Hello Group Inc. - Investors

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Non-accelerated filer

Emerging growth company

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Form 20-F

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

20-F

(Mark One)

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report

For the transition period from

Commission file number:

001-36765

Hello Group Inc.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

20th Floor, Block B

Tower 2, Wangjing SOHO

No. 1 Futongdong Street

Chaoyang District, Beijing 100102

People’s Republic of China

(Address of principal executive offices)

Jonathan Xiaosong Zhang, Chief Financial Officer

Telephone:

+86-10-5731-0567

Email: ir@immomo.com

20th Floor, Block B

Tower 2, Wangjing SOHO

No. 1 Futongdong Street

Chaoyang District, Beijing 100102

People’s Republic of China

(Name, Telephone,

E-mail

and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(b) of the Act:


Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
American depositary shares (each American depositary share representing two Class A ordinary shares, par value US$0.0001 per share)	MOMO	The Nasdaq Stock Market LLC (The Nasdaq Global Select Market)
Class A ordinary shares, par value US$0.0001 per share*		The Nasdaq Stock Market LLC (The Nasdaq Global Select Market)

*	Not for trading, but only in connection with the listing on The Nasdaq Global Select Market of American depositary shares.

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the Issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

314,836,418 Class A ordinary shares and 80,364,466 Class B ordinary shares, par value US$0.0001 per share, as of December 31, 2021.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☒ Yes ☐ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes ☒ No

Note – Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule

12b-2

of the Exchange Act. (Check one):

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐

†	The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒ Yes ☐ No

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:


U.S. GAAP ☒	International Financial Reporting Standards as issued		Other ☐
	by the International Accounting Standards Board	☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow. ☐ Item 17 ☐ Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). ☐ Yes ☒ No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. ☐ Yes ☐ No

Table of Contents

TABLE OF CONTENTS


INTRODUCTION			1

FORWARD-LOOKING INFORMATION			1

PART I			2
Item 1. Identity of Directors, Senior Management and Advisers			2
Item 2. Offer Statistics and Expected Timetable			2
Item 3. Key Information			2
Item 4. Information on the Company			55
Item 4A. Unresolved Staff Comments			86
Item 5. Operating and Financial Review and Prospects			86
Item 6. Directors, Senior Management and Employees			107
Item 7. Major Shareholders and Related Party Transactions			117
Item 8. Financial Information			120
Item 9. The Offer and Listing			121
Item 10. Additional Information			122
Item 11. Quantitative and Qualitative Disclosures about Market Risk			136
Item 12. Description of Securities Other than Equity Securities			137

PART II			138
Item 13. Defaults, Dividend Arrearages and Delinquencies			138
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds			138
Item 15. Controls and Procedures			138
Item 16A. Audit Committee Financial Expert			140
Item 16B. Code of Ethics			140
Item 16C. Principal Accountant Fees and Services			140
Item 16D. Exemptions from the Listing Standards for Audit Committees			141
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			141
Item 16F. Change in Registrant’s Certifying Accountant			141
Item 16G. Corporate Governance			141
Item 16H. Mine Safety Disclosure			141
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			142

PART III			142
Item 17. Financial Statements			142
Item 18. Financial Statements			142
Item 19. Exhibits			142

SIGNATURES			150

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INTRODUCTION

In this annual report, except where the context otherwise requires and for purposes of this annual report only:

•

“$,” “dollars,” “US$” or “U.S. dollars” refers to the legal currency of the United States;

•

“ADSs” refers to our American depositary shares, each representing two Class A ordinary shares, par value US$0.0001 per share;

•

“China” or the “PRC” refers to the People’s Republic of China, and solely for the purpose of this annual report, excludes Hong Kong, Macau and Taiwan;

•

“MAUs” refers to monthly active users. We define Momo MAUs during a given calendar month as Momo users who were daily active users for at least one day during the

30-day

period counting back from the last day of such calendar month. Momo daily active users are users who accessed our platform through mobile devices and utilized any of the functions on our platform on a given day.

•

“Hello Group,” “we,” “us,” “our company,” or “our” refers to our holding company Hello Group Inc., previously named “Momo Inc.,” its subsidiaries and in the context of describing our operations and consolidated financial information, the consolidated affiliated entities and their subsidiaries;

•

“ordinary shares” refers to our Class A and Class B ordinary shares, par value US$0.0001 per share; and

•

“RMB” or “Renminbi” refers to the legal currency of China.

FORWARD-LOOKING INFORMATION

This annual report on Form

20-F

contains forward-looking statements that reflect our current expectations and views of future events. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by words or phrases such as “may,” “could,” “should,” “would,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to,” “project,” “continue,” “potential” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

•

our goals and strategies;

•

our future business development, financial condition and results of operations;

•

the expected growth of mobile social networking platforms, live video services, mobile marketing services, mobile games and online entertainment services in China;

•

our expectations regarding demand for and market acceptance of our services;

•

our expectations regarding our user base and level of user engagement;

•

our monetization strategies;

•

our plans to invest in our technology infrastructure;

•

competition in our industry; and

•

relevant government policies and regulations relating to our industry.

You should not place undue reliance on these forward-looking statements and you should read these statements in conjunction other sections of this annual report, in particular the risk factors disclosed in “Item 3. Key Information—D. Risk Factors.” These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. Moreover, we operate in a rapidly evolving environment. New risks emerge from time to time and it is impossible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ from those contained in any forward-looking statement. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. We do not undertake any obligation to update or revise the forward-looking statements except as required under applicable law.

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Current period amounts in this annual report are translated into U.S. dollars for the convenience of the readers. Unless otherwise stated, all translations of Renminbi into U.S. dollars were made at the rate at RMB6.3726 to US$1.0000, the exchange rate as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System in effect as of December 30, 2021. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade.

PART I

Item 1.

Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.

Offer Statistics and Expected Timetable

Not applicable.

Item 3.

Key Information

Our Holding Company Structure and Contractual Arrangements with the Consolidated Affiliated Entity

Hello Group Inc. is not a PRC operating company, but rather a Cayman Islands holding company with no equity ownership in its consolidated affiliated entities. Our Cayman Islands holding company does not conduct business operations directly. We conduct our operations in China through (i) our PRC subsidiaries and (ii) the consolidated affiliated entities with which we have maintained contractual arrangements and their subsidiaries in China. PRC laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies that engage in certain value-added telecommunication services, internet audio-video program services and certain other businesses. Accordingly, we operate these businesses in China through the consolidated affiliated entities and their subsidiaries, and rely on contractual arrangements among our PRC subsidiaries, the consolidated affiliated entities and their nominee shareholders to control the business operations of the consolidated affiliated entities. The consolidated affiliated entities are consolidated for accounting purposes, but are not entities in which our Cayman Islands holding company, or our investors, own equity. Revenues contributed by the consolidated affiliated entities accounted for 99.9%, 99.2% and 98.4% of our total revenues for the years ended December 31, 2019, 2020 and 2021, respectively. As used in this annual report, “we,” “us,” “our company,” “our,” or “Hello Group” refers to Hello Group Inc., its subsidiaries, and, in the context of describing our operations and consolidated financial information, the consolidated affiliated entities and their subsidiaries in China, including but not limited to Beijing Momo Technology Co., Ltd. (“Beijing Momo”), Tianjin Heer Technology Co., Ltd. ( “Tianjin Heer”), Loudi Momo Technology Co. Ltd. (“Loudi Momo”), Chengdu Momo Technology Co. Ltd. (“Chengdu Momo”), Hainan Yilingliuer Network Technology Co., Ltd. (“Hainan Yilingliuer”), Hainan Miaoka Network Technology Co., Ltd. (“Hainan Miaoka”), Tantan Culture Development (Beijing) Co., Ltd. (“Tantan Culture”), Tianjin Apollo Exploration Culture Co., Ltd.(“Tianjin Apollo”), QOOL Media (Tianjin) Co., Ltd (“Tianjin QOOL Media”), Beijing Top Maker Technology Co., Ltd. (“Beijing Top Maker,” formerly known as Beijing Fancy Reader Technology Co., Ltd.), Beijing Perfect Match Technology Co., Ltd. (“Beijing Perfect Match”) and SpaceTime (Beijing) Technology Co., Ltd. (“SpaceTime Beijing”). Investors in our ADSs are not purchasing equity interest in the consolidated affiliated entities in China, but instead are purchasing equity interest in a holding company incorporated in the Cayman Islands.

