addition, implementation of industry-wide regulations directly targeting our operations could cause the value of our securities to significantly decline, or become worthless. Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC government affecting our business.\n\nThe PCAOB had historically been unable to inspect our former auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.\n\nOur former auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP, the independent registered public accounting firm that issued 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 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. This auditor is located in mainland China, a jurisdiction where the PCAOB was historically unable to conduct inspections and investigations completely before 2022. As a result, we and investors in our securities were deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China in the past has made it more difficult to evaluate the effectiveness of our former 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. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. However, if the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong, and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we and investors in our securities would be deprived of the benefits of such PCAOB inspections again, which could cause investors and potential investors in our securities to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.\n\n62\n\n[Table of Contents](#TOC)\n\nOur securities may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in China. The prohibition of trading in the securities, or the threat of the trading being prohibited, may materially and adversely affect the value of your investment.\n\nPursuant to the HFCAA, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States.\n\nOn December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong and our former auditor, Deloitte Touche Tohmatsu Certified Public Accountants LLP, was subject to that determination. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021.\n\nOn December 15, 2022, the PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. As of the date of this annual report, the PCAOB has not issued any new determination that it is unable to inspect or investigate completely registered public accounting firms headquartered in any jurisdiction. For this reason, we do not expect to be identified as a Commission-Identified Issuer under the HFCAA after we file this annual report on Form 20-F.\n\nEach year, the PCAOB will determine whether it can inspect and investigate completely registered public accounting firms in mainland China and Hong Kong, among other jurisdictions. If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely registered public accounting firms in mainland China and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the SEC, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. In accordance with the HFCAA, our securities would be prohibited from being traded on a national securities exchange or in the over-the-counter trading market in the United States if we are identified as a Commission-Identified Issuer for two consecutive years in the future. If our shares 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. A prohibition of being able to trade in the United States would substantially impair your ability to sell or purchase our securities when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our securities. 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.\n\n63\n\n[Table of Contents](#TOC)\n\nIt may be challenging for overseas regulators to conduct investigations or collect evidence within mainland China.\n\nPursuing shareholder claims or regulatory investigations in mainland China involves uncertainties and may be challenging as a matter of law or practicality. For example, in mainland China, there are uncertainties regarding providing information needed for regulatory investigations or litigations initiated by regulators outside mainland China. Although the authorities in mainland China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States may not be efficient in the absence of mutual and practical cooperation mechanism and involves uncertainty. The PRC government authorities have strengthened the supervision of cross-border information provision. For example, 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, evidence collection and other activities within the PRC territory. Furthermore, pursuant to the Provisions on Strengthening the Confidentiality and Archives Administration of Overseas Securities Issuance and Listing by Domestic Companies, which became effective on March 31, 2023, if any overseas securities regulators and competent overseas authorities requests to investigate, including to collect evidence for investigation purpose, or inspects a PRC domestic company that has been listed or offered securities in an overseas market or securities companies and securities service providers that undertake securities business for such PRC domestic companies, such investigation and inspection shall be conducted under a cross-border regulatory cooperation mechanism, and the CSRC and competent authorities will provide necessary assistance pursuant to bilateral and multilateral cooperation mechanisms. Any domestic enterprises, securities companies and securities service agencies must seek the consent of the CSRC or administrative authorities before cooperating with overseas securities regulators or securities authorities in inspections or investigations, or providing documents and materials for such cooperation. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to M&A and Overseas Listing.” While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within mainland China may further increase the uncertainties you face in protecting your interests. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Our ADSs or Ordinary Shares—You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.”\n\nThe custodians or authorized users of our controlling non-tangible assets, including chops and seals, may fail to fulfill their responsibilities, or misappropriate or misuse these assets.\n\nUnder the PRC law, legal documents for corporate transactions, including agreements and contracts are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with PRC market regulation administrative authorities.