{"url_path":"/sec/cik-0001734262/10-k/2026/item-4","section_key":"item-4","section_title":"Item 4 ****INFORMATION ON THE COMPANY**","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":21875,"has_tables":true,"body_markdown":"**ITEM 4.****INFORMATION ON THE COMPANY**\n\n**A.****History and Development of the Company**\n\nWe commenced our mobile internet business and launched our first mobile application, TouchPal Smart Input, in 2008. We initially conducted our business through Shanghai Hanxiang (CooTek) Information Technology Co., Ltd., a PRC domestic company. The business of Shanghai Hanxiang (CooTek) Information Technology Co., Ltd. was migrated into other entities in our company, and it has gradually ceased its business operations since 2012.\n\nIn March 2012, we incorporated CooTek (Cayman) Inc., or CooTek Cayman, as our offshore holding company in order to facilitate foreign investment in our company. We established CooTek Hong Kong Limited as our intermediate holding company, which in turn established a wholly owned PRC subsidiary, Shanghai Chule (CooTek) Information Technology Co., Ltd., or Shanghai Chule or the WFOE, in June 2012.\n\nIn March 2012, we formed a PRC domestic company, Shanghai Chubao (CooTek) Information Technology Co., Ltd., or Shanghai Chubao, to operate part of our Chinese business.\n\nIn September 2014, we incorporated TouchPal HK Co., Limited to operate our overseas business.\n\nIn July 2015, we incorporated TouchPal. Inc., a U.S. company, to operate a research and development center in Silicon Valley and acquire talents from the United States.\n\nIn 2017, we formed Molihong (Shenzhen) Internet Technology Co., Ltd., or Molihong, in China to operate certain of our portfolio products.\n\n72\n\n[Table of Contents](#TOC)\n\nIn January 2018, we formed Nova (Cayman) Inc., former known as TouchPal (Cayman) Inc., as our intermediate holding company.\n\nIn September 2018, we completed our initial public offering and our ADSs began trading on the NYSE under the symbol “CTK.” On May 9, 2022, we changed the number of ordinary shares represented by each ADS from 50 to 650. Except as otherwise indicated, all ADS and per ADS data in this annual report give retroactive effect to the ADS ratio of one 1 ADS to 650 Class A ordinary shares. On May 19, 2022, we were notified by the NYSE that the staff of NYSE Regulation determined to commence proceedings to delist our ADSs from the NYSE. Trading in our ADSs was suspended after the market close on the NYSE on May 19, 2022. On June 6, 2022, the NYSE filed a Form 25 with the SEC to strike our ADSs from listing, which became effective 10 days after the filing. Our ADSs have been quoted on the OTC Pink Limited Information under the symbol “CTKYY” after the NYSE suspended the trading of our ADSs on May 19, 2022. On April 2, 2025, the Depositary notified us of its resignation as depositary bank of our ADR program. The termination of the Deposit Agreement became effective on January 5, 2026, and as a result, our ADSs were delisted from the OTC Pink Limited Information on January 6, 2026.\n\nIn June 2019, we formed Smillage, Inc. to operate mobile games in overseas markets.\n\nIn July 2019, we formed VitalTek, Inc. to operate online literature products in overseas markets.\n\nIn July 2020, Techdelic Investment Co., Limited was established for the operations of online literature products and mobile games in overseas markets.\n\nIn 2020, we formed Shanghai Qianqi Technology Co., Ltd, Shanghai Qinglin Network Technology Co., Ltd., or Qinglin, and Shanghai Lingdian Network Technology Co., Ltd., or Lingdian, to operate mobile games in China market.\n\nDue to restrictions imposed by PRC laws and regulations on foreign ownership of companies that engaged in mobile internet and mobile advertising businesses, our WFOE also entered into a series of contractual arrangements with Shanghai Chubao, Molihong and Qinglin, and their respective shareholders. We collectively refer to these domestic entities as the VIEs in this annual report. For more details and risks related to our variable interest entity structure, please see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.” As a result of our direct ownership in our WFOE and the variable interest entity contractual arrangements, we are regarded as the primary beneficiary of the VIEs. We treat them as the consolidated affiliated entities under U.S. GAAP, and have consolidated the financial results of these entities in our consolidated financial statements in accordance with U.S. GAAP.\n\nOur principal executive offices are located at 7F, T3, Lane 360, Xinlong Road, Minhang District, Shanghai, 201101, People’s Republic of China. Our telephone number at this address is +86 21 6485-6352. Our registered office in the Cayman Islands is located at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.\n\nAll information we file with the SEC can be obtained over the internet at the SEC’s website at *www.sec.gov*. You can also find information on our website at *ir.cootek.com*.\n\n**B.****Business Overview**\n\nWe are a mobile internet company with a global vision. Our mission is to empower everyone to enjoy content relevant to people seamlessly. We have developed and brought to market pan-entertainment mobile applications, focusing on two categories: online literature and mobile games. Sophisticated big data analytics and data-driven user insights are the backbone of our business, enabling us to release appealing products that capture mobile internet users’ ever-evolving content needs and attract targeted users. Our portfolio products of mobile applications serve a global user base comprised of an average of 0.4 million DAUs in December 2025.\n\nStarting with our TouchPal Smart Input in 2008, an intelligent input method for mobile devices, we have enabled mobile users to enjoy better typing experience using smart phones. Based upon our user insights accumulated through our TouchPal Smart Input, we have formulated a systematic approach to develop a global portfolio of utility applications to enhance mobile users’ functional experiences on smart phones, such as phonebook, wallpaper, fitness and health tracking.\n\n73\n\n[Table of Contents](#TOC)\n\nWith the popularity of mobile phones and the improvement of mobile operating system in recent years, users’ attention has shifted from the basic functions of the mobile phones to the consumption of productivity or entertainment contents. Since 2019, we have invested in the development of pan-entertainment mobile applications. As of December 31, 2025, we have launched over 190 online literature applications and mobile games, the revenues from which contributed 98.4% of our total net revenues in 2025.\n\n**Our Products**\n\nPan-entertainment Mobile Applications\n\nFollowing our user-centric and data-driven approach, we have developed and brought to market the following pan-entertainment mobile applications focusing on two categories: mobile games and online literature.\n\n*Mobile games*\n\nWe launched our first internally developed mobile game in the third quarter of 2019, and thereafter introduced a series of internally developed casual games, including dress-up games such as Catwalk Beauty, which ranked No.1 in the United States and other 57 countries and regions on App Store and Google Play game category as of May 2021, and interactive story game series such as Love Fantasy and Hey Beauty. Love Fantasy ranked No. 2 on the US iOS Games in December 2021.\n\nWe have rich experience in the development of casual games. Through the innovative combination of diversified casual games and the synergy with our online literature, we launched “Interactive Story+” series of games in 2021, which allows players to enjoy the thrill of casual games and also engages them in interactive plots.\n\n*Online literature*\n\nWe launched Fengdu Novel in China in 2019 and Readict in the overseas market in 2020.\n\nFengdu Novel is a mobile application that provides users with free online novels. Unlike the other paid user-only model in the online literature industry that charges users a fee for most content offered, users of Fengdu Novel can enjoy literature works under a free-to-read model. Users have free access to a large literature library. We classify the genre, length, popularity, serial or completed literature works by adding keywords to the content, and users can search for content based on these key words. Fengdu Novel is currently available on both Android and iOS operating systems.\n\nWe launched Fengdu Literature Platform to develop our original content ecosystem at the end of 2019. Fengdu Literature Platform is deemed as diverse in category, covering 14 major categories of male and female preferred content including genres of romance, fantasy, science fiction, history and others. More than 50% of content focus on gender specialized stories in urban context and ancient romance.\n\nIn addition, we are actively diversifying our IP business based on the original books from Fengdu Literature Platform. We license our original books to third-party websites and applications to serve their users. We also created several short video series based on Fengdu Literature Platform content and IP resources.\n\nWe introduced online community feature in 2021 for book lovers on Fengdu Novel, which allows readers to make book reviews, chapter reviews and posts. We incentivize users to make comments by rewarding witty and popular review writers with virtual gold coins and VIP membership. The comment that has received most likes will be placed on the top of the section. By allowing users to directly share and express their comments, we believe this feature help improve the retention rate of users and users’ reading time, which will in turn attract more writers to join our community to interact with their fans.\n\nWe operate our online literature mobile applications in China and overseas markets, including various English and Spanish speaking countries and regions. The proportion of total net revenues generated from online literature mobile applications operated in overseas market increased from 30% in 2023 to 78% in 2024, and further to 80% in 2025, becoming a material source of our revenues.\n\n74\n\n[Table of Contents](#TOC)\n\nUtility Mobile Applications\n\nBased upon our user insights accumulated through our TouchPal Smart Input, we have also developed a global portfolio of utility applications to enhance mobile users’ functional experiences on smart phones, such as phonebook, wallpaper, fitness, and health tracking.\n\n**Product Distribution and Marketing**\n\nWe distribute our products and acquire users primarily through user downloads from digital distribution platforms and social media.\n\nWe acquire new users through downloads of our products from digital distribution platforms such as Apple App Store and Google Play. Some of these users acquired through downloads are drawn to our applications through word-of-mouth or general interest in one of our global products, thus growing our user base organically. A majority of our users are drawn to our products through our paid marketing campaigns on third-party oversea distribution platforms such as AppLovin and Facebook Ads.\n\n**Monetization**\n\nAdvertising represented our primary source of revenue through fiscal year 2023. Beginning in 2024, however, in-app purchases became the principal driver of our revenue growth. To further diversify our monetization strategy, we have continued to expand our in-app monetization channels. In addition to advertising placements, we enable users to make in-app purchases to access special features or tools in our mobile games, as well as extra content in our online literature offerings.\n\nOur in-app purchase revenues increased from US$6.5 million in 2023 to US$19.5 million in 2024, and then decreased to US$14.1 million in 2025. Our in-app purchase revenues as a percentage of our total net revenues increased from 20.2% in 2023 to 64.4% in 2024, and further to 64.8% in 2025.\n\nOur value proposition to advertisers is driven by our large, engaged and sticky user base, insightful understanding of user interests and demands, and precision targeting of content to the preferred audience in a variety of usage scenarios. We provide performance-based advertising solutions that are compelling to our advertisers. The number of our available advertising spaces is a function of the size of our user base and the number of our product offerings. We possess the technical capability to efficiently managing our advertising spaces. Our advertising spaces within our products can accommodate a variety of ad formats. At the same time, our priority is to achieve a balance between user experience and utilization of advertising spaces. Launched in 2019, CooTek Ads is our in-house advertising network platform that provides our clients with high-quality and tailored advertising services. We terminated the operation of this system in 2022 as part of our efforts to optimize our monetization strategies.\n\nOur advertisers are from a broad range of industries, including healthcare, e-commerce, online games, merchant services and business services. Most of our advertisers are represented by third-party advertising exchanges and agencies. Our top two advertising customers, which are advertising exchanges, in aggregate accounted for approximately 18.4% of our total revenues in 2025. We have entered into standard forms of agreements with our major advertising customers. We have entered into distribution cooperation agreement 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. Our business depends on our relationships with these large advertising exchanges and agencies. For more details, see “Item 3. Key Information—D. Risk Factors—We depend on certain third-party advertising exchanges and agencies for a large portion of our mobile advertising revenues.”\n\nWe also diversify our monetization by out-licensing our original novels on Fengdu Literature Platform to produce audiobooks, short videos, etc. In addition, we operated IP content commercialization based on content on our online literature products, such as Fengdu Novel. As a part of our IP incubation efforts, Fengdu Novel has formed business relationships with third party content suppliers in content creation and adaptation.\n\n**Technology and Research and Development**\n\nTechnology is the key to our success. Our research and development efforts focus on big data analytical capabilities.\n\n75\n\n[Table of Contents](#TOC)\n\nAI Generated Content tools for content production\n\nWe employ AI generated content tools that use machine learning algorithms to create content automatically. We have used AI generated content tools in mobile game art design to automatically generate backgrounds, characters, and other features based on user inputs from our mobile games. We have also used AI generated content tools to create novel outlines. The AI generated content tools allow us to analyze existing works, identify patterns in novels and generate outlines that fit within certain parameters. By using AI generated content tools, we are able to improve efficiency and save efforts while still producing high-quality work.\n\nAI-based analytics tool for content production\n\nWe have 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. The platform that we are building is not just a place for authors to publish books, but also a platform to really enable them to improve their authorship based on a proper data matrix, so that even an average author may also produce valuable content.\n\nData integration, mining and analytics\n\nWe have deployed a scalable, distributed data system to manage and mine our massive and diverse data. We have developed an advanced data warehouse and real-time data analysis platform to support our build-up of user insights. We have also developed a business intelligence system which facilitates our product planning, data analytics, user growth and acquisition, monetization, and other crucial business activities.\n\nResearch and development team\n\nWe are committed to technological innovation since our inception. Approximately 56% of our employees are software engineers and product designers tasked with research and development to achieve innovation and advancement.\n\n**Intellectual Property**\n\nWe rely on a combination of patent, copyright, trademark and trade secret laws, as well as non-competition and confidentiality agreements and contractual clauses, to establish and protect our intellectual property rights.\n\nAs of December 31, 2025, we held 18 patents in mainland China and 10 patents in other countries and regions, covering inventions and designs; we have 2 patent applications currently pending in mainland China. As of December 31, 2025, we have registered 265 trademarks with the Trademark Office of the State Administration for Industry and Commerce in mainland China, including our company’s name “CooTek,” CooTek logos, trademarks relating to our products such as TouchPal Smart Input and TouchPal Phonebook; we have registered 2 trademarks in other countries and regions. As of December 31, 2025, we are the registered owner of 237 software copyrights in mainland China, each of which we have registered with the State Copyright Bureau of China. As of December 31, 2025, we own the rights to approximately 45 domain names that we use in connection with the operation of our business, including our CooTek and TouchPal websites *cootek.com, chubao.cn*and*touchpal.com.* In addition to the foregoing protections, we generally control access to and use of our proprietary and other confidential information through the use of internal and external controls. For example, for external controls, we enter into confidentiality agreements or agree to confidentiality clauses with our advertising customers and mobile device manufacturers and, for internal controls, we adopt and maintain policies governing the operation and maintenance of our IT systems and the management of user-generated data.\n\n**User Privacy and Cyber Security**\n\nWe place paramount importance on, and dedicate significant amount of resources to, the protection of the personal privacy of each of our users and the security of their data.\n\nTransparency. Our end user license agreement and privacy policy describe our data use practices and how privacy works on our mobile applications. We provide our users with adequate and timely notices as to what data are being collected, and we undertake to manage and use the data collected in accordance with applicable laws and make reasonable efforts to prevent unauthorized use, loss or leak of such user data. Our users may opt out of personal data collection or choose to have personal data erased from our servers.\n\n76\n\n[Table of Contents](#TOC)\n\nProtection. We have adopted comprehensive policies, procedures and guidelines to regulate our employees’ actions in relation to user data in order to protect user privacy and cyber security. We also have adopted a strict access control mechanism to ensure implementation of least privilege and need-to-know principles and to protect user privacy while meeting business requirements. For instance, we strictly limit the number and clearance level of personnel who may access user data or those servers that store user data. In addition, we employ a variety of technical solutions to prevent and detect risks and vulnerabilities in user privacy and cyber security, such as encryption, firewall, vulnerability scanning and log audit. For instance, we have built an internal compliance team which has privacy professionals who participate in new product and feature development and are dedicated to the ongoing review and monitoring of cyber security practices and security professionals who monitor internal and external security threats and risks. We store and transmit all user data in encrypted format on separate servers depending on each individual user’s location. We do not share any input data from our users or any user insight data with third parties or allow third parties to access user data stored on our servers, and we also utilize firewalls to protect against potential cyber-attacks or unauthorized access. We periodically audit our systems and procedures to detect information security risks and privacy risks.\n\nCompliance. Various laws and regulations, such as the General Data Protection Regulation in the European Union, California, Consumer Privacy Act in the United States and the CyberSecurity Law of the PRC, govern the collection, use, retention, sharing, and security of the personal data we receive from and about our users. Privacy groups and government bodies have increasingly scrutinized the ways in which companies link personal identities and data associated with particular users with data collected through the internet, and we expect such scrutiny to continue to increase. We devote substantial amount of resources to the compliance with, and the prevention of any violation of, the laws and regulations relating to user privacy and cyber security. For additional information on our efforts to comply with applicable laws and regulations relating to user privacy and cyber security, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—If we fail to prevent security breaches, cyber-attacks or 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.” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business—Data privacy concerns relating to our products and current practices may, particularly in light of increased regulatory scrutiny of and user expectations regarding the processing, collection, use, storage, dissemination, transfer and disposal of user data, 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\n**Competition**\n\nWe face intense competition for users, usage time and advertising customers. Our portfolio products compete with applications of the same or a similar kind. In addition, we compete with all major internet companies for user attention and advertising spending. Fengdu Novel competes with other leading free online literature applications in the Chinese market including Fanqie Novel and Qimao Novel. Readict, along with our other online literature applications targeting overseas markets, competes globally with platforms such as 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.\n\n**Seasonality**\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 the year ended December 31, 2023, 2024 and 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.\n\n**Insurance**\n\nWe do not maintain insurance policies covering damages to our network infrastructures or information technology systems. We also do not maintain business interruption insurance or general third-party liability insurance, nor do we maintain product liability insurance or key-man insurance. We consider our insurance coverage to be in line with that of other companies in the same industry of similar size in mainland China.\n\n77\n\n[Table of Contents](#TOC)\n\n**Legal Proceedings**\n\nWe may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. For more information, see “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.”\n\n**Regulation**\n\nWe are an international company that is incorporated as a Cayman Islands exempted company under the laws of Cayman Islands. Our principal offices are located in mainland China while we have business operations around the world. As a result of this organizational structure and the scope of our operations, we are subject to a variety of laws in different countries, including those related to personal privacy, data protection, content restrictions, telecommunications, intellectual property, consumer protection, advertising and marketing, labor, foreign exchange, competition and taxation. These laws and regulations are constantly evolving and may be interpreted, implemented or amended in a manner that could harm our business. It also is likely that if our business grows and evolves and our products and services are used more globally, we will become subject to laws and regulations in additional jurisdictions. This section sets forth the summary of material laws and regulations relevant to our business operations.\n\n**Regulations Relating to Personal Privacy and Data Protection**\n\nIn the area of personal privacy and data protection, we are subject to the laws in various jurisdictions where our products are available for use, and such laws and regulations can impose stringent requirements. Such requirements also vary from jurisdiction to jurisdiction. Many jurisdictions, including mainland China and the United States, continue to consider the need for greater regulation or reform to the existing regulatory framework.\n\nIn the United States, there is no single comprehensive national law governing the collection and use of user data or personal information. Instead, the U.S. has both federal and state laws in parallel and regulations that sometimes overlap and even contradict one another. In addition, there are many guidelines developed by government authorities and industry groups that, although lacking the force of law, are considered “best practices” and are relied upon for setting standards. All states in the U.S. have now passed laws to regulate the actions that a business must take in the event of a data breach, such as prompt disclosure and notification to affected users and regulatory authorities. In addition, some states have 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. At the federal level, the Federal Trade Commission Act is a federal consumer protection law that prohibits unfair or deceptive practices and has been applied to offline and online privacy and cyber security policies. The Federal Trade Commission empowered by the Federal Trade Commission Act, oversees consumer privacy compliance of most companies doing business in the U.S. and provides various guidelines regarding privacy and security practices for different industries. The Federal Trade Commission has brought many enforcement actions against companies for failing to comply with their own privacy policies and for the unauthorized disclosure of personal data. The U.S. federal and state legislatures will likely continue to consider the need for greater regulation aimed at restricting certain targeted advertising practices.\n\n78\n\n[Table of Contents](#TOC)\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 regulation applies to any company established in the EU 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 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 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 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 non-compliance, which significantly increases our potential financial exposure for non-compliance. However, in the absence of precedence and guidance from EU regulators, the application of the regulation to the provision of internet services remains unsettled. Moreover, the implementation of the regulation may require substantial amendments to our procedures and policies, and these changes could impact our business by increasing its operational and compliance costs. The Company has adopted policies and procedures in compliance with the 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\nPRC government authorities have enacted legislation on internet use to protect personal information from any unauthorized disclosure. The Decision on Strengthening Network Information Protection promulgated by the PRC National People’s Congress in December 2012 provides that electronic information that identifies a citizen or involves privacy of any citizen is protected by law and must not be unlawfully collected or provided to others. ICP operators collecting or using personal electronic information of citizens must specify the purposes, manners and scopes of information collection and uses, obtain consent of the relevant citizens, and keep the collected personal information confidential. ICP operators are prohibited from disclosing, tampering with, damaging, selling or illegally providing others with, collected personal information. ICP operators are required to take technical and other measures to prevent the collected personal information from any unauthorized disclosure, damage or loss. The Administrative Measures on Internet Information Services prohibit an ICP operator from insulting or slandering a third party or infringing upon the lawful rights and interests of a third party. According to the Provisions on Protection of Personal Information of Telecommunication and Internet Users, which was promulgated by the Ministry of Industry and Information Technology and became effective in September 2013, telecommunication business operators and ICP operators are responsible for the security of the personal information of users they collect or use in the course of their provision of services. Without obtaining the consent from the users, telecommunication business operators and ICP operators may not collect or use the users’ personal information. The personal information collected or used in the course of provision of services by the telecommunication business operators or ICP operators must be kept in strict confidence, and may not be divulged, tampered with or damaged, and may not be sold or illegally provided to others. The ICP operators are required to take certain measures to prevent any divulgence of, damage to, tampering with or loss of users’ personal information. In accordance with the Cybersecurity Law, network operators are required to collect and use personal information in compliance with the principles of legitimacy, properness and necessity, and strictly within the scope of authorization by the subject of personal information unless otherwise prescribed by laws or regulations. In the event of any unauthorized disclosure, damage or loss of collected personal information, network operators must take immediate remedial measures, notify the affected users and report the incidents to the authorities in a timely manner. If any user knows that a network operator illegally collects and uses his or her personal information in violation of laws, regulations or any agreement with the user, or the collected and stored personal information is inaccurate or wrong, the user has the right to request the network operator to delete or correct the collected personal information.\n\n79\n\n[Table of Contents](#TOC)\n\nThe telecommunications authorities are further authorized to order ICP operators to rectify unauthorized disclosure. ICP operators are subject to legal liability, including warnings, fines, confiscation of illegal gains, revocation of licenses or filings, closing of the websites, administrative punishment, criminal liabilities, or civil liabilities, if they violate provisions on internet privacy. Pursuant to the Ninth Amendment to the Criminal Law issued by the Standing Committee of the National People’s Congress in August 2015 and becoming effective in November 2015, the standards of crime of infringing citizens’ personal information were amended accordingly and the criminal culpability of unlawful collection, transaction, and provision of personal information has been reinforced. In addition, any ICP provider that fails to fulfill the obligations related to internet information security administration as required by applicable laws and refuses to rectify upon orders, will be subject to criminal liability for (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’s information; (iii) any serious loss of evidence of criminal activities; or (iv) other severe situations, and any individual or entity that (x) sells or provides personal information to others unlawfully, or (y) steals or illegally obtains any personal information, will be subject to criminal liability in severe situations. In addition, the Interpretations of the Supreme People’s Court and the Supreme People’s Procuratorate of the PRC on Several Issues Concerning the Application of Law in Handling Criminal Cases of Infringing Personal Information, effective in June 2017, have clarified certain standards for the conviction and sentencing in relation to personal information infringement. The PRC government has the power and authority to order ICP operators to turn over personal information if an internet user posts any prohibited content or engages in illegal activities on the internet. The Civil Code further provides in a stand-alone chapter of right of personality and reiterate that the personal information of a natural person shall be protected by the law. Any organization or individual shall legitimately obtain such personal information of others in due course on a need-to-know basis and ensure the safety and privacy of such information, and refrain from excessively handling or using such information.