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Our subsidiaries, the consolidated affiliated entities and their shareholders have entered into a series of contractual agreements. These contractual arrangements enable us to:

•

receive the economic benefits that could potentially be significant to the consolidated affiliated entities in consideration for the services provided by our subsidiaries;

•

exercise effective control over the consolidated affiliated entities; and

•

hold an exclusive option to purchase all or part of the equity interests in the consolidated affiliated entities when and to the extent permitted by PRC law.

A series of contractual agreements, including business operation agreement, exclusive call option agreement, equity interest pledge agreement, exclusive cooperation agreement, power of attorney and spousal consent letter, have been entered into by and among our subsidiaries, the consolidated affiliated entities and their respective shareholders. Terms contained in each set of contractual arrangements with the consolidated affiliated entities and their respective shareholders are substantially similar. Despite the lack of legal majority ownership, our Cayman Island holding company is considered the primary beneficiary of the consolidated affiliated entities and consolidates the consolidated affiliated entities and their subsidiaries as required by Accounting Standards Codification (“

ASC

”) topic 810,

Consolidation

. Accordingly, we treat the consolidated affiliated entities as the consolidated entities under the accounting principles generally accepted in the United States, or U.S. GAAP, and we consolidate the financial results of the consolidated affiliated entities in the consolidated financial statements in accordance with U.S. GAAP. For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the Consolidated Affiliated Entities and Their Respective Shareholders.”

However, the contractual arrangements may not be as effective as direct ownership in providing us with control over the consolidated affiliated entities and we may incur substantial costs to enforce the terms of the arrangements. Uncertainties in the PRC legal system may limit our ability, as a Cayman Islands holding company, to enforce these contractual arrangements. Meanwhile, there are very few precedents as to whether contractual arrangements would be judged to form effective control over the relevant consolidated affiliated entities through the contractual arrangements, or how contractual arrangements in the context of a consolidated affiliated entity should be interpreted or enforced by the PRC courts. Should legal actions become necessary, we cannot guarantee that the court will rule in favor of the enforceability of the consolidated affiliated entity contractual arrangements. In the event we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over the consolidated affiliated entities, and our ability to conduct our business may be materially adversely affected. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with the consolidated affiliated entities and their respective shareholders for our operations in China, which may not be as effective in providing operational control as direct ownership” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—The shareholders of the consolidated affiliated entities may have potential conflicts of interest with us, which may materially and adversely affect our business.”

There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the consolidated affiliated entities and their nominee shareholders. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or any of the consolidated affiliated entities is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. If the PRC government deems that our contractual arrangements with the consolidated affiliated entities do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy. Our Cayman Islands holding company, our PRC subsidiaries and consolidated affiliated entities, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated affiliated entities and, consequently, significantly affect the financial performance of the consolidated affiliated entities and our company as a whole. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the agreements that establish the structure for operating certain of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “—We face uncertainties with respect to the implementation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.”

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Our corporate structure is subject to risks associated with our contractual arrangements with the consolidated affiliated entities. The company and its investors may never have a direct ownership interest in the businesses that are conducted by the consolidated affiliated entities. Uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements, and these contractual arrangements have not been tested in a court of law. If the PRC government finds that the agreements that establish the structure for operating our business in China do not comply with PRC laws and regulations, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we and the consolidated affiliated entities could be subject to severe penalties or be forced to relinquish our interests in those operations. This would result in the consolidated affiliated entities being deconsolidated. The majority of our assets, including the necessary licenses to conduct business in China, are held by the consolidated affiliated entities. A significant part of our revenues are generated by the consolidated affiliated entities. An event that results in the deconsolidation of the consolidated affiliated entities would have a material effect on our operations and result in the value of the securities of our company diminish substantially or even become worthless. Our company, our PRC subsidiaries and consolidated affiliated entities, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated affiliated entities and, consequently, significantly affect the financial performance of the consolidated affiliated entities and our company as a whole. Hello Group Inc. may not be able to repay its indebtedness, and the Class A ordinary shares or ADSs of our company may decline in value or become worthless, if we are unable to assert our contractual control rights over the assets of our PRC subsidiaries and consolidated affiliated entities that conduct all or substantially all of our operations. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”

Other Risks related to Our PRC Operations

We face various risks and uncertainties related to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments or financing, or list on a United States exchange. In addition, since our auditor is located in China, a jurisdiction where the Public Company Accounting Oversight Board (United States), or the PCAOB, has been unable to conduct inspections without the approval of the Chinese authorities, our auditor is currently not inspected by the PCAOB. As a result, our ADSs may be delisted under the Holding Foreign Companies Accountable Act, or the HFCA Act. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. Additionally, the inability of the PCAOB to conduct inspections deprives our investors with the benefits of such inspections. These risks could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks related to doing business in China, “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China.”

PRC government’s significant authority in regulating our operations and its oversight and control over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations in this nature may cause the value of such securities to significantly decline or become worthless. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PRC government’s significant oversight and discretion over our business operations could result in a material adverse change in our operations and the value of our ADSs.”

Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of our ADSs. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China— Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.”

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The HFCA Act

The HFCA Act was enacted on December 18, 2020. The HFCA Act states that if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange. Since our auditor is located in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities, our auditor is not currently inspected by the PCAOB, which may impact our ability to remain listed on a United States or other foreign exchange. The related risks and uncertainties could cause the value of our ADSs to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China— Our ADSs will be prohibited from trading in the United States under the HFCA Act in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”

Furthermore, on December 2, 2021, the SEC adopted final amendments implementing the disclosure and submission requirements under the HFCA Act, pursuant to which the SEC will identify a “Commission-Identified Issuer” if an issuer has filed an annual report containing an audit report issued by a registered public accounting firm that the PCAOB has determined it is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction, and will then impose a trading prohibition on an issuer after it is identified as a Commission-Identified Issuer for three consecutive years.

Cash Flow through Our Organization

Hello Group Inc. is a holding company with no operations of its own. We conduct our operations primarily through our PRC subsidiaries, the consolidated affiliated entities and their subsidiaries in China. As a result, Hello Group Inc.’s ability to pay dividends depends upon dividends paid by our PRC subsidiaries. If our existing PRC subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Furthermore, each of our PRC subsidiaries and the consolidated affiliated entities is required to set aside at least 10% of its

after-tax

profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entities in China is also required to further set aside a portion of its

after-tax

profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. These reserves are not distributable as cash dividends. For more details, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.” Our subsidiaries’ ability to distribute dividends is based upon their distributable earnings.

Under PRC laws and regulations, our PRC subsidiaries and consolidated affiliated entities are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by the banks designated by State Administration of Foreign Exchange, or SAFE. The amounts restricted include the

paid-up

capital and the statutory reserve funds of our PRC subsidiaries and the net assets of the consolidated affiliated entities in which we have no legal ownership, totaling RMB1.5 billion, RMB1.5 billion and RMB1.5 billion (US$0.2 billion) as of December 31, 2019, 2020 and 2021, respectively. For risks relating to the fund flows of our operations in China, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We may rely on dividends paid by our PRC subsidiaries to fund cash and financing requirements. Any limitation on the ability of our PRC subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of the ADSs and our ordinary shares.”

For the years ended December 31, 2019, 2020 and 2021, the Company declared and distributed cash dividends with amount of US$128.6 million, US$158.6 million and US$132.0 million to its investors, respectively, which was funded by surplus cash on our balance sheet.

For the years ended December 31, 2019, 2020 and 2021, Beijing Momo IT declared and distributed dividends with amount of RMB nil, RMB2,200.0 million and RMB1,300.0 million (US$204.0 million), respectively, to its offshore parent company, Momo HK. Withholding taxes of RMB nil, RMB220.0 million, and RMB130.0 million (US$20.4 million) in connection with the dividends were fully paid during the years ended December 31, 2019, 2020 and 2021, respectively.

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Under PRC law, Hello Group Inc. may provide funding to our PRC subsidiaries only through capital contributions or loans, and to the consolidated affiliated entities only through loans, subject to satisfaction of applicable government registration and approval requirements. Hello Group Inc., its subsidiaries and the consolidated affiliated entities may also transfer cash through intra-group transactions.

For the years ended December 31, 2019, 2020 and 2021, Hello Group Inc. provided loans with principal amount of RMB nil, RMB118.2 million and RMB820.9 million (US$128.8 million), respectively, to its subsidiaries, and there was no repayment from the subsidiaries to Hello Group Inc.

For the years ended December 31, 2019, 2020 and 2021, Hello Group Inc. provided capital contributions with the amount of RMB70,000.0, RMB142,000.0 and RMB nil, respectively, to its subsidiaries.

For the years ended December 31, 2019, 2020 and 2021, the subsidiaries of Hello Group Inc. provided loans with principal amount of RMB15.2 million, RMB nil and RMB nil, respectively, to Hello Group Inc., and there was no repayment from Hello Group Inc. to its subsidiaries

For the years ended December 31, 2019, 2020 and 2021, subsidiaries of Hello Group Inc. provided loans with principal amount of RMB nil, RMB nil and RMB799.8 million (US$125.5 million), respectively, to the consolidated affiliated entities and there was no repayment from the consolidated affiliated entities to our subsidiaries.

For the years ended December 31, 2019, 2020 and 2021, the consolidated affiliated entities provided loans with principal amount of RMB65.3 million., RMB71.9 million and RMB nil, respectively, to our PRC subsidiaries and there was no repayment from our PRC subsidiaries to the consolidated affiliated entities.

The consolidated affiliated entities may transfer cash to the subsidiaries of Hello Group Inc. by paying service fees and license fees pursuant to certain contractual arrangements among them, and we intend to settle the services fees and license fees through such contractual arrangements going forward. For the years ended December 31, 2019, 2020 and 2021, subsidiaries of Hello Group Inc. received license fee, technical service fees and

non-technical

services fees with amount of RMB8,975.3 million, RMB6,317.8 million and RMB5,616.2 million (US$881.3 million), respectively, from the consolidated affiliated entities.

For the years ended December 31, 2019, 2020 and 2021, cash paid by the consolidated affiliated entities to other subsidiaries for other operation service fees were RMB88.9 million, RMB23.0 million and RMB64.5 million (US$10.1 million), respectively. For the years ended December 31, 2019, 2020 and 2021, cash paid by other subsidiaries to consolidated affiliated entities for other operation service fees were RMB43.9 million, RMB12.0 million and RMB nil, respectively.

Our PRC subsidiaries may charge the consolidated affiliated entities for services provided to the consolidated affiliated entities. These service fees shall be recognized as expenses of the consolidated affiliated entities, with a corresponding amount as service income by our PRC subsidiaries and eliminate in consolidation. For income tax purposes, our PRC subsidiaries and the consolidated affiliated entities file income tax returns on a separate company basis. The service fees paid are recognized as a tax deduction by the consolidated affiliated entities and as income by our PRC subsidiaries and are tax neutral.

Permissions Required from the PRC Authorities for Our Operations

We conduct our business primarily through our subsidiaries and consolidated affiliated entity in China. Our operations in China are governed by PRC laws and regulations. As of the date of this annual report, our PRC subsidiaries, consolidated affiliated entity and its subsidiaries have obtained the requisite licenses and permits from the PRC government authorities that are material for the business operations of our holding company, the consolidated affiliated entity in China, including, among others, the Value-added Telecommunications Business Operation License for information services via internet, or ICP License, and the internet culture operation license and the internet audio/video program transmission license. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future, and may not be able to maintain or renew our current licenses, permits, filings or approvals. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—If we fail to obtain and maintain the requisite licenses and approvals required under the complex regulatory environment applicable to our businesses in China, or if we are required to take compliance actions that are time-consuming or costly, our business, financial condition and results of operations may be materially and adversely affected.”

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Furthermore, under current PRC laws, regulations and regulatory rules, we, our PRC subsidiaries and the consolidated affiliated entities may be required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, and may be required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, in connection with any future offering and listing in an overseas market. As of the date of this annual report, we have not been subject to any cybersecurity review made by the CAC. If we fail to obtain the relevant approval or complete other review or filing procedures for any future offshore offering or listing, we may face sanctions by the CSRC or other PRC regulatory authorities, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, restrictions on or delays to our future financing transactions offshore, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval” and “—PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using offshore funds to make loans to our PRC subsidiaries and consolidated affiliated entities and their subsidiaries, or to make additional capital contributions to our PRC subsidiaries.”

Financial Information Related to the Consolidated Affiliated Entity

The following table presents the condensed consolidating schedule of financial position for the consolidated affiliated entity and other entities as of the dates presented.

Selected Condensed Consolidated Statements of Income Information


	For the Year Ended December 31, 2021
	Hello Group Inc.			Other Subsidiaries			Consolidated Affiliated Entities and Their Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Third-party revenues		—			239,180			14,336,539			—			14,575,719
Inter-company revenues (1)		—			5,100,060			1,352			(5,101,412	)		—
Total costs and expenses		(248,609	)		(8,283,022	)		(13,711,014	)		5,101,412			(17,141,233	)
Income (loss) from subsidiaries and VIEs (2)		(2,629,002	)		587,881			—			2,041,121			—
Other income (loss)		(36,876	)		324,513			182,813			—			470,450

Income (loss) before income tax expense and share of loss on equity method investments		(2,914,487	)		(2,031,388	)		809,690			2,041,121			(2,095,064	)
Income tax expenses		—			(597,628	)		(224,928	)		—			(822,556	)
Share of income (loss) on equity method investments		779			—			(8,863	)		—			(8,084	)

Net income (loss)		(2,913,708	)		(2,629,016	)		575,899			2,041,121			(2,925,704	)
Less: net loss attributable to non-controlling interests		—			(14	)		(11,982	)		—			(11,996	)

Net income (loss) attributable to Hello Group’s shareholders		(2,913,708	)		(2,629,002	)		587,881			2,041,121			(2,913,708	)


	For the Year Ended December 31, 2020
	Hello Group Inc.			Other Subsidiaries			Consolidated Affiliated Entities and Their Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Third-party revenues		—			121,497			14,902,691			—			15,024,188
Inter-company revenues (1)		—			6,257,010			6,580			(6,263,590	)		—
Total costs and expenses		(340,519	)		(4,253,075	)		(14,391,526	)		6,263,590			(12,721,530	)
Income from subsidiaries and consolidated affiliated entities (2)		2,467,172			501,180			—			(2,968,352	)		—
Other income (loss)		(23,169	)		367,236			251,809			—			595,876

Income before income tax expense and share of loss on equity method investments		2,103,484			2,993,848			769,554			(2,968,352	)		2,898,534
Income tax expenses		—			(526,922	)		(228,698	)		—			(755,620	)
Share of income (loss) on equity method investments		—			233			(42,755	)		—			(42,522	)

Net income		2,103,484			2,467,159			498,101			(2,968,352	)		2,100,392
Less: net loss attributable to non-controlling interests		—			(13	)		(3,079	)		—			(3,092	)

Net income attributable to Hello Group’s shareholders		2,103,484			2,467,172			501,180			(2,968,352	)		2,103,484

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	For the Year Ended December 31, 2019
	Hello Group Inc.			Other Subsidiaries			Consolidated Affiliated Entities and Their Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Third-party revenues		—			13,752			17,001,337			—			17,015,089
Inter-company revenues (1)		—			7,807,851			36,786			(7,844,637	)		—
Total costs and expenses		(109,066	)		(5,267,956	)		(16,272,848	)		7,844,637			(13,805,233	)
Income from subsidiaries and consolidated affiliated entities (2)		3,070,794			750,887			—			(3,821,681	)		—
Other income		9,162			300,146			348,755			—			658,063

Income before income tax expense and share of loss on equity method investments		2,970,890			3,604,680			1,114,030			(3,821,681	)		3,867,919
Income tax expenses		—			(534,047	)		(349,754	)		—			(883,801	)
Share of loss on equity method investments		—			—			(23,350	)		—			(23,350	)