\n\nIn order to secure the use of our chops and seals, we have established internal control procedures and rules for using these chops and seals. In any event that the chops and seals are intended to be used, the responsible personnel will submit a formal application, which will be verified and approved by authorized employees in accordance with our internal control procedures and rules. In addition, in order to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to authorized employees. Although we monitor such authorized employees, the procedures may not be sufficient to prevent all instances of abuse or negligence. There is a risk that our employees could abuse their authority, for example, by entering into a contract that we did not approve or seeking to gain control of one of our subsidiaries or our affiliated entities or their subsidiaries. If any employee obtains, misuses or misappropriates our chops and seals or other controlling non-tangible assets for whatever reason, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve and divert management from our operations, and we may not be able to recover our loss due to such misuse or misappropriation if the third party relies on the apparent authority of such employees and acts in good faith.\n\n64\n\n[Table of Contents](#TOC)\n\n**Risks Related to Our ADSs and Ordinary Shares**\n\nThe Depositary Bank has resigned and the Deposit Agreement has been terminated, resulting in the termination of our ADR program and ADS facility, which has had and may continue to have a material adverse effect on the liquidity and value of our securities and our ability to access the U.S. capital markets.\n\nOn April 2, 2025, we were notified the Deutsche Bank Trust Company Americas (the “Depositary”) of its resignation as Depositary Bank of our ADR program. According to the deposit agreement dated September 27, 2018 among the Depositary, the ADSs holders and us, as amended by an Amendment No.1 to the deposit agreement dated May 9, 2022 (the “Deposit Agreement”), we shall use reasonable efforts to appoint a successor depositary on or before 90 days from the delivery of the notice of resignation. Since no successor was appointed by the expiry date, the Depositary terminated the Deposit Agreement by mailing a notice of the termination to the holders of all ADSs 30 days prior to January 5, 2026, the effective date of termination (the “Termination Date”). The ADSs holders have at least 6 months after the termination date to surrender the ADSs for cancellation and to take delivery of the underlying shares. Upon such termination, holders of ADSs will be entitled to voluntarily exchange their ADSs for the underlying ordinary shares, but such exchange is not mandatory. Holders who fail to timely exchange their ADSs may have the underlying shares sold by the depositary, and they may only receive the net sale proceeds after deducting fees, expenses, and taxes.\n\nThe termination of our ADS facility could adversely affect the liquidity and trading price of our securities, increase administrative burdens and costs for holders, and limit our ability to access the U.S. capital markets.\n\nThe termination of the Deposit Agreement has had a material adverse effect on us by, among other things, causing investors to dispose of our ADSs and limiting:\n\n●the liquidity of our ADSs;\n\n●the number of institutional and other investors that will consider investing in our ADSs;\n\n●the number of broker-dealers willing to execute trades in our ADSs; and\n\n●our ability to obtain equity or debt financing for the continuation of our operations.\n\nThe resignation of the depositary and the termination of our ADS facility may give rise to class action suits, litigation or arbitration proceedings by ADS holders or other parties. 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 operating results. 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.\n\nOur 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 may view as beneficial.\n\nWe have created a dual-class share structure such that our ordinary shares shall 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 twenty-five (25) votes per share on all matters subject to vote at general meetings of our company based on our dual-class share structure. Each Class B ordinary share is convertible into one Class A ordinary share at any time at the option of the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale, transfer, assignment or disposition of any Class B ordinary shares by a holder thereof to any person or entity other than holders of Class B ordinary shares or their affiliates, or upon a change of ultimate beneficial ownership of any Class B ordinary shares to any person who is not an affiliate of the holder thereof, such Class B ordinary shares shall be automatically and immediately converted into the equivalent number of Class A ordinary shares.\n\n65\n\n[Table of Contents](#TOC)\n\nAs of March 31, 2026, our chairman of the board of directors, chief technology officer and acting chief financial officer, Karl Kan Zhang, beneficially owned all of our issued Class B ordinary shares. These Class B ordinary shares constituted approximately 5.1% of our total issued and outstanding share capital and 57.3% of the aggregate voting power of our total issued and outstanding share capital as of March 31, 2026, due to the disparate voting powers associated with our dual-class share structure. See “Item 6. Directors, Senior Management and Employees—E. Share Ownership.” As a result of the dual-class share structure and the concentration of ownership, holders of Class B ordinary shares have considerable influence over matters such as decisions regarding mergers, consolidations and the sale of all or substantially all of our assets, election of directors and other significant corporate actions. Such holders 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 securities. 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 may view as beneficial.\n\nThe dual-class structure of our ordinary shares may adversely affect the trading market for our securities.\n\nS&P Dow Jones and FTSE Russell have announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual-class structure of our ordinary shares may prevent the inclusion of our securities in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for our securities. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of our securities.\n\nIf securities or industry analysts do not publish research about our business, or if they adversely change their recommendations regarding our securities, the market price for our securities and trading volume could decline.\n\nThe trading market for our securities will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade our securities, the market price for our securities would likely decline. If one or more of these analysts cease to cover us, or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for our securities to decline. The termination of our ADR program may further reduce analyst coverage, which could adversely affect the liquidity and market price of our securities.\n\nSubstantial future sales or the perception of a potential sale of substantial amounts of our securities could adversely affect the market price of our securities.\n\nSales of substantial amounts of our securities in the public market, or the perception that these sales could occur, could adversely affect the market price of our securities and could materially impair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our securities.\n\nBecause we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of our securities for return on your investment.\n\nWe 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 securities as a source for a future dividend income.\n\n66\n\n[Table of Contents](#TOC)\n\nPursuant to our seventh amended and restated memorandum and articles of association, our board of directors has complete discretion as to whether to distribute dividends, subject to certain requirements of Cayman Islands law. In addition, our shareholders may by ordinary resolution declare a dividend, but no dividend may exceed the amount recommended by our board of directors. Under Cayman Islands law, a Cayman Islands company may pay a dividend either out of profits or share premium account; *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 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, we received 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 securities will likely depend entirely upon any future price appreciation of our securities. There is no guarantee that our ADSs will appreciate in value or even maintain the price at which you purchased the securities. You may not realize a return on your investment in our securities and you may even lose your entire investment.\n\nYou may be subject to PRC income tax on dividends from us or on any gain realized on the transfer of our ADSs or ordinary shares.\n\nUnder the PRC Enterprise Income Tax Law and its implementation rules, subject to any applicable tax treaty or similar arrangement between the PRC and your jurisdiction of residence that provides for a different income tax arrangement, PRC withholding tax at the rate of 10% is normally applicable to dividends from PRC sources payable to investors 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 if the relevant income is not effectively connected with the establishment or place of business. Any gain realized on the transfer of ADSs or ordinary shares by such non-PRC resident enterprise investors is also subject to 10% PRC income tax if such gain is regarded as income derived from sources within the PRC, unless a tax treaty or similar arrangement provides otherwise. 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 ADSs or ordinary 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 similar arrangements and PRC laws. Although substantially all of our daily operations are in China, it is unclear whether dividends we pay with respect to our ADSs or ordinary shares, or the gain realized from the transfer of our ADSs or ordinary shares, would be treated as income derived from sources within the PRC and as a result be subject to PRC income tax if we were considered a PRC resident enterprise, as described above. If PRC income tax were imposed on gains realized through the transfer of our ADSs or ordinary shares or on dividends paid to our non-PRC resident investors, the value of your investment in our securites may be materially and adversely affected. Furthermore, our ADS holders whose jurisdictions of residence have tax treaties or similar arrangements with China may not qualify for benefits under such tax treaties or arrangements.\n\nWe believe we were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for our taxable year ended December 31, 2025, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs or ordinary shares.\n\nA non-U.S. corporation will be considered a passive foreign investment company, or PFIC, for any taxable year if either (i) at least 75% of its gross income for such year consists of certain types of “passive” income; or (ii) at least 50% of the value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce passive income or are held for the production of passive income, or the asset test. Although the law in this regard is not entirely clear, we treat the VIEs as being owned by us for United States federal income tax purposes because, in accordance with contractual arrangements, we control their management decisions and are entitled to substantially all of the economic benefits associated with them. As a result, we have a “controlling financial interest” in the VIEs (as defined in FASB ASC 810), and we are considered the primary beneficiary of the VIEs for accounting purposes. We therefore consolidate their results of operations in our consolidated U.S. GAAP financial statements.\n\n67\n\n[Table of Contents](#TOC)\n\nAssuming that we are the owner of the VIEs for United States federal income tax purposes, we believe that we were a PFIC for our taxable year ended December 31, 2025, and we will likely be classified as a PFIC for the current taxable year. The determination of whether we are or will become a PFIC is a fact-intensive inquiry made on an annual basis that depends, in part, upon the composition of our income and assets and the value of our assets.\n\nFluctuations in the market price of our ADSs may cause us to become a PFIC for the current or future taxable years because the value of our assets for the purpose of the asset test, including the value of our goodwill and unbooked intangibles, may be determined by reference to the market price of our ADSs from time to time (which may be volatile). In particular, recent decline in the market price of our ADSs increased our risk of becoming a PFIC. The market price of our ADSs may continue to fluctuate considerably and, consequently, we cannot assure you of our PFIC status for any taxable year. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets. Under circumstances where our revenue from activities that produce passive income significantly increases relative to our revenue from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming a PFIC may substantially increase.\n\nIf we were to be or become a PFIC for any taxable year during which a U.S. Holder (as defined in “Item 10. Additional Information—Taxation—United States Federal Income Tax Considerations”) holds our ADSs or ordinary shares, certain adverse U.S. federal income tax consequences could apply to such U.S. Holder. See “Item 10. Additional Information—Taxation—United States Federal Income Tax Considerations-Passive Foreign Investment Company Rules.”\n\nOur memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our Class A ordinary shares.\n\nOur seventh memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. Our dual-class voting structure gives disproportionate voting power to holders of the Class B ordinary shares. In addition, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our Class A ordinary shares. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of our securities may fall and the voting and other rights of the holders of our Class A ordinary shares may be materially and adversely affected.\n\n68\n\n[Table of Contents](#TOC)\n\nYou 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.\n\nWe are an exempted company limited by shares incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and the common law of the Cayman Islands. The rights of shareholders to take action against the directors, actions by minority shareholders, and the fiduciary duties owed to us by our directors 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 owed to us by 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, with respect to Cayman Islands companies, plaintiffs may face special obstacles, including but not limited to those relating to jurisdiction and standing, in attempting to assert derivative claims in state or federal courts of the United States.\n\nShareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (save for our memorandum and articles of association, our register of mortgages and charges and special resolutions of our shareholders) or to obtain copies of lists of shareholders of these companies. Under Cayman Islands law, the names of our current directors can be obtained from a search conducted at the Registrar of Companies in the Cayman Islands. Our directors have discretion under our 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 our shareholders to obtain the information needed to establish any facts necessary for them to motion or to solicit proxies from other shareholders in connection with a proxy contest.\n\nAs 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.\n\nADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which has been terminated, and this could result in less favorable outcomes to the plaintiff (s) in any such action.\n\nThe deposit agreement governing the ADSs representing our Class A ordinary shares, which was terminated effective January 5, 2026, provided that, subject to the depositary’s right to require a claim to be submitted to arbitration, the federal or state courts in the City of New York have exclusive jurisdiction to hear and determine claims arising under the deposit agreement and in that regard, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.\n\nIf we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable U.S. state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the U.S. federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before entering into the deposit agreement.\n\n69\n\n[Table of Contents](#TOC)\n\nIf you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under U.S. federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.\n\nNevertheless, if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs serves as a waiver by any holder or beneficial owner of ADSs or by us or the depositary of compliance with any substantive provision of the U.S. federal securities laws and the rules and regulations promulgated thereunder.\n\nYour rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement, which has been terminated.\n\nUnder the deposit agreement, which was terminated effective January 5, 2026, 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.\n\nThe 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, although the arbitration provisions do not preclude you from pursuing claims under the Securities Act or the Exchange Act in state or federal courts.\n\nCertain judgments obtained against us by our shareholders may not be enforceable.\n\nWe are a Cayman Islands exempted company and substantially all of our assets are located outside of the United States. Substantially all of our daily operations are conducted in mainland China. In addition, substantially all of our current directors and officers are nationals and residents of countries other than the United States, and substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the U.S. federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the Cayman Islands and of mainland China may render you unable to enforce a judgment against our assets or the assets of our directors and officers.\n\nOn July 14, 2006, the Supreme People’s Court of China and the Government of the Hong Kong Special Administrative Region signed an Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters, which came into effect on August 1, 2008. Under this arrangement, where any designated mainland China court or any designated Hong Kong court has made an enforceable final judgment requiring payment of money in a civil or commercial case pursuant to a “choice of court” agreement in writing, any party concerned may apply to the mainland China court or Hong Kong court for recognition and enforcement of the judgment.\n\nOn January 18, 2019, the Supreme Court of the People’s Republic of China and the Department of Justice under the Government of the Hong Kong Special Administrative Region signed the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region, which became effective on January 29, 2024. This arrangement seeks to establish a mechanism for judgment recognition and enforcement with greater clarity and certainty in a wider range of civil and commercial matters between the mainland China and Hong Kong Special Administrative Region. Under this arrangement, a “choice of court” agreement in writing is no longer required for bilateral judgment recognition and enforcement. This arrangement will allow a broader range of civil and commercial judgments of the mainland China courts to be enforced in Hong Kong. However, since uncertainties exist with respect to the interpretation and implementation of this arrangement, there exist uncertainties about the outcomes and effectiveness of enforcement or recognition of judgments under this arrangement.\n\n70\n\n[Table of Contents](#TOC)\n\nAs CooTek is an exempted company incorporated in the Cayman Islands and not listed on any stock exchange, its corporate governance practices may differ significantly from those of companies incorporated in Delaware or other states in the United States or those of companies listed on a stock exchange, and these practices may afford less protection to shareholders.\n\nCooTek is an exempted company incorporated under the laws of the Cayman Islands and not currently listed on any stock exchange. As a Cayman Islands company, CooTek’s corporate affairs are governed by its memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands and 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, but does not follow recent English statutory enactments.\n\nIn addition, as a Cayman Islands exempted company, CooTek is not required to hold an annual general meeting pursuant to its currently effective memorandum and articles of association.\n\nFurthermore, as CooTek is not currently listed on any stock exchange, CooTek is not subject to any listing rules or listing standards. To the extent that CooTek continues to follow the NYSE corporate governance listing standards that were previously applicable to it, CooTek may stop following any or all of those listing standards at any time at the discretion of its board of directors or management, as the case may be. In May 2023, CooTek’s independent directors resigned from the board and CooTek’s board resolved to dissolve the audit committee, the compensation committee and the nominating and corporate governance committee. CooTek’s board has been assuming the functions and responsibilities of these committees since May 2023 and there are no independent directors on CooTek’s board as of the date of this annual report. As two out of three directors on CooTek’s board are executive officers, including Karl Kan Zhang and Susan Qiaoling Li, the lack of independent directors on CooTek’s board could create a potential conflict of interest in that the directors have the authority to determine issues concerning audit, management compensation, and director nominations that may conflict with the interest of the shareholders of CooTek. As a result, CooTek’s corporate governance practices may afford shareholders less protection than they would otherwise enjoy as shareholders of companies incorporated in Delaware or other states in the United States or under the corporate governance listing standards of the NYSE, the Nasdaq Stock Market or other stock exchanges.\n\nWe are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.\n\nBecause we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:\n\n●the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC;\n\n●the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;\n\n●the sections of the Exchange Act requiring principal shareholders 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.\n\nWe are required to file an annual report within four months of the end of each fiscal year. Press releases relating to financial results and material events are furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC are less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer.\n\n71\n\n[Table of Contents](#TOC)\n\nFollowing the termination of the Deposit Agreement, holders of ADSs who have not yet surrendered their ADSs for the underlying ordinary shares will not be able to exercise voting rights through the depositary and may face additional limitations on their ability to vote.\n\nPrior to the termination of the Deposit Agreement on January 5, 2026, holders of ADSs did not have the same rights as our registered shareholders. Holders of ADSs did not have any direct right to attend general meetings of our shareholders or to cast any votes at such meetings, and could only exercise the voting rights carried by the underlying Class A ordinary shares represented by their ADSs indirectly by giving voting instructions to the depositary in accordance with the provisions of the Deposit Agreement. Following the termination of the Deposit Agreement, the depositary is no longer obligated to solicit or act upon voting instructions from ADS holders. Holders of ADSs who wish to exercise voting rights with respect to the underlying Class A ordinary shares must surrender their ADSs and take delivery of the underlying shares in order to become registered holders of such shares prior to the record date for any general meeting. Holders who fail to surrender their ADSs during the six-month period following the termination date risk losing the ability to exercise voting rights, and may have the underlying shares sold by the depositary, with such holders receiving only the net sale proceeds after deduction of fees, expenses, and taxes.\n\nHolders of ADSs may be subject to significant limitations on the transfer or surrender of their ADSs during the wind-down period following the termination of our ADR program.\n\nPrior to the termination of the Deposit Agreement on January 5, 2026, ADSs were transferable on the books of the depositary, subject to certain restrictions, including the depositary’s right to close its books at any time or from time to time when it deemed expedient in connection with the performance of its duties. Following the termination of the Deposit Agreement, the depositary may close its transfer books and cease to accept deposits of ordinary shares or the issuance of new ADSs. Holders of ADSs have at least six months after the termination date to surrender their ADSs for cancellation and to take delivery of the underlying ordinary shares. After the expiration of this period, the depositary may sell the underlying ordinary shares and holders may only receive the net sale proceeds after deducting applicable fees, expenses, and taxes. Accordingly, holders of ADSs may face significant limitations on their ability to transfer or otherwise dispose of their ADSs during the wind-down period, and any delay in surrendering ADSs could result in the depositary selling the underlying shares on behalf of such holders."}