\n\nWith respect to the security of information collected and used by mobile apps, pursuant to the Announcement of Conducting Special Supervision against the Illegal Collection and Use of Personal Information by Apps, which was issued on January 23, 2019, app operators should collect and use personal information in compliance with the Cybersecurity Law and should be responsible for the security of personal information obtained from users and take effective measures to strengthen the personal information protection. Furthermore, app operators should not force their users to make authorization by means of bundling, suspending installation or in other default forms and should not collect personal information in violation of laws, regulations or breach of user agreements. Such regulatory requirements were emphasized by the Notice on the Special Rectification of Apps Infringing upon User’s Personal Rights and Interests, which was issued by the Ministry of Industry and Information Technology on October 31, 2019. On November 28, 2019, the Cyberspace Administration of China, the Ministry of Industry and Information Technology, the Ministry of Public Security and the State Administration for Market Regulation jointly issued the Methods of Identifying Illegal Acts of Apps to Collect and Use Personal Information. This regulation further illustrates certain commonly seen illegal practices of apps operators in terms of personal information protection, including “failure to publicize rules for collecting and using personal information,” “failure to expressly state the purpose, manner and scope of collecting and using personal information,” “collection and use of personal information without consent of users of such App,” “collecting personal information irrelevant to the services provided by such app in violation of the principle of necessity,” “provision of personal information to others without users’ consent,” “failure to provide the function of deleting or correcting personal information as required by laws” and “failure to publish information such as methods for complaints and reporting.” Among others, any of the following acts of an app operator will constitute “collection and use of personal information without consent of users”: (i) collecting an user’s personal information or activating the permission for collecting any user’s personal information without obtaining such user’s consent; (ii) collecting personal information or activating the permission for collecting the personal information of any user who explicitly refuses such collection, or repeatedly seeking for user’s consent such that the user’s normal use of such app is disturbed; (iii) any user’s personal information which has been actually collected by the app operator or the permission for collecting any user’s personal information activated by the app operator is beyond the scope of personal information which such user authorizes such app operator to collect; (iv) seeking for any user’s consent in a non-explicit manner; (v) modifying any user’s settings for activating the permission for collecting any personal information without such user’s consent; (vi) using users’ personal information and any algorithms to directionally push any information, without providing the option of non-directed pushing such information; (vii) misleading users to permit collecting their personal information or activating the permission for collecting such users’ personal information by improper methods such as fraud and deception; (viii) failing to provide users with the means and methods to withdraw their permission of collecting personal information; and (ix) collecting and using personal information in violation of the rules for collecting and using personal information promulgated by such app operator.\n\nOn August 22, 2019, the Cyberspace Administration of China promulgated the Children Information Protection Provisions, which took effect on October 1, 2019, requiring that before collecting, using, transferring or disclosing the personal information of a child, the Internet service operator should inform the child’s guardians in a noticeable and clear manner and obtain their consents. Meanwhile, internet service operators should take measures like encryption when storing children’s personal information.\n\n80\n\n[Table of Contents](#TOC)\n\nOn March 12, 2021, the Cyberspace Administration of China and three other authorities jointly issued the Rules on the Scope of Necessary Personal Information for Common Types of Mobile Internet Applications. The Rules specifies the scope of necessary personal information to be collected each for a variety of common mobile internet applications, such as maps and navigation apps, online ride-hailing apps, instant messaging apps, online community apps. Operators of such apps shall not refuse to provide basic services to users on the ground of users’ refusal to provide their personal non-essential information.\n\nOn April 26, 2021, the Ministry of Industry and Information Technology issued the Interim Administrative Provisions on Personal Information Protection in Internet Mobile Applications (Draft for Comment). The draft of the Interim Administrative Provisions on Personal Information Protection in Internet Mobile Applications sets forth two principles of collection and utilization of personal information, namely “explicit consent” and “minimum necessity.”\n\n**Regulations Relating to Generative AI**\n\nOn December 31, 2021, the Cyberspace Administration of China, the Ministry of Industry and Information Technology, the Ministry of Public Security and the State Administration for Market Regulation jointly made public the Administration Provisions on Algorithmic Recommendation of Internet Information Services, which became effective on March 1, 2022. The provisions apply to providers of internet information service leveraging algorithmic recommendation technologies, which include the use of algorithmic technologies such as generation and synthesis, personalized push, sorting and selection, retrieval and filtering, scheduling decision-making, etc. to provide information to users. The provisions set out further obligations on such providers to, among others, protect the interests and rights of the users, especially the interests and rights of minors, elders, and workers. In addition, the provisions state that an algorithm recommendation service provider with public opinion attribute or social mobilization ability shall, within ten working days from the date of provision of services, fill in such information as the service provider’s name, service form, application field, algorithm type, algorithm internal assessment report and content to be disclosed via the internet information service algorithm record-filing system to go through record-filing formalities.\n\nOn November 25, 2022, the Cyberspace Administration of China, the Ministry of Industry and Information Technology and Ministry of Public Security jointly issued the Administrative Provisions on Deep Synthesis of Internet Information Services successively, which became effective on January 10, 2023. According to the provisions, deep synthesis technology refers to any technology that utilizes deep learning, virtual reality or any other generative or synthetic algorithm to produce text, images, audio, video, virtual scenes, or other network information. The provisions emphasize that the providers of deep synthesis services, as the primary entities responsible for the information security, should not use deep synthesis services to engage in activities prohibited by laws and regulations.\n\nOn April 11, 2023, the Cyberspace Administration of China released draft Administrative Measures for Generative Artificial Intelligence Services for public consultation. The deadline for submitting comments is May 10, 2023. These draft measures apply to research and development into, as well as the use of, generative AI that is offered to the public within the territory of China. Providers of generative AI are required to, among others, 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 a generative AI service to the public at large. Providers shall be responsible for the legitimacy of the pre-training data of the generated AI products and the source of the optimized training data and shall specify and disclose the applicable users, occasions and purposes of their services, and take appropriate measures to prevent users from over-reliance on or addiction to generated content. Besides, providers shall have the obligation to protect the information input by users and the use records. It is not allowed to illegally retain the input information from which the identity of a user can be deduced, draw a portrait based on the information input by a user and the use situation, or provide the information input by a user to others A provider of generative AI that violates the requirements under these draft 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.\n\n81\n\n[Table of Contents](#TOC)\n\nOn July 13, 2023, the Cyberspace Administration of China and six other authorities jointly issued the Interim Measures for the Management of Generative Artificial Intelligence Services, effective on August 15, 2023. Any entity or individual that utilizes generative AI technology to provide texts, pictures, audio, video or other content generation services to the public within the territory of PRC shall assume the responsibility as a content producer for the content generated by generative AI technology. If personal information is involved, these providers are required to take the responsibility as the personal information processors and protect personal information. Those providing generative artificial intelligence services with public opinion attributes or the capacity for social mobilization must apply for a security assessment from the national cyberspace authority and follow algorithm filings procedures. If any illegal generated content is discovered, these providers must timely take measures such as termination of generation and transmission of inappropriate content, prevent the recurrence through model optimization training and other methods, and report to the authorities. These providers shall label pictures, videos, and other AI-generated content in accordance with the Administrative Provisions on Deep Synthesis of Internet Information Services.\n\nIn February 2024, the National Technical Committee on Cybersecurity Standardization issued the Basic Security Requirements for Generative Artificial Intelligence Service, which stipulated the basic safety requirements for generative artificial intelligence including requirements for training data security, model security and safety precautions, and provided requirements for safety evaluations. Service providers should conduct safety evaluations before launching or making any material change to the generative artificial intelligence services. Service providers are also required to assess whether these services are suitable for minors.\n\n**Regulations Relating to Cyber Security**\n\nThe PRC Congress promulgated the PRC Cybersecurity Law, effective in June 2017 and last amended on October 28, 2025. Under the Cybersecurity Law, “network operators” are broadly defined as network owners, network administrator, and network service providers are subject to various security protection-related obligations. As a network service provider, our obligations include:\n\n●complying with security protection obligations in accordance with tiered requirements with respect to maintenance of the security of internet systems, which include designing internal security management rules and developing manuals, appointing personnel in charge of internet security, adopting measures to prevent computer viruses and activities that threaten internet security, adopting measures to monitor and record status of network operations, holding Internet security training events, retaining user logs for at least six months, and adopting measures such as data classification, key data back-up, and encryption for the purpose of securing networks from interference, vandalism, or unauthorized visits, and preventing network data from leakage, theft, or tampering; and\n\n●verifying users’ identities before signing agreements or providing services such as network access, domain name registration, landline telephone or mobile phone access, information publishing, or real-time communication services; and formulating internet security emergency response plans, timely handling security risks, initiating emergency response plans, taking appropriate remedial measures, and reporting to governmental authorities;\n\nUnder the Cybersecurity Law, network service providers must inform users about and report to the governmental authorities any known security defects or bugs, and must provide constant security maintenance services for their products and services. Network products and service providers may not contain or provide any malware. Network service providers who do not comply with the Cybersecurity Law may be subject to fines, suspension of their businesses, shutdown of their websites, and revocation of their business licenses.\n\nThe Provisions on Technological Measures for Internet Security Protection, promulgated by the Ministry of Public Security and became effective in March 2006, require all ICP operators to keep records of certain information about its users (including user registration information, log-in and log-out time, IP address, content and time of posts by users) for at least 60 days and submit the above information as required by laws and regulations. The Decision on Strengthening Network Information Protection which was promulgated by the PRC National People’s Congress in December 2012, states that ICP operators must request identity information from users when ICP operators provide information publication services to the users. If ICP operators come across prohibited information, they must immediately cease the transmission of such information, delete the information, keep records, and report to government authorities.\n\n82\n\n[Table of Contents](#TOC)\n\nIn addition, the State Secrecy Bureau has issued provisions authorizing the blocking of access to any website it deems to be leaking state secrets or failing to comply with the legislation regarding the protection of state secrets during online information distribution. Specifically, internet companies in mainland China with bulletin boards, chat rooms or similar services must apply for specific approval prior to operating such services.\n\nOn August 20, 2021, the Standing Committee of the National Peoples’ Congress promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection.\n\nFor the further purposes of regulating data processing activities, safeguarding cyber security, promoting data development and utilization, protecting the lawful rights and interests of individuals and organizations, and maintaining national sovereignty, security, and development interests, on June 10, 2021, Standing Committee of the PRC National People’s Congress published the Data Security Law of the People’s Republic of China, which took effect on September 1, 2021. The Data Security Law requires data processing, which includes the collection, storage, use, processing, transmission, provision, publication of data, to be conducted in a legitimate and proper manner. The Data Security Law provides for cyber security and privacy obligations on entities and individuals carrying out data activities. The Data Security Law also introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it may cause to national security, public interests, or legitimate rights and interests of individuals or organizations if such data are tampered with, destroyed, leaked, illegally acquired or illegally used. The appropriate level of protection measures is required to be taken for each respective category of data. For example, a processor of important data is required to designate the personnel and the management body responsible for cyber security, carry out risk assessments of its data processing activities and file the risk assessment reports with the competent authorities. State core data, i.e., data having a bearing on national security, the lifelines of national economy, people’s key livelihood and major public interests, shall be subject to stricter management system. Moreover, the Data Security Law provides a national security review procedure for those data activities which affect or may affect national security and imposes export restrictions on certain data and information. In addition, the Data Security Law also provides that any organization or individual within the territory of the PRC shall not provide any foreign judicial body and law enforcement body with any data without the approval of the competent PRC governmental authorities. We may be required to make further adjustments to our business practices to comply with this law, as well as any adjustments that may be required by the Personal Information Protection Law.\n\nOn July 6, 2021, certain PRC regulatory authorities issued Opinions on Strictly Cracking Down on Illegal Securities Activities, which, among others, provides for improving laws and regulations on cyber security, cross-border data transmission, and confidential information management. It provided that efforts will be made to revise the regulations on strengthening the confidentiality and file management relating to the offering and listing of securities overseas, to implement the responsibility on information security of overseas listed companies, and to strengthen the standardized management of cross-border information provision mechanisms and procedures. On February 24, 2023, the CSRC and three 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.\n\nOn December 28, 2021, the Cyberspace Administration of China issued the Measures for Cyber Security Review. The scope of review under the Measures for Cyber Security Review extends to critical information infrastructure operators that intend to purchase internet products and services and internet platform operators engaging in data processing activities, which affect or may affect national security. According to the Measures for Cyber Security Review, internet platform operators who possess personal information of over a million users shall apply to the Cyber Security Review Office for cyber security reviews before listing in a foreign country. If the authorities consider that certain network products and services, data processing activities and listings in foreign countries affect or may affect national security, the authorities may initiate a cyber security review even if the operators do not have an obligation to report for a cyber security review under such circumstances. The Measures for Cyber Security Review also elaborated the factors to be considered when assessing the national security risks of the activities, including among others, risks of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country and risks of critical information infrastructure, core data, important data or a large amount of personal information data being affected, controlled and maliciously used by foreign governments after a foreign listing. However, the Measures for Cyber Security Review remain unclear on whether companies that have been listed on a U.S. stock exchange or whose securities are trading in the United States are required to make applications.\n\n83\n\n[Table of Contents](#TOC)\n\nOn July 30, 2021, the State Council issued the Regulations on Protection of Critical Information Infrastructure, pursuant to which, critical information infrastructure shall mean the important network facilities or information systems of key industries or fields such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defense science, and important network facilities or information systems which may endanger national security, people’s livelihood and public interest once there occur damage, malfunctioning or data leakage to them. The Regulations provide that no individual or organization may carry out any illegal activity of intruding into, interfering with, or sabotaging any critical information infrastructures, or endanger the security of any critical information infrastructures. The Regulations also require that critical information infrastructure operators shall establish a cyber security protection system and accountability system, and that the main responsible person of a critical information infrastructure operator shall take full responsibility for the security protection of the critical information infrastructures operated by it. In addition, administration departments of each important industry and sector shall be responsible for formulating the rule of critical information infrastructure determination applicable to their respective industry or sector, and determine the critical information infrastructure operators in their industry or sector.\n\nOn July 12, 2021, the Ministry of Industry and Information Technology and two other authorities jointly issued the Provisions on the Administration of Security Vulnerabilities of Network Products. These provisions state that, no organization or individual may abuse the security vulnerabilities of network products to engage in activities that endanger network security, or to illegally collect, sell, or publish the information on such security vulnerabilities. Anyone who is aware of the aforesaid offenses shall not provide technical support, advertising, payment settlement and other assistance to the offenders. According to these provisions, network product providers, network operators, and platforms collecting network product security vulnerabilities shall establish and improve channels for receiving network product security vulnerability information and keep such channels available, and retain network product security vulnerability information reception logs for at least six months. The Provisions also bans provision of undisclosed vulnerabilities to overseas organizations or individuals other than to the product providers.\n\nOn August 20, 2021, the Standing Committee of the National People’s Congress of China promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect on November 1, 2021. The Personal Information Protection Law requires, among others, that (i) the processing of personal information should have a clear and reasonable purpose which should be directly related to the processing purpose and should be conducted in a method that has the minimum impact on personal rights and interests, and (ii) the collection of personal information should be limited to the minimum scope as necessary to achieve the processing purpose and avoid the excessive collection of personal information. Personal information processors shall adopt necessary measures to safeguard the security of the personal information they handle. The offending entities could be ordered to correct, or to suspend or terminate the provision of services, and face confiscation of illegal income, fines or other penalties.\n\n84\n\n[Table of Contents](#TOC)\n\nOn September 24, 2024, the State Council issued the Administrative Measures for Internet Data Security, which took effective on January 1, 2025. The regulation reiterates and further clarifies key rules for data processing and cybersecurity: i) a network data processor may transfer personal information abroad without applying for the security assessment if satisfying certain conditions, such as when the data transfer is necessary to perform statutory duties or obligations; ii) network data processors conducting network data processing activities that affect or may affect national security shall undergo a national security review in accordance with relevant national regulations. In addition, the Regulations on Network Data Security Management also require that network data processors processing important data shall conduct an annual risk assessment of their cyber data processing activities, and submit the risk assessment report of the previous year to the competent authorities at or above the provincial level.\n\nThe PRC government authorities further enhanced the supervision and regulation of cross-border data transmission. On July 7, 2022, the Cyberspace Administration of China promulgated the Measures for the Security Assessment of Cross-border Data Transfer, which became effective on September 1, 2022. In accordance with these measures, data processors will be subject to security assessment conducted by the Cyberspace Administration of China prior to any cross-border transfer of data if the transfer involves (i) important data; (ii) personal information transferred overseas by operators of critical information infrastructure or a data processor that has processed personal data of more than one million persons; (iii) personal information transferred overseas by a data processor which has already provided personal data of 100,000 persons or sensitive personal data of 10,000 persons overseas since January 1 of the preceding year; or (iv) other circumstances as requested by the Cyberspace Administration of China. Furthermore, data processors shall conduct internal assessment on the risks of cross-border data transfer prior to their applying for the security assessment and focus on assessment of the following significant matters, including, among others: (i) the legality and necessity of the purpose, scope and method of cross-border data transfer; (ii) the scale, scope, type and sensitivity of data transferred overseas, and risks to the national security, public interests or legitimate rights of individuals or organizations caused by such cross-border data transfer; (iii) the responsibilities and obligations that the overseas recipient of such data promises to undertake, and whether such overseas recipient’s management and technical measures and capabilities for performing its responsibilities and obligations can guarantee the security of cross-border data transfer; (iv) the risks that the data transferred overseas may be falsified, destroyed, divulged, lost, transferred, illegally obtained or illegally used during and after the cross-border transfer, and whether the channel for the maintenance of personal information rights and interests is smooth; (v) whether contracts or other legally binding documents entered into with the overseas recipient have fully stipulated the responsibilities and obligations to protect data security. In addition, any cross-border data transfer activities conducted in violation of the Measures for the Security Assessment of Cross-border Data Transfer before the effectiveness of such measures are required to be rectified within six months of the effectiveness date thereof.\n\nOn October 21, 2019, the Supreme People’s Court and the Supreme People’s Procuratorate of the PRC jointly issued the Interpretations on Certain Issues Regarding the Applicable of Law in the Handling of Criminal Case Involving Illegal Use of Information Networks and Assisting Committing Internet Crimes, which came into effect on November 1, 2019, and further clarifies the meaning of Internet service provider and the severe situations of the crimes.\n\n**Regulations Relating to Foreign Investment**\n\nNegative List and Encouraged Industry Guidelines Related to Foreign Investment. Investment activities in mainland China by foreign investors are principally governed by the Special Administrative Measures (Negative List) for Access to Foreign Investment (2024 Revision), which was promulgated by the Ministry of Commerce of the PRC, and the National Development and Reform Commission, as amended from time to time, and the Catalogue of Encouraged Industries for Foreign Investment (2022 Revision), or Encouraged Industry Catalogue, issued by the Ministry of Commerce and the National Development and Reform Commission.\n\nIf foreign investment falls into industries specified in the Special Administrative Measures (Negative List) for Access to Foreign Investment (2024 Revision), special administrative measures shall apply, such as the percentage of foreign invested equity interests and background and quality of senior management. According to this negative list, the proportion of foreign investments in entities engaged in value- added telecommunications business shall not exceed 50%, except for e-commerce, domestic multi-party communication, store-and-forward service, and call centers service. The online transmission of audio-visual programs business, online publishing services and online cultural business (except for music) remain as prohibited industries for foreign investment.\n\n85\n\n[Table of Contents](#TOC)\n\nForeign Investment in Telecommunication Business. Regulations for Administration of Foreign-Invested Telecommunications Enterprises promulgated by the PRC State Council in 2001 and most recently amended on March 29, 2022, effective on May 1, 2022, requires that in general, the foreign party to a foreign-invested telecommunications enterprise engaging in value-added telecommunications services may hold up to 50% of the equity of the foreign-invested telecommunications enterprise, of which the geographical area it may conduct telecommunications services is provided by the Ministry of Industry and Information Technology in accordance with provisions as mentioned above. According to the amended regulations, the previous requirement on the primary foreign investor’s experience and good track record has been canceled. However, this modification is relatively new, uncertainties still exist in relation to its interpretation and implementation. A foreign investor is not allowed to hold more than 50% of the total equity interest in value-added telecommunications service business, except for e-commerce, domestic multi-party communication, store-and-forward service, and call centers service in mainland China. The Ministry of Industry and Information Technology issued an Announcement on Issues concerning the Provision of Telecommunication Services in Mainland China by Service Providers from Hong Kong and Macau, allowing investors from Hong Kong and Macau to hold more than 50% of the equity in foreign-invested telecommunications enterprises engaging in certain specified categories of value-added telecommunications services.\n\nIn 2006, the Ministry of Information Industry, the predecessor of the Ministry of Industry and Information Technology, issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, pursuant to which, a PRC company that holds a license for providing internet information services is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors to conduct value-added telecommunications businesses illegally in mainland China. Furthermore, the trademarks and domain names that are used in the provision of internet content services must be owned by the ICP operator or its shareholders. In addition, an ICP operator shall have appropriate facilities for its approved business operations and to maintain such facilities in the regions covered by its license.\n\nIn view of these restrictions on foreign direct investment in the value-added telecommunications sector, we established PRC domestic companies to engage in value-added telecommunications services through a series of contractual agreements with the VIEs and their shareholders.\n\nForeign Investment in Online Games. In September 2009, the General Administration of Press and Publication (the predecessor of the State Administration of Radio and Television), together with the National Copyright Administration and the National Office of Combating Pornography and Illegal Publications, jointly issued a Notice on Further Strengthening on the Administration of Pre-examination and Approval of Online Games and the Examination and Approval of Imported Online Games. This notice states that foreign investors are not permitted to invest in online game operating businesses in mainland China via wholly foreign-owned entities, Chinese-foreign equity joint ventures or cooperative joint ventures or to exercise control over or participate in the operation of domestic online game businesses through indirect means, such as other joint venture companies or contractual or technical arrangements. In view of these restrictions on foreign direct investment in the online games sector, we established PRC domestic companies to engage in the provision of online games mobile apps through a series of contractual agreements with the VIEs and their shareholders.\n\nDue to a lack of interpretative materials from the PRC governmental authorities, there are uncertainties regarding whether PRC governmental authorities would consider our corporate structure and contractual arrangements to constitute foreign ownership of a telecommunications business or an online games business. In order to comply with PRC regulatory requirements, we operate a portion of our business through the VIEs, with which we have contractual relationships but in which we do not have an actual ownership interest. If our current ownership structure is found to be in violation of current or future PRC laws, rules or regulations regarding the legality of foreign investment in the internet sector in mainland China, we could be subject to severe penalties.\n\n**Regulations Relating to Telecommunications Services**\n\nIn 2000, the State Council promulgated the Telecommunications Regulations, as most recently amended in February 2016, which set out the general framework for regulating telecommunication services by PRC companies. The Telecommunications Regulations differ “basic telecommunications services” from “value-added telecommunications services.” The Catalogue of Telecommunications Business, most recently updated in June 2019, categorizes information services, internet data centers and internet access as value-added telecommunications services.\n\n86\n\n[Table of Contents](#TOC)\n\nIn 2000, the State Council issued the Measures for the Administration of Internet Information Services, as most recently amended in January 2011. These measures define “internet information services” as the services of providing internet information to online users, which is further divided into “commercial internet information services” and “non-commercial internet information services.” A commercial internet information services operator must obtain a value-added telecommunications services license for internet information services from the Ministry of Industry and Information Technology or its local branch at the provincial or municipal level in accordance with the Telecommunications Regulations before providing any commercial internet information services in mainland China. Our business includes providing VoIP services and other value-added telecommunications services such as internet information service.\n\nThe measures further stipulate that entities providing online information services regarding news, publishing, education, medicine, health, pharmaceuticals and medical equipment must procure the consent of the national authorities responsible for such areas prior to applying for an operating license from the Ministry of Industry and Information Technology or its local branch at the provincial or municipal level. Moreover, ICP operators must display their operating license numbers in conspicuous locations on their home pages. ICP operators are required to police their internet platforms and remove certain prohibited content. Many of these requirements mirror internet content restrictions that have been announced previously by PRC ministries, such as the Ministry of Industry and Information Technology, and the Ministry of Culture and Tourism of the PRC, formerly the Ministry of Culture.\n\nThe Measures on the Administration of Telecommunications Business Operating Permit, promulgated by the Ministry of Industry and Information Technology in 2009 and most recently amended in July 2017, sets forth detailed activities that an enterprise are permitted to conduct under their licenses. A commercial telecommunication service operator must first obtain a value-added telecommunications services license from the Ministry of Industry and Information Technology, or its provincial level authorities if providing mere inter-provincial services. A licensed telecommunication services operator must conduct its business, whether basic or value-added, in accordance with the specifications in its Telecommunications Services Operating License.\n\nThe Cyberspace Administration of China promulgated the Administrative Provisions on Mobile Internet Applications Information Services on June 14, 2022 and became effective on August 1, 2022. Under these provisions, mobile application providers are prohibited from engaging in any activity that may endanger national security, disturb the social order, or infringe the legal rights of third parties, and may not produce, copy, issue or disseminate through internet mobile applications any content prohibited by laws and regulations. These provisions also require application providers to obtain the qualifications required by laws and regulations for providing services through such applications.\n\nWe currently hold seven Value-added Telecommunications Services Operating Licenses.\n\n**Regulations Relating to Internet Publication Services**\n\nThe State Administration of Radio and Television, formerly known as the State Administration of Press, Publication, Radio, Film and Television, as integrated from the State Administration of Radio, Film and Television, and the General Administration of Press and Publication, in March 2018 as a result of institutional reform, is the government agency responsible for regulating publication activities in mainland China. In June 2002, the Ministry of Industry and Information Technology and the General Administration of Press and Publication jointly promulgated the Interim Administrative Measures on Internet Publication, which require internet publishers to obtain a license from the General Administration of Press and Publication to conduct internet publication activities.\n\nIn February 2016, the State Administration of Press, Publication, Radio, Film and Television and the Ministry of Industry and Information Technology jointly issued the Administrative Measures for Internet Publication Services, which took effect in March 2016. The Administrative Measures for Internet Publication Services further strengthened and expanded the supervision and management on the internet publication services. Pursuant to the Administrative Measures for Internet Publication Services, entities engaging in the internet publication service are required to obtain an internet publication service license from the State Administration of Radio and Television. Internet Publication Services refer to the activities of providing internet publications to the public through information networks, and the internet publications refer to the digitalized works with the publishing features such as editing, producing and processing, including e-books and online games. In the event of failure to obtain the licenses and approvals, an operator may face heavy penalties, such as being ordered by the regulatory authority to shut down services and delete all 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.\n\n87\n\n[Table of Contents](#TOC)\n\nIn May 2016, the State Administration of Press, Publication, Radio, Film and Television issued a Notice on Administration of Mobile Game Publishing Services, effective in July 2016, which provides that the content of mobile games is subject to its review, and that mobile game publishers and operators must apply for publishing and authorization codes for the games. Under this notice, significant upgrades and expansion packs for mobile games that have previously been approved for publishing could be regarded as new works, and the operators will be required to obtain approval for such upgrades and expansion packs before they are released. In the event of any failure to meet these license and approval requirements, an operator may face heavy penalties, such as being ordered to stop operation, or having its business license revoked. As of the date of this annual report, we have not obtained the approval for our internet publication service license and publication codes for those domestic online games we operate. We are applying for publication codes for certain future online games.\n\n**Regulations Relating to Internet Audio-Visual Program Services**\n\nThe State Administration of Radio and Television and the Ministry of Industry and Information Technology jointly issued the Administrative Provisions for the Internet Audio-Video Program Service in 2007 which was amended in August 2015. The provisions define “internet audio-visual programs services” as the production, edition and integration of audio-video programs, the supply of audio-video programs to the public via the internet, and providing uploading and audio-video programs transmission services to a third party. Entities engaging in internet audio-visual programs services must obtain internet audio-visual program transmission licenses, which will only be issued to state-owned or state-controlled entities unless the license applicants have obtained internet audio-visual program transmission licenses prior to the promulgation of the provisions in accordance with the then-in-effect laws and regulations. According to the Categories of the Internet Audio-Video Program Services promulgated by the State Administration of Radio and Television in March 2017, “aggregation of internet audio-visual programs,” meaning “editing and arranging the internet audio-visual programs on the same website and providing searching and watching services to public users,” falls into the definition of the aforementioned “internet audio-visual programs services.” As of the date of this annual report, we have not obtained the internet audio-visual program transmission license for our business.\n\n**Regulations Relating to Online Cultural Products**\n\nIn 2011 and as amended in 2017, the Ministry of Culture and Tourism issued the Provisional Regulations for the Administration of Online Culture, which applies to entities engaging in activities related to “online cultural products,” including the cultural products that are produced specially for internet use, such as online music and entertainment, online games, online plays, online performances, online art works and Web animations, and those cultural products that, through technical means, produce or reproduce music, entertainment, games, plays and other art works for internet dissemination. Further, commercial entities are required to apply to the local branch of the Ministry of Culture and Tourism for an Online Culture Operating Permit if they engage in any of the following types of activities:\n\n●the production, duplication, importation, release or broadcasting of online cultural products;\n\n●the dissemination of online cultural products on the internet or transmission thereof via internet or mobile phone networks to users’ terminals such as computers, fixed-line or mobile phones, television sets, gaming consoles and internet surfing service sites such as internet cafés for the purpose of browsing, using or downloading such products; or\n\n●the exhibition or holding of contests related to online cultural products.\n\nThe Ministry of Culture and Tourism issued a Notice on Strengthening the Administration of Online Performance in July 2016, and the Measures of Administration of Online Performance Operating Activities, effective in January 2017. The notice and measures both stipulate that online performance service providers must obtain Online Culture Operating Permits and that online performances must not contain any content that is horrific, cruel, violent, vulgar or humiliating in nature, mocking persons with disabilities, including photographs or video clips that infringing on third parties’ privacy or other rights, featuring animal abuse, or presenting characters or other features of online games that have not been registered and approved for publication by applicable PRC governmental authorities. A violator of these regulations may face an order of correction from competent authorities, or be subject to confiscation of illegal proceeds or a fine. If the violation is severe, competent authorities may order the violator to cease its operation for rectification, revoke the violator’s Online Culture Operating Permit, or impose applicable criminal liability.\n\nWe currently hold two Online Culture Operating Permits.\n\n88\n\n[Table of Contents](#TOC)\n\n**Regulations Related to Online Games**\n\nRegulatory Authorities and Restriction on Foreign Investment\n\nThe establishment, operation, and management of companies in China are governed by the PRC Company Law, as last amended on December 29, 2023 and effective on July 1, 2024. According to the PRC Company Law, a company established in the PRC may take the form of a limited liability company or a joint stock company with limited liability. Each company is an independent legal entity with property rights. Foreign-invested companies established in PRC are also subject to the PRC Company Law. Shareholders of a limited liability company must fully pay in their subscribed registered capital within five years from the date of establishment of this company. Companies established before July 1, 2024 shall gradually adjust their capital contribution to meet this new requirement.\n\nIn 2008, the General Office of the State Council issued a circular, pursuant to which, the General Administration of Press and Publication is responsible for the examination and approval of online games prior to the online publication, while the Ministry of Culture is responsible for regulating the online game market. In 2009, the General Administration of Press and Publication, the National Copyright Administration and the National Office of Combating Pornography and Illegal Publications jointly published the Notice Regarding the Consistent Implementation of the “Stipulations on ‘Three Provisions’ of the State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the Further Strengthening of the Administration of Pre-examination and Approval of Internet Games and the Examination and Approval of Imported Internet Games,” which expressly requires that all online games need to be screened by the General Administration of Press and Publication through the pre-approvals before they can be operated online, and any updated online game versions or any change to the online games shall be subject to further pre-approvals before they can be operated online.\n\nPursuant to the Notice to Adjust the Scope of Online Culture Operation Permit Approval and to Further Regulate the Approval Work released by the Ministry of Culture and Tourism 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 Permits covering the business scope of using the information network to operate online games. The licenses granted by the Ministry of Culture and Tourism before this notice will remain valid until the expiration dates of these licenses, but those whose business scopes include only the operation of online games cannot be renewed after the expiration dates. On July 23, 2019, the Ministry of Culture and Tourism announced the abolishment of the Interim Measures on Administration of Online Games, which regulated the issuance of Online Culture Operation Permits relating to online games.\n\nBoth the internet publication services (including the online game publishing) and online culture operation (including the online game operation) fall within the prohibited categories in the Negative List. The Notice Regarding the Consistent Implementation of the “Regulation on Three Provisions” of the State Council and the Relevant Interpretations of the State Commission Office for Public Sector Reform and the Further Strengthening of the Administration of Pre-examination and Approval of Online Games and the Examination and Approval of Imported Online Games, promulgated by the General Administration of Press and Publication, together with the National Copyright Administration and the Office of the National Working Group for Crackdown on Pornographic and Illegal Publications in 2009, provides that, among other things, foreign investors are not permitted to invest or engage in online game operations in mainland China through their wholly owned subsidiaries, equity joint ventures or cooperative joint ventures, and foreign investors are not permitted to gain control over or participate in domestic online game operations indirectly through joint ventures, contractual agreements or technical support. Serious violation of the notice will result in suspension or revocation of the licenses and registrations.\n\n89\n\n[Table of Contents](#TOC)\n\nOnline Game Examination and Publishing\n\nPursuant to the Administrative Measures for Internet Publication Services jointly promulgated by the State Administration of Press, Publication, Radio, Film and Television and the Ministry of Industry and Information Technology in February 2016, online publications such as games provided to the public through information networks must be approved by the State Administration of Press, Publication, Radio, Film and Television and the service operator must obtain an internet publication service license. An online publishing service provider shall first file an application with the competent provincial-level counterpart of the State Administration of Press, Publication, Radio, Film and Television in the place where it is located and the application, if approved, shall be submitted to the State Administration of Press, Publication, Radio, Film and Television for approval. For the publishing of online games authorized by foreign copyright owners, the online publishing service provider shall obtain legal authorization for the copyright and complete the approval formalities.\n\nIn May 2016, the State Administration of Press, Publication, Radio, Film and Television issued the Notice on Administration of Mobile Game Publishing Services, which provides that the content of mobile games is subject to its review, and that mobile game publishers and operators must apply for publishing and authorization codes for the games. Under this notice, significant upgrades and expansion packs for mobile games that have previously been approved for publishing could be regarded as new works, and the operators will be required to obtain approval for such upgrades and expansion packs before they are released. In the event of any failure to meet these license and approval requirements, an operator may face heavy penalties, such as being ordered to stop operation, or having its business license revoked.\n\nThe Central Committee of the Communist Party of China issued the Plan for Deepening the Institutional Reform of the Party and State and the National People’s Congress adopted the Institutional Reform Plan of the State Council in March 2018. According to these plans, the State Administration of Press, Publication, Radio, Film and Television was reformed and now known as the State Administration of Radio and Television and the National Administration of Press and Publication. Concurrently with the implementation of this reformation, the assessment and pre-approval on domestic and foreign developed online games had been suspended during April to December 2018 and had resumed since December 2018. After this reorganization, companies need to apply with the National Administration of Press and Publication for the approvals publishing the online games. As of the date of this annual report, we have not obtained the approval for our internet publication service license and publication codes for those domestic online games we operate. We are applying for publication codes for certain future online games.\n\nOnline Game Operation\n\nIn June 2010, the Ministry of Culture promulgated the Interim Measures on Administration of Online Games, as amended on December 15, 2017, which governed the research, development and operation of online games and the issuance and trading services of virtual currency. All operators of online games, issuers of virtual currency and providers of virtual currency trading services are required to obtain Online Culture Operation Permits. An Online Culture Operation Permit is valid for three years.\n\nIn May 2019, the Ministry of Culture and Tourism released the Notice on Adjusting the Scope of Examination and Approval regarding the to Further Regulate the Approval Work, pursuant to which 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.\n\nOn July 23, 2019, the Ministry of Culture and Tourism announced the abolishment of the Interim Measures on Administration of Online Games. After the abolishment, the game operators are no longer required to apply to the Ministry of Culture and Tourism for examination of imported online games or go through filing procedures for domestic online games.\n\nRegulations Related to Anti-fatigue System, Real-name Registration System and Parental Guardianship Project\n\nIn 2007, the General Administration of Press and Publication and several other government agencies issued a circular requiring the implementation of an anti-fatigue system and a real-name registration system by all PRC online game operators to curb addictive online game playing by minors. Under the anti-fatigue system, three hours or less of continuous playing by minors, defined as game players under 18 years of age, is considered to be “healthy,” three to five hours to be “fatiguing,” and five hours or more to be “unhealthy.” Game operators are required to reduce the value of in-game benefits to a minor player by half if the minor has reached the “fatiguing” level, and to zero once reaching the “unhealthy” level.\n\n90\n\n[Table of Contents](#TOC)\n\nTo identify whether a game player is a minor and thus subject to the anti-fatigue system, a real-name registration system must be adopted to require online game players to register their real identity information before playing online games. The online game operators are also required to submit the identity information of game players to the public security authority for verification. In 2011, the General Administration of Press and Publication, together with several other government agencies, jointly issued the Notice on Initializing the Verification of Real-name Registration for the Anti-Fatigue System on Online Games to strengthen the implementation of the anti-fatigue and real-name registration system. The main purpose of this notice is to curb addictive online game playing by minors and protect their physical and mental health. This notice indicates that the National Citizen Identity Information Center of the Ministry of Public Security will verify identity information of game players submitted by online game operators. This notice also imposes stringent penalties on online game operators that do not implement the required anti-fatigue and real-name registration systems properly and effectively, including terminating their online game operations.\n\nIn 2011, the Ministry of Culture, together with several other government agencies, jointly issued a Circular on Printing and Distributing Implementation Scheme regarding Parental Guardianship Project for Minors Playing Online Games to strengthen the administration of online games and protect the legitimate rights and interests of minors. This circular indicates that online game operators must have person in charge, set up specific service webpages and publicize specific hotlines to provide parents with necessary assistance to prevent or restrict minors’ improper game playing behavior. Online game operators must also submit a report regarding its performance under the Parental Guardianship Project to the provincial level counterpart of the Ministry of Culture each quarter.\n\nOn June 14, 2022, the Cyberspace Administration of China issued the Administrative Provisions on Mobile Internet Applications Information Services, which became effective on August 1, 2022. Under these provisions, the mobile applications information service providers shall satisfy the qualifications required by laws and regulations, strictly carry out the information security management responsibilities and fulfill their obligations in various aspects relating to the real-name system, protection of users’ information and the examination and management of information content. The app store service providers shall file with the local cyberspace administration authorities within 30 days after its app store services being launched, and such app store service providers are responsible for overseeing app information service providers operated in their stores.\n\nIn August 2018, the National Health Commission, the Ministry of Education, together with several other government agencies, jointly issued the Implementation on Comprehensive Prevention and Control of Juveniles’ Myopia, which sets forth the plans to control the number of new online games and to restrict the amount of time when juveniles play games and use electronic devices.\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. Furthermore, minors are prohibited from playing games exceeding a certain period of time per day or charging their accounts exceeding a certain amount.\n\nOn October 17, 2020, the Standing Committee of the National People’s Congress issued the Law of the PRC on the Protection of Minors (2020 Revision), which took effect on June 1, 2021. The Law of the PRC on the Protection of Minors (2020 Revision) added a new section entitled “Internet Protections,” which stipulates a series of provisions to further protect minors’ interests on the internet, including, among others, (i) online product and service providers are prohibited from providing minors with products and services that would induce minors to indulge; (ii) online service providers for services, such as online games, live streaming, audio-visual, and social networking, are required to establish special management systems of user duration, access authority and consumption for minors; (iii) online games service providers must request minors to register and log into online games with their valid identity information; (iv) online games service providers shall categorize games according to the rules and standards, notify users about the appropriate ages for the players of the games, and take technical measures to keep minors from accessing inappropriate online games functions, and (v) online games service providers may not provide online games services to minors from 10:00 p.m. to 8:00 a.m. the next day.\n\nIn 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, the National Press and Publication Administration of China limits online gaming time for minors to an hour per day from 8 p.m. to 9 p.m. on Friday, Saturday, Sunday and legal holidays in mainland China starting from September 1, 2021 and 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.\n\n91\n\n[Table of Contents](#TOC)\n\nOn 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. These regulations set out various requirements based on the nature of products or services and the data processing behavior of providers of network products and services, processors of personal data, and manufacturers and sellers of intelligent terminal products. Service providers must comply with the requirements for the protection of minors on the network at all stages of the design, research and development, and operation of their network services and products.\n\nOn December 22, 2023, the National Administration of Press and Publication published the draft Measures for the Administration of Online Games that provided detailed regulations for the protection of minors in the operations of online games. Under these draft measures, game providers are required to implement measures to limit the time minors spend on online games, restrict minors’ access to potentially addictive and inappropriate content, and enforce limitations on spending for different age groups. These draft measures prohibit certain services from being provided to minors, such as account rental and sale, in-game currency and virtual item trading, game boosting or game levelling services, and probability-based luck draw features. The providers are required to verify the minors’ identities and ages and provide reminders to protect minors’ physical and psychological health. The classification of game products based on age stages and prominent reminders during downloads, registrations, and login screens are also mandated. As of the date of this annual report, these draft measures have not been formally adopted.\n\n**Regulations Relating to Online Advertising Services**\n\nThe PRC Congress amended the Advertising Law effective in April 2021. The amended Advertising Law stipulates the potential legal liability of providers of advertising services, and includes provisions intended to strengthen identification of false advertising and the power of regulatory authorities. In July 2016, the State Administration of Industry and Commerce issued the Interim Measures of the Administration of Online Advertising. The Advertising Law and the interim measures both provide that advertisements posted or published through the internet shall not affect users’ normal usage of network, and advertisements published in the form of pop-up windows on the internet must display an outstanding “close” sign with a button to close the pop-up windows. These interim measures provide that all online advertisements must be marked as “Advertisement” so that viewers can easily identify them as such. The Advertising Law and the interim measures will require us to conduct more stringent examination and monitoring of our advertisers and the content of their advertisements.\n\nAdvertisements 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.\n\nAccording 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\nWhere there is a false advertisement, the administration of market regulation may (i) request the discontinuation of publishing the target advertisement and the elimination of any adverse effects caused by such false advertisement; (ii) impose fines calculated based on advertisement expenses, if the advertising expense is incalculable or evidently low, the fines should be RMB200,000 to RMB1,000,000, and if the advertiser has published false advertisements more than three times in the past two years or in other serious cases, the fines should be five to ten times of the advertising expense and where the advertising expense is incalculable or evidently low, the fines should be between RMB1,000,000 to RMB2,000,000; and (iii) cancel the advertiser’s business license. The advertisement examination authority may revoke advertisements approvals and reject advertisement examination requests from such advertisers for one year.\n\n​\n\n92\n\n[Table of Contents](#TOC)\n\nThe relevant advertisers, advertisement operators and advertisement publishers may also face criminal liabilities. According to the Criminal Law, where an advertiser, advertisement operator or advertisement publisher uses false advertising for its products or services and when the circumstances are serious, the offender may face imprisonment of not more than two years, criminal detention and fines. According to the Provisions of the Supreme People’s Procuratorate and the Ministry of Public Security on Criteria for Docketing and Prosecution of Criminal Cases under the Jurisdiction of Public Security Authorities (II), where an advertiser, advertisement operator or advertisement publisher uses false advertising for its products or services, the offender may be prosecuted if, among other serious violation circumstances, (i) the amount of illegal gains exceeds RMB100,000, (ii) causing direct economic loss of over RMB50,000 to a single consumer, or accumulatively direct loss of over RMB200,000 to several consumers, or (iii) the offender has received administrative punishment more than two times within two years for conducting false advertising.\n\n**Regulations on Unfair Competition**\n\nOn June 27, 2025, the Standing Committee of the National People’s Congress promulgated the amended Anti-Unfair Competition Law of the People’s Republic of China, which became effective on October 15, 2025.\n\nPursuant to the Anti-Unfair Competition Law, a business operator shall not conduct any false or misleading commercial publicity in respect of the performance, functions, quality, sales, user reviews, and honors received of its commodities, in order to defraud or mislead consumers. A business operator publishing any false advertisements in violation of this provision shall be punished in accordance with the PRC Advertising Law.\n\nThe Anti-Unfair Competition Law also stipulated that a business operator engaging in production or distribution activities online shall abide by the provisions of the Anti-Unfair Competition Law. No business operator may, by technical means to affect users’ options, among others, commit the acts of interfering with or sabotaging the normal operation of online products or services legally provided by another business operator.\n\nIn addition, according to the Anti-Unfair Competition Law, a business operator is prohibited from any of the following unfair activities: (i) committing act of confusion to mislead a person into believing that a commodity is one of another person or has a particular connection with another person; (ii) seeking transaction opportunities or competitive edges by bribing entities or individuals with property or by any other means; (iii) infringing on trade secrets; (iv) premium campaign violating the provision of the Anti-Unfair Competition Law; and (v) fabricating or disseminating false or misleading information to damage the goodwill or product reputation of a competitor.\n\n**Regulations Relating to Intellectual Property Protection**\n\nMainland China has adopted comprehensive legislation governing intellectual property rights, including copyrights, patents and trademarks.\n\nCopyright\n\nUnder the PRC Copyright Law promulgated by the National People’s Congress in 1990 and most recently amended in 2020, copyright protection extends to internet activities, products disseminated over the internet and software products. In addition, there is a voluntary registration system administered by the China Copyright Protection Center, and requires registration of any pledge of a copyright. Its implementing regulation, Computer Software Copyright Registration Procedures, was promulgated in 2011 and most recently amended in January 2013, specifies detailed procedures and requirements regarding the registration of software copyrights.\n\nTo address the problem of copyright infringement related to content posted or transmitted over the internet, the PRC National Copyrights Administration and the Ministry of Industry and Information Technology jointly promulgated the Measures for Administrative Protection of Copyright Related to Internet in 2005. Upon receipt of an infringement notice from a legitimate copyright holder, an ICP operator must take remedial actions immediately by removing or disabling access to the infringing content. If an ICP operator knowingly transmits infringing content or fails to take remedial actions after receipt of a notice of infringement harming public interest, the ICP operator could be subject to administrative penalties, including an order to cease infringing activities, confiscation by the authorities of all income derived from the infringement activities, or payment of fines.\n\n93\n\n[Table of Contents](#TOC)\n\nThe Provisions of the Supreme People’s Court on Certain Issues Related to the Application of Law in the Trial of Civil Cases Involving Disputes on Infringement of the Information Network Dissemination Rights provides that disseminating works, performances or audio-video products by internet users or internet service providers via the internet without the consents of the copyright owners shall be deemed to have infringed the right of dissemination of the copyright owner. Under the Regulations on the Protection of the Right to Network Dissemination of Information, promulgated by the State Council in 2006 and amended in 2013, an owner of the network dissemination rights with respect to written works or audio or video recordings who believes that information storage, search or link services provided by an internet service provider infringe his or her rights may require that the internet service provider delete, or disconnect the links to, such works or recordings. As of December 31, 2025, we have registered 237 software copyrights in mainland China.\n\nPatent Law\n\nUnder the Patent Law promulgated by PRC Congress in 1984 and most recently amended in 2020, and its implementation regulations issued in 2010, the State Intellectual Property Office is responsible for administering patents in mainland China. The Chinese patent system adopts a “first to file” principle, which means that where more than one person files a patent application for the same invention, a patent will be granted to the person who filed the application first. To be patentable, invention or utility models must meet all three conditions: novelty, inventiveness and practical applicability. A patent is valid for 20 years in the case of an invention and 10 years in the case of utility models and designs. A third-party user must obtain consent or proper license from the patent owner to use the patent. Otherwise, third-party use constitutes an infringement of patent rights. As of December 31, 2025, we held 18 patents in mainland China.\n\nTrademark Law\n\nUnder the Trademark Law promulgated by PRC Congress in 1982 and most recently amended in 2019, and its implementation regulations issued in 2002 and amended in April 2014, the Trademark Office of the Administration for Industry and Commerce is responsible for the registration and administration of trademarks. The Administration for Industry and Commerce under the State Council has established a Trademark Review and Adjudication Board for resolving trademark disputes. As with patents, mainland China has adopted a “first-to-file” principle for trademark registration. If two or more applicants apply for registration of identical or similar trademarks for the same or similar commodities, the application that was filed first will receive preliminary approval and will be publicly announced. For applications filed on the same day, the trademark that was first used will receive preliminary approval and will be publicly announced. Registered trademarks are valid for ten years from the date the registration is approved. A registrant may apply to renew a registration within twelve months before the expiration date of the registration. If the registrant fails to apply in a timely manner, a grace period of six additional months may be granted. If the registrant fails to apply before the grace period expires, the registered trademark shall be deregistered. Renewed registrations are valid for ten years. As of December 31, 2025, we had 265 trademarks in mainland China.\n\nDomain Name\n\nDomain names are protected in mainland China under the Administrative Measures on the Internet Domain Names promulgated by the Ministry of Industry and Information Technology, which became effective on November 1, 2017. The Ministry of Industry and Information Technology is the primary regulatory authority responsible for the administration of the PRC internet domain names. The registration of domain names in mainland China has adopted a “first-to-file” principle. A domain name applicant will become the domain name holder upon the completion of its application procedure.\n\nAs of December 31, 2025, we had registered approximately 45 domain names, including “cootek.com,” “chubao.cn” and “touchpal.com.”\n\n94\n\n[Table of Contents](#TOC)\n\nInternet Infringement\n\nUnder the PRC Civil Code promulgated by PRC Congress and became effective on January 1, 2021, an internet user or an internet service provider that infringes upon the civil rights or interests of others through using the internet assumes tort liability. If an internet user infringes upon the civil rights or interests of another through internet, the victim has the right to notify and request the facilitating internet service provider to take necessary measures including deletion, blocking or disconnection of any relevant internet link. If, the internet service provider fails to take necessary measures upon notification in a timely manner to stop the infringement, such internet service provider shall be jointly and severally liable for any additional harm caused by its failure to act. According to the PRC Civil Code, civil rights and interests include the personal rights and rights of property, such as the right to life, right to health, right to name, right to reputation, right to honor, right of portraiture, right of privacy, right of marital autonomy, right of guardianship, right to ownership, right to usufruct, right to security interests, copyright, patent right, exclusive right to use trademarks, right to discovery, right to equity interests and right of heritage, among others.\n\n**Regulations Relating to User Protection**\n\nThe Measures on the Complaint Settlement of the Telecommunication Services Users, issued by the Ministry of Industry and Information Technology in May 2016, requires telecommunication services providers to respond to their users within fifteen days upon the receipt of any complaint delivered by such users, the failure of which will give the complaining users the right to file a complaint against the service providers with the provincial branch offices of the Ministry of Industry and Information Technology.\n\n**Regulations Relating to M&A and Overseas Listing**\n\nIn 2006, six PRC regulatory agencies, including the Ministry of Commerce, the State Assets Supervision and Administration Commission, the State Administration of Taxation, the State Administration of Industry and Commerce, the CSRC and the SAFE, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, as amended in 2009. The regulations require an offshore special purpose vehicle, formed for purposes of the overseas listing of equity interests in PRC companies through acquisitions of PRC domestic companies and controlled directly or indirectly by PRC companies or individuals, to obtain the approval of the CSRC prior to any listing or trading of such special purpose vehicle’s securities on any overseas stock exchange. In 2006, the CSRC published on its official Website procedures for obtaining its approval of overseas listings by special purpose vehicles, which requires the filing of a number of documents with the CSRC. The application of this PRC regulation remains unclear, with no consensus currently existing among leading PRC law firms regarding the scope of the applicability of the CSRC approval requirements.\n\nThe Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors also establish procedures and requirements that could make some acquisitions of Chinese companies by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a Chinese domestic enterprise.\n\nIn 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 established a security review system for mergers and acquisitions of domestic enterprises by foreign investors. 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 “de facto control” of domestic enterprises with “national security” concerns. In August 2011, the Ministry of Commerce promulgated the Rules on Implementation of Security Review System. These rules which came into effect on September 1, 2011 provide that the Ministry of Commerce will look into the substance and actual impact of a transaction and prohibit foreign investors from bypassing the security review requirement by structuring transactions through proxies, trusts, indirect investments, leases, loans, control through contractual arrangements or offshore transactions. 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\n95\n\n[Table of Contents](#TOC)\n\nBased on our understanding of the current PRC laws and regulations, as of the date of this annual report, we believe that we will not be required to submit an application to the CSRC for the approval of our historical listing and trading of the ADSs on any designated stock exchange or market. However, there remains some uncertainty as to how the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors will be interpreted or implemented in the context of an overseas offering, and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to these regulations.\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 mainland 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 mainland China-based overseas-listed companies.\n\nOn September 6, 2024, the National Development and Reform Commission and the Ministry of Culture 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 domestic 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 percentage shall be subject, mutatis mutandis, to the regulations on the domestic securities investments by foreign investors.\n\nOn February 17, 2023, the CSRC issued the Trial Administrative Measures of Overseas Securities Offerings and Listings by Domestic Companies and five supporting guidelines, effective March 31, 2023. Any future securities offerings and listings outside of mainland China by our company, including, but not limited to, listings, follow on offerings, issuance of convertible notes, exchangeable notes or preferred shares, and other equivalent offering activities, either directly or indirectly, will be subject to the filing requirements with CSRC under these trial measures, and we cannot assure you that we will be able to comply with such filing requirements in a timely manner, or at all. Under these trial measures, required filings include (i) a filing report, (ii) regulatory opinions, filing or approval documents issued by the competent authorities of the industry concerned (if applicable), (iii) opinions on the security assessment and review issued by the competent department of the State Council (if applicable), (iv) legal opinions and undertakings issued by PRC counsel, and (v) the listing documents. Failure to complete filing or other procedures may lead to sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties. See also “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\n96\n\n[Table of Contents](#TOC)\n\nFive supporting guidelines provide that the examination and determination of an indirect offering and listing will be conducted on a substance-over-form basis, and an offering and listing shall be deemed as a PRC company’s indirect overseas offering and listing if the issuer meets both of the following conditions: (i) any of the operating income, gross profit, total assets, or net assets of the PRC companies in the most recent fiscal year was more than 50% of the line item in the issuer’s audited consolidated financial statement for that year; and (ii) senior management personnel responsible for business operations and management are mostly PRC citizens or are ordinarily resident in the PRC, or the principal place of business is in the PRC or carried out in the PRC. In all such cases, the issuer or its designated principal operating PRC entity, as the case may be, shall file with the CSRC for its initial public offering, follow-on offering and other equivalent offering activities. Particularly, the issuer shall submit a filing with respect to its initial public offering and listing within three business days after its initial filing of the listing application, and submit a filing with respect to its follow-on offering within three business days after the completion of the follow-on offering. The issuer shall also submit a report with respect to the following material events within three business days after the occurrence and announcement of such event: (i) change of control rights; (ii) being investigated or punished by overseas securities regulatory authorities or the competent authorities; (iii) change of listing status or listing board; and (iv) voluntary or mandatory termination of the listing. The guidance rules specify that “control relationship” or “control right” under the trial measures refer to the actual control of the company by means of equity, voting rights, trusts, agreements and other arrangements, either individually or jointly, directly or indirectly. Therefore, the trial measures are interpreted to apply to PRC companies that use a variable interest entity structure. The trial measures also identify certain circumstances that will preclude issuers from pursuing overseas offerings and listings, including (i) explicit prohibition from financing through listing by laws, administrative regulations, or national provisions; (ii) recognition by the competent department of the State Council that the issuer’s overseas offering and listing may harm national security; (iii) commission of criminal offenses, such as embezzlement, bribery, misappropriation of property, or disruption of market orders by the domestic companies, its controlling shareholder, or the actual controller within the past three years; (iv) ongoing investigation by law enforcement agencies for suspected criminal or significant illegal and irregular activities without any clear conclusion yet; and (v) material ownership disputes over shares held by the controlling shareholder or by other shareholders that are controlled by controlling shareholder and/or actual controller. Additionally, the trial measures include certain compliance requirements for issuers, such as compliance with national security laws, regulations and provisions on foreign investment, cyber security and data security, and address that security review procedures, if involved, shall be carried out in accordance with the laws prior to submitting the application for overseas offering and listing.\n\nAccording to these trial measures, the issuer or its affiliated domestic company, as the case may be, shall file with the CSRC (i) with respect to its initial public offering and listing within three business days, after its initial filing of the listing application to the regulator in the place of the intended listing, (ii) with respect to its follow-on offering within three business days after completion of the follow-on offering, (iii) with respect to its follow-on offering for purpose of acquiring specific assets, within three business days after the first public announcement of the transaction, and (iv) with respect to listing by means of reverse takeover, share swap, acquisition and similar transactions, within three business days after its initial filing of the listing application or the first public announcement of the transaction, as case may be. The CSRC also requires the PRC domestic companies to submit regulatory opinions, assessment opinions or approvals issued by the authorities as filing materials if applicable. These trial measures also require subsequent report to the CSRC on material events, such as material change in principal business and change of control.\n\nNon-compliance with these trial measures may result in a warning on the domestic companies or a fine of RMB1 million to RMB10 million on them. The directly responsible person in charge and other directly responsible persons shall be given a warning and a fine of RMB500,000 to RMB5 million. The controlling shareholder or actual controller of domestic companies who organizes or instigates the illegal act under these trial measures shall be given a fine of RMB1 million to RMB10 million. According to the Circular of the People’s Republic of China on Administrative Arrangements for Filing of Overseas Issuance and Listing of Domestic Enterprises released on February 17, 2023, companies that have completed overseas issuance and listing before September 30, 2023 are not required to file immediately, and should file as required if subsequent filing matters such as refinancing are involved.\n\n97\n\n[Table of Contents](#TOC)\n\nOn February 24, 2023, the CSRC and three 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. These provisions set out rules, requirements and procedures relating to provision of documents, materials and accounting archives for securities companies, securities service providers, overseas regulators and other entities and individuals in connection with overseas offering and listing, including, without limitation, to, domestic companies that carry out overseas offering and listing (either directly or indirectly) and the securities companies and securities service providers (either incorporated domestically or overseas) that undertake the businesses shall not leak any state secret and working secret of government agencies, or harm national security and public interest, and a domestic company shall first obtain approval from competent authorities according to law, 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. The working papers formed within mainland China by the securities companies and securities service agencies that provide corresponding services for the overseas issuance and listing of domestic enterprises shall be stored within mainland China. Where the overseas securities regulator and the competent authorities request to conduct inspection or investigation to collect evidence from a domestic enterprise and the domestic securities companies and securities service agencies providing the corresponding services in respect of the overseas issuance and listing activities of the domestic enterprise, the inspection or investigation shall be carried out under the cross-border regulatory cooperation mechanism, and the CSRC or the authorities shall provide the requisite assistance pursuant to the bilateral and multilateral cooperation mechanism. 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.\n\n**Regulations Relating to Foreign Currency Exchange and Dividend Distribution**\n\nThe principal regulations governing foreign currency exchange in mainland China are the Foreign Exchange Administration Regulations, which were promulgated by the State Council in 1996 and most recently amended in 2008. Under these regulations, the RMB is freely convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions, but not for capital account items, such as direct investments, loans, repatriation of investments and investments in securities outside of the PRC, unless the prior approval of the SAFE is obtained and prior registration with the SAFE is made. Dividends paid by a PRC subsidiary to its overseas shareholder are deemed income of the shareholder and are taxable in mainland China. Pursuant to the Administration Rules of the Settlement, Sale and Payment of Foreign Exchange promulgated by the PBOC in 1996, foreign-invested enterprises in mainland China may purchase or remit foreign currency, subject to a cap approved by the SAFE, for settlement of current account transactions without the approval of the SAFE. Foreign currency transactions under the capital account are still subject to limitations and require approvals from, or registration with, the SAFE and other PRC governmental authorities.\n\nIn July 2014, the SAFE promulgated the Circular on Issues Concerning Foreign Exchange Administration over the Overseas Investment and Financing and Roundtrip Investment by Domestic Residents Via Special Purpose Vehicles, or SAFE Circular 37. SAFE Circular 37 requires PRC residents, including PRC institutions and individuals, to register with the local SAFE office in connection with their direct establishment or indirect control of an offshore entity, referred to in SAFE Circular 37 as a “special purpose vehicle” for the purpose of holding domestic or offshore assets or interests. PRC residents must also file amendments to their registrations in the event of any significant changes with respect to the special purpose vehicle, such as increase or decrease of capital contributed by PRC individuals, share transfer or exchange, merger, division or other material event. Under these regulations, PRC residents’ failure to comply with such regulations may result in restrictions being imposed on the foreign exchange activities of the PRC entity, including the payment of dividends and other distributions to its offshore parent, as well as restrictions on capital inflows from the offshore entity to the PRC entity, including restrictions on the ability to contribute additional capital to the PRC entity. Further, failure to comply with the various SAFE registration requirements could result in liability under PRC laws for evasion of foreign exchange regulations.\n\nUnder SAFE Circular 37, if a non-listed special purpose vehicle uses its own equity to grant equity incentives to any directors, supervisors, senior management or any other employees directly employed by a domestic enterprise which is directly or indirectly controlled by such special purpose vehicle, or with which such an employee has established an employment relationship, related PRC residents and individuals may, prior to exercising their rights, apply to the SAFE for foreign exchange registration formalities for such special purpose vehicle. However, in practice, different local SAFE offices may have different views and procedures on the interpretation and implementation of the SAFE regulations, and since SAFE Circular 37 was the first regulation to regulate the foreign exchange registration of a non-listed special purpose vehicle’s equity incentives granted to PRC residents, there remains uncertainty with respect to its implementation.\n\n98\n\n[Table of Contents](#TOC)\n\nIn February 2015, SAFE promulgated the Notice on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, as amended in December 2019, which amended SAFE Circular 37 by requiring PRC residents or entities to register the incorporation or control of an offshore entity for purposes of offshore investment or offshore financing with qualified banks rather than SAFE or its local branches.\n\nUnder the Administration Measures on Individual Foreign Exchange Control issued by PBOC in 2006, and related Implementation Rules issued by the SAFE in 2007 as amended in 2016, all foreign exchange transactions involving an employee share incentive plan, share option plan, or similar plan participated in by onshore individuals shall obtain approval from the SAFE or its local office.\n\nThe principal regulations governing distribution of dividends of foreign holding companies include the Foreign Investment Law promulgated in 2019, the Regulation on Implementing the Foreign Investment promulgated in 2019, and the Company Law as recently amended in 2023. Under these regulations, wholly foreign-owned enterprises in mainland China may pay dividends only out of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise in mainland China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until its cumulative total reserve funds reaches 50% of its registered capital. At the discretion of the board of directors of the wholly foreign-owned enterprise, it may allocate a portion of its after-tax profits based on PRC accounting standards to staff welfare and bonus funds. These reserve funds and staff welfare and bonus funds, however, may not be distributed as cash dividends.\n\nFurthermore, under the Enterprise Income Tax Law, which became effective in January, 2008 and latest amended in December 2018, the maximum tax rate for the withholding tax imposed on dividend payments from PRC foreign invested companies to their overseas investors that are not regarded as “resident” for tax purposes is 20%. The rate was reduced to 10% under the Implementing Regulations for the PRC Enterprise Income Tax Law issued by the State Council. However, a lower withholding tax rate of 5% might be applied if there is a tax treaty between mainland China and the jurisdiction of the foreign holding companies, such as is the case with Hong Kong, and certain requirements specified by PRC tax authorities are satisfied.\n\n**Regulations Relating to Employee Share Option Plans**\n\nPursuant to the Notice of Issues Related to the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Listed Company issued by the SAFE in February 2012, employees, directors, supervisors, and other senior management participating in any share incentive plan of an overseas publicly listed company who are PRC citizens or non-PRC citizens residing in mainland China for a continuous period of not less than one year, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which may be a PRC subsidiary of such overseas listed company, and complete certain other procedures.\n\nIn addition, the State Administration of Taxation has issued certain circulars concerning employee share options and restricted shares. Under these circulars, employees working in mainland China who exercise share options or are granted restricted shares will be subject to PRC individual income tax. The PRC subsidiaries of an overseas listed company are obligated to file documents related to employee share options and restricted shares with tax authorities and to withhold individual income taxes of employees who exercise their share option or purchase restricted shares. If the employees fail to pay or the PRC subsidiaries fail to withhold income tax in accordance with laws and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC governmental authorities.\n\n99\n\n[Table of Contents](#TOC)\n\n**Regulations Relating to Employment and Social Insurance**\n\nThe PRC Labor Contract Law promulgated by PRC Congress in 2007 and amended in December 2012, and its implementation rules issued by the State Council in 2008, require employers to provide written contracts to their employees, restrict the use of temporary workers and aim to give employees long-term job security. Violations of the PRC Labor Law and the PRC Labor Contract Law may result in fines and other administrative sanctions, and serious violations may result in criminal liabilities.\n\nPursuant to the PRC Labor Contract Law, employment contracts lawfully concluded prior to the implementation of the PRC Labor Contract Law and continuing as of the date of its implementation shall continue to be performed. Where an employment relationship was established prior to the implementation of the PRC Labor Contract Law but no written employment contract was concluded, a contract must be concluded within one month after its implementation.\n\nThe PRC governmental authorities have passed a variety of laws and regulations regarding social insurance and housing funds from time to time, including, among others, the PRC Social Insurance Law, the Regulation of Insurance for Labor Injury, the Regulations of Insurance for Unemployment, and Interim Measures for Enterprise Employees’ Maternity Insurance. Pursuant to these laws and regulations, PRC companies must make contributions at specified levels for their employees to the local social insurance and housing fund authorities. Failure to comply with such laws and regulations may result in various fines and legal sanctions and supplemental contributions to the local social insurance and housing fund regulatory authorities.\n\n100\n\n[Table of Contents](#TOC)\n\n**C.****Organizational Structure**\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\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\n101\n\n[Table of Contents](#TOC)\n\nThe following is a summary of our contractual arrangements with respect to Shanghai Chubao, Molihong and Qinglin.\n\nAgreements that provide us effective control over Shanghai Chubao\n\nLoan Agreement. On August 6, 2012, the WFOE and each shareholder of Shanghai Chubao entered into loan agreement. Pursuant to such agreements, the WFOE will provide loan to the shareholders of Shanghai Chubao solely for the purpose of capital contribution. The shareholders of Shanghai Chubao should pledge their equity interests in Shanghai Chubao and enter into an equity pledge agreement to secure such loan and other obligations. The shareholders can only repay the loans by the sale of all their equity interest in Shanghai Chubao to WFOE or its designated person. Each loan agreement will remain effective for 10 years, and will be automatically renewed by three years upon the option of the WFOE.\n\nEquity Pledge Agreement. On August 6, 2012, the WFOE and Shanghai Chubao and each of its shareholders entered into an equity pledge agreement, which was subsequently amended and restated on October 30, 2012. Pursuant to the amended and restated equity pledge agreement, each shareholder of Shanghai Chubao shall pledge 100% equity interests in Shanghai Chubao to the WFOE to guarantee their and Shanghai Chubao’s performance of their obligations under the contractual arrangements including the exclusive business cooperation agreement, exclusive purchase option agreement and the power of attorney. In the event of a breach by Shanghai Chubao or its shareholders of their contractual obligations under these agreements, the WFOE, as pledgee, will have the right to dispose of the pledged equity interests in Shanghai Chubao. The shareholders of Shanghai Chubao also undertakes that, during the term of the equity pledge agreements, they will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests. During the term of the equity pledge agreements, our WFOE has the right to receive all of the dividends and profits distributed on the pledged equity interests. We have completed the registration of the equity pledges with the office of the administration for industry and commerce in accordance with the PRC Property Rights Law.\n\nPower of Attorney. On October 30, 2012, each shareholder of Shanghai Chubao granted irrevocable and exclusive power of attorney to the WFOE as his/her attorney-in-fact to exercise all shareholder rights, including, but not limited to, attend shareholders meeting of Shanghai Chubao, voting on their behalf on all matters of Shanghai Chubao, disposing of all or part of the shareholder’s equity interest in Shanghai Chubao, and electing, appointing or removing legal representative, directors, supervisors and executive officers of Shanghai Chubao. Each power of attorney will remain in force for so long as the shareholder remains a shareholder of Shanghai Chubao. Each shareholder has waived all the rights which have been authorized to our WFOE under each power of attorney.\n\nSpouse Consent Letters. Pursuant to the spouse consent letters dated October 30, 2012, each spouse of the shareholders of Shanghai Chubao, if any, confirmed that his/her spouse can perform the obligations under the contractual arrangements and has sole discretion to amend and terminate the contractual arrangements. Each spouse agreed that the equity interest in Shanghai Chubao held by and registered in the name of his/her spouse will be disposed of pursuant to the amended and restated equity pledge agreement, the amended and restated exclusive option agreement and the power of attorney. In addition, in the event that each spouse obtains any equity interest in Shanghai Chubao held by his/her spouse for any reason, he/she agreed to be bound by the contractual arrangements.\n\nAgreement that allows us to receive economic benefits from Shanghai Chubao\n\nExclusive Business Cooperation Agreement. On August 6, 2012, our WFOE and Shanghai Chubao entered into an exclusive business cooperation agreement. Under such agreement, our WFOE has the exclusive right to provide Shanghai Chubao with operational support and technology and consulting services. The WFOE owns the exclusive intellectual property rights created as a result of the performance of this agreement. Shanghai Chubao agrees to pay our WFOE a monthly service fee, at an amount equal to 100% of Shanghai Chubao’s monthly net income or an amount otherwise agreed by the WFOE. This agreement will remain effective unless terminated unilaterally by the WFOE or otherwise as required by applicable PRC laws and regulations.\n\n102\n\n[Table of Contents](#TOC)\n\nAgreement that provides us with the option to purchase the equity interest in Shanghai Chubao\n\nExclusive Purchase Option Agreement. On August 6, 2012, the WFOE and each shareholder of Shanghai Chubao entered into an exclusive purchase option agreement, which was subsequently amended and restated on October 30, 2012. Pursuant to the amended and restated exclusive purchase option agreement, each shareholder of Shanghai Chubao irrevocably grants our WFOE an exclusive option to purchase, or have its designated person to purchase, at its discretion, to the extent permitted under PRC law, all or part of the shareholder’s equity interests in Shanghai Chubao. In addition, the purchase price should be the amount of registered capital, which may be subject to fair value adjustments if required by the PRC laws. Without the prior written consent of the WFOE, the shareholders of Shanghai Chubao may not amend its articles of association, increase or decrease the registered capital, dispose of its assets or business, create any encumbrance on its assets or business, incur any debts or guarantee liabilities, enter into any material contracts, merger with or acquire any other persons or make any investments, provide any loans for any third parties or distribute dividends to the shareholders. Each shareholder of Shanghai Chubao agrees that, without the prior written consent of the WFOE, he/she will not dispose of his/her equity interests in Shanghai Chubao or create or allow any encumbrance on the equity interests. Each exclusive purchase option agreement will remain effective unless the agreement is required to be terminated by applicable PRC laws and regulations.\n\nThe WFOE, Molihong, Qinglin and its shareholders have entered into contractual arrangements which contain agreements and terms substantially similar to our contractual arrangements with Shanghai Chubao and its shareholders described above. The registration of the equity pledges over the equity interests of Molihong and Qinglin have been completed with the office of the administration for industry and commerce in accordance with the PRC Property Rights Law.\n\nIn the opinion of JunHe LLP, our PRC legal counsel:\n\n●the ownership structure of the WFOE and the VIEs is not in violation of PRC laws or regulations currently in effect; and\n\n●the contractual arrangements among the WFOE, the VIEs and their respective shareholders governed by PRC law are valid and binding, and do not result in any violation of PRC laws or regulations currently in effect.\n\nHowever, we have been further advised by our PRC legal counsel that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules, and there can be no assurance that the PRC regulatory authorities will ultimately take a view that is consistent with the opinion stated above. Accordingly, the PRC regulatory authorities may in the future take a view that is contrary to or otherwise different from the above opinion of our PRC legal counsel. If the PRC government finds that the agreements that establish the structure for operating our mobile internet business do not comply with PRC government restrictions on foreign investment in our businesses, we could be subject to severe penalties including being prohibited from continuing operations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government 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\n**D.****Property, Plants and Equipment**\n\nOur headquarters are located in Shanghai, China, where we currently lease and occupy approximately 873 square meters of office space. As of December 31, 2025, we also lease offices in Beijing, with an aggregate area of approximately 15 square meters of office space.\n\nBelow is a summary of the term of each of our current leases and we plan to renew most of them when they expire:\n\n​\n\n​\n\n​\n\n​\n\n​\n\n**Leased properties**\n\n  ​ ​ ​\n\n**Term**\n\n  ​ ​ ​\n\n**Area (square meters)**\n\nShanghai\n\n \n\n3 years\n\n \n\n873\n\nBeijing\n\n \n\n1 year\n\n \n\n15\n\n**Total**\n\n \n\n​\n\n \n\n**888**\n\n​\n\n​\n\n103\n\n[Table of Contents](#TOC)"}