Net income		2,970,890			3,070,633			740,926			(3,821,681	)		2,960,768
Less: net loss attributable to non-controlling interests		—			(161	)		(9,961	)		—			(10,122	)

Net income attributable to Hello Group’s shareholders		2,970,890			3,070,794			750,887			(3,821,681	)		2,970,890

Selected Condensed Consolidated Balance Sheets Information


	As of December 31, 2021
	Hello Group Inc.		Other Subsidiaries		Consolidated Affiliated Entities and Their Subsidiaries		Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Cash and cash equivalents		876,917		2,218,672		2,474,974		—			5,570,563
Short-term deposits		—		2,310,000		550,000		—			2,860,000
Accounts receivable		—		28,916		176,309		—			205,225
Amounts due from Group companies (3)		1,523,429		—		—		(1,523,429	)		—
Other current assets		16,875		344,484		413,713		—			775,072
Long-term deposits		—		6,450,000		750,000		—			7,200,000
Investment in subsidiaries and consolidated affiliated entities (2)		11,751,913		3,085,888		—		(14,837,801	)		—
Long-term investments		415,482		—		404,524		—			820,006
Other non-current assets		76,471		362,401		241,500		—			680,372

Total assets		14,661,087		14,800,361		5,011,020		(16,361,230	)		18,111,238

Accounts payable		—		90,572		635,635		—			726,207
Deferred revenue		—		20,730		519,237		—			539,967
Amount due to Group companies (3)		—		1,103,742		419,687		(1,523,429	)		—
Other current liabilities		77,958		771,947		399,686		—			1,249,591
Non-current liabilities		4,588,608		358,173		63,095		—			5,009,876

Total liabilities		4,666,566		2,345,164		2,037,340		(1,523,429	)		7,525,641
Total shareholders’ equity		9,994,521		12,455,197		2,973,680		(14,837,801	)		10,585,597
Total liabilities and shareholders’ equity		14,661,087		14,800,361		5,011,020		(16,361,230	)		18,111,238

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	As of December 31, 2020
	Hello Group Inc.		Other Subsidiaries		Consolidated Affiliated Entities and Their Subsidiaries		Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Cash and cash equivalents		715,359		1,336,870		1,311,713		—			3,363,942
Short-term deposits		1,761,750		5,200,000		604,500		—			7,566,250
Accounts receivable		—		9,697		191,134		—			200,831
Amounts due from Group companies (3)		733,265		—		—		(733,265	)		—
Other current assets		87,916		174,429		353,481		—			615,826
Long-term deposits		—		4,600,000		950,000		—			5,550,000
Investment in subsidiaries and consolidated affiliated entities (2)		15,724,370		2,483,672		—		(18,208,042	)		—
Long-term investments		—		—		454,996		—			454,996
Other non-current assets		—		5,203,886		264,825		—			5,468,711

Total assets		19,022,660		19,008,554		4,130,649		(18,941,307	)		23,220,556

Accounts payable		—		91,964		607,430		—			699,394
Deferred revenue		—		9,922		501,695		—			511,617
Amount due to Group companies (3)		—		552,479		180,786		(733,265	)		—
Other current liabilities		97,784		805,680		402,265		—			1,305,729
Non-current liabilities		4,684,632		1,124,871		58,984		—			5,868,487

Total liabilities		4,782,416		2,584,916		1,751,160		(733,265	)		8,385,227
Total shareholders’ equity		14,240,244		16,423,638		2,379,489		(18,208,042	)		14,835,329
Total liabilities and shareholders’ equity		19,022,660		19,008,554		4,130,649		(18,941,307	)		23,220,556

Selected Condensed Consolidated Cash Flows Information


	For the Year Ended December 31, 2021
	Hello Group Inc.			Other Subsidiaries			Consolidated Affiliated Entities and Their Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Net cash provided by (used in) operating activities (4)		25,346			1,683,825			(149,973	)		—			1,559,198

Loans to Hello Group companies		(820,897	)		(799,794	)		—			1,620,691			—
Cash dividends received from subsidiaries		1,153,506			—			—			(1,153,506	)		—
Purchase of short-term deposits		(516,688	)		(3,910,000	)		(550,000	)		—			(4,976,688	)
Cash received on maturity of short-term deposits		2,263,070			6,800,000			604,500			—			9,667,570
Purchase of long-term deposits		—			(1,850,000	)		—			—			(1,850,000	)
Other investing activities		(115,052	)		(375,081	)		199,593			—			(290,540	)

Net cash provided by (used in) investing activities		1,963,939			(134,875	)		254,093			467,185			2,550,342

Borrowings under loan from Hello Group companies		—			820,897			799,794			(1,620,691	)		—
Dividends payment to Hello Group Inc.		—			(1,153,506	)		—			1,153,506			—
Repurchase of ordinary shares		(862,865	)		—			—			—			(862,865	)
Dividends payment to Hello Group’s shareholders		(852,743	)		—			—			—			(852,743	)
Other financing activities		(12,181	)		(59,120	)		—			—			(71,301	)

Net cash provided by (used in) financing activities		(1,727,789	)		(391,729	)		799,794			(467,185	)		(1,786,909	)

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	For the Year Ended December 31, 2020
	Hello Group Inc.			Other Subsidiaries			Consolidated Affiliated Entities and Their Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Net cash provided by (used in) operating activities (4)		(70,022	)		2,409,483			741,428			—			3,080,889

Loans to Hello Group companies		(118,159	)		—			(71,860	)		190,019			—
Capital injection to subsidiaries		(142	)		(1,000	)		—			1,142			—
Cash dividends received from subsidiaries		1,976,631			—			—			(1,976,631	)		—
Purchase of short-term deposits		(1,890,665	)		(12,444,500	)		(614,500	)		—			(14,949,665	)
Cash received on maturity of short-term deposits		2,272,659			16,494,500			810,000			—			19,577,159
Purchase of long-term deposits		—			(4,300,000	)		(950,000	)		—			(5,250,000	)
Other investing activities		—			(122,511	)		(3,449	)		—			(125,960	)

Net cash provided by (used in) investing activities		2,240,324			(373,511	)		(829,809	)		(1,785,470	)		(748,466	)

Borrowings under loan from Hello Group companies		—			190,019			—			(190,019	)		—
Capital injection from parent company		—			142			1,000			(1,142	)		—
Dividends payment to Hello Group Inc.		—			(1,976,631	)		—			1,976,631			—
Repurchase of ordinary shares		(330,207	)		—			—			—			(330,207	)
Dividends payment to Hello Group’s shareholders		(1,123,983	)		—			—			—			(1,123,983	)
Other financing activities		(18,128	)		(25,832	)		—			—			(43,960	)

Net cash provided by (used in) financing activities		(1,472,318	)		(1,812,302	)		1,000			1,785,470			(1,498,150	)


	For the Year Ended December 31, 2019
	Hello Group Inc.			Other Subsidiaries			Consolidated Affiliated Entities and Their Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Net cash provided by (used in) operating activities (4)		(3,222	)		4,032,402			1,419,706			—			5,448,886

Loans to Hello Group companies		—			(15,182	)		(65,275	)		80,457			—
Capital injection to subsidiaries		(70	)		—			—			70			—
Purchase of short-term deposits		(2,000,130	)		(19,005,005	)		(1,146,000	)		—			(22,151,135	)
Cash received on maturity of short-term deposits		2,985,425			15,355,005			346,000			—			18,686,430
Other investing activities		—			(483,386	)		(81,828	)		—			(565,214	)

Net cash provided by (used in) investing activities		985,225			(4,148,568	)		(947,103	)		80,527			(4,029,919	)

Borrowings under loan from Hello Group companies		15,182			65,275			—			(80,457	)		—
Capital injection from parent company		—			70			—			(70	)		—
Deferred payment for business acquisition		(379,507	)		—			—			—			(379,507	)
Dividends payment to Hello Group’s shareholders		(877,346	)		—			—			—			(877,346	)
Other financing activities		187			(28,114	)		11,000			—			(16,927	)

Net cash provided by (used in) financing activities		(1,241,484	)		37,231			11,000			(80,527	)		(1,273,780	)

Notes:

(1)	Represents the elimination of the intercompany service charge at the consolidation level.

(2)	Represents the elimination of the investment among Hello Group Inc., other subsidiaries, and consolidated affiliated entities and their subsidiaries.

(3)	Represents the elimination of intercompany balances among Hello Group Inc., other subsidiaries, and consolidated affiliated entities and their subsidiaries.

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(4)

For the years ended December 31, 2019, 2020 and 2021, cash paid by the consolidated affiliated entities to other subsidiaries for license fee, technical service fees and

non-technical

service fees were RMB8,975.3 million, RMB6,317.8 million and RMB5,616.2 million (US$881.3 million), respectively. For the years ended December 31, 2019, 2020 and 2021, cash paid by the consolidated affiliated entities to other subsidiaries for other operation service fee were RMB88.9 million, RMB23.0 million and RMB64.5 million (US$10.1 million), respectively. For the years ended December 31, 2019, 2020 and 2021, cash paid by other subsidiaries to consolidated affiliated entities for other operation service fees were RMB43.9 million, RMB12.0 million and RMB nil, respectively.

Selected Consolidated Financial Data

The following table presents the selected consolidated financial information of our company. The selected consolidated statements of comprehensive income data for the years ended December 31, 2019, 2020 and 2021 and the selected consolidated balance sheets data as of December 31, 2020 and 2021 have been derived from our audited consolidated financial statements included in this annual report beginning on page

F-1.

The selected consolidated statements of comprehensive income data for the years ended December 31, 2017 and 2018 and the selected consolidated balance sheets data as of December 31, 2017, 2018 and 2019 have been derived from our audited consolidated financial statements not included in this annual report. Our audited consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarily indicate results expected for any future period. You should read the following selected financial data in conjunction with the consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report.


	Year Ended December 31,
	2017 RMB			2018 RMB			2019 RMB			2020 RMB			2021 RMB			2021 US$

				(in thousands, except share and share-related data)
Selected Data of Consolidated Statements of Operations
Net Revenues (1)		8,886,390			13,408,421			17,015,089			15,024,188			14,575,719			2,287,248
Cost and expenses (2)
Cost of revenues		(4,373,377	)		(7,182,897	)		(8,492,096	)		(7,976,781	)		(8,383,431	)		(1,315,543	)
Research and development expenses		(346,144	)		(760,644	)		(1,095,031	)		(1,167,677	)		(1,131,781	)		(177,601	)
Sales and marketing expenses		(1,467,376	)		(1,812,262	)		(2,690,824	)		(2,813,922	)		(2,604,309	)		(408,673	)
General and administrative expenses		(422,005	)		(640,023	)		(1,527,282	)		(763,150	)		(624,700	)		(98,029	)
Impairment loss on goodwill and intangible assets		—			—			—			—			(4,397,012	)		(689,987	)

Total cost and expenses		(6,608,902	)		(10,395,826	)		(13,805,233	)		(12,721,530	)		(17,141,233	)		(2,689,833	)

Other operating income		156,764			253,697			344,843			228,777			175,947			27,610
Income (loss) from operations		2,434,252			3,266,292			3,554,699			2,531,435			(2,389,567	)		(374,975	)
Interest income		145,568			272,946			407,542			444,471			384,279			60,302
Interest expense		—			(56,503	)		(78,611	)		(78,872	)		(73,776	)		(11,577	)
Other gain or loss, net		(30,085	)		(43,200	)		(15,711	)		1,500			(16,000	)		(2,511	)

Income (loss) before income tax and share of income on equity method investments		2,549,735			3,439,535			3,867,919			2,898,534			(2,095,064	)		(328,761	)
Income tax expenses		(445,001	)		(699,648	)		(883,801	)		(755,620	)		(822,556	)		(129,077	)

Income (loss) before share of income (loss) on equity method investments		2,104,734			2,739,887			2,984,118			2,142,914			(2,917,620	)		(457,838	)
Share of income (loss) on equity method investments		39,729			48,660			(23,350	)		(42,522	)		(8,084	)		(1,269	)
Net income (loss)		2,144,463			2,788,547			2,960,768			2,100,392			(2,925,704	)		(459,107	)
Less: net loss attributable to non-controlling interest		(3,635	)		(27,228	)		(10,122	)		(3,092	)		(11,996	)		(1,882	)

Net income (loss) attributable to Hello Group Inc.		2,148,098			2,815,775			2,970,890			2,103,484			(2,913,708	)		(457,225	)

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	Year Ended December 31,
	2017 RMB		2018 RMB		2019 RMB		2020 RMB		2021 RMB			2021 US$

			(in thousands, except share and share-related data)
Net income attributable to ordinary shareholders		2,148,098		2,815,775		2,970,890		2,103,484		(2,913,708	)		(457,225	)

Net income (loss) per share attributable to ordinary shareholders
Basic		5.44		6.92		7.15		5.05		(7.20	)		(1.13	)
Diluted		5.17		6.59		6.76		4.83		(7.20	)		(1.13	)
Weighted average shares used in computing net income per ordinary share
Basic		394,549,323		407,009,875		415,316,627		416,914,898		404,701,910			404,701,910
Diluted		415,265,078		433,083,643		451,206,091		452,081,642		404,701,910			404,701,910

(1)	Components of our net revenues are presented in the following table:


	Year Ended December 31,
	2017 RMB		2018 RMB		2019 RMB		2020 RMB		2021 RMB		2021 US$

	(in thousands)
Live video service		7,429,906		10,709,491		12,448,131		9,637,579		8,378,945		1,314,839
Value-added service		695,798		1,883,150		4,105,963		5,112,182		5,971,792		937,104
Mobile marketing		514,279		500,321		331,822		198,197		159,010		24,952
Mobile games		241,388		130,392		92,451		39,564		47,712		7,487
Other services		5,019		185,067		36,722		36,666		18,260		2,866

Total		8,886,390		13,408,421		17,015,089		15,024,188		14,575,719		2,287,448

(2)	Share-based compensation expenses were allocated in cost and expenses as follows:


	Year Ended December 31,
	2017 RMB		2018 RMB		2019 RMB		2020 RMB		2021 RMB		2021 US$

	(in thousands)
Cost of revenues		13,547		21,661		23,972		18,449		17,941		2,815
Research and development expenses		59,190		152,806		175,053		175,870		139,571		21,902
Sales and marketing expenses		79,032		142,927		196,311		158,902		70,821		11,113
General and administrative expenses		183,204		263,419		1,012,896		325,465		247,438		38,828

Total		334,973		580,813		1,408,232		678,686		475,771		74,658

The following table presents our selected consolidated balance sheet data as of December 31, 2017, 2018, 2019, 2020 and 2021.


	As of December 31,
	2017 RMB		2018 RMB		2019 RMB		2020 RMB		2021 RMB		2021 US$

	(in thousands)
Selected Consolidated Balance Sheet Data:
Cash and cash equivalents		4,462,194		2,468,034		2,612,743		3,363,942		5,570,563		874,143
Total assets		8,471,188		18,965,538		22,483,681		23,220,556		18,111,238		2,842,048
Total liabilities		1,719,088		7,942,679		8,764,899		8,385,227		7,525,641		1,180,937
Total equity		6,752,100		11,022,859		13,718,782		14,835,329		10,585,597		1,661,111

B.	Capitalization and Indebtedness

Not applicable.

C.	Reasons for the Offer and Use of Proceeds

Not applicable.

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D.	Risk Factors

Summary of Risk Factors

An investment in our ADSs or Class A ordinary shares involves significant risks. Below is a summary of material risks we face, organized under relevant headings. These risks are discussed more fully in Item 3. Key Information—D. Risk Factors.

Risks Related to Our Business and Industry

•

If we fail to retain our existing users, further grow our user base, or if user engagement on our platform declines, our business and operating results may be materially and adversely affected.;

•

We cannot guarantee that the monetization strategies we have adopted will be successfully implemented or generate sustainable revenues and profits;

•

We operate in a highly dynamic market, which makes it difficult to evaluate our future prospects;

•

We currently generate a substantial majority of our revenues from our live video service. We may not be able to continue to grow or continue to achieve profitability from such service;

•

We have incurred significant losses;

•

We may not be able to successfully maintain and increase the number of paying users for the various services we offer on our platform;

•

Our business is dependent on the strength of our brands and market perception of our brand;

•

Our business is subject to complex and evolving Chinese and international laws and regulations regarding cybersecurity, information security, privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation, and any failure or perceived failure to comply with these laws and regulations could result in claims, changes to our business practices, negative publicity, legal proceedings, increased cost of operations, or declines in user base or engagement, or otherwise harm our business;

•

Content posted or displayed on our social networking platform, including the live video shows hosted by us or our users, has been and may again be found objectionable by PRC regulatory authorities and may subject us to penalties and other serious consequences;

Risks Related to Our Corporate Structure

•

We are a Cayman Islands holding company with no equity ownership in the consolidated affiliated entities and we conduct our operations in China through (i) our PRC subsidiaries and (ii) the consolidated affiliated entities with which we have maintained contractual arrangements and their subsidiaries. Investors in our Class A ordinary shares or the ADSs thus are not purchasing equity interest in the consolidated affiliated entities in China but instead are purchasing equity interest in a Cayman Islands holding company. If the PRC government finds that the agreements that establish the structure for operating certain of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company in the Cayman Islands, the consolidated affiliated entities, and investors of our company face uncertainty about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the consolidated affiliated entities and, consequently, significantly affect the financial performance of the consolidated affiliated entities and our company as a group;

•

We rely on contractual arrangements with the consolidated affiliated entities and their respective shareholders for our operations in China, which may not be as effective in providing operational control as direct ownership; and

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•

We may lose the ability to use and enjoy assets held by the consolidated affiliated entities that are important to the operation of our business if the consolidated affiliated entities declare bankruptcy or become subject to a dissolution or liquidation proceeding.

Risks Related to Doing Business in China

•

The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections;

•

Our ADSs will be prohibited from trading in the United States under the HFCA Act in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment;

•

The PRC government’s significant oversight and discretion over our business operations could result in a material adverse change in our operations and the value of our ADSs.

•

Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us;

•

We face uncertainties with respect to the implementation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations;

•

China’s M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China; and

•

The approval of the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval.

Risks Related to our ADSs

•

The trading price of our ADSs is likely to be volatile, which could result in substantial losses to investors;

•

We believe that we were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for the taxable year ended December 31, 2021, which could result in adverse U.S. federal income tax consequences to U.S. holders of our ADSs or ordinary shares;

•

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ADSs, the market price for our ADSs and trading volume could decline; and

•

Substantial future sales or the expectation of substantial sales of our ADSs in the public market could cause the price of our ADSs to decline.

Risks Related to Our Business and Industry

If we fail to retain our existing users, further grow our user base, or if user engagement on our platform declines, our business and operating results may be materially and adversely affected.

The size of our user base and the level of our user engagement are critical to our success. There have been times when our user base failed to grow. There is no guarantee that our MAUs will grow at a desirable rate or at all. Growing our user base and increasing the overall level of user engagement on our social networking platform and in particular our live video service, which currently contributes a majority of our revenues, are critical to our business. If our user growth rate slows down or becomes negative, our success will become increasingly dependent on our ability to retain existing users and enhance user engagement on our platform. If our Momo and Tantan mobile applications are no longer one of the social networking tools that people frequently use, or if people do not perceive our services to be interesting or useful, we may not be able to attract users or increase the frequency or degree of their engagement. A number of user-oriented instant communication products that achieved early popularity have since seen the size of their user base or level of user engagement decline, in some cases precipitously. There is no guarantee that we will not experience a similar erosion of our user base or user engagement level in the future. A number of factors could negatively affect user retention, growth and engagement, including if:

•

we are unable to attract new users to our platform or retain existing ones;

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•

we fail to introduce new and improved services, or if we introduce services that are not favorably received by users;

•

we are unable to combat spam on or inappropriate or abusive use of our platform, which may lead to negative public perception of us and our brand;

•

technical or other problems prevent us from delivering our services in a rapid and reliable manner or otherwise adversely affect the user experience;

•

we suffer from negative publicity, fail to maintain our brand or if our reputation is damaged;

•

we fail to address user concerns related to privacy and communication, safety, security or other factors;

•

there are adverse changes in our services that are mandated by, or that we elect to make to address, legislation, regulations or government policies; and

•

the growth of the number of smartphone users in China stalls.

If we are unable to grow our user base or enhance user engagement, our platform will become less attractive to our users, customers and platform partners, which would have a material and adverse impact on our business and operating results.

We cannot guarantee that the monetization strategies we have adopted will be successfully implemented or generate sustainable revenues and profits.

As the online social networking industry in China is relatively young, prevailing monetization models similar to ours have yet to be proven to be sustainable, and it may be more difficult to predict user and customer behaviors and demands compared to other established industries. Our monetization model has been evolving. We began to generate revenues in the second half of 2013 primarily through membership subscriptions and also game publishing and other services, but we continue to explore and implement new monetization models. While membership subscriptions contributed a majority of our revenues prior to 2016, live video service, which we launched in September 2015 and adopted a virtual items-based revenue model, has replaced membership subscription as our major source of revenues in 2017, 2018, 2019, 2020 and 2021. The services that we currently provide, including live video service, value-added service (comprising membership subscriptions and virtual gift service), mobile marketing services, mobile games, and other services, contributed approximately 57.5%, 41.0%, 1.1%, 0.3% and 0.1%, respectively, of our net revenues in 2021. Apart from live video services, from time to time we have launched new services on our platform, explored new monetization models and broadened our revenue sources, and we expect to continue to do so. For example, in the fourth quarter of 2016, we launched a virtual gift service which allows our users to purchase and send virtual gifts to other users outside of live video service. In 2018, we

co-produced

a TV variety show. In addition, compared to Momo, Tantan is at an earlier stage of monetization. In 2018, Tantan launched membership subscriptions and some other premium features on a

pay-per-use

basis. In 2019, Tantan introduced Quick Chat, which has services based on both the subscription model and the

pay-per-use

model. In 2020, Tantan launched its live video services with a virtual item-based revenue model. However, there is no assurance that any of these and other new monetization models would be profitable or sustainable. If our strategic initiatives do not enhance our ability to monetize our existing services or enable us to develop new approaches to monetization, we may not be able to maintain or increase our revenues and profits or recover any associated costs.

We may in the future introduce new services to further diversify our revenue streams, including services with which we have little or no prior development or operating experience. If these new or enhanced services fail to engage users, customers or platform partners, we may fail to attract or retain users or to generate sufficient revenues to justify our investments, and our business and operating results may suffer as a result.

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We operate in a highly dynamic market, which makes it difficult to evaluate our future prospects.

The market for social networking platforms is relatively new, highly dynamic and may not develop as expected. Our users, customers and platform partners may not fully understand the value of our services, and potential new users, customers and platform partners may have difficulty distinguishing our services from those of our competitors. Convincing potential users, customers and platform partners of the value of our services is critical to the growth of our user base and the success of our business.

We launched our Momo mobile application in August 2011 and acquired our Tantan mobile application in May 2018. The operating history, the recency of our Tantan acquisition and our evolving monetization strategies make it difficult to assess our future prospects or forecast our future results. You should consider our business and prospects in light of the risks and challenges we encounter or may encounter in this developing and rapidly evolving market. These risks and challenges include our ability to, among other things:

•

expand our paying user base for the various services offered by our platform, including live video service, value-added service, mobile games and others;

•

develop and deploy diversified and distinguishable features and services for our users, customers and platform partners;

•

convince customers of the benefits of our marketing services compared to alternative forms of marketing, and continue to increase the efficiency of our mobile marketing solutions and expand our network of marketers;

•

develop or implement strategic initiatives to monetize our platform;

•

develop beneficial relationship with key strategic partners, talented broadcasters and talent agencies for our live video service;

•

develop a reliable, scalable, secure, high-performance technology infrastructure that can efficiently handle increased usage;

•

successfully compete with other companies, some of which have substantially greater resources and market power than us, that are currently in, or may in the future enter, our industry, or duplicate the features of our services;

•

attract, retain and motivate talented employees; and

•

defend ourselves against litigation, regulatory, intellectual property, privacy or other claims.

If we fail to educate potential users, customers and platform partners about the value of our services, if the market for our platform does not develop as we expect or if we fail to address the needs of this dynamic market, our business will be harmed. Failure to adequately address these or other risks and challenges could harm our business and cause our operating results to suffer.

We currently generate a substantial majority of our revenues from our live video service. We may not be able to continue to grow or continue to achieve profitability from such service.

In September 2015, Momo launched our live video service with a virtual items-based revenue model, whereby users can enjoy live performances and interact with the broadcasters for free, and have the option of purchasing

in-show

virtual items. In 2020, Tantan launched its live video services and contributed to our live video service revenue. While we had initial success with this service, which contributed RMB7,429.9 million, RMB10,709.5 million and RMB12,448.1 million to, or 83.6%, 79.9% and 73.2% of, our net revenues in 2017, 2018 and 2019, respectively, this contribution dropped to RMB9,637.6 million and RMB8,378.9 million (US$1,314.8 million) in 2020 and 2021, respectively, or 64.1% and 57.5% of our net revenues, respectively. While we plan to continue to invest significantly in expanding our live video service, we may not be able to continue to achieve our historical levels of profitability based on the virtual items-based revenue model. In addition, popular broadcasters or talent agencies may cease to use our service and we may be unable to attract new talents that can attract users or cause such users to increase the amount of time spent on our platform or the amount of money spent on

in-show

virtual items.

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Although we believe we have a large and diversified pool of talented broadcasters, talent agencies as well as paying users and have entered into multi-year exclusivity agreements with popular broadcasters and talent agencies, if a large number of our broadcasters, particularly popular broadcasters, were to leave our platform for competing platforms at the same time, if we are unable to negotiate acceptable business terms with popular broadcasters or talent agencies, or if a large number of our users decided to use live video services provided by our competitors, we might not be able to expand the user base of our live video service and achieve or maintain the level of revenues and profitability as we currently anticipate. Broadcasters provide live video service on our platform as an individual or as a member of a talent agency. The talent agencies recruit, train and retain the broadcasters. We are committed to provide strong support and resources to broadcasters and talent agencies to offer high-quality content. We are also committed to closely cooperate and develop long-term relationship with broadcasters and talent agencies. However, under our current arrangements with our broadcasters and talent agencies, we share with them a portion of the revenues we derive from the sales of

in-show

virtual items in our live video service. Payments of revenue sharing to broadcasters and talent agencies for our live video service constitute a major portion of our cost of revenues. If we are required to share a larger portion of our revenues with the broadcasters and talent agencies for competition purpose, our results of operations may be adversely impacted.

We have incurred significant losses.

In 2021, we had a net loss of RMB2,925.7 million (US$459.1 million) and a loss from operations of RMB2,389.6 million (US$375.0 million), primarily due to the goodwill and intangible assets impairment of RMB4,397.0 million (US$690.0 million) mainly in connection with our acquisition of Tantan in 2018. In May 2018, we completed the acquisition of Tantan, a Chinese social and dating app for approximately 5.3 million newly issued Class A ordinary shares of our company and US$613.2 million in cash. As of December 31, 2021, as part of our annual impairment testing and based on (i) a decline in our share price which caused our market capitalization to drop significantly below our net book value of equity and (ii) the adjustment in the monetization approach of Tantan to improve user experience and retention which has further caused Tantan’s near term revenue to decrease and net loss to widen, we determined that it was more likely than not that goodwill was impaired. Accordingly, we determined the fair value of each respective reporting unit using the income-based approach, such that Tantan’s cash flows forecasts mainly factored in the lower-than-projected business outlook. As a result, the fair value of the reporting units was estimated to be below the carrying value and therefore indicated an impairment.

We may not be able to successfully maintain and increase the number of paying users for the various services we offer on our platform.

Our future growth depends on our ability to convert our users into paying users of our services, including live video service, value-added service, mobile games and other services, and our ability to retain our existing paying users. However, we cannot assure you that we will be successful in any of the foregoing initiatives, nor can we assure you that we will be able to successfully compete with current and new competitors on attracting paying users. Our efforts to provide greater incentives for our users to pay for our various services may not continue to succeed. Our paying users may discontinue their spending on our services because they may no longer serve our paying users’ needs, or simply because the interests and preferences of these users shift. If we cannot successfully maintain or increase the number of our paying users, our business, results of operations and prospects will be adversely affected.

Our business is dependent on the strength of our brands and market perception of our brand.

In China, we market our services primarily under the brands “陌陌” or “Momo” and “探探” or “Tantan.” Our business and financial performance are highly dependent on the strength and the market perception of our brands and services. A well-recognized brand is critical to increasing our user base and, in turn, facilitating our efforts to monetize our services and enhancing our attractiveness to customers. From time to time, we conduct marketing activities across various media to enhance our brands and to guide public perception of our brands and services. In order to create and maintain brand awareness and brand loyalty, to influence public perception and to retain existing and attract new mobile users, customers and platform partners, we may need to substantially increase our marketing expenditures. We cannot assure you, however, that these activities will be successful or that we will be able to achieve the brand promotion effect we expect.

In addition, people may not understand the value of our platform, and there may be a misperception that Momo is used solely as a tool to randomly meet or date strangers. Convincing potential new users, customers and platform partners of the value of our services is critical to increasing the number of our users, customers and platform partners and to the success of our business.

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Our business generates and processes a large quantity of data. We face risks inherent in handling and protecting large volume of data. In particular, we face a number of challenges relating to data from transactions and other activities on our platforms, including:

•

protecting the data in and hosted on our system, including against attacks on our system by outside parties or fraudulent behavior or improper use by our employees;

•

addressing concerns related to privacy and sharing, safety, security and other factors; and

•

complying with applicable laws, rules and regulations relating to the collection, use, storage, transfer, disclosure and security of personal information, including any requests from regulatory and government authorities relating to these data.

In general, we expect that data security and data protection compliance will receive greater attention and focus from regulators, both domestically and globally, as well as attract continued or greater public scrutiny and attention going forward, which could increase our compliance costs and subject us to heightened risks and challenges associated with data security and protection. If we are unable to manage these risks, we could become subject to penalties, including fines, suspension of business and revocation of required licenses, and our reputation and results of operations could be materially and adversely affected.

The PRC regulatory and enforcement regime with regard to data security and data protection is evolving and may be subject to different interpretations or significant changes. Moreover, different PRC regulatory bodies, including the Standing Committee of the NPC, the Ministry of Industry and Information Technology, or the MIIT, the CAC, the Ministry of Public Security, or the MPS, and the State Administration for Market Regulation, or the SAMR, have enforced data privacy and protections laws and regulations with varying standards and applications. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Internet Information Security” and “—Regulations Relating to Privacy Protection.” The following are examples of certain recent PRC regulatory activities in this area:

Data Security

•

In June 2021, the Standing Committee of the NPC promulgated the PRC Data Security Law, which took effect in September 2021. The PRC Data Security Law, among other things, provides for security review procedure for data-related activities that may affect national security. In July 2021, the State Council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to this regulation, critical information infrastructure means key network facilities or information systems of critical industries or sectors, such as public communication and information service, energy, transportation, water conservation, finance, public services,

e-government

affairs and national defense science, the damage, malfunction or data leakage of which may endanger national security, people’s livelihoods and the public interest. In December 2021, the CAC, together with other authorities, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022 and replaces its predecessor regulation. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services, and operators of network platforms conducting data processing activities must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that network platform operators that hold personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity review before any initial public offering at a foreign stock exchange. Given that the Cybersecurity Review Measures was recently promulgated, there are substantial uncertainties as to its interpretation, application, and enforcement. On November 14, 2021, the CAC published a draft of the Administrative Measures for Internet Data Security, or the Draft Data Security Regulations, for public comments. The Draft Data Security Regulations provides that data processors conducting the following activities must apply for cybersecurity review: (i) merger, reorganization, or division of internet platform operators that have acquired a large number of data resources related to national security, economic development, or public interests, which affects or may affect national security; (ii) a foreign listing by a data processor processing personal information of over one million users; (iii) a listing in Hong Kong which affects or may affect national security; or (iv) other data processing activities that affect or may affect national security. There have been no further clarifications from the authorities as of the date of this annual report as to the standards for determining such activities that “affects or may affect national security.” The period for which the CAC solicited comments on this draft ended on December 13, 2021, but there is no timetable as to when the draft regulations will be enacted. As such, substantial uncertainties exist with respect to the enactment timetable, final content, interpretation, and implementation of the draft regulations, including the standards for determining activities that “affects or may affect national security.” As the Draft Data Security Regulations have not been adopted and it remains unclear whether the formal version adopted in the future will have any further material changes, it is uncertain how the draft regulations will be enacted, interpreted or implemented and how they will affect us.

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•

In November 2021, the CAC released the Administrative Regulations on the Internet Data Security (Draft for Comments), or the Draft Regulations. The Draft Regulations provide that data processors refer to individuals or organizations that, during their data processing activities such as data collection, storage, utilization, transmission, publication and deletion, have autonomy over the purpose and the manner of data processing. In accordance with the Draft Regulations, data processors shall apply for a cybersecurity review for certain activities, including, among other things, (i) the listing abroad of data processors that process the personal information of more than one million users and (ii) any data processing activity that affects or may affect national security. However, there have been no clarifications from the relevant authorities as of the date of this annual report as to the standards for determining whether an activity is one that “affects or may affect national security.” In addition, the Draft Regulations requires that data processors that process “important data” or are listed overseas must conduct an annual data security assessment by itself or commission a data security service provider to do so, and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year. As of the date of this annual report, the Draft Regulations was released for public comment only, and their respective provisions and anticipated adoption or effective date may be subject to change with substantial uncertainty.

Personal Information and Privacy

•

The Anti-monopoly Guidelines for the Platform Economy Sector published by the Anti-monopoly Committee of the State Council, effective on February 7, 2021, prohibits collection of user information through coercive means by online platforms operators.

•

In August 2021, the Standing Committee of the NPC promulgated the PRC 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. We update our privacy policies from time to time to meet the latest regulatory requirements of PRC government authorities and adopt technical measures to protect data and ensure cybersecurity in a systematic way. Nonetheless, the PRC Personal Information Protection Law elevates the protection requirements for personal information processing, and many specific requirements of this law remain to be clarified by the CAC, other regulatory authorities, and courts in practice. We may be required to make further adjustments to our business practices to comply with the personal information protection laws and regulations.

Many of the data-related legislations are relatively new and certain concepts thereunder remain subject to interpretation by the regulators. If any data that we possess belongs to data categories that are subject to heightened scrutiny, we may be required to adopt stricter measures for protection and management of such data. The Cybersecurity Review Measures and the Draft Regulations remain unclear on whether the relevant requirements will be applicable to companies that are already listed in the United States, such as us, if we were to pursue another listing outside of the PRC. We cannot predict the impact of the Cybersecurity Review Measures and the Draft Regulations, if any, at this stage, and we will closely monitor and assess any development in the rule-making process. If the Cybersecurity Review Measures and the enacted version of the Draft Regulations mandate clearance of cybersecurity review and other specific actions to be taken by issuers like us, we face uncertainties as to whether these additional procedures can be completed by us timely, or at all, which may delay or disallow our future listings (should we decide to pursue them), subject us to government enforcement actions and investigations, fines, penalties, suspension of our

non-compliant

operations, or removal of our apps from the relevant application stores, and materially and adversely affect our business and results of operations. As of the date of this annual report, we have not been involved in any formal investigations on cybersecurity review made by the CAC on such basis.

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In general, compliance with the existing PRC laws and regulations, as well as additional laws and regulations that PRC regulatory bodies may enact in the future, related to data security and personal information protection, may be costly and result in additional expenses to us, and subject us to negative publicity, which could harm our reputation and business operations. There are also uncertainties with respect to how such laws and regulations will be implemented and interpreted in practice.

Our practices may become inconsistent with new laws or regulations concerning data protection, or the interpretation and application of existing consumer and data protection laws or regulations, which is often uncertain and in flux. If so, in addition to the possibility of fines, this could result in an order requiring that we change our practices, which could have an adverse effect on our business and operating results. For example, the European Union General Data Protection Regulation (“GDPR”), which came into effect on May 25, 2018, includes operational requirements for companies that receive or process personal data of residents of the European Economic Area. The GDPR establishes new requirements applicable to the processing of personal data, affords new data protection rights to individuals and imposes penalties for serious data breaches. Individuals also have a right to compensation under the GDPR for financial or

non-financial

losses. Although we do not conduct any business in the European Economic Area, in the event that residents of the European Economic Area access our platform and input protected information, we may become subject to provisions of the GDPR. Additionally, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the U.S. Known as the California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA, which went into effect on January 1, 2020, requires covered companies to provide new disclosures to California consumers, and provides such consumers new ways to

opt-out

of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. With some other conditions, the CCPA requires companies “doing business in California” to follow the CCPA. However, the phrase “doing business in California” is not defined in the CCPA. With reference to the California tax code, the phrase “doing business in California” is described as “

actively

engaging in any transaction for the purpose of financial or pecuniary gain or profit.” We are currently not actively doing business in California, and thus, there is still uncertainty regarding whether the CCPA will apply to us. If further interpretations or court decisions render us “doing business in California,” the CCPA will apply to us and it may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

Intensified government regulations, rules or guidelines of the internet industry in China could restrict our ability to maintain or increase the level of user traffic to, and user willingness to spend on, our platform as well as our ability to tap into other market opportunities, and negatively impact our businesses, results of operations, or financial condition.

The PRC government has promulgated, in recent years, intensified regulations, rules, or guidelines on various aspects of the internet industry in China. For example, in August 2018, the National Office of Anti-Pornography and Illegal Publication, or the NOAPIP, the MIIT, the MPS, the Ministry of Culture and Tourism, or MCT (previously known as the Ministry of Culture), the NRTA and the CAC jointly issued the Notice on Strengthen the Management of Online Live Broadcast Service, which required the real-name registration system for users to be put in place by online live broadcast service providers. On November 12, 2020, the NRTA promulgated the Circular on Strengthening the Administration of the Online Show Live Broadcast and Online

E-commerce

Live Broadcast (“Notice 78”), which sets forth registration requirements for platforms providing online show live broadcast or online

e-commerce

live broadcast to have their information and business operations registered by November 30, 2020. Notice 78 also sets forth requirements for certain online live broadcast businesses with respect to real-name registration, limits on user spending on virtual gifting, restrictions on minors on virtual gifting, online live broadcast review personnel requirements, content tagging requirements, and other requirements. For example, Notice 78 requires online live broadcast platforms to set a limit to the amount of virtual gifts a user can send per day and per month, as well as the amount that can be gifted at any one time. However, there is currently no clear guidance as to what limits on virtual gifting spending will be imposed by the NRTA pursuant to Notice 78 and it is unclear how and to what degree any such limits would be imposed on different platforms.

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Furthermore, on February 9, 2021, the NOAPIP, the MIIT, the MPS, the MCT, the NRTA, the CAC and the SAMR jointly issued the Guiding Opinions on Strengthening the Administration of Online Live Broadcast (“Opinions 3”), which strengthens the positive guidance and management of the online broadcast industry, including standardizing the behavior of virtual gifting and promoting the classification of the online live broadcast accounts. For example, Opinions 3 requires online live broadcast platforms to reasonably limit the maximum amount of a single virtual gift and a single virtual gifting per time to remind the users whose daily consumption amount has triggered the corresponding threshold, and to set necessary cooling off period and deferred payment period. We are still in the process of obtaining further guidance from regulatory authorities and evaluating the applicability and effect of the various requirements under Notice 78 and Opinions 3 on our business. Any limits on user spending on virtual gifting ultimately imposed may negatively impact our revenues derived from virtual gifting and our results of operations. Any further rulemaking under Notice 78, Opinions 3 or other intensified regulation with respect to online live broadcast may increase our compliance burden, and may have an adverse impact on our business and results of operations. On March 25, 2022, the CAC, the State Administration of Taxation, or the SAT, and the SAMR jointly issued the Opinions on Further Rectifying the Profit-making Online Live Broadcast to Promote the Healthy