0001791278--12-312021FYfalsetrue0013618609122108305114840561484010.080.081.501.50561484014391021891291186206912466219779612143786111156148401361860951148400001791278us-gaap:ConvertiblePreferredStockMember2020-07-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2020-07-310001791278blct:SeriesCRedeemableConvertiblePreferredSharesMember2020-07-310001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMember2020-07-310001791278blct:SeriesBRedeemableConvertiblePreferredSharesMember2020-07-310001791278blct:Series1RedeemableConvertiblePreferredSharesMember2020-07-310001791278us-gaap:RedeemableConvertiblePreferredStockMember2019-12-310001791278us-gaap:ConvertiblePreferredStockMember2019-12-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2019-12-310001791278blct:SeriesCRedeemableConvertiblePreferredSharesMember2019-12-310001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMember2019-12-310001791278blct:SeriesBRedeemableConvertiblePreferredSharesMember2019-12-310001791278blct:Series1RedeemableConvertiblePreferredSharesMember2019-12-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2018-12-310001791278blct:SeriesCRedeemableConvertiblePreferredSharesMember2018-12-310001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMember2018-12-310001791278blct:SeriesBRedeemableConvertiblePreferredSharesMember2018-12-310001791278blct:Series1RedeemableConvertiblePreferredSharesMember2018-12-310001791278us-gaap:RedeemableConvertiblePreferredStockMember2019-01-012019-12-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2019-01-012019-12-310001791278blct:SeriesCRedeemableConvertiblePreferredSharesMember2019-01-012019-12-310001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMember2019-01-012019-12-310001791278blct:SeriesBRedeemableConvertiblePreferredSharesMember2019-01-012019-12-310001791278blct:Series1RedeemableConvertiblePreferredSharesMember2019-01-012019-12-310001791278us-gaap:AdditionalPaidInCapitalMember2021-01-012021-12-310001791278us-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001791278us-gaap:ConvertiblePreferredStockMemberus-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMemberus-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001791278blct:SeriesCRedeemableConvertiblePreferredSharesMemberus-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMemberus-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001791278blct:SeriesBRedeemableConvertiblePreferredSharesMemberus-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001791278blct:Series1RedeemableConvertiblePreferredSharesMemberus-gaap:AdditionalPaidInCapitalMember2020-01-012020-12-310001791278blct:Mr.BaoliMaMemberus-gaap:CommonClassAMember2021-01-012021-12-310001791278us-gaap:CommonClassAMemberus-gaap:CommonStockMember2020-01-012020-12-310001791278us-gaap:ConvertiblePreferredStockMemberus-gaap:CommonStockMember2020-01-012020-12-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMemberus-gaap:CommonStockMember2020-01-012020-12-310001791278blct:SeriesCRedeemableConvertiblePreferredSharesMemberus-gaap:CommonStockMember2020-01-012020-12-310001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMemberus-gaap:CommonStockMember2020-01-012020-12-310001791278blct:SeriesBRedeemableConvertiblePreferredSharesMemberus-gaap:CommonStockMember2020-01-012020-12-310001791278blct:Series1RedeemableConvertiblePreferredSharesMemberus-gaap:CommonStockMember2020-01-012020-12-310001791278us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-01-012021-12-310001791278us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-01-012021-12-310001791278us-gaap:RetainedEarningsMember2021-12-310001791278us-gaap:AdditionalPaidInCapitalMember2021-12-310001791278us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001791278us-gaap:RetainedEarningsMember2020-12-310001791278us-gaap:AdditionalPaidInCapitalMember2020-12-310001791278us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001791278us-gaap:RetainedEarningsMember2019-12-310001791278us-gaap:AdditionalPaidInCapitalMember2019-12-310001791278us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310001791278us-gaap:RetainedEarningsMember2018-12-310001791278us-gaap:AdditionalPaidInCapitalMember2018-12-310001791278us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310001791278us-gaap:CommonClassBMemberus-gaap:CommonStockMember2021-12-310001791278us-gaap:CommonClassAMemberus-gaap:CommonStockMember2021-12-310001791278us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-12-310001791278us-gaap:CommonClassAMemberus-gaap:CommonStockMember2020-12-310001791278us-gaap:CommonStockMember2019-12-310001791278us-gaap:CommonStockMember2018-12-310001791278us-gaap:CommonClassAMemberus-gaap:IPOMember2020-07-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2018-11-010001791278us-gaap:ConvertiblePreferredStockMember2018-02-080001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2017-11-020001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMember2016-06-270001791278blct:SeriesCRedeemableConvertiblePreferredSharesMember2016-04-080001791278blct:SeriesBRedeemableConvertiblePreferredSharesMember2014-10-300001791278blct:Series1RedeemableConvertiblePreferredSharesMember2014-05-150001791278us-gaap:ConvertiblePreferredStockMember2013-04-270001791278srt:MinimumMember2020-12-310001791278srt:MaximumMember2020-12-310001791278srt:MinimumMember2019-12-310001791278srt:MaximumMember2019-12-310001791278us-gaap:ShareBasedPaymentArrangementEmployeeMember2020-06-012020-06-300001791278blct:ShareIncentivePlan2021Member2021-08-240001791278us-gaap:ShareBasedPaymentArrangementNonemployeeMemberblct:ShareIncentivePlan2020Member2020-10-310001791278us-gaap:ShareBasedPaymentArrangementEmployeeMemberblct:ShareIncentivePlan2020Member2020-06-300001791278blct:ShareIncentivePlan2020Member2020-06-150001791278blct:ShareIncentivePlan2015Member2015-03-110001791278us-gaap:ShareBasedCompensationAwardTrancheOneMember2021-08-242021-08-240001791278us-gaap:ShareBasedCompensationAwardTrancheOneMember2020-06-152020-06-150001791278blct:ShareIncentivePlan2015Memberus-gaap:ShareBasedCompensationAwardTrancheOneMember2015-03-112015-03-110001791278us-gaap:ShareBasedCompensationAwardTrancheTwoMember2021-08-242021-08-2400017912782021-08-242021-08-240001791278us-gaap:ShareBasedCompensationAwardTrancheTwoMember2020-06-152020-06-1500017912782020-06-152020-06-150001791278blct:ShareIncentivePlan2015Memberus-gaap:ShareBasedCompensationAwardTrancheTwoMember2015-03-112015-03-110001791278blct:ShareIncentivePlan2015Member2015-03-112015-03-110001791278us-gaap:ServiceOtherMember2021-01-012021-12-310001791278us-gaap:ServiceMember2021-01-012021-12-310001791278us-gaap:ProductMember2021-01-012021-12-310001791278us-gaap:MembershipMember2021-01-012021-12-310001791278us-gaap:AdvertisingMember2021-01-012021-12-310001791278blct:LiveStreamingServiceMember2021-01-012021-12-310001791278us-gaap:ServiceOtherMember2020-01-012020-12-310001791278us-gaap:ServiceMember2020-01-012020-12-310001791278us-gaap:ProductMember2020-01-012020-12-310001791278us-gaap:MembershipMember2020-01-012020-12-310001791278us-gaap:AdvertisingMember2020-01-012020-12-310001791278blct:LiveStreamingServiceMember2020-01-012020-12-310001791278us-gaap:ServiceOtherMember2019-01-012019-12-310001791278us-gaap:ServiceMember2019-01-012019-12-310001791278us-gaap:MembershipMember2019-01-012019-12-310001791278us-gaap:AdvertisingMember2019-01-012019-12-310001791278blct:LiveStreamingServiceMember2019-01-012019-12-310001791278srt:MaximumMemberus-gaap:LeaseholdImprovementsMember2021-01-012021-12-310001791278us-gaap:OfficeEquipmentMember2021-01-012021-12-310001791278us-gaap:OfficeEquipmentMember2021-12-310001791278us-gaap:LeaseholdImprovementsMember2021-12-310001791278us-gaap:OfficeEquipmentMember2020-12-310001791278us-gaap:LeaseholdImprovementsMember2020-12-310001791278us-gaap:CommonClassAMemberus-gaap:IPOMember2020-07-012020-07-310001791278blct:Mr.BaoliMaMember2020-04-032020-04-030001791278blct:IrainbowHongKongLimitedMember2021-01-012021-12-310001791278blct:GuangzhouYingyoutianxiaNetworksTechnologyCo.LtdMember2021-01-012021-12-310001791278blct:IrainbowHongKongLimitedMember2020-12-012020-12-310001791278blct:GuangzhouYingyoutianxiaNetworksTechnologyCo.LtdMember2020-08-252020-12-310001791278blct:JinxinFertilityGroupCompanyLimitedMemberblct:SharesSaleAndRepurchaseAgreementMember2020-07-282020-07-2800017912782018-09-072018-09-070001791278blct:MengmeiLifePtyLtdMember2020-01-012020-12-310001791278blct:MengmeiLifePtyLtdMember2019-01-012019-12-310001791278blct:JinxinFertilityGroupCompanyLimitedMemberblct:SharesSaleAndRepurchaseAgreementMember2020-01-012020-12-310001791278us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-12-310001791278us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-12-310001791278us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-12-310001791278us-gaap:RetainedEarningsMember2021-01-012021-12-310001791278us-gaap:RetainedEarningsMember2020-01-012020-12-310001791278us-gaap:RetainedEarningsMember2019-01-012019-12-310001791278us-gaap:CommonStockMember2019-01-012019-12-310001791278us-gaap:AdditionalPaidInCapitalMember2019-01-012019-12-3100017912782020-03-092020-03-090001791278country:KY2021-01-012021-12-310001791278country:JP2021-01-012021-12-310001791278blct:OtherCountriesMember2021-01-012021-12-310001791278country:KY2020-01-012020-12-310001791278country:JP2020-01-012020-12-310001791278blct:OtherCountriesMember2020-01-012020-12-310001791278country:KY2019-01-012019-12-310001791278country:JP2019-01-012019-12-310001791278blct:OtherCountriesMember2019-01-012019-12-310001791278blct:UserBaseMember2021-01-012021-12-3100017912782019-11-202019-11-200001791278srt:MinimumMemberblct:UserBaseMember2021-01-012021-12-310001791278srt:MaximumMemberblct:UserBaseMember2021-01-012021-12-310001791278us-gaap:TradeNamesMember2021-01-012021-12-310001791278us-gaap:TechnologyBasedIntangibleAssetsMember2021-01-012021-12-310001791278us-gaap:LicensingAgreementsMember2021-01-012021-12-310001791278us-gaap:TradeNamesMember2021-12-310001791278us-gaap:TechnologyBasedIntangibleAssetsMember2021-12-310001791278us-gaap:LicensingAgreementsMember2021-12-310001791278blct:UserBaseMember2021-12-310001791278us-gaap:TradeNamesMember2020-12-310001791278us-gaap:TechnologyBasedIntangibleAssetsMember2020-12-310001791278us-gaap:LicensingAgreementsMember2020-12-310001791278blct:UserBaseMember2020-12-310001791278us-gaap:SecuritiesInvestmentMember2020-12-310001791278us-gaap:EquitySecuritiesMember2020-12-310001791278us-gaap:SecuritiesInvestmentMember2019-12-310001791278us-gaap:EquitySecuritiesMember2019-12-310001791278us-gaap:DebtSecuritiesMember2019-12-310001791278us-gaap:SecuritiesInvestmentMember2018-12-310001791278us-gaap:EquitySecuritiesMember2018-12-310001791278us-gaap:DebtSecuritiesMember2018-12-310001791278us-gaap:ConvertibleDebtMember2018-12-310001791278us-gaap:FairValueInputsLevel3Member2020-12-310001791278blct:OtherSecuritiesMember2020-12-310001791278blct:MengmeiLifePtyLtdMember2018-09-070001791278blct:ScenarioTwoMemberus-gaap:ForeignCountryMember2021-01-012021-12-310001791278blct:ScenarioOneMemberus-gaap:ForeignCountryMember2021-01-012021-12-310001791278us-gaap:ResearchAndDevelopmentExpenseMember2021-01-012021-12-310001791278us-gaap:ResearchAndDevelopmentExpenseMember2020-01-012020-12-310001791278us-gaap:SellingAndMarketingExpenseMember2019-01-012019-12-310001791278us-gaap:ResearchAndDevelopmentExpenseMember2019-01-012019-12-310001791278us-gaap:GeneralAndAdministrativeExpenseMember2019-01-012019-12-310001791278us-gaap:CostOfSalesMember2019-01-012019-12-310001791278us-gaap:DomesticCountryMember2021-12-310001791278blct:TwoThousandTwentyTwoMember2021-12-310001791278blct:TwoThousandTwentyThreeMember2021-12-310001791278blct:TwoThousandTwentySixMember2021-12-310001791278blct:TwoThousandTwentySevenMember2021-12-310001791278blct:TwoThousandTwentyNineMember2021-12-310001791278blct:TwoThousandTwentyFourMember2021-12-310001791278blct:TwoThousandTwentyFiveMember2021-12-310001791278blct:TwoThousandTwentyEightMember2021-12-310001791278blct:TwoThousandThirtyOneMember2021-12-3100017912782017-03-092017-03-0900017912782017-03-090001791278us-gaap:ConvertibleNotesPayableMember2016-05-090001791278blct:SeriesC2RedeemableConvertiblePreferredSharesMember2017-03-092017-03-090001791278blct:SeriesC2RedeemableConvertiblePreferredSharesMember2017-03-090001791278us-gaap:ConvertibleNotesPayableMemberblct:SeriesCRedeemableConvertiblePreferredSharesMember2016-05-092016-05-090001791278country:HK2021-01-012021-12-310001791278blct:PrcExcludingHongKongMember2021-01-012021-12-310001791278country:HK2020-01-012020-12-310001791278blct:PrcExcludingHongKongMember2020-01-012020-12-310001791278country:HK2019-01-012019-12-310001791278blct:PrcExcludingHongKongMember2019-01-012019-12-310001791278us-gaap:RedeemableConvertiblePreferredStockMemberus-gaap:IPOMember2021-12-310001791278us-gaap:ConvertiblePreferredStockMemberus-gaap:IPOMember2021-12-310001791278us-gaap:RedeemableConvertiblePreferredStockMember2018-12-310001791278us-gaap:CommonClassBMember2021-04-012021-04-300001791278us-gaap:CommonClassAMember2021-04-012021-04-3000017912782021-01-0100017912782020-01-010001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMemberus-gaap:CommonClassBMember2021-12-310001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMemberus-gaap:CommonClassAMember2021-12-310001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMemberus-gaap:CommonClassBMember2020-12-310001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMemberus-gaap:CommonClassAMember2020-12-310001791278us-gaap:CommonClassBMember2020-12-310001791278us-gaap:CommonClassAMember2020-12-310001791278us-gaap:CommonStockMember2020-07-310001791278us-gaap:CommonClassBMember2020-07-310001791278us-gaap:CommonClassAMember2020-07-3100017912782013-12-310001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2021-01-012021-12-310001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2020-01-012020-12-310001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-01-012019-12-310001791278us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2019-01-012019-12-310001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2019-12-310001791278us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2019-12-3100017912782019-12-310001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2018-12-310001791278us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2018-12-310001791278blct:IrainbowHongKongLimitedMemberus-gaap:TradeNamesMember2020-12-010001791278blct:IrainbowHongKongLimitedMemberus-gaap:TechnologyBasedIntangibleAssetsMember2020-12-010001791278blct:IrainbowHongKongLimitedMemberblct:UserBaseMember2020-12-010001791278blct:GuangzhouYingyoutianxiaNetworksTechnologyCo.LtdMemberus-gaap:TradeNamesMember2020-08-250001791278blct:GuangzhouYingyoutianxiaNetworksTechnologyCo.LtdMemberus-gaap:TechnologyBasedIntangibleAssetsMember2020-08-250001791278blct:GuangzhouYingyoutianxiaNetworksTechnologyCo.LtdMemberblct:UserBaseMember2020-08-250001791278blct:IrainbowHongKongLimitedMember2020-12-012020-12-010001791278blct:GuangzhouYingyoutianxiaNetworksTechnologyCo.LtdMember2020-08-252020-08-250001791278blct:IrainbowHongKongLimitedMember2020-12-010001791278blct:GuangzhouYingyoutianxiaNetworksTechnologyCo.LtdMember2020-08-250001791278us-gaap:AssetPledgedAsCollateralMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001791278us-gaap:AssetPledgedAsCollateralMemberus-gaap:VariableInterestEntityPrimaryBeneficiaryMember2020-12-310001791278us-gaap:EmployeeStockOptionMember2021-01-012021-12-310001791278us-gaap:EmployeeStockOptionMember2020-01-012020-12-310001791278us-gaap:PreferredStockMember2019-01-012019-12-310001791278us-gaap:EmployeeStockOptionMember2019-01-012019-12-3100017912782018-12-310001791278us-gaap:ShareBasedPaymentArrangementNonemployeeMemberus-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-12-310001791278us-gaap:ShareBasedPaymentArrangementEmployeeMember2021-01-012021-12-310001791278us-gaap:SellingAndMarketingExpenseMember2021-01-012021-12-310001791278us-gaap:IPOMember2021-01-012021-12-310001791278us-gaap:GeneralAndAdministrativeExpenseMember2021-01-012021-12-310001791278us-gaap:CostOfSalesMember2021-01-012021-12-310001791278blct:TechnologyAndProductDevelopmentExpensesMember2021-01-012021-12-310001791278us-gaap:SellingAndMarketingExpenseMember2020-01-012020-12-310001791278us-gaap:GeneralAndAdministrativeExpenseMember2020-01-012020-12-310001791278us-gaap:CostOfSalesMember2020-01-012020-12-310001791278blct:TechnologyAndProductDevelopmentExpensesMember2020-01-012020-12-310001791278us-gaap:IPOMember2019-01-012019-12-310001791278blct:IrainbowHongKongLimitedMemberus-gaap:TradeNamesMember2020-12-012020-12-010001791278blct:IrainbowHongKongLimitedMemberus-gaap:TechnologyBasedIntangibleAssetsMember2020-12-012020-12-010001791278blct:IrainbowHongKongLimitedMemberblct:UserBaseMember2020-12-012020-12-010001791278blct:GuangzhouYingyoutianxiaNetworksTechnologyCo.LtdMemberus-gaap:TradeNamesMember2020-08-252020-08-250001791278blct:GuangzhouYingyoutianxiaNetworksTechnologyCo.LtdMemberus-gaap:TechnologyBasedIntangibleAssetsMember2020-08-252020-08-250001791278blct:GuangzhouYingyoutianxiaNetworksTechnologyCo.LtdMemberblct:UserBaseMember2020-08-252020-08-250001791278dei:AdrMember2021-01-012021-12-310001791278us-gaap:CommonStockMember2021-12-310001791278us-gaap:CommonClassBMember2021-12-310001791278us-gaap:CommonClassAMember2021-12-310001791278dei:BusinessContactMember2021-01-012021-12-310001791278blct:OnlineServicesMember2021-01-012021-12-310001791278blct:MerchandiseMember2021-01-012021-12-310001791278us-gaap:ConvertiblePreferredStockMemberus-gaap:IPOMember2018-01-260001791278us-gaap:ConvertiblePreferredStockMember2018-02-082018-02-080001791278blct:SeriesCRedeemableConvertiblePreferredSharesMember2016-03-182016-04-080001791278blct:SeriesBRedeemableConvertiblePreferredSharesMember2014-10-302014-10-300001791278blct:Series1RedeemableConvertiblePreferredSharesMember2014-05-152014-05-150001791278us-gaap:ConvertiblePreferredStockMember2013-04-272013-04-270001791278blct:ScenarioOneMemberblct:SeriesDRedeemableConvertiblePreferredSharesMember2021-12-310001791278us-gaap:ConvertiblePreferredStockMember2021-12-310001791278blct:SeriesCRedeemableConvertiblePreferredSharesMember2021-12-310001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMember2021-12-310001791278blct:SeriesBRedeemableConvertiblePreferredSharesMember2021-12-310001791278blct:Series1RedeemableConvertiblePreferredSharesMember2021-12-310001791278blct:ScenarioTwoMemberblct:SeriesDRedeemableConvertiblePreferredSharesMember2021-12-310001791278us-gaap:RedeemableConvertiblePreferredStockMember2020-01-012020-12-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2020-01-012020-12-310001791278blct:SeriesCRedeemableConvertiblePreferredSharesMember2020-01-012020-12-310001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMember2020-01-012020-12-310001791278blct:SeriesBRedeemableConvertiblePreferredSharesMember2020-01-012020-12-310001791278blct:Series1RedeemableConvertiblePreferredSharesMember2020-01-012020-12-310001791278us-gaap:ConvertiblePreferredStockMember2020-01-012020-12-310001791278blct:ShareholderOfSeries1PreferredSharesMemberblct:SeriesC1RedeemableConvertiblePreferredSharesMember2016-06-272016-06-270001791278blct:ShareholderOfSeriesPreferredSharesMemberus-gaap:ConvertiblePreferredStockMember2014-11-042014-11-040001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMember2016-06-272016-06-270001791278blct:Series1RedeemableConvertiblePreferredSharesMember2014-11-042014-11-040001791278srt:MinimumMemberdei:AdrMemberus-gaap:SubsequentEventMember2022-04-182022-04-180001791278srt:MaximumMemberdei:AdrMemberus-gaap:SubsequentEventMember2022-04-182022-04-180001791278srt:MinimumMemberus-gaap:SubsequentEventMember2022-04-182022-04-180001791278srt:MaximumMemberus-gaap:SubsequentEventMember2022-04-182022-04-180001791278srt:MaximumMemberdei:AdrMemberus-gaap:SubsequentEventMember2022-01-022022-01-020001791278srt:MaximumMemberus-gaap:SubsequentEventMember2022-01-022022-01-020001791278srt:MinimumMember2021-01-012021-12-310001791278srt:MaximumMember2021-01-012021-12-310001791278srt:MinimumMember2020-01-012020-12-310001791278srt:MaximumMember2020-01-012020-12-310001791278srt:MinimumMember2019-01-012019-12-310001791278srt:MaximumMember2019-01-012019-12-310001791278us-gaap:AdvertisingMembersrt:MaximumMember2021-01-012021-12-310001791278blct:RepurchaseUnvestedShareOptionsFromBluecityMediaLimitedMember2018-04-122018-04-120001791278us-gaap:CommonClassBMemberus-gaap:CommonStockMember2020-01-012020-12-310001791278us-gaap:CommonStockMember2020-01-012020-12-310001791278srt:MinimumMemberus-gaap:ConvertiblePreferredStockMemberus-gaap:IPOMember2018-01-260001791278srt:MinimumMemberus-gaap:ConvertiblePreferredStockMemberus-gaap:IPOMember2018-01-262018-01-260001791278us-gaap:RedeemableConvertiblePreferredStockMember2021-01-012021-12-310001791278us-gaap:ConvertiblePreferredStockMember2021-01-012021-12-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2021-01-012021-12-310001791278blct:SeriesCRedeemableConvertiblePreferredSharesMember2021-01-012021-12-310001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMember2021-01-012021-12-310001791278blct:SeriesBRedeemableConvertiblePreferredSharesMember2021-01-012021-12-310001791278blct:Series1RedeemableConvertiblePreferredSharesMember2021-01-012021-12-310001791278blct:SubscriptionBasedMembershipServicesMembersrt:MinimumMember2021-01-012021-12-310001791278blct:SubscriptionBasedMembershipServicesMembersrt:MaximumMember2021-01-012021-12-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2018-01-262018-11-010001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2017-06-092017-11-020001791278blct:RepurchaseUnvestedShareOptionsFromBluecityMediaLimitedMember2019-01-012019-12-310001791278blct:RepurchaseUnvestedShareOptionsFromBluecityMediaLimitedMember2018-01-012018-12-310001791278us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-01-012021-12-310001791278us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2020-01-012020-12-310001791278us-gaap:IPOMember2020-01-012020-12-310001791278us-gaap:CommonClassBMember2021-01-012021-12-310001791278blct:MengmeiLifePtyLtdMember2018-09-072018-09-070001791278dei:AdrMemberus-gaap:SubsequentEventMember2022-01-022022-01-020001791278blct:Mr.BaoliMaMember2021-01-012021-12-310001791278blct:Series1RedeemableConvertiblePreferredSharesMember2020-07-012020-07-310001791278blct:SeriesBRedeemableConvertiblePreferredSharesMember2020-07-012020-07-310001791278blct:SeriesDRedeemableConvertiblePreferredSharesMember2020-07-012020-07-310001791278us-gaap:CommonStockMember2020-07-012020-07-310001791278us-gaap:CommonClassBMember2020-07-012020-07-310001791278us-gaap:ConvertiblePreferredStockMember2020-07-012020-07-310001791278blct:SeriesCRedeemableConvertiblePreferredSharesMember2020-07-012020-07-310001791278us-gaap:CommonClassAMember2020-07-012020-07-310001791278blct:SeriesC1RedeemableConvertiblePreferredSharesMember2020-07-012020-07-310001791278us-gaap:SecuritiesInvestmentMember2019-01-012019-12-310001791278us-gaap:EquitySecuritiesMember2019-01-012019-12-310001791278us-gaap:DebtSecuritiesMember2019-01-012019-12-310001791278us-gaap:SecuritiesInvestmentMember2021-01-012021-12-310001791278us-gaap:EquitySecuritiesMember2021-01-012021-12-310001791278us-gaap:SecuritiesInvestmentMember2020-01-012020-12-310001791278us-gaap:EquitySecuritiesMember2020-01-012020-12-310001791278us-gaap:DebtSecuritiesMember2020-01-012020-12-310001791278us-gaap:ConvertibleDebtMember2019-01-012019-12-310001791278us-gaap:DomesticCountryMember2021-01-012021-12-310001791278us-gaap:DomesticCountryMember2019-01-012019-12-310001791278blct:DragAlongSaleMember2021-12-310001791278srt:MinimumMemberblct:DragAlongSaleMember2021-12-3100017912782019-11-2000017912782020-07-310001791278us-gaap:CommonClassAMember2021-01-012021-12-310001791278srt:MinimumMemberblct:MengmeiLifePtyLtdMember2021-12-310001791278srt:MaximumMemberblct:MengmeiLifePtyLtdMember2021-12-310001791278blct:MengmeiLifePtyLtdMember2021-12-310001791278currency:VNDcountry:VN2021-12-310001791278currency:USDcountry:US2021-12-310001791278currency:USDcountry:HK2021-12-310001791278currency:USDcountry:CN2021-12-310001791278currency:JPYcountry:JP2021-12-310001791278currency:HKDcountry:HK2021-12-310001791278currency:CNYcountry:CN2021-12-310001791278country:VN2021-12-310001791278country:US2021-12-310001791278country:JP2021-12-310001791278country:HK2021-12-310001791278country:CN2021-12-310001791278currency:VNDcountry:VN2020-12-310001791278currency:USDcountry:US2020-12-310001791278currency:USDcountry:HK2020-12-310001791278currency:USDcountry:CN2020-12-310001791278currency:JPYcountry:JP2020-12-310001791278currency:HKDcountry:HK2020-12-310001791278currency:CNYcountry:CN2020-12-310001791278country:VN2020-12-310001791278country:US2020-12-310001791278country:JP2020-12-310001791278country:HK2020-12-310001791278country:CN2020-12-310001791278us-gaap:ForeignCountryMember2021-01-012021-12-310001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2021-12-310001791278us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001791278us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001791278srt:ParentCompanyMembersrt:ReportableLegalEntitiesMember2020-12-310001791278us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2020-12-310001791278us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2020-12-3100017912782021-12-3100017912782020-12-3100017912782021-01-012021-12-3100017912782020-01-012020-12-3100017912782019-01-012019-12-31blct:segmentiso4217:CNYiso4217:USDiso4217:HKDxbrli:purexbrli:sharesblct:Voteiso4217:USDxbrli:sharesiso4217:CNYxbrli:sharesiso4217:USDiso4217:CNY

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

OR

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

For the fiscal year ended December 31, 2021

OR

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

For the transition period from to

OR

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 . . . . . . . . . . . . . . . . . . .        

Commission file number: 001-39364

BlueCity Holdings Limited

(Exact Name of Registrant as Specified in Its Charter)

N/A

(Translation of Registrant’s Name Into English)

Cayman Islands

(Jurisdiction of Incorporation or Organization)

Block 2 Tower B Room 028, No. 22 Pingguo Shequ, Bai Zi Wan Road, Chaoyang District

Beijing 100022

People’s Republic of China

(Address of Principal Executive Offices)

Junchen Sun, Acting Chief Financial Officer

Block 2 Tower B Room 028, No. 22 Pingguo Shequ, Bai Zi Wan Road, Chaoyang District

Beijing 100022

People’s Republic of China

Phone: +86 10 5876-9855

Email: sunjunchen@bluecity.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

Title of Each Class

    

Trading Symbol(s)

    

Name of Each Exchange On Which Registered

American depositary shares, each two American depositary shares representing one Class A ordinary share

BLCT

Nasdaq Global Market

Class A ordinary shares, par value US$0.0001 per share*

Nasdaq Global Market

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

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

Not Applicable

(Title of Class)

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

Not Applicable

(Title of Class)

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

As of December 31, 2021, there were 18,733,449 ordinary shares outstanding, par value $0.0001 per share, being the sum of 13,618,609 Class A ordinary shares and 5,114,840 Class B ordinary shares.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Table of Contents

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

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 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 the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated filer

Emerging growth company

If an emerging growth company that 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.

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

U.S. GAAP

International Financial Reporting Standards as issued
by the International Accounting Standards Board

Other

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

PART I

4

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

4

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

4

ITEM 3. KEY INFORMATION

4

ITEM 4. INFORMATION ON THE COMPANY

69

ITEM 4A. UNRESOLVED STAFF COMMENTS

105

ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

106

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

119

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

130

ITEM 8. FINANCIAL INFORMATION

132

ITEM 9. THE OFFER AND LISTING

133

ITEM 10. ADDITIONAL INFORMATION

134

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

148

ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

149

PART II

151

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

151

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

151

ITEM 15. CONTROLS AND PROCEDURES

151

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

153

ITEM 16B. CODE OF ETHICS

153

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

153

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

153

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

153

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

154

ITEM 16G. CORPORATE GOVERNANCE

154

ITEM 16H. MINE SAFETY DISCLOSURE

154

ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

154

PART III

154

ITEM 17. FINANCIAL STATEMENTS

154

ITEM 18. FINANCIAL STATEMENTS

154

ITEM 19. EXHIBITS

155

SIGNATURES

156

i

Table of Contents

INTRODUCTION

Unless otherwise indicated and except where the context otherwise requires, and for the purpose of this annual report on Form 20-F to:

“ADRs” refer to the American depositary receipts that evidence the ADSs;
“ADSs” refer to our American depositary shares, each two (2) ADSs represent one (1) Class A ordinary share;
“ARPPU” refers to average revenue per paying user in a given period;
“average daily sessions per active user” for any period is calculated by dividing (i) the sum of number of times of opening our Blued mobile app per DAU for each day of such period, by (ii) the number of days in such period;
“average daily time spent per active user” for any period is calculated by dividing (i) the sum of time spent on our Blued mobile app per DAU for each day of such period, by (ii) the number of days in such period;
“average DAUs” for any period is calculated by dividing (i) the sum of DAUs (as defined below) for each day of such period, by (ii) the number of days in such period;
“average MAUs” for any period is calculated by dividing (i) the sum of MAUs (as defined below) for each month of such period, by (ii) the number of months in such period;
“China” or “the PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan, and “Greater China” includes Hong Kong, Macau and Taiwan;
“Class A ordinary shares” are to our Class A ordinary shares of par value US$0.0001 per share;
“Class B ordinary shares” are to our Class B ordinary shares of par value US$0.0001 per share;
“BlueCity” are to BlueCity Holdings Limited, our Cayman Islands holding company, and “we,” “us,” “our company” and “our” are to BlueCity Holdings Limited and its subsidiaries, and, in the context of describing our operations and consolidated financial information, the VIE and its subsidiaries;
“our portfolio apps,” “our portfolio mobile apps,” or “our mobile apps” refer to Blued and Finka;
“DAUs” or “Daily Active Users” refers to the number of users, including both paying and non-paying users, that logged in to any of our portfolio mobile apps in a given day at least once. We treat each account as a distinct user when calculating DAUs. Starting from December 2020, we count DAUs of Finka into our DAUs without eliminating duplicates among our portfolio apps. We counted DAUs of LESDO into our DAUs in a period from September 2020 to June 2021, without eliminating duplicates among our portfolio apps, as we terminated the operation of this product in October 2021;
“MAUs” or “Monthly Active Users” refers to the number of users, including both paying and non-paying users, that logged in to any of our portfolio mobile apps in a given month at least once. We treat each account as a distinct user when calculating MAUs. Starting from December 2020, we count MAUs of Finka into our MAUs without eliminating duplicates among our portfolio apps. We counted MAUs of LESDO into our MAUs in a period from September 2020 to June 2021, without eliminating duplicates among our portfolio apps, as we terminated the operation of this product in October 2021;
“the VIE” refers to Beijing BlueCity Culture and Media Co., Ltd.;

1

Table of Contents

“paying users” on our platform are to users who make payments for products and services on our Blued, LESDO and Finka, including payments for live streaming services and membership. Starting from December 2020, we count paying users of Finka into our paying users without eliminating duplicates among our portfolio apps. We counted paying users of LESDO into our paying users in a period from September 2020 to June 2021, without eliminating duplicates among our portfolio apps, as we terminated the operation of this product in October 2021;
“our WFOE” refers to Beijing BlueCity Information& Technology Co., Ltd.;
“next-month retention rate,” as applied to the number of unique MAUs of Blued mobile app in a calendar month, is the percentage of these unique MAUs in the next calendar month;
“registered user” means a user that has registered by providing required information and logged in to our portfolio mobile apps at least once since registration. We calculate the number of registered users as the cumulative number of valid user accounts at the end of the relevant period, and consequently, the number of registered users may not be equal to the number of active user accounts during the relevant period. Each individual user may have more than one registered user account for our portfolio mobile app, and consequently, the number of registered users we present in this annual report may not be equal to the number of distinct individuals who are represented by the registered users;
“RMB” and “Renminbi” refers to the legal currency of China;
“ordinary shares” refer to our ordinary shares, par value US$0.0001 per share; and
“US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States.

Our reporting currency is RMB. This annual report also contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations from Renminbi to U.S. dollars were made at a rate of RMB6.3726 to US$1.00, the exchange rate in effect as of December 30, 2021 as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. We make no representation that any Renminbi or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Renminbi, 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 Renminbi into foreign exchange and through restrictions on foreign trade.

2

Table of Contents

FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. The forward looking statements are contained principally in the sections entitled “Item 3. Key Information — D. Risk Factors,” “Item 6. Directors, Senior Management and Employees” and “Item 4. Information on the Company.” Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information — D. Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events 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 relating to:

our goals and strategies;
our ability to retain and increase the number of users, paying members and advertisers, and expand our product and service offerings;
our future business development, financial condition and results of operations;
expected changes in our revenues, costs or expenditures;
competition in our industry and our popularity within the LGBTQ population; and
relevant government policies and regulations relating to our industry.

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Item 3. Key Information—D. Risk Factors,” “Item 6. Directors, Senior Management and Employees,” “Item 4. Information on the Company,” “Item 4. Information on the Company— B. Business Overview—Regulation” and other sections in this annual report. You should read thoroughly this annual report and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.

The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this annual report and the documents that we refer to in this annual report and have filed as exhibits to the registration statement, of which this annual report is a part, completely and with the understanding that our actual future results may be materially different from what we expect.

3

Table of Contents

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 VIE Contractual Arrangements

BlueCity Holdings Limited is not an operating company in China but a Cayman Islands holding company with no equity ownership in its VIE or subsidiaries. We conduct our business primarily through our WFOE, the VIE and its subsidiaries in China. Our WFOE is not eligible to operate value-added telecommunication business, internet video, online advertising services and other businesses which foreign-owned companies are prohibited or restricted from conducting in China. As a result, we conduct such business activities through the VIE and its subsidiaries, and rely on contractual arrangements among our WFOE, the VIE and its shareholders to control the business operations of the VIE. The VIE is consolidated for accounting purposes, but is not an entity in which our Cayman Islands holding company, or our investors, own equity. Revenues contributed by the VIE accounted for 5.5%, 63.1% and 90.5% of our total revenues for the fiscal years 2019, 2020 and 2021, respectively. As used in this annual report, “BlueCity” are to BlueCity Holdings Limited, our Cayman Islands holding company, and “we,” “us,” “our company” and “our” are to BlueCity Holdings Limited and its subsidiaries, and, in the context of describing our operations and consolidated financial information, the VIE and its subsidiaries in China, including Beijing BlueCity Culture and Media Co., Ltd., Beijing BlueCity Youning Health Management Co., Ltd., Danlan (Beijing) Media Co., Ltd., City of Glory Chengdu Information Technology Co., Ltd., Shandong Youping Pharmacy Chain Co., Ltd., Beijing Asphere Interactive Network Technology Co., Ltd., Shandong He Health Internet Hospital Co., Ltd., Chongqing Changyuan Pharmaceutical Co., Ltd., Guangzhou Yingyoutianxia Networks Technology Co., Ltd., Beijing Youji Technology and Culture Co., Ltd., Beijing Aiyou Jiuyou Internet Technology Co., Ltd., Beijing Lanpengyou Catering Management Co., Ltd. and Beijing Duoyuanyin Culture and Media Co., Ltd. Holders of the ADSs hold equity interest in BlueCity Holdings Limited, our Cayman Islands holding company, and do not have direct or indirect equity interests in the VIE or its subsidiaries.

4

Table of Contents

The following diagram illustrates our corporate structure, including our principal subsidiaries and consolidated affiliated entities, as of the date of this annual report:

Graphic

Note:

(1)Mr. Baoli Ma, our founder, chairman and chief executive officer, and Mr. Changyou Ma, a family member of Mr. Baoli Ma, hold 99.15% and 0.85% equity interests in the VIE, respectively.

A series of contractual arrangements, including powers of attorney, equity interest pledge agreement, spouse consent letters, exclusive consulting and services agreement, and equity option agreement, have been entered into by and among our WFOE, the VIE and its respective shareholders. As a result of the contractual arrangements, we have effective control over and are considered the primary beneficiary of the VIE, and we have consolidated the financial results of the VIE in our consolidated financial statements. For more details of these contractual arrangements, see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Contractual Arrangements with Our Consolidated Affiliated Entities and Their Respective Shareholders.”

The contractual arrangements may not be as effective as direct ownership in providing us with control over the VIE, and we may incur substantial costs to enforce the terms of the arrangements. In addition, these arrangements have not been tested in PRC courts. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with the VIE and its shareholders for a portion of our business operations, which may not be as effective as direct ownership in providing operational control.”

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 VIE and its 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 the VIE 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. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the arrangements that establish the structure for operating some 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 “—Uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.”

5

Table of Contents

Our corporate structure is subject to risks associated with our contractual arrangements with the VIE. If the PRC government deems that our contractual arrangements with the VIE do not comply with PRC regulatory restrictions on foreign investment in the relevant industries, or if these regulations or the interpretation of existing regulations change or are interpreted differently in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, our WFOE, the VIE, and investors of our company face uncertainties about potential future actions by the PRC government that could affect the validity and the enforceability of the contractual arrangements with the VIE and, consequently, significantly affect the financial performance of the VIE and our company as a whole. For a detailed description of the risks associated with our corporate structure, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.”

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, including data security or anti-monopoly related 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 the 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 the 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 Chinese laws and regulations could limit the legal protections available to you and us” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

Permissions Required from the PRC Authorities for Our Operations

We conduct our business primarily through our WFOE, the VIE and its subsidiaries in China. Our operations in China are generally governed by PRC laws and regulations. As of the date of this annual report, our WFOE and the VIE have obtained the requisite licenses and permits from the PRC government authorities that are material for our business operations in China. The VIE holds an ICP License for internet information service (excluding news, publication, education, medical and healthcare, drug and medical instruments, electronic publication services), and an internet culture operation license for operating music products and shows. 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. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

Furthermore, recent legal developments in PRC laws have created uncertainties on compliance with respect to our issuance of securities to foreign investors. The PRC governmental authorities have recently promulgated laws, regulations and regulatory rules related to cybersecurity review and overseas listing. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of, or filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.” In connection with our previous issuance of securities to foreign investors, we have not been involved in investigations on cybersecurity review made by the Cyberspace Administration of China, or the CAC, and we have not received any inquiry, notice, warning, or sanctions in such respect, however, we cannot assure you that we would be able to comply with the existing or new regulatory guidance or requirements relating to our future overseas capital raising activities. See also “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to M&A and Overseas Listing.” Any failure to obtain or delay in obtaining such approval or completing such procedures would subject us to sanctions by the China Securities Regulatory Commission, or the CSRC, CAC or other PRC regulatory authorities. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of the ADSs.

6

Table of Contents

The PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of, or filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing,” “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business is subject to complex and evolving laws and regulations in various countries and regions where we have business. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business” and “Item 3. Key Information—Risks Related to Our Business and Industry—Our business generates and processes a large amount of data, and we are required to comply with PRC and other applicable laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects.”

The Holding Foreign Companies Accountable Act

The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the Public Company Accounting Oversight Board (United States), or the PCAOB, for three consecutive years beginning in 2021, the SEC shall prohibit our shares or the ADSs from being traded on a national securities exchange. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to inspect or investigate completely. 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”, “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment ”, and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—It may be difficult for overseas regulators to conduct investigation or collect evidence within China.”

Cash Flows through Our Organization

The following table presents the cash flows among BlueCity Holdings Limited, its subsidiaries and the VIE in the years ended December 31, 2019, 2020 and 2021:

For the Year Ended December 31,

    

2019

    

2020

    

2021

RMB

RMB

RMB

The Company received from Subsidiaries

 

36,974

 

25,598

 

30,353

The Company transferred to Subsidiaries

 

(34,959)

 

(278,095)

 

(264,577)

Subsidiaries received from VIE

 

16,000

 

136,600

 

222,550

Subsidiaries transferred to VIE

 

(18,007)

 

(39,129)

 

(52,634)

BlueCity Holdings Limited is a holding company with no operations of its own. We conduct our business primarily through our WFOE, the VIE and its subsidiaries in China. As a result, BlueCity Holdings Limited’s ability to pay dividends depends upon dividends paid by our WFOE. If our WFOE or any newly formed PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiaries in China are permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Further, each of our WFOE, the VIE and its subsidiaries in China is required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends and can only be used for specific purposes. For more details, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.”

7

Table of Contents

Under PRC laws and regulations, our WFOE and the VIE 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 the State Administration of Foreign Exchange. The amounts restricted include the paid-up capital and the statutory reserve funds of our PRC subsidiaries and the net assets of the VIE in which we have no legal ownership. 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 and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have, and any limitation on the ability of our WFOE to make payments to us could have a material and adverse effect on our ability to conduct our business.”

Under PRC laws, BlueCity Holdings Limited and its offshore subsidiaries may provide funding to our WFOE only through capital contributions or loans, and to the VIE only through loans, subject to satisfaction of applicable government registration and approval requirements. The VIE may transfer cash to our WFOE by paying service fess according to the exclusive consulting and services agreement. Pursuant to the agreement, the VIE agrees to pay the applicable subsidiaries consulting and service fees, subject to conditions therein.

None of our subsidiaries, the VIE and its subsidiaries in China made cash dividends or other distributions to BlueCity Holdings Limited, the holding company, or its offshore subsidiaries, in the years ended December 31, 2019, 2020 and 2021. Going forward, our subsidiaries and the VIE intend to retain most, if not all, of their available funds and any future earnings.

BlueCity Holdings Limited has not declared or paid any cash dividends, nor does it have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in the ADSs or ordinary shares, see “Item 10. Additional Information—E. Taxation.”

In the years ended December 31, 2019, 2020 and 2021, no assets other than cash were transferred through our organization.

Financial Information Related to The VIE and Its Subsidiaries

The following table presents the condensed consolidating schedule of financial position for BlueCity Holdings Limited, its subsidiaries, the VIE and its subsidiaries during the periods and as of the dates presented.

Selected Condensed Consolidated Statements of Income Information

For the Year Ended December 31, 2021

    

BlueCity

    

    

    

    

Holdings

Company

VIE and its

Consolidated

Limited

Subsidiaries

subsidiaries

Eliminations

Total

(RMB, in thousands)

Total revenues

299,369

974,103

(196,881)

1,076,591

Net (loss) income

 

(309,624)

 

(326,669)

 

31,858

 

294,811

 

(309,624)

For the Year Ended December 31, 2020

    

BlueCity

    

    

    

    

Holdings

Company

VIE and its

Consolidated

    

Limited

    

Subsidiaries

    

subsidiaries

    

Eliminations

    

Total

(RMB, in thousands)

Total revenues

590,159

651,070

(209,906)

1,031,323

Net loss

 

(221,853)

 

(136,652)

 

(79,743)

 

216,395

 

(221,853)

For the Year Ended December 31, 2019

    

BlueCity

    

    

    

    

Holdings

Company

VIE and its

Consolidated

    

Limited

    

Subsidiaries

    

subsidiaries

    

Eliminations

    

Total

(RMB, in thousands)

Total revenues

716,881

42,007

758,888

Net loss

 

(52,930)

 

(43,636)

 

(8,857)

 

52,493

 

(52,930)

8

Table of Contents

Selected Condensed Consolidated Balance Sheets Information

As of December 31, 2021

BlueCity

Holdings

Company

VIE and its

Consolidated

    

Limited

    

Subsidiaries

    

subsidiaries

    

Eliminations

    

Total

(RMB, in thousands)

Cash and cash equivalents

15,988

306,962

26,836

349,786

Accounts receivable, net

 

 

2,510

 

10,368

 

 

12,878

Inventories

 

 

 

7,402

 

 

7,402

Prepayment and other current assets

 

4,286

 

46,805

 

48,686

 

 

99,777

Amounts due from related parties

 

 

98,986

 

 

(98,986)

 

Total current assets

 

20,274

 

455,263

 

93,292

 

(98,986)

 

469,843

Investment in subsidiaries Investment in subsidiaries and consolidated VIE

 

437,336

 

 

 

(437,336)

 

Intangible assets, net

 

 

 

44,204

 

 

44,204

Goodwill

 

 

81,752

 

 

 

81,752

Other non-current assets

 

 

7,465

 

6,898

 

 

14,363

Total non-current assets

 

437,336

 

89,217

 

51,102

 

(437,336)

 

140,319

Total assets

 

457,610

 

544,480

 

144,394

 

(536,322)

 

610,162

Accounts payable

 

 

17,062

 

11,445

 

 

28,507

Deferred revenue

 

 

579

 

35,217

 

 

35,796

Income tax payable

 

 

3,587

 

1,460

 

 

5,047

Accrued expenses and other current liabilities

 

11,664

 

44,052

 

27,246

 

 

82,962

Amounts due to related parties

 

 

 

98,986

 

(98,986)

 

Total current liabilities

 

11,664

 

65,280

 

174,354

 

(98,986)

 

152,312

Deferred income tax liabilities

 

 

 

9,603

 

 

9,603

Other non-current liabilities

 

 

 

2,300

 

 

2,300

Total non-current liabilities

 

 

 

11,903

 

 

11,903

Total liabilities

 

11,664

 

65,280

 

186,257

 

(98,986)

 

164,215

Total shareholders’ equity (deficit)

 

445,946

 

479,200

 

(41,863)

 

(437,336)

 

445,947

As of December 31, 2020

BlueCity

Holdings

Company

VIE and its

Consolidated

    

Limited

    

Subsidiaries

    

subsidiaries

    

Eliminations

    

Total

(RMB, in thousands)

Cash and cash equivalents

261,878

135,598

42,017

439,493

Term Deposit

 

 

172,257

 

 

 

172,257

Prepayment and other current assets

 

1,483

 

24,650

 

44,938

 

 

71,071

Amounts due from related parties

 

 

129,873

 

 

(129,873)

 

Total current assets

 

263,361

 

462,378

 

86,955

 

(129,873)

 

682,821

Investment in subsidiaries and consolidated VIE

 

517,612

 

 

 

(517,612)

 

Intangible assets, net

 

 

 

52,085

 

 

52,085

Goodwill

 

 

192,948

 

3,055

 

 

196,003

Other non-current assets

 

 

7,127

 

6,794

 

 

13,921

Total non-current assets

 

517,612

 

200,075

 

61,934

 

(517,612)

 

262,009

Total assets

 

780,973

 

662,453

 

148,889

 

(647,485)

 

944,830

Accrued expenses and other current liabilities

 

23,779

 

45,865

 

49,315

 

 

118,959

Amount due to related parties

 

 

 

129,873

 

(129,873)

 

Other current liabilities

 

 

16,701

 

41,651

 

 

57,722

Total current liabilities

 

23,779

 

61,936

 

220,839

 

(129,873)

 

176,681

Deferred income tax liabilities

 

 

 

10,955

 

 

10,955

Total non-current liabilities

 

 

 

10,955

 

 

10,955

Total liabilities

 

23,779

 

61,936

 

231,794

 

(129,873)

 

187,636

Total shareholders’ equity (deficit)

 

757,194

 

600,517

 

(82,905)

 

(517,612)

 

757,194

9

Table of Contents

Selected Condensed Consolidated Cash Flows Information

For the Year Ended December 31, 2021

BlueCity

    

    

    

    

Holdings

Company

VIE and its

Consolidated

Limited

Subsidiaries

subsidiaries

Eliminations

Total

    

(RMB, in thousands)

Net cash provided by (used in) operating activities

 

(6,796)

 

(169,905)

 

(34,200)

 

 

(210,901)

Net cash (used in) provided by investing activities

 

(234,224)

 

111,333

 

(11,745)

 

264,988

 

130,352

Net cash provided by (used in) financing activities

 

64

 

234,224

 

30,764

 

(264,988)

 

64

For the Year Ended December 31, 2020

BlueCity

    

    

    

    

Holdings

Company

VIE and its

Consolidated

Limited

Subsidiaries

subsidiaries

Eliminations

Total

(RMB, in thousands)

Net cash provided by (used in) operating activities

 

1,961

 

(62,968)

 

20,705

 

 

(40,302)

Net cash used in by investing activities

 

(252,497)

 

(323,230)

 

(12,533)

 

299,522

 

(288,738)

Net cash provided by (used in) financing activities

 

532,995

 

252,497

 

17,510

 

(299,522)

 

503,480

For the Year Ended December 31, 2019

    

BlueCity

    

    

    

    

Holdings

Company

VIE and its

Consolidated

Limited

Subsidiaries

subsidiaries

Eliminations

Total

(RMB, in thousands)

Net cash (used in) provided by operating activities

 

(702)

 

(42,208)

 

11,268

 

 

(31,642)

Net cash provided by (used in) investing activities

 

2,015

 

265,157

 

(2,902)

 

21,324

 

285,594

Net cash (used in) provided by financing activities

 

(921)

 

(2,015)

 

2,008

 

(21,324)

 

(22,252)

A.[Reserved]

B.Capitalization and Indebtedness

Not applicable.

C.Reasons for the Offer and Use of Proceeds

Not applicable.

D.Risk Factors

Summary of Risks Factors

An investment in the ADSs involves significant risks. Below is a summary of material risks we face, organized under relevant headings. These risks are discussed more fully in the section entitled “Item 3. Key Information—D. Risk Factors.”

Risks Related to Our Business and Industry

If we fail to retain our existing users or acquire new users, or if user engagement declines, our business, results of operations and prospects may be materially and adversely affected.
We have a limited operating history and we may not be able to sustain our rapid growth, effectively manage our growth or implement our business strategies.
We cannot guarantee that our monetization strategies will be successfully implemented or generate sustainable revenues and profit.

10

Table of Contents

We have substantial overseas operations and we plan to continue expanding our operations abroad. If we fail to meet the challenges presented by our increasing international operations, our business, financial condition and results of operations may be materially and adversely affected.
Our business is subject to complex and evolving laws and regulations in various countries and regions where we have business. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.
We face uncertainties with respect to the enactment, interpretation and implementation of laws, regulations and rules related to live streaming.
The success of our business depends in part on our ability to develop and provide our users with new and innovative products and services.
We have incurred, and may continue to incur net losses in the future.

Risks Related to Our Corporate Structure

We are a Cayman Islands holding company with no equity ownership in our variable interest entities and we conduct our operations in China through our WFOE, the VIE, with which we have maintained contractual arrangements, and its subsidiaries in China. Holders of the ADSs hold equity interest in BlueCity Holdings Limited, our Cayman Islands holding company, and do not have direct or indirect equity interests in the VIE or its subsidiaries. If the PRC government finds that the arrangements that establish the structure for operating our business do not comply with PRC laws and regulations, or if these regulations or their interpretations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, the VIE and investors of our company face uncertainties about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIE and, consequently, significantly affect the financial performance of the VIE and our company as a whole. The PRC regulatory authorities could disallow the variable interest entities structure, which would likely result in a material adverse change in our operations, and our Class A ordinary shares or the ADSs may decline significantly in value.
Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.
The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

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 the ADSs.
Recent regulatory developments in China may subject us to additional regulatory review and disclosure requirement, expose us to government interference, or otherwise restrict our ability to offer securities and raise capitals outside China, all of which could materially and adversely affect our business and the value of our securities.
Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business, financial condition and results of operations.
The approval of, or filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.
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.

11

Table of Contents

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

Risks Related to The ADSs

The market price for the ADSs has been and may continue to be volatile.
There can be no assurance that any definitive offer will be made with respect to the going private transaction proposed by Mr. Baoli Ma and Metaclass Management ELP, that any definitive agreement will be executed or that this or any other similar transaction will be approved or consummated. Potential uncertainty involving the proposed going private transaction may adversely affect our business and the market price of the ADSs.

Risks Related to Our Business and Industry

If we fail to retain our existing users or acquire new users, or if user engagement declines, our business, results of operations and prospects may be materially and adversely affected.

Our ability to maintain and grow our user base while keeping our users highly engaged is critical to the continued success and growth of our business. Since our inception in 2011, we have strived to create a trusted community and deliver more diversified products and services to attract new users and keep our existing users engaged. To maintain and improve the level of engagement of our users and expand our user base, we must continue to innovate our products and services, respond promptly to evolving user preferences and lifetime needs, implement new technologies and strategies, curate interesting content created by popular broadcasters and stimulate interactions in our community, all of which will require us to incur substantial costs and expenses. If such costs and expenses fail to effectively translate into larger user base and improved user engagement, we may not be able to achieve all these goals and our results of operations may be materially and adversely affected.

If we are not successful in our efforts to retain or grow our user base, the engagement level of our users may decrease, which may in turn reduce our monetization opportunities and have a material and adverse effect on our business, financial condition and results of operations. If we fail to convert users into paying users, or if the number of our paying users declines, our revenues may decline and our results of operations may be materially and adversely affected.

In particular, there is no assurance that our platform will be able to remain popular within the LGBTQ community. A number of factors could negatively affect user retention, growth and engagement, such as:

failure to provide new products and services that are attractive to users;
failure to adapt our products, services or business model to the needs of the LGBTQ community, new industry standards or emerging technologies;
changes of service patterns or protocols that are required by, or that we elect to make to stay compliant with, legislation, regulations or government policies;
failure to combat spam on or inappropriate or abusive use of our platform, which may lead to declined user trust in us, negative publicity about us and our brand or even cause us to incur legal liabilities;
failure to protect our brand reputation;
failure of our abilities to attract new and maintain existing broadcasters who could keep our users engaged;
failure to address user concerns related to privacy and communication, safety, security or other factors; and
failure to successfully compete with existing competitors or new market entrants.

12

Table of Contents

We have a limited operating history and we may not be able to sustain our rapid growth, effectively manage our growth or implement our business strategies.

We have experienced rapid growth since our inception in 2011. As we grow our user base, increase the level of user engagement, broaden our mix of products and services and expand overseas, we may incur increasing costs related to our expansion domestically and internationally. If such expansion is not properly managed, it may adversely affect our financial condition and results of operations.

As we have a limited operating history, it is difficult to assess our future prospects or forecast our future results of operations. 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, some of which are beyond our control. These risks and challenges include, among other things:

the emergence of alternative business models, changes in rules, regulations, government policies or general economic conditions;
our ability to develop and deploy diversified and unique features, products and services for our users;
our ability to hire, retain and motivate talented employees and attract management talents that are compatible with our business expansion both domestically and internationally;
decreasing user spending, decreasing user engagement, increasing competition, and declining growth of our overall market or industries;
our ability to increase the number of users;
our ability to expand into new geographic markets that are amenable to our business model;
our ability to develop a reliable, scalable, secure, high-performance technology infrastructure that can efficiently handle increased usage and enlarged user base;
the ability of our broadcasters to deliver engaging content on our platform;
our ability to develop or implement strategic initiatives to monetize our platform;
our ability to 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 industries, or duplicate the features of our services; and
our ability to defend ourselves against litigation and/or claims relating to regulatory compliance, intellectual property, privacy or other matters.

Many aspects of our business are unique, evolving and relatively unproven. Our business and prospects depend on the continuing development of the industries in which we operate, in each case, especially among the LGBTQ community. The market for our products and services is relatively new and rapidly developing and is subject to significant challenges. Our business relies upon our ability to create a vibrant and interactive platform addressing the needs of the LGBTQ population and to successfully monetize our user base, so as to increase revenues from various sources, including live streaming, membership, advertising, merchandise sales and health-related services. In addition, our rapid growth and expansion has placed, and will continue to place, significant strain on our management and resources. This level of significant growth may not be sustainable or achievable at all in the future. We believe that our continued growth will depend on many factors, including our ability to develop new sources of revenues, diversify monetization methods, continue developing innovative technologies in response to user demand, increase brand awareness, expand into new market segments, and adjust to the rapidly changing regulatory environment globally. There can be no assurance that we will achieve any of the above, and our failure to do so may materially and adversely affect our business and results of operations.

13

Table of Contents

We cannot guarantee that our monetization strategies will be successfully implemented or generate sustainable revenues and profit.

We are in the early stage of our business and our monetization model is new and evolving. We began monetizing our business in 2016. Currently, we generate a significant majority of our revenues from live streaming services. In 2019, 2020 and 2021, respectively, we generated RMB671.4 million, RMB868.9 million and RMB820.8 million (US$128.8 million) of revenues from live streaming, representing 88.5%, 84.3% and 76.2% of our total revenues for the same period, respectively. The remaining revenues are generated from membership services, advertising services, merchandise sales and others. As we continue to develop our business and expand overseas, we are making efforts to adjust our revenue mix by continuing to convert our non-paying users into paying users, grow our health-related businesses and explore various new and innovative revenue streams. As a result, our revenue is affected by our ability to expand into new markets, increase user engagement and convert non-paying users to paying users, which in turn depends on our ability to offer high-quality products and services. If we fail to generate revenues from users in our new markets, monetize our existing or new services or develop new approaches to monetization, we may not be able to maintain or increase our revenues and profits or recover any associated costs. We monitor market developments and may adjust our monetization strategies accordingly from time to time, which may result in decreases of our overall revenue or revenue contributions from some monetization channels. In addition, we may have limited or no experience with the new revenue streams that we may introduce in the future. If these new revenue streams fail to engage our users, customers or business partners, we may fail to retain or attract users or generate sufficient revenues to justify our investment, and our business and results of operations may suffer as a result.

We have substantial overseas operations and we plan to continue expanding our operations abroad. If we fail to meet the challenges presented by our increasing international operations, our business, financial condition and results of operations may be materially and adversely affected.

We began to expand our business operations overseas in 2017 and we currently have Blued users in approximately 170 countries and regions. As we continue to expand our business internationally, we will face risks associated with expanding into markets where we have limited or no experience and where we may be less well-known or have fewer local resources. If we fail to execute our global expansion strategy, we may be subject to a variety of risks inherent in doing business internationally, including:

political, social and economic instability of each foreign jurisdiction where we operate;
bias and negative social sentiment towards the LGBTQ community;
fluctuations in currency exchange rates;
compliance challenges due to different laws and regulatory environments, particularly in the case of privacy and data security;
potential non-compliance with tax regulations in multiple tax jurisdictions;
risks related to the overall legal and regulatory environment in foreign jurisdictions, including with respect to cybersecurity, privacy and personal information, difficulties understanding and ensuring compliance with multiple, conflicting and changing laws, rules and regulations by both our employees and our business partners, over whom we exert no control, and unexpected changes in law, regulatory requirements and enforcement;
potential damage to our brand and reputation due to compliance with local laws, including potential censorship and/or requirements to provide user information to local authorities;
difficulties in staffing and managing global operations and the increased travel, infrastructure and compliance costs associated with multiple international locations; and
differing levels of technology development in different countries, including third party payment platforms.

14

Table of Contents

As we expand further into new and existing countries, regions and markets, these risks could intensify, and efforts we make to expand our businesses and operations internationally may not be successful. Failure to expand internationally and manage the complexity of our global operations successfully could materially and adversely affect our business, financial condition and results of operations.

We are still in the early stage of generating revenue from our users outside of China. Despite our global footprint, approximately 6.6%, 10.0% and 11.9% of our total revenues for 2019, 2020 and 2021, respectively, were contributed by users outside China. There can be no assurance we will be as effective or efficient in generating revenue from our users outside China as we were in generating revenue from our users in China. We have devoted, and will need to continue to devote, substantial managerial, financial and human resources to devise and implement monetization strategies and product and service offerings that are suitable for diverse overseas markets with different user needs, competitive landscapes and operational requirements. If we fail to generate revenue from our users outside of China in an effective and efficient manner, our business, financial condition, and results of operations may be materially and adversely affected.

Our business is subject to complex and evolving laws and regulations in various countries and regions where we have business. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

We are subject to a variety of laws and regulations that involve matters important to or may otherwise impact our business, including, among others, provision of internet information, sales of internet advertising, providing live streaming and short video broadcasting services, online sale of pharmaceutical products, providing health-related services, cybersecurity, user privacy, data protection, protection of minors, foreign exchange and taxation. See also “Item 4. Information on the Company—B. Business Overview—Regulation.” The introduction of new products and services, expansion of our activities in certain jurisdictions, past and future acquisitions, partnerships or alliance or other actions that we may take may subject us to additional laws, regulations, other government scrutiny or additional compliance costs. In addition, foreign laws and regulations can impose different obligations or be more restrictive than those in the PRC.

These laws and regulations are continuously evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the rapidly evolving industries in which we operate and any new jurisdiction into which we enter. In addition, these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities and in different jurisdictions, and inconsistently with our current policies and practices. These laws and regulations may be costly to comply with, and such compliance or any associated inquiries or investigations or any other government actions may delay or impede our development of new products and services, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical business operations, or demands or orders that we modify or cease existing business practices.

The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we provide our products and services could require us to change certain aspects of our business and operations to ensure compliance, which could decrease demand for products and services, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, subject us to additional liabilities, or lead to any of our portfolio apps being removed or disabled from the app stores. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected.

15

Table of Contents

As our international operations continue to expand, we face significant challenges to ensure the content and communications on our platform are in compliance with various local jurisdictions’ regulatory frameworks and social environment, many of which could be substantially different from those of China and each other due to differences in, among others, legal systems, political environment, culture and religion. Such differences may impose more stringent requirements and restrictions on the content we present outside of China. Our experience gained from our operations in China may not apply to our overseas operations. In addition, the regulatory framework for live streaming and social networking services is still developing and remains uncertain in many countries where we offer our services. New laws and regulations may also be adopted from time to time to address new issues that come to the attention of local government authorities. Considerable uncertainties still exist with respect to the interpretation and implementation of existing and any future laws and regulations governing our business activities in these areas. In addition, we may be required to impose more stringent content monitoring measures, be in compliance with relevant content regulatory regimes, obtain relevant licenses or permits or renew or expand the coverage of our existing licenses, and we cannot assure you that we will be able to timely obtain or maintain all the required licenses or permits or make any necessary filings applicable in the future, or comply with other relevant regulatory requirements. If we fail to obtain, hold or maintain any of the required licenses or permits or make necessary filings on time or at all, or fail to comply with other regulatory requirements, we may be subject to various penalties. Cultural differences may also pose additional challenges to our efforts in content control. Therefore, such different and possibly more stringent regulatory and cultural environments may increase the risk exposure to our daily operations in foreign jurisdictions.

Due to the uncertainties in the regulatory environment of the industries in which we operate, there can be no assurance that we have obtained or applied for all the approvals, permits and licenses required for conducting our business and all activities, or that we would be able to maintain our existing approvals, permits and licenses or obtain any new approvals, permits and licenses if required by any future laws or regulations. If we fail to obtain and maintain approvals, licenses or permits required for our business, or to comply with relevant laws and regulations, we could be subject to liabilities, fines, penalties and operational disruptions, or we could be required to modify our business model, which could materially and adversely affect our business, financial condition and results of operations. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

We face uncertainties with respect to the enactment, interpretation and implementation of laws, regulations and rules related to live streaming.

On November 12, 2020, the National Radio and Television Administration, or the NRTA, issued the Notice on Strengthening the Management of Online Show Live Streaming and E-commerce Live Streaming, or Notice 78. In February 2021, the National Internet Information Office, the National Office against Pornographic and Illegal Publications, the Ministry of Industry and Information Technology, or the MIIT, the Ministry of Public Security, or the MPS, the Ministry of Culture and Tourism, or the MCT, the State Administration for Market Regulation, or the SAMR, and the NRTA promulgated the Guiding Opinion on Strengthening the Management of Online Show Live Streaming, or Notice 3. Notice 78 and Notice 3 set forth requirements for certain live streaming businesses with respect to real-name registration, limits on user spending on virtual gifting, restrictions on minors on virtual gifting, live streaming review personnel requirements, content tagging requirements, and other requirements. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Live Streaming Service.”

According to Notice 78, platforms providing online show live streaming or e-commerce live streaming services shall, among other things, register their information and business operations by November 30, 2020, ensure real-name registration for all broadcasters and virtual gifting users, prohibit users that are minors or without real-name registration from virtual gifting, and set a limit on the maximum amount of virtual gifting per time, per day, and per month. We have applied for registration in the National Internet Audio-visual Platforms Information Management System as requested, which application is currently under government authorities’ review.

16

Table of Contents

The PRC government may further tighten the real-name registration and identity verification requirements for minors or impose a higher standard with respect to the registration and identity verification for all users on our platform in the future, which may require us to upgrade our system, purchase additional services from third-party service providers and incur additional costs. For example, on August 30, 2021, the MCT promulgated the Measures for the Administration of Online Performance Brokerage Agencies, or the Online Performance Brokerage Agencies Measures, which took effect on the same date, pursuant to which, online performance brokerage agencies are not allowed to provide online performance brokerage services to minors under the age of 16, and when providing such services to minors over the age of 16, online performance brokerage agencies must verify their identity information and obtain written consent from their guardians. The Notice 78 and Online Performance Brokerage Agencies Measures further restrict the methods online performance brokerage agencies could use to incentivize user spending on the live streaming platforms. On March 25, 2022, the CAC, the STA and the SAMR jointly issued the Notice on Further Standardizing the Profit-Making Behavior of Live Streaming to Promote the Healthy Development of the Industry, which required live streaming platforms to authenticate the identity of each live streaming publisher and report various information of those publishers that have profit-making behaviours to local provincial-level network department and tax authorities semi-annually.

As of the date of this annual report, there is no explicit provisions as to what limits on virtual gifting will be imposed by the NRTA or other relevant departments pursuant to Notice 78, Notice 3 and Online Performance Brokerage Agencies Measures, and it is unclear how and to what degree any such limits would be imposed on different platforms. Given there is no explicit provisions on how to set the limit on virtual gifting, we have not been able to set such limit on our platform and we are currently not able to assess the impact this requirement under Notice 78 will have on the virtual gifting spending activities on our platform. We derived 88.5%, 84.3% and 76.2% of our revenues from live streaming services in 2019, 2020 and 2021, respectively. Any such limits ultimately imposed may materially and adversely impact our revenues derived from virtual gifting, live streaming business, and our results of operations.

Since some of the requirements in such new laws, regulations and rules remain unclear and have no explicit provisions or implementation standards, we are still in the process of getting further guidance from regulatory authorities and evaluating the applicability and effect of the various requirements under Notice 78 and Notice 3 on our business. Any further rulemaking under Notice 78, Notice 3 or other intensified regulation with respect to live streaming may increase our compliance burden in the live streaming business, and may have an adverse impact on our business and results of operations.

The success of our business depends in part on our ability to develop and provide our users with new and innovative products and services.

Our business is growing and becoming more complex, and our ability to engage, retain, increase and engage our user base and to increase our revenue will depend heavily on our ability to quickly and successfully develop and launch new and innovative products and services. The industries in which we operate are evolving rapidly and users expect to see new features and experience new products and services offered by us within a relatively short period of time. Over the years, we have been continuously upgrading our social networking platform. Users can enjoy our premium services by subscribing for our membership services, communicate with each other in various means, such as text, pictures, videos, voice and gaymojis, share their lives or view the lives of other users, enjoy talent shows, interact with broadcasters and send virtual gifts to broadcasters. We have also started offering health-related services to our users to address their growing needs. We may introduce significant changes to our existing products and services or develop and introduce new and unproven products and services. Developing and integrating new products and services could also be expensive and time-consuming, and these efforts may not yield the benefits we expect to achieve at all. If new or enhanced products or services fail to engage our users, customers or business partners, we may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify our investments, any of which may seriously harm our business.

We have incurred, and may continue to incur net losses in the future.

We recorded net losses of RMB52.9 million, RMB221.9 million and RMB309.6 million (US$48.6 million) in 2019, 2020 and 2021, respectively. Our ability to achieve profitability is affected by various factors, many of which are beyond our control, such as the continual development of the industries in which we operate, both in China and other countries and regions, changes in the macroeconomic and regulatory environment or competitive dynamics and our inability to respond to these changes in a timely and effective manner. We also expect our costs to increase on an absolute basis due to our continued investment in services, products, technology and development and our continued sales and marketing initiatives. If we cannot successfully offset our increased costs with a significant increase in total revenues, our financial condition and results of operations may be materially and adversely affected. We may continue to incur net losses in the future.

17

Table of Contents

Difficulties in identifying, consummating and integrating acquisitions and strategic alliances and potential write-offs in connection with our investments or acquisitions may have a material and adverse effect on our business and results of operations.

We have acquired, and may in the future acquire, companies that are complementary to our business. From time to time, we may also make alternative investments and enter into strategic partnerships or alliances as we see fit. For example, in 2020, we acquired the business of Finka, a gay social networking app in China targeting younger generations, through the acquisition of 100% equity interests of its operating entity, iRainbow Hong Kong Limited and all of its subsidiaries and other entities under its control, for an aggregate consideration equivalent to RMB237 million in cash. In 2020, we acquired the business of LESDO, a lesbian social networking service provider in China, and we terminated the operation of this product in October 2021. LESDO contributed less than 1% of our total revenue in 2021. In March 2021, one of the VIE’s subsidiaries entered into a License Purchase Agreement with Chongqing Changyuan Pharmaceutical Co., Ltd., whereby we purchased a license of drug operation permit for RMB2.6 million.

While we have completed the acquisitions of Finka, Finka still remains as a stand-alone brand and the process of integrating certain aspects of their operations into our own operations is still continuing as of the date of this annual report. We cannot assure you that the standards of certain operation aspects of Finka, including without limitation, the aspects of technology, finance, compliance, etc., have been fully in line with those of our Blued mobile app. The on-going integration could result in unforeseen operating difficulties, divert significant management attention and require significant resources that would otherwise have been available for the ongoing development of our existing operations.

Moreover, past and future acquisitions, partnerships or alliances may expose us to potential risks, including risks associated with:

the difficulty in retaining and increasing the user base of the acquired businesses following the acquisitions;
the need to integrate certain operations, systems, technologies, and personnel, the inefficiencies that may result if such integration is delayed or not implemented as expected, and unforeseen difficulties and expenditures that may arise in connection with such integration;
the difficulty in successfully evaluating and utilizing the technology and features of the acquired businesses;
the difficulty in integrating potentially contrasting corporate cultures and management philosophies;
diversion of our management’s and personnel’s attention from our existing businesses and initiatives;
the difficulty in retaining employees following the acquisition;
the difficulties relating to achieving the expected synergies of the transaction;
the administrative penalties and criminal liabilities due to the non-compliance relating to the historical operations of the acquired businesses;
the incurrence of unforeseen obligations or liabilities, which may entail significant expense; and
the difficulty in integrating financial reporting of the acquired businesses, which may affect our ability to maintain effective controls and procedures over our consolidated financial reporting.

Moreover, we may not be able to achieve our intended strategic goals or attain the synergies from the transaction. If we are unable to successfully integrate Finka and any future investment and manage the larger business, or are unable to achieve the expected benefits of the transaction, we may be required to record substantial impairment charges to goodwill. Any such negative development could have a material adverse effect on our business, reputation, results of operations and financial condition.

We may incur impairment charges for our intangible assets and goodwill.

Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from the acquired entity as a result of our business combinations. The balance of our goodwill was RMB196.0 million and RMB81.8 million (US$12.8 million) as of December 31, 2020 and 2021, respectively.

18

Table of Contents

We are required to test our goodwill for impairment annually or more frequently if events or changes in circumstances indicate that they may be impaired. Based on the result of test, we recorded the impairment of goodwill of RMB106.9 million (US$16.8 million) for the year ended December 31, 2021. We may record additional impairment of goodwill acquired in connection with our acquisitions if the carrying value of our goodwill acquired in connection with our past or future acquisitions are determined to be impaired.

Our intangible assets consist primarily of intangible assets acquired through business combination. Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets are subsequently measured at cost less accumulated amortization and impairment. Intangible assets should be tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. We recorded the impairment loss of intangible assets of RMB2.9 million (US$0.5 million) for the year ended December 31, 2021. We cannot guarantee that we will not record additional impairment losses of intangible assets in the future. Material impairment of intangible assets could negatively affect our financial condition and results of operations.

The availability of our mobile apps in countries and regions with anti-LGBTQ public policies, negative sentiment toward the LGBTQ community or where homosexuality is illegal may subject our users to danger, and may lead to our application being blocked or banned, which could have an adverse effect on our reputation and business.

Our mobile apps are or may become available in certain countries and regions with anti-LGBTQ public policies, negative cultural, social or religious sentiment toward the LGBTQ community, and where homosexuality is illegal. Legal consequences for same-sex activities and relationships in countries and regions where same-sex relationships are illegal vary depending on the local law, with the most severe being the death penalty. In countries and regions with anti-LGBTQ public policies or negative sentiment toward the LGBTQ community but same-sex relationships are not explicitly illegal, governmental authorities generally have discretion to block LGBTQ platforms on broad moral grounds. For example, in early 2018, dozens of apps for the LGBTQ community, including Blued, were blocked by the Google app store upon the request of the Indonesian government. Finally, while we do not expect that any government that permits us to carry on our business activities will reverse that policy, we cannot guarantee that we will continue to be able to provide our services in any jurisdiction where we currently have legal authority to do so. If any of our users in these countries and regions are subjected to penalties as a result of using our products and services or if any of our products and services were to be banned in any of these countries and regions, we may be unable to retain existing users and attract new users, and we may be subject to heightened regulatory scrutiny, which would in turn have a material adverse effect on our reputation and business.

Our business generates and processes a large amount of data, and we are required to comply with PRC and other applicable laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects.

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.

19

Table of Contents

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 National People’s Congress, the MIIT, the CAC, the MPS and 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 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 National People’s Congress promulgated the Data Security Law, which took effect in September 2021. The 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 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 public listing in a foreign country. As of the date of this annual report, no detailed rules or implementation rules have been issued by any authority and we have not been informed that we are a critical information infrastructure operator by any government authorities. Furthermore, the exact scope of “critical information infrastructure operators” under the current regulatory regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable laws. Therefore, it is uncertain whether we would be deemed to be a critical information infrastructure operator under PRC law. If we are deemed to be a critical information infrastructure operator under the PRC cybersecurity laws and regulations, we may be subject to obligations in addition to what we have fulfilled under the PRC cybersecurity laws and regulations.
In November 2021, the CAC released the Regulations of Internet Data Security Management (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 in a foreign country 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

In October 2020, the Standing Committee of the National People’s Congress revised and promulgated the Law of the PRC on the Protection of Minors (2020 Revision), which took effect on June 1, 2021, according to which, information processors must follow the principles of legality, legitimacy and necessity when processing personal information of minors via internet, and must obtain consent from minors’ parents or other guardians when processing personal information of minors under age of 14. Internet service providers must also promptly alert upon the discovery of publishing private information by minors via the internet and take necessary protective measures.

20

Table of Contents

In August 2021, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect on November 1, 2021. 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 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 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. 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 subject us to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant operations, or removal of our app 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.

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.

In addition, regulatory authorities around the world have adopted or are considering a number of legislative and regulatory proposals concerning data protection. These legislative and regulatory proposals, if adopted, and the uncertain interpretations and application thereof could, in addition to the possibility of fines, result in an order requiring that we change our data practices and policies, which could have an adverse effect on our business and results of operations. 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 website or our mobile platform and input protected information, we may become subject to provisions of the GDPR.

If we fail to keep up with technological developments and evolving user expectations, we may fail to maintain or attract users and customers or generate revenues, and our business and results of operations may be materially and adversely affected.

We operate in markets characterized by rapidly changing technologies, evolving industry standards, new product and service announcements, new generations of product enhancements, and changing user expectations.

Accordingly, our performance and the ability to further monetize our products and services will depend on our ability to adapt to these rapidly changing technologies and industry standards, and our ability to continually innovate in response to both evolving demands of the marketplace and competitive services. There may be occasions when we may not be as responsive as our competitors in adapting our products and services to changing industry standards and the needs of our users. Historically, new features may be introduced by one player in the industry, and if they are perceived as attractive to users, they are often quickly copied and improved upon by others.

21

Table of Contents

Introducing new technologies into our systems involves numerous technical challenges, substantial amounts of capital and personnel resources and often takes many months to complete. We intend to continue to devote resources to the development of additional technologies and services. We may not be able to effectively integrate new technologies on a timely basis or at all, which may decrease user satisfaction with our products and services. Such technologies, even if integrated, may not function as expected or may be unable to attract and retain a substantial number of users to use our platform. We also may not be able to protect such technology from being copied by our competitors. Our failure to keep pace with rapid technological changes may cause us to fail to retain or attract users or generate revenues, and could have a material and adverse effect on our business and results of operations.

We face risks related to natural disasters, health epidemics and other outbreaks, such as the COVID-19 pandemic, which could significantly disrupt our operations.

In recent years, there have been outbreaks of epidemics in China and globally, including the outbreak of COVID-19. In March 2020, the World Health Organization declared the COVID-19 a pandemic. COVID-19 has resulted in quarantines, travel restrictions, and the temporary closure of businesses and facilities in China and worldwide.

Our results of operations have been, and could continue to be adversely, and may be materially, affected, to the extent that the COVID-19 or any other epidemic harms the Chinese and global economy in general. Any potential impact to our results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 and the actions taken by government authorities and other entities to contain the COVID-19 or treat its impact, including the effectiveness of the vaccine programs, almost all of which are beyond our control. For the COVID-19’s impact on our financial results, please see “Item 5. Operating and Financial Review and Prospects.” As it has historically, the COVID-19 pandemic may continue to, among other things, have following impact:

temporary closure of offices, travel restrictions or suspension of services of our customers and suppliers have negatively affected, and could continue to negatively affect, the demand for our services;
cancellation and postponement of various offline promotional events and community activities, which may have an adverse impact on the implementation of our marketing and business expansion initiatives, including discouraging our users from engaging in offline social networking activities initiated through our social networking platform;
our customers in industries that are negatively impacted by COVID-19, including healthcare, travel, offline education, franchising, auto/transportation and real estate/home furnishing sectors, may reduce their budgets on online advertising and marketing, which may materially adversely impact our revenue from advertising services;
our customers may require additional time to pay us or fail to pay us at all, which could significantly increase the amount of accounts receivable and require us to record additional allowances for doubtful accounts;
the business operations of talent agencies have been and could continue to be negatively impacted by the pandemic, which may negatively impact our live streaming services;
any disruption of our supply chain, logistics providers or customers could adversely impact our business and results of operations, including causing us or our suppliers to cease manufacturing Mr. Heer products and other products available on our platform for a period of time or materially delay delivery to customers, which may also lead to loss of customers, as well as reputational, competitive and business harm to us;
the global stock markets have experienced, and may continue to experience, significant decline from the COVID-19 pandemic and the private and public companies that we have invested in could be materially adversely affected, which may lead to significant impairment in the fair values of our investments and in turn materially adversely affect our financial condition and operating results; and
initiatives we put forth in response to COVID-19 and many other efforts to leverage our technology, products and services to help contain the pandemic, may increase our operating costs and expenses, thus negatively affect our financial condition and operating results.

22

Table of Contents

In general, our business could be adversely affected by the effects of epidemics, including, but not limited to, the COVID-19, avian influenza, severe acute respiratory syndrome (SARS), the influenza A virus, Ebola virus, severe weather conditions such as a snowstorm, flood or hazardous air pollution, or other outbreaks. In response to an epidemic, severe weather conditions, or other outbreaks, government and other organizations may adopt regulations and policies that could lead to severe disruption to our daily operations, including temporary closure of our offices and other facilities. These severe conditions may cause us and/or our partners to make internal adjustments, including, but not limited to, temporarily closing down business, limiting business hours, and setting restrictions on travel and/or visits with clients and partners for a prolonged period of time. Various impact arising from a severe condition may cause business disruption, resulting in material, adverse impact to our financial condition and results of operations.

Our operating metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may materially and adversely affect our business and operating results.

We regularly review metrics, including our daily and monthly active users, paying users, user next-month retention rate, and ARPPU, to evaluate growth trends, measure our performance and make strategic decisions. These metrics are calculated using internal company data and have not been validated by an independent third party. While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring usage and user engagement across our large user base. We treat each account as a separate user for the purposes of calculating our active users, because it may not always be possible to identify people that have set up more than one account. Accordingly, the calculations of our active users may not accurately reflect the actual number of people using our mobile apps, including Blued and Finka. We are also facing inherent challenges when assessing the geographic distribution of our user base because using their IP addresses and the country or currency in which they download apps or make purchases from Apple App store or Google Play Store may not reflect the actual geolocation of users. Errors or inaccuracies in our metrics could result in incorrect business decisions and inefficiencies. For example, if a significant understatement or overstatement of daily or monthly active users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our growth strategies.

Our measures of operating metrics may differ from estimates published or adopted by third parties, including but not limited to business partners, market and investment research organizations (including short-selling research firms), investors and media, or from similarly titled metrics used by our competitors or other companies in the relevant industries due to differences in methodology and assumptions. If these third parties do not perceive our operating metrics to be accurate representations of operations, or if we discover material inaccuracies in our operating metrics, our brand value and reputation may be materially harmed, our users and business partners may be less willing to allocate their resources or spending to us, and we may face lawsuits or disputes in relation to the inaccuracies. As a result, our business and operating results may be materially and adversely affected.

Our business depends on our ability to maintain and scale our technology infrastructure. Any service disruption in our service could damage our reputation, result in a potential loss of users and decrease in user engagement, and seriously harm our business.

The popularity of our platform and our ability to further monetize user traffic depend on our ability to adapt to rapidly changing technologies as well as our ability to continually innovate in response to evolving user demands and expectations and intense market competition. Our ability to provide a superior user experience on our platform depends on the continuous and reliable operation of our IT systems and infrastructures.

As our user base and the volume and types of information shared on our platform continue grow, we will need an increasing amount of technology infrastructure, including network capacity and computing power, to continue to satisfy our users’ needs. For example, in China, almost all access to the internet is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the MIIT. Moreover, we primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. Web traffic in most countries around the world has experienced significant growth during the past few years. Effective bandwidth and server storage at internet data centers in large cities are scarce. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our platform. There can be no assurance that the internet infrastructure and the fixed telecommunications networks in countries where we operate will be able to support the demands associated with the continued growth in internet usage. If we cannot increase our capacity to deliver our services, we may not be able to the increases in traffic we anticipate from our expanding user base, and the adoption of our services may be hindered, which could adversely impact our business and impede our growth.

23

Table of Contents

In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be materially and adversely affected. Furthermore, if internet access fees or other charges to internet users increase, some users may be prevented from accessing the mobile internet and thus cause the growth of mobile internet users to decrease, which may in turn adversely affect our ability to continue to expand our user base.

Our IT systems and content delivery network are also vulnerable to damage or interruption as a result of fire, floods, earthquakes, power losses, telecommunication failures, undetected errors in software, computer viruses, hacking or other attempts to harm our IT systems. We have experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes and cybersecurity-related threats, if we fail to address these issues promptly and in a way satisfactory to our users, our user experience may be negatively affected, which in turn may have a material and adverse effect on our reputation and business.

We currently rely on Tencent Cloud for all of our computing, storage, bandwidth and other services both in and outside of China. Any transition of the cloud services currently provided by Tencent Cloud to other cloud providers would be difficult to implement and will cause us to incur significant time and expense. Any significant disruption of or interference with our use of Tencent Cloud would negatively impact our operation and our business would be seriously harmed. If our users or partners are not able to access our mobile platform through Tencent Cloud or encounter difficulties in doing so, we may lose users, partners or revenues. The level of service provided by Tencent Cloud may also impact the usage of and our users’ and partners’ satisfaction with our mobile platform and could seriously harm our business and reputation. If Tencent Cloud experience interruptions in service regularly or for a prolonged basis, or other similar issues, our business would be seriously harmed. Hosting costs will also increase as our user base and user engagement grows and may seriously harm our business if we are unable to grow our revenues faster than the cost of utilizing the services of Tencent Cloud or similar providers.

We cooperate with talent agencies to manage all of our broadcasters. If we are not able to maintain our relationship with talent agencies, our operations may be materially and adversely affected.

We cooperate with talent agencies to manage all broadcasters on our platform. Substantially all of our live streaming revenues are contributed by broadcasters managed by talent agencies. Cooperation with talent agencies increases our operational efficiency in terms of discovering, supporting and managing broadcasters in a more organized and structured manner, and turning amateur broadcasters to full-time broadcasters.

We pay talent agencies certain fees determined based on a percentage of revenue from virtual gift sales that are attributed to the broadcasters’ live streams. If the talent agencies fail to reach or maintain satisfactory cooperation arrangements with such broadcasters or ensure timely payments to the broadcasters, we may not be able to retain or attract broadcasters.

In addition, some talent agencies do not have exclusive cooperative relationships with us. If other platforms offer better incentives to these talent agencies, such talent agencies may choose to devote more of their resources to broadcasters who stream on the other platforms, or they may encourage their broadcasters to use or even enter into an exclusive agreement with other platforms, any of which could materially and adversely affect our business, financial condition and results of operations.

We may fail to attract, cultivate and retain top broadcasters, which may negatively affect our user retention and our business and results of operations.

The size and engagement level of our user base as well as the quality of the live streaming content offered on our platform are critical to our success and are closely linked to the broadcasters who perform on our platform.

In 2021, our top 20 most popular broadcasters in terms of user spending attributable to their respective live streams contributed approximately 26.8% of our total live streaming revenues. Although these broadcasters are subject to exclusivity provisions, if any of them decides to breach the agreement or chooses not to continue the cooperation with us once the current term expires, the popularity of our platform may decline and the number of our paying users or the amount of revenues we generate from each paying user may decrease, which could materially and adversely affect our operations, financial condition and results of operations.

24

Table of Contents

In addition to the most popular broadcasters on our platform, we must continue to attract and retain talented broadcasters in order to maintain and increase the amount of content on our platform and ensure the sustainable growth of our live streaming business. We must identify and acquire potential talented broadcasters and provide them with sufficient resources. We cooperate with talent agencies to recruit, manage, train and support our broadcasters, as well as conduct activities to promote new broadcasters. However, there can be no assurance that we can continue to maintain the same level of attractiveness to our broadcasters.

Broadcasters on our platform, including those who are subject to exclusivity provisions, may leave us for other platforms which may offer better services and terms than we do, or stop broadcasting for personal reasons. In addition, if talented and popular broadcasters cease to contribute content to our platform, or their live streams fail to attract users, we may experience a decline in user traffic and user engagement, which may have material and adverse impact on our results of operations, financial conditions and results of operation.

Increases in the costs of content on our platform, such as higher revenue sharing ratio with broadcasters through talent agencies, may have an adverse effect on our business, financial condition and results of operations.

Our portfolio apps needs popular and attractive content to provide our users with engaging and satisfying viewing experiences, and the generation and sharing of such content is dependent on our ability to attract and retain our live broadcasters and talent agencies. We have a revenue sharing arrangement with our broadcasters through their talent agencies under which we share with them a portion of the revenues from the sales of virtual items on our platform. The absolute amounts and revenue percentages that we pay talent agencies may increase if our competitor platforms offer higher revenue sharing ratios with an intent to attract the most popular broadcasters on our platform. If we are not able to continue to retain our broadcasters and high quality content cannot be generated on our platform at costs that are commercially viable, our business, financial condition and results of operations would be adversely impacted. Furthermore, as our business and user base further expands, we may have to devote more resources in encouraging our broadcasters to produce more diverse content that meets the varied interests of our user base, which would increase the costs of content on our platform. There can be no assurance that these investments of resources will generate the returns we expect. If we are unable to generate sufficient revenues that outpace our increased content costs, our business, operating margins, financial condition and results of operations may be materially and adversely affected.

Our revenue growth is significantly dependent on paying users and revenue per paying user. If we fail to grow or maintain our paying users and increase revenue per paying user, our business operation and financial results may be materially and adversely affected.

Our revenues and results of operation depends on our ability to monetize our user base, to convert more users to paying users and to increase the spending of our paying users. Whether we can increase paying users and average revenue per paying user in a given period, or ARPPU, depends on many factors, and many of them are out of our control. For example, our users may be unwilling to pay for our products and services, we may fail to develop new products and services that are attractive enough to our existing paying users for them to pay, our paying users may have less disposable income as they need to meet financial obligations elsewhere, they may decide to no longer follow a particular broadcaster that they had supported financially, and overall worsening economic conditions can lower disposable income for all existing paying users, causing them to spend less on our platform. We expect that our business will continue to be significantly dependent on revenue collected from paying users in the near future. Any decline in the number of paying users or ARPPU may materially and adversely affect our results of operations.

We generate a portion of our revenues from advertising. If we fail to attract more advertisers to our platform or if advertisers are less willing to advertise with us, our revenues may be adversely affected.

Although we currently primarily rely on revenues generated from live streaming services, we also generate a portion of our revenues from advertising. In 2019, 2020 and 2021, we generated RMB35.4 million, RMB45.5 million and RMB53.9 million (US$8.5 million) of revenues from the sales of advertising, respectively, representing 4.7%, 4.4% and 5.0% of our total revenues for the same period. Our revenues from advertising partly depend on the continued development of the online advertising industry in China and abroad and advertisers’ willingness to allocate budgets to online advertising or advertising at all due to macroeconomic conditions and, more importantly, their willingness to allocate budgets to our platform that serves primarily the LGBTQ community. In addition, companies that decide to advertise or promote online may utilize more established methods or channels, such as more established internet portals or search engines, over advertising on our platform, due to their concern about user perception or otherwise. If the online advertising market does not continue to grow, or if we are unable to capture and retain a sufficient share of that market, our ability to increase our current level of advertising revenues and our profitability and prospects may be materially and adversely affected.

25

Table of Contents

Furthermore, our core and long-term priority of optimizing user experience and satisfaction may limit our platform’s ability to generate revenues from advertising. For example, in order to provide our users with an uninterrupted user experience, we have limited the amount of advertising placement and inventory and designed functions to allow users to skip or shut down advertisements more conveniently. Our philosophy of putting our users first may not be in line with the interest of our advertisers, and may not result in the long-term benefits that we expect, in which case the success of our business and results of operations could be harmed.

Any non-compliance found on the advertisements shown on our online platform and online store may subject us to penalties and other administrative actions.

We are responsible for and are obligated to monitor the advertising content shown on our platform and online store to ensure that such content is true and accurate and in full compliance with applicable laws and regulations. In addition, for certain types of advertisements such as advertisements relating to pharmaceuticals and medical devices, review by relevant governmental authorities is required before such advertisements can be posted, and we are obligated to confirm that such review has been performed and approval has been obtained.

While we have made significant efforts to ensure that the advertisements shown on our platform are in full compliance with applicable PRC laws and regulations, there can be no assurance that all the content contained in such advertisements or offers is true and accurate as required by the advertising laws and regulations, especially given the uncertainty in the interpretation of these PRC laws and regulations. For example, we enter into agreements with third parties in relation to the distribution of pharmaceutical products of such third parties through our online store. If such arrangement is deemed as conducting advertising operations, we will be required to submit application to the applicable governmental authority for approval before displaying the pharmaceutical products on our online store. If we fail to do so, we may be ordered to cease dissemination of the advertisements, our advertising income on such products will be confiscated, and we will be subject to a fine of three to five times the advertising income. In addition, advertisements of prescription drugs are not allowed to be posted on the internet and social media. If the distribution of third-party prescription drugs on our online store are deemed as conducting advertising operations, our advertising income on such products will be confiscated, and we will be subject to a fine between RMB200,000 and RMB1,000,000, and in serious cases, we may be ordered by the relevant PRC governmental authorities to close the online store and terminate the business of online pharmacy, which may have a material adverse effect on our business, financial condition, results of operations and prospects.

We are subject to risks inherent in marketing, distributing and selling pharmaceutical and other health and wellness products.

In connection with the health-related services offered on He Health, we are exposed to risks inherent in marketing, distributing and selling pharmaceutical and other health and wellness products in China.

The regulations of the internet health-related service are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty. The pharmaceutical retail and wholesale industry in China is subject to extensive government regulation and supervision as well as monitoring by various government authorities. Certain other laws, rules and regulations may affect the pricing, demand and distribution of pharmaceutical products, such as those relating to procurement, prescription and dispensing of drugs by hospitals and other medical institutions, retail pharmacy, government funding for private healthcare and medical services, and the inclusion of products in the drugs catalogs for national basic medical insurance, on-the-job injury insurance and maternity insurance promulgated by the Ministry of Human Resources and Social Security, or the MOHRSS. In addition, the pharmaceutical manufacturing, pharmaceutical distribution, pharmaceutical retail, healthcare services and medical device industries in China are each subject to extensive and changing government regulations and supervision. Any unfavorable regulatory changes in these industries may also increase our compliance burden and materially and adversely affect our business, profitability and prospects. However, as of the date of this annual report, none of the regulations or implementation rules regulating online drug sales have yet been promulgated and implemented, which may further introduce and impose certain conditions and restrictions to the online sale of drugs.

26

Table of Contents

Due to the uncertainties in the regulatory environment of the industries in which we operate, there can be no assurance that we have obtained or applied for all the approvals, permits and licenses required for conducting our business and all activities in China, or that we would be able to maintain our existing approvals, permits and licenses or obtain any new approvals, permits and licenses if required by any future laws or regulations. We provide our users with the access to a wide variety of OTC and prescription drugs and nutritional supplements related to men’s health through our self-owned pharmacy operated by Shandong Youping Pharmacy Chain Co., Ltd., Chongqing Changyuan Pharmaceutical Co., Ltd. and Shandong He Internet Hospital Co., Ltd. We may be subject to administrative penalties if we fail to comply fully with the legal formalities, and/or claims or customer complaints if any of our customers experience side effect or complications, any products sold through our platform are deemed or proven to be unsafe, ineffective or defective, or are found to contain illicit substances, we may also be subject to customer allegations, such as providing inadequate warnings or insufficient or misleading disclosures of side effects.

Any claims made against us could be costly to defend against, result in substantial damage awards against us and divert the attention of our management from our operations, which could have a material adverse effect on our business, financial condition, results of operations and reputation.

Our business may be materially and adversely affected by unfavorable perception of, or negative developments and news regarding, the family planning services we provided in the past and/or the ART industry as a whole.

We stopped from accepting new orders for providing family planning services in March 2021. However, we cannot assure you that our historical orders and operations of the family planning services will not subject us to the risks described herein. We are aware that ART technology in general has been viewed negatively or opposed to by certain feminist groups. Certain ART services that are in demand among members of the LGBTQ community, including surrogacy, use of a gestational carrier, directed gamete donation and collection, and embryo donation and collection are currently prohibited in China. Any negative perception of ART or actual or potential actions by relevant governmental authorities or other parties against ART service providers may subject us for our past provision of family planning services to potential penalties and other legal liabilities, render potential customers reluctant to seek, or cause negative perception towards our company as a whole, thereby having an adverse effect on our brand, reputation and the other products and services provided by us.

From time to time, there has been negative news and publicity about the assisted reproductive industry, assisted reproductive medical facilities and/or medical professionals practicing in this industry. Any further negative news and publicity about the ART industry could amplify existing concerns and misperceptions about ART, and thus may have an adverse effect on our brand, reputation, and results of operations.

Uncertainties in laws and regulations applicable to the ART industry may materially and adversely affect our business.

We stopped from accepting new orders for providing family planning services in March 2021. However, we cannot assure you that our historical orders and operations of the family planning services will not subject us to the risks described herein.

PRC laws provide that ART should only be carried out in approved and registered medical institutions in China. No entity or individual in the PRC should carry out ART or related intermediary services in the PRC without the approval of competent public health authority. Furthermore, any form of advertisement on unapproved ART services is prohibited in the PRC. From time to time, the governmental authorities in the PRC initiate campaigns against unapproved ART services and entities acting as intermediaries or providing advertising for such services, by strengthening the supervision of the publication of relevant information and advertisements on social media, and on investigating intermediaries for illegal ART activities.

As part of our past provision of family planning services, our subsidiary in China, Bluebaby (Beijing) Medical Management & Consulting Ltd., or Bluebaby Beijing, provided consulting and administrative services related to ART such as translation, concierge and logistics. However, due to the lack of a clear and consistent official distinction between the consulting services and intermediary or advertising services in the PRC, there is no assurance that the family planning service provided in the past may not be deemed by the relevant PRC governmental authorities as intermediary or advertising service. The revenues generated from the family planning services represent approximately 1.2%, 0.9% and 0.2% of our total revenues in 2019, 2020 and 2021, respectively.

27

Table of Contents

If the relevant PRC governmental authorities, including a PRC court, choose to scrutinize our family planning services prior to March 2021 and deem Bluebaby Beijing as an intermediary or providing advertising for unapproved ART services, the validity and enforceability of service agreements entered into between Bluebaby Beijing and its customers may be challenged and will be considered in light of the Civil Code of the PRC, or the Civil Code by taking several factors into consideration, such as ethical, legal and social impact. If the relevant PRC governmental authorities determine that we are providing intermediary services or advertising on unapproved ART services in the PRC, we may be subject to fines, confiscation of illegal gains, discontinuation or restriction of our operations in China, shutting down of all or a portion of our network or servers, takedown of our mobile application from the app store, revocation of business license of the applicable operating entity, operation limits, banning of the gateway to the ART consulting services, and other regulatory or enforcement actions, which may have a material and adverse effect on our business and results of operations. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business is subject to complex and evolving laws and regulations in various countries and regions where we have business. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.”

Our past commercial dealings with ART service providers outside of China may also subject us to risks associated with compliance with local laws and regulations. For example, when we introduced customers to ART service providers outside of China, such as reproductive clinics and ancillary agencies, we received commissions from the ART service providers as referral fees. Local laws of certain jurisdictions where some of these ART service providers operate prohibit commission payments of this nature. Where prohibited by local laws, we ceased entering into new agreements containing commission payment arrangements since January 2020 to ensure compliance. However, we cannot assure you that we will not be subject to penalties or sanctions imposed by applicable law enforcement bodies, if they choose to scrutinize our commission arrangements prior to January 2020 in these jurisdictions despite collectively immaterial contribution of the payments to our revenue. If we become subject to such penalties and sanctions, our operations in these local jurisdictions may be materially disrupted.

Our business depends on the strength and perception of our brands within our addressable user community.

We operate our business under the main brand “BlueCity.” Our mobile app Blued has received wide recognition among the LGBTQ population in China and certain other geographic areas where we operate, such as India, Korea, Thailand and Vietnam. Starting as a website focused on public wellbeing and HIV prevention, BlueCity has transformed into a community providing a full suite of services empowering LGBTQ persons in all aspects of their daily lives. Over the years, our users have developed a unique culture that distinguishes us from players in the market. Our users come to and stay with our platform owing to their sense of belonging. We therefore believe that maintaining and promoting a healthy and respectful community culture is critical to retaining and expanding our user base. Our business and financial performance are highly dependent on the strength and market perception of our brand. A well-recognized brand is crucial to increasing our user base and, in turn, facilitating our efforts to monetize our products and services and enhancing our attractiveness to users, customers and business partners. From time to time, we conduct various marketing activities both online and offline to enhance our brand and to guide public perception of our brand and services. We may need to substantially increase our marketing expenditures in order to create and maintain brand awareness and brand loyalty, to influence public perception, to retain existing and to attract new users, customers and business partners as well as to promote our products and services. However, there can be no assurance that these activities will be successful or that we will be able to achieve the brand promotion effect we expect.

Since we operate in highly competitive industries, brand maintenance and enhancement directly affect our ability to maintain our market position. We must continuously exercise strict quality control of our platform to ensure that our brand image is not tarnished by substandard products or services. We must also promote and distinguish our platform from those of our competitors. If for any reason we are unable to maintain and enhance our brand recognition, or if we incur excessive expenses in this effort, our business, results of operations and prospect may be materially and adversely affected.

In addition, people may not fully comprehend the value of our platform, and there may be a misperception that our platform is used solely as a tool to start spontaneous relationships with strangers. Convincing potential new users, customers and business partners of the value of our services and our welcoming community culture is critical to increasing the number of our users, customers and business partners and to the success of our business.

28

Table of Contents

If events occur that damage our reputation and brand, our ability to expand our user base and business partners may be impaired, and our business and results of operations may be materially and adversely affected.

Since our inception, we and our community have had to fend against social bias and public sentiment, and we are under continuous media scrutiny and governmental supervision. Unfavorable publicity regarding us, our service offerings, our business practices, or our users, business partners, shareholders or competitors and other industry players, even if factually incorrect or based on isolated incidents, could seriously harm our reputation and brand. Such negative publicity could also adversely affect the size, demographics, engagement and loyalty of our user base and result in decreased revenue or slower user growth rate, which could seriously harm our business. There can be no assurance that we will be able to address negative publicity about us, our management and/or our products or services to the satisfaction of our investors, users, customers and business partners. In the past there had been negative publicity about our company and the misuse of our services, which adversely affected our brand, public image and reputation, and there can be no assurance that there will not be similar negative publicity in the future. Such negative publicity, especially when it is directly addressed against us, may also require us to engage in defensive media campaigns. This may cause us to increase our marketing expenses and divert our management’s attention and may adversely impact our business and results of operations.

Our brand image, business and results of operations may be adversely impacted by user misconduct and misuse of our mobile apps including Blued and Finka.

Our portfolio apps, Blued and Finka, allow users to freely contact and communicate with other users and enable users and broadcasters to interact and engage in various other online activities. In China, we have required all users to complete real-name registration procedures pursuant to the notice jointly issued by National Office of Anti-Pornography and Illegal Publication and other five authorities in August 2018. See also “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Real-Name Registration System.” In countries other than China, our users are not required to complete real-name registration or verify their emails when registering and we are unable to verify the sources of the information posted by our users. In addition, since we have limited control over real-time and offline behavior of our broadcasters and users, our mobile apps may still be misused by users or broadcasters.

We have implemented control procedures on our mobile apps, Blued and Finka, to detect and block illegal or inappropriate content and illegal or fraudulent activities conducted through the misuse of our platform, including inappropriate user profiles, messages and live streams. We may be required by relevant governmental authorities to report certain misbehaviors for further investigation if such misbehaviors are subject to judicial or police investigation. In addition, safety alerts will automatically pop up after a user sends a first message to another user, alerting the recipient to be wary of fraudulent activities. We have also announced the rules of conduct for our broadcasters which are made available on the top of our live streaming page as a banner. Despite all these efforts, we may not be able to identify every incident of inappropriate stream and content, or prevent all such contents from being further disseminated. As a majority of the video and audio communications on our platform are conducted in real time, we cannot filter the content generated by our streamers and users on air before they are streamed on our platform. Therefore, it is possible that broadcasters and users may engage in illegal, obscene or incendiary conversations or activities, including distribution of inappropriate content or content that may be deemed unlawful under applicable laws and regulations on our platform. If any content on our platform is deemed illegal, obscene or incendiary, or if appropriate licenses and third-party consents have not been obtained, claims may be brought against us for torts, defamation, libel, negligence, copyright, patent or trademark infringement, other unlawful activities or other theories and claims based on the nature and content of the information delivered on or otherwise accessed through our platform. In response to allegations of illegal or inappropriate activities conducted through our platform, relevant governmental authorities may intervene and hold us liable for non-compliance with applicable laws and regulations concerning the dissemination of information on the internet and subject us to administrative penalties or other sanctions, such as requiring us to restrict or discontinue some of the features and services provided on our platform. In addition, there were cases where our users suffered or alleged to have suffered physical, financial or emotional harm following contact initiated on our platform, although we have not been subjected to civil lawsuits or other liabilities initiated by the affected users, there can be no assurance that if similar cases occur in the future, we would not face civil lawsuits or other liabilities initiated by the affected user. Our business and public perception of our brand may be materially and adversely affected. Defending any such actions could be costly and require significant time and attention of our management and other resources, which would materially and adversely affect our business.

29

Table of Contents

Although our terms of use strictly prohibit minors from registering and using our mobile apps, Blued and Finka, some underage users created profiles by misrepresenting their age. For example, in early 2019, there were news reports of minors in China using Blued by registering with false age, and that such minors were exposed to explicit content or alleged to have contracted HIV following contact initiated on Blued. Upon learning of these reports, we promptly and voluntarily halted new user registration in Blued for one week to review the allegation and launched a comprehensive content audit of our mobile app. We then announced the measures we have taken and will take to address the issue and reaffirmed our commitment to protecting minors. New user registration was resumed thereafter. These efforts may not be sufficient to prevent minors from using our mobile apps or our other products and services. If similar events occur, our users may lose trust in us and our reputation may be seriously harmed, and we may be subject to heightened regulatory scrutiny domestically or in overseas jurisdictions, thereby having a material and adverse effect on our business, financial condition and prospects.

If the content contained within videos, audios and other content formats on our platforms is deemed to violate any PRC laws or regulations, our business, financial condition and results of operations may be materially and adversely affected.

The PRC government and regulatory authorities have adopted regulations scrutinizing videos, audio and other content on the internet. Under these regulations, internet content providers are prohibited from posting or displaying internet content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent, violent or defamatory. Internet content providers are also prohibited from displaying content that may be deemed by relevant government authorities as “socially destabilizing” or leaking “state secrets” of China. Failure to comply with these requirements may result in revocation of licenses to provide internet content or other licenses, closure of the concerned websites and reputational harm. The website operator may also be held liable for such censored information displayed on or linked to their website. In January 2019, the China Netcasting Services Association, or the CNSA, issued the Regulations on Administration of Network Short Video Platforms, pursuant to which all content of a short video, including but not limited to its title, description, bullet-chats and comments, may be required to be reviewed in advance before the content is broadcasted. Furthermore, the number of content reviewers a platform is required to host should in principle be more than one one-thousandth of the number of short videos newly broadcasted on the platform per day. In January 2019, CNSA issued the Censoring Criteria for Network Short Video Content, as amended in 2021, which set forth certain details of content prohibited to be broadcasted, such as violence, pornography, gambling, terrorism, and other illegal or immoral content. The enactment of these regulations may significantly increase our compliance costs in recruiting additional content reviewers and training them to identify content violations timely and accurately. In November 2019, the CAC, the MCT, and the NRTA, jointly issued the Administrative Provisions on Online Audio-Visual Information Services, effective from January 1, 2020, which provide that online audio-visual information service providers are the principals responsible for managing the security of information content, and should, among other things, establish and improve their internal policies in relation to user registration, scrutiny of information publication, and information security management. Any failure to comply with these regulations may subject us to liability. In November 2020, the NRTA further promulgated Notice 78, which requests the live streaming platforms for online shows and e-commerce to strengthen positive value guidance and to prevent the spread of the trends of wealth flaunting, money worshiping and vulgarity. See also “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Transmission of Audio-Visual Programs.”

In particular, failure to identify and prevent illegal or inappropriate content from being uploaded on our platform may subject us to liability. To the extent that PRC regulatory authorities find any content on our platform objectionable, they may require us to limit or eliminate the dissemination of such content on our platform in the form of take-down orders, or cause our app to be removed from app stores.

In addition, PRC laws and regulations are subject to interpretation by relevant authorities, and it may not be possible to determine in all cases the types of content that could result in our liability as a platform operator. We also may face liability for copyright or trademark infringement, fraud and other claims based on the nature and content of the materials that are delivered, shared or otherwise accessed through or displayed on our platform. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We have been and may be subject to intellectual property infringement claims or other allegations by third parties, which may materially and adversely affect our business, financial condition and prospects.”

30

Table of Contents

Our business, financial condition and results of operations may be materially and adversely affected if we are unable to compete effectively.

We face competition from other platforms that provide products and services to the LGBTQ community, both domestically and internationally. In addition, our users face a vast array of choices in almost every aspect of our business and costs for users to switch between products are low, and users have a propensity to try new approaches whether to connect with people, enjoy live streams of broadcasters or consult other service providers for healthcare related matters. As a result, new products, entrants and business models are likely to continue to emerge. It is possible that a new product could gain rapid scale at the expense of existing brands through harnessing a new technology, creating more interesting content or other means. Many of our current and potential competitors have greater resources and broader global recognition and enjoy better competitive positions in certain geographical areas or user demographics that we currently serve or may serve in the future. These advantages could enable these competitors to offer products and services that are more appealing to users than our products and services or to respond more quickly and/or cost-effectively than us to new or changing opportunities. Similarly, existing players in an adjacent or downstream industries may choose to leverage their existing infrastructure and expand their services and compete with us to serve the LGBTQ community. If these players succeed in doing so, our business could be encroached upon by their entrance and adversely affected.

If we fail to compete effectively with our current or future competitors that may emerge, our overall user base and level of user engagement may decrease. We may be required to devote additional resources to further increase our brand recognition and promote our products and services, and such additional capital expenditure may adversely affect our profitability. Furthermore, if we are involved in disputes with any of our competitors that result in negative publicity to us, such disputes, regardless of their veracity or outcome, may harm our reputation or brand image and in turn lead to reduced number of users and advertisers. Any legal proceedings or measures we take in response to such disputes may be expensive, time-consuming and disruptive to our operations and divert our management’s attention.

We face risks associated with the misconduct of our employees, business partners and their employees and other related personnel.

We rely on our employees to maintain and operate our business and have implemented an internal code of conduct to guide the actions of our employees. However, we do not have control over the actions of our employees, and any misbehavior of our employees could materially and adversely affect our reputation and business. For example, if our employees download pirated software to their work computers or perform other unauthorized actions on our IT system, we may be exposed to security breach. Despite the security measures we have implemented, our systems and procedures and those of our third-party providers, may be vulnerable to security breaches, act of vandalism, software viruses, misplaced or lost data, programming or human errors or other similar events caused by our employees, our business partners and their employees and other related personnel, which may disrupt our delivery of services or expose the identities and confidential information of our users and others. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed, we may lose current and potential users and may be exposed to legal and financial risks, including legal claims, regulatory fines and penalties, which in turn could adversely affect our business, reputation and results of operations.

With respect to employees, we could also in the future face a wide variety of claims, including discrimination (for example, based on gender, age, race or religious affiliation), sexual harassment, privacy, labor and employment claims. Often these cases raise complex factual and legal issues, and the result of any such claims are inherently unpredictable. Claims against us, whether meritorious or not, could require significant amounts of management time and corporate resources to defend, could result in significant media coverage and negative publicity, and could be harmful to our reputation and our brand. If any of these claims were to be determined adversely to us, or if we were to enter settlement arrangements, we could be exposed to monetary damages or be forced to change the way in which we operate our business, which could have an adverse effect on our business, financial condition and results of operations.

31

Table of Contents

We also rely on our business partners, including assisted reproductive medical facilities and third-party logistics and delivery companies to directly interact with and serve our users and customers, and their performance is directly associated with our brand. However, we do not directly supervise them in providing services to users and customers. Although we have implemented measures to select business partners with strong reputation and track record, we may not be able to successfully monitor, maintain and improve the quality of their services. In the event of any unsatisfactory performance by our business partners and/or their employees, we or our users may experience disruptions in content or services and our reputation may be materially and adversely affected. For example, we pay the compensation of broadcasters through talent agencies. If any talent agency fails to make payment to the broadcasters, they may lose trust in us and stop live streaming on our platform, they may also disclose such information during live streaming. As a result, our reputation may be materially and adversely affected, we may fail to retain and expand our users, and our business, financial condition and results of operations may be materially and adversely affected.

We organize and train volunteers for HIV prevention initiatives and conduct research studies jointly with third-party institutions. Although we have measures in place to regulate the activities of these volunteers or research institutions to prevent the unauthorized disclosure of private information, we do not directly supervise the volunteers or third-party institutions in how they use the private information. In the event of abusive use or unlawful disclosure of private information involved in this process, our reputation and brand may be seriously harmed, which may in turn materially and adversely affect our business, financial condition and results of operations.

Our results of operations are subject to fluctuations due to seasonality.

We experience seasonality in certain aspects of our business, reflecting seasonal fluctuations in internet usage. As a result, comparing our results of operations on a period-to-period basis may not be meaningful. For example, the number of active users tend to be higher during popular western or Chinese festivals such as Valentine’s Day, Christmas and the Chinese Valentine’s Day, whereas lower during long national holidays. Advertising revenues tend to be higher in June and November, which correlates with marketing campaigns and promotional activities conducted by top e-commerce platforms.

Overall, the historical seasonality of our business has been relatively mild due to our rapid growth but seasonality may increase in the future. Due to our limited operating history, the seasonal trends that we have experienced in the past may not apply to, or be indicative of, our future results of operations. Once our business development has reached a more matured stage, our financial results may reflect seasonal effects owing to the factors mentioned above.

We are dependent on app stores to disseminate our mobile apps.

We offer our social networking service through our mobile apps, including Blued and Finka. Our mobile apps are offered via smartphone and tablet apps stores operated by third parties, such as Apple App Store and Google Play Store, which could suspend or terminate users’ access to our mobile apps, increase access costs or change the terms of access in a way that makes our apps less desirable or harder to access. As a result, our ability to expand our user base may be hindered if potential users experience difficulties in or are barred from accessing our mobile app.

While each of our mobile apps, including Blued and Finka, is free to download from third-party app stores, we provide value-added services comprising a wide variety of additional social features and functions that users pay to use mainly in the form of subscription-based membership services and pay-per-use enhancement functions. We determine the prices at which these memberships services are sold and, in exchange for facilitating the purchase of these membership services through our mobile app to users who download our mobile app from these stores, and we pay Apple, as applicable, a certain share of the revenue we receive from these transactions. As the distribution of our mobile application through app stores increases, and given the strict requirements to use the in-app payments systems tied into Apple’s, and to a lesser degree, Google’s distribution services, we may need to offset any further increase in fees charged by app stores by decreasing traditional marketing expenditures as a percentage of revenue, increasing user volume or monetization per user, or by engaging in other efforts to increase revenue or decrease costs generally, otherwise our business, financial condition and results of operations could be adversely affected.

32

Table of Contents

User growth and engagement depend upon effective interoperation with mobile operating systems, hardware, networks, regulations and standards that we do not control.

Our mobile apps, including Blued and Finka, must remain interoperable with popular mobile operating systems, such as iOS and Android, and related hardware. We have no control over these operating systems or hardware, and any changes to these systems or hardware that degrade the functionality of our products and services, or give preferential treatment to competitive products, could seriously harm usage of our mobile app. We plan to continue to introduce new products regularly and have experienced that it takes time to optimize such products to function with these operating systems and hardware, impacting the popularity of such products, and we expect this trend to continue.

To deliver high quality products and services, it is crucial that our products and services work well with a range of mobile technologies, systems, networks, regulations and standards that we do not control. In particular, any future changes to the iOS or Android operating systems may impact the accessibility, speed, functionality and other performance aspects of our products and services, which issues are likely to occur in the future from time to time. In addition, the adoption of any laws or regulations that adversely affect the growth, popularity or use of the internet, including laws governing internet neutrality, could decrease the demand for our products and increase our cost of doing business.

We may fail to successfully cultivate relationships with key industry participants or develop products and services that operate effectively with these technologies, systems, networks, regulations or standards. If it becomes more difficult for our users to access and use our app on their mobile devices, if our users choose not to access or use our app on their mobile devices, or if our users choose to use mobile products that do not offer access to our app, our user growth, retention, and engagement could be seriously harmed.

If the software used by our platform and internal systems contains undetected programming errors or vulnerabilities, our business could be adversely affected.

Our mobile platform and internal systems rely on software, including software developed or maintained internally and/or by third parties. In addition, our mobile platform and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely in the past has contained, and may now or in the future contain, undetected programming errors, bugs, or vulnerabilities. Some errors may only be discovered after the code has been released for external or internal use. Errors, vulnerabilities, or other design defects within the software on which we rely may result in a negative experience for users using our mobile platform, delay introductions of new features or enhancements, result in errors or compromise our ability to protect the data of our users and/or our intellectual property or lead to reductions in our ability to provide some or all of our services. In addition, any errors, bugs, vulnerabilities, or defects discovered in the software on which we rely, and any associated degradations or interruptions of service, could result in harm to our reputation and loss of users, which could adversely affect our business, financial condition and operation results.

Our business is sensitive to economic conditions. A severe or prolonged downturn in the global or Chinese economy could materially and adversely affect our business, financial condition and results of operations.

COVID-19 may continue to have a severe and prolonged negative impact on the Chinese and the global economy, including potential reductions in advertising and marketing customers’ budgets, which may affect our advertising revenues and financial performance generally. Whether this will lead to a prolonged economic downturn is still uncertain. Even before the outbreak of COVID-19, the Chinese and global macroeconomic environment faced numerous challenges. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies which had been adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. The conflict in Ukraine and the imposition of broad economic sanctions on Russia could raise energy prices and disrupt global markets. Unrest, terrorist threats and the potential for war in the Middle East and elsewhere may increase market volatility across the globe. There have also been concerns about the relationship between China and other countries, including neighboring Asian countries, which may potentially have negative economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to trade policies, treaties, government regulations and tariffs. The tensions between China, the U.S. and other countries have intensified especially since the outbreak of COVID-19. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economies may materially and adversely affect our business, results of operations and financial condition.

33

Table of Contents

Our failure to protect our intellectual property rights may undermine our competitive position, and third-party infringements of our intellectual property rights may adversely affect our business.

We believe that our copyrights, trademarks and other intellectual property are essential to our success. See also “Item 5. Operating and Financial Review and Prospects—C. Research and Development, Patents and Licenses, Etc.” We have devoted considerable time and energy to the development and improvement of our mobile app and our system infrastructure.

We rely on a combination of copyright and trademarks laws, trade secrets protection and other contractual restrictions for the protection of the intellectual property used in our business. For example, we have generally registered and continue to apply to register and renew, or secure by contract where appropriate, trademarks and service marks as they are developed. Effective trademark protection may not be available or may not be sought in every country in which our products are made available, and contractual disputes may affect the use of marks governed by private contract. Although our contracts with users and business partners typically prohibit the unauthorized use of our brands, images, characters and other intellectual property rights, there can be no assurance that they will always comply with these terms. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Although we enter into confidentiality agreements with our employees which also include intellectual property ownership provisions, these confidentiality agreements could be breached, we may not have adequate remedies for any breach, and our proprietary technology, know-how or other intellectual property could otherwise become known to third parties. In addition, third parties may independently discover trade secrets and proprietary information, limiting our ability to assert any trade secret rights against such parties.

While we actively take steps to protect our proprietary rights, such steps may not be adequate to prevent the infringement or misappropriation of our intellectual property. In addition, there can be no assurance that any of our trademark applications will ultimately proceed to registration or will result in registration with adequate scope for our business. Some of our pending applications or registrations may be successfully challenged or invalidated by others. If our trademark applications are not successful, we may have to use different marks for affected products or services, or seek to enter into arrangements with any third parties who may have prior registrations, applications or rights, which might not be available on commercially reasonable terms, if at all.

Implementation of intellectual property laws in China has historically been lacking, primarily because of ambiguities in the laws and difficulties in enforcement. Accordingly, intellectual property right protection in China may not be as effective as in other jurisdictions that have a more developed legal framework regulating intellectual property rights. Policing unauthorized use of our proprietary technology, trademarks and other intellectual property is difficult and expensive, and litigation may be necessary in the future to enforce our intellectual property rights. Future litigation could result in substantial costs and diversion of our resources, and could disrupt our business, as well as materially adversely affect our financial condition and results of operations.

We have been and may be subject to intellectual property infringement claims or other allegations by third parties, which may materially and adversely affect our business, financial condition and prospects.

We have been and may in the future be subject to intellectual property infringement claims or other allegations by third party owners or right holders of technology patents, copyrights, trademarks, trade secrets and website content for services we provide or for information or content displayed on, retrieved from or linked to, recorded, stored or made accessible on our platform, or otherwise distributed to our users, including in connection with the music, movies and videos played, recorded, stored or made accessible on our platform during live-streaming or advertisement display, which may materially and adversely affect our business, financial condition and prospects.

Under our agreements with talent agencies, we obtain the intellectual property arising from live-streaming on our platform. We have implemented internal control measures to ensure that the design of our platform and the content that is streamed on it does not infringe on valid intellectual property, such as patents and copyrights held by third parties. We also license certain intellectual properties from third parties to implement certain functions available on our platform.

However, companies in the internet-related industries are frequently involved in litigation based on allegations of infringement of intellectual property rights, unfair competition, invasion of privacy, defamation and other violations of other parties’ rights. The validity, enforceability and scope of protection of intellectual property rights in internet-related industries, particularly in China, are uncertain and still evolving. As we face increasing competition and as litigation becomes a more common method for resolving commercial disputes in China, we face a higher risk of being the subject of intellectual property infringement claims or other legal proceedings.

34

Table of Contents

We allow users and broadcasters to upload text, pictures, audio, video and other content to our platform and users to download, share, link to and otherwise access other content on our platform. Under relevant PRC laws and regulations, online service providers, which provide storage space for users to upload works or links to other services or content, could be held liable for copyright infringement under various circumstances, including situations where the online service provider knows or should reasonably have known that the relevant content uploaded or linked to on its platform infringes upon the copyright of others and the online service provider failed to take necessary actions to prevent such infringement. We have procedures implemented to reduce the likelihood that content might be used without proper licenses or third-party consents. However, these procedures may not be effective in preventing the unauthorized posting or distribution of copyrighted content and we may be considered failing to take necessary actions against such infringement. Therefore, we may face liability for copyright or trademark infringement, defamation, unfair competition, libel, negligence, and other claims, or our portfolio apps may be disabled or taken down from app stores, based on the nature and content of the materials that are delivered, shared or otherwise accessed through our platform. For example, in December 2020, Blued app was temporarily taken down from Apple App Store due to the alleged infringements by our users.

Defending claims is costly and can impose a significant burden on our management and employees, and there can be no assurance that favorable final outcomes will be obtained in all cases. Such claims, even if they do not result in liability, may harm our reputation. Any resulting liability or expenses, or changes required to our platform to reduce the risk of future liability, may have a material adverse effect on our business, financial condition and prospects.

Some of our products and services contain open source software, which may pose particular risk to our proprietary software, products and services in a manner that negatively affect our business.

We use open source software in some of our products and services and will continue to use open source software in the future. There is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Additionally, we may face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant additional technology and development resources, and we may not be able to complete it successfully.

Furthermore, because any software source code we contribute to open source projects is publicly available, our ability to protect our intellectual property rights with respect to such software source code may be limited or lost entirely. As a result, we may be unable to prevent our competitors or others from using such software source code contributed by us.

Our business depends substantially on the continuing efforts of our executive officers and other key employees. If we lose their services, our business operations and growth prospects may be materially and adversely affected.

Our future success depends heavily on the continuing services of our executive officers and other key employees. In particular, we rely on the expertise, experience and vision of our founder and chief executive officer, Mr. Baoli Ma, as well as other members of our senior management team. If one or more of our executive officers or key employees were unable or unwilling to continue their services with us, we might not be able to replace them easily, in a timely manner, or at all. Competition for qualified talent is intense, there can be no assurance that we will be able to attract or retain qualified employees. As a result, our business may be materially and adversely affected, our financial condition and results of operations may be severely affected, and we may incur additional expenses to recruit, train and retain key personnel.

Moreover, if any of our executive officers or other key employees joins a competitor or forms a competing company, we may lose know-how, trade secrets, business partners, user base and market share. Each of our executive officers and key employees has entered into an employment agreement and a non-compete agreement. However, the non-competition agreements may be deemed invalid or unenforceable under PRC laws. If any dispute arises between our executive officers or key employees and us, there can be no assurance that we would be able to enforce these non-compete agreements in China, where these executive officers and key employees reside.

We are subject to risks relating to third-party online payment platforms.

Currently, we settle a significant portion of our products and services to our users through third-party online payment systems. In all these online payment transactions, secured transmission of confidential information such as paying users’ credit card numbers and personal information over public networks is essential to maintaining users’ trust and confidence on our platform.

35

Table of Contents

We do not have control over the security measures of our third-party online payment vendors. Any security breaches of the online payment systems that we use could expose us to litigation and possible liability for failing to secure confidential customer information and could, among other things, damage our reputation and the perceived security of all of the online payment systems that we use. If a well-publicized internet or mobile network security breach were to occur, users may become reluctant to purchase our products and services even if the publicized breach did not involve payment systems or methods used by us. In addition, there may be billing software errors that would damage customer confidence in these online payment systems. If any of the above were to occur and damage our reputation or the perceived security of the online payment systems we use, we may lose paying users and users may be discouraged from purchasing our products and services, which may have a material adverse effect on our business.

In addition, there are currently only a limited number of reputable third-party online payment systems in China and certain other countries where we operate. If any of these major payment systems decides to cease to provide services to us, or significantly increase the percentage they charge us for using their payment systems for our products and services, our results of operations may be materially and adversely affected.

Present or future strategic alliances or acquisitions may fail and our business, reputation and results of operations may be materially and adversely affected.

We may enter into strategic alliances, including joint ventures or minority equity investments, with various third parties to further our business purpose from time to time. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.

In addition, if appropriate opportunities arise, we may acquire additional assets, products, technologies or businesses that are complementary to our existing business. Future acquisitions and the subsequent integration of new assets and businesses into our own would require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our business operations. Acquisitions may not achieve our goals and could be viewed negatively by users, advertisers, partners or investors. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant. In addition to possible shareholders’ approval, we may also have to obtain approvals and licenses from relevant governmental authorities for the acquisitions and to comply with any applicable PRC laws and regulations, which could result in increased delay and costs. For example, in August 2020, we completed the acquisition of LESDO, a leading location-based social networking service provider targeting the lesbian community in China. We subsequently terminated the operation of LESDO in October 2021. In December 2020, we completed the acquisition of Finka, a leading gay social networking app in China targeting younger generations. While we believe our acquisitions serve to broaden our product offerings and extend our coverage of sub-groups of the LGBTQ population, we cannot guarantee that these transactions will achieve the strategic value that we have anticipated or assure that these transactions will not negatively impact our results of operations.

We may not have sufficient insurance to cover our business risks, so that any uninsured occurrence of business disruption may result in substantial costs to us and the diversion of our resources, which could have an adverse effect on our results of operations and financial condition.

We have obtained insurance to cover certain potential risks and liabilities, such as property all risks insurance to cover physical loss of or damage to the insured property and digital business, data protection insurance to cover losses due to privacy beach, confidentiality breach, cyber extortion threat, business interruption event, unavailability of our computer system, cyberattack or wrongful act, and D&O insurance to reduce our indemnification obligations towards our directors and officers for certain preset types of claims and liabilities asserted against them in relation to their exercise of duties for our company. However, we may not be able to acquire any insurance for certain types of risks such as business liability to cover our operations and our coverage may not be adequate to compensate for all losses that may occur, particularly with respect to loss of business or operations. Any business disruption, litigation, regulatory action, outbreak of epidemic disease or natural disaster could also expose us to substantial costs and diversion of resources. There can be no assurance that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policies on a timely basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected.

36

Table of Contents

If we fail to implement and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our results of operations or prevent fraud or fail to meet our reporting obligations, and investor confidence and the market price of the ADSs may be materially and adversely affected.

In the course of preparing our consolidated financial statements as of and for the year ended December 31, 2021 and in the course of auditing our consolidated financial statements as of and for the year ended December 31, 2021, we and our independent registered public accounting firm identified one material weakness in our internal control over financial reporting as of December 31, 2021, in accordance with the standards established by the Public Company Accounting Oversight Board of the United States (PCAOB).

As defined in the standards established by the PCAOB, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified related to our lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and related disclosures in accordance with U.S. GAAP and financial reporting requirements set forth by the SEC. The material weakness, if not timely remedied, may have led to significant misstatements in our consolidated financial statements in the future.

Following the identification of the material weakness and other control deficiencies, we have taken measures and plan to continue to take measures to remedy these control deficiencies. See “Item 15. Controls and Procedures—Management's Annual Report on Internal Control Over Financial Reporting.” However, the implementation of these measures may not fully address these deficiencies in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct these control deficiencies or our failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. Moreover, ineffective internal control over financial reporting could significantly hinder our ability to prevent fraud.

We are now a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2021. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, as we are now a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems. We may be unable to timely complete our evaluation testing and any required remediation.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our consolidated financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of the ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

37

Table of Contents

We have been named as a defendant in two putative shareholder class action lawsuits that could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.

We are defending against the putative shareholder class action lawsuits described in “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings” including any appeals of such lawsuits, should our initial defense be successful. We are currently unable to estimate the possible loss or possible range of loss, if any, associated with the resolution of these lawsuits. In the event that our initial defense of these lawsuits is unsuccessful, there can be no assurance that we will prevail in any appeal. Any adverse outcome of these cases, including any plaintiff’s appeal, could have a material adverse effect on our business, financial condition, results of operation, cash flows and reputation. In addition, there can be no assurance that our insurance carriers will cover all or part of the defense costs, or any liabilities that may arise from these matters. The litigation process may utilize a significant portion of our cash resources and divert management’s attention from the day-to-day operations of our company, all of which could harm our business. We are also subject to claims for indemnification related to these matters, and we cannot predict the impact that indemnification claims may have on our business or financial results.

We have granted and expect to continue to grant share-based awards in the future under our share incentive plan, which may result in increased share-based compensation expenses.

We adopted the 2015 stock incentive plan (the “2015 Plan”) in 2015, a share incentive plan (the “2020 Plan”) in 2020, and 2021 share Incentive Plan (the “2021 Plan”) in 2021 for purposes of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. We account for compensation costs for all share options using a fair-value based method and recognize expenses in our consolidated statements of comprehensive loss in accordance with U.S. GAAP.

Under the 2015 Plan, we are authorized to grant options to purchase ordinary shares of our company and restricted share units to receive ordinary shares. Under the 2020 Plan and the 2021 Plan, we are authorized to grant options and other types of awards. The maximum number of ordinary shares which may be issued pursuant to all awards under the 2015 Plan is 1,551,724. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2020 Plan is 758,783. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2021 Plan shall initially be 298,780, plus an annual increase on the first day of each fiscal year of the company during the term of the 2021 Plan commencing with the fiscal year beginning January 1, 2022, by (i) an amount equal to 1.5% of the total number of shares issued and outstanding on the last day of the immediately preceding fiscal year, or (ii) such lesser number of shares as may be determined by our board of directors. As of February 28, 2022, awards to purchase a total of 1,227,375 ordinary shares under the 2015 Plan, 747,417 ordinary shares under the 2020 Plan, and 266,704 ordinary shares under the 2021 Plan have been granted and are outstanding. We did not record share-based compensation expenses for the year ended December 31, 2019. We recorded share-based compensation of RMB186.9 million and RMB15.9 million (US$2.5 million) for 2020 and 2021, respectively.

We believe the granting of share incentive awards is of significant importance to our ability to attract and retain employees, and we will continue to grant share incentive awards to employees in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations.

We may be the subject of allegations, harassing or other detrimental conduct by third parties, which could harm our reputation and cause us to lose market share, users and customers.

We have been subject to allegations by third parties or purported former employees, negative internet postings and other adverse public exposure on our business, operations and staff compensation. We may also become the target of harassment or other detrimental conduct by third parties or disgruntled former or current employees. Such conduct may include complaints, anonymous or otherwise, to regulatory agencies, media or other organizations. We may be subject to government or regulatory investigations or other proceedings as a result of such third-party conduct and may be required to spend significant time and incur substantial costs to address such third-party conduct, and there is no assurance that we will be able to conclusively refute each of the allegations within a reasonable period of time, or at all. Additionally, allegations, directly or indirectly against us, may be posted on the internet, including social media platforms by anyone, whether or not related to us, on an anonymous basis. Any negative publicity on us or our management can be quickly and widely disseminated. Information posted may be inaccurate and adverse to us, and it may harm our reputation, business or prospects. The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be negatively affected as a result of the public dissemination of negative and potentially false information about our business and operations, which in turn may cause us to lose market share, users or customers.

38

Table of Contents

Computer and mobile malware, viruses, hacking and phishing attacks, spamming and improper or illegal use of our platform may affect user experience, which could reduce our ability to attract users and advertisers and materially and adversely affect our business, financial condition and results of operations.

Computer and mobile malware, viruses, hacking and phishing attacks have become more prevalent in our industries, have occurred on our platform in the past, and may occur again in the future. Although it is difficult to determine what, if any, direct harm may result from an interruption or attack, any failure to maintain performance, reliability, security and availability of our products and technical infrastructure to the satisfaction of our users may seriously harm our reputation and our ability to retain existing users and attract new users.

In addition, spammers may use our platform to send targeted and untargeted spam messages to users, which may affect user experience. In spamming activities, spammers typically create multiple user accounts for the purpose of sending spam messages. Although we attempt to identify and delete accounts created for spamming purposes, we may not be able to effectively eliminate all spam messages from our platform in a timely fashion. Our actions to combat spam may also require diversion of significant time and focus of our engineering team from improving our products. As a result, our users may use our products less or stop using them altogether, and result in continuing operational costs to us.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and noncompliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct activities, including the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws and regulations. Those laws generally prohibit us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. A violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation.

We have adopted and implemented policies and procedures designed to ensure compliance by us and our directors, officers, employees, representatives, consultants, agents and business partners with applicable anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations. However, our policies and procedures may not be sufficient and our directors, officers, employees, representatives, consultants, agents, business partners, and users could engage in improper conduct for which we may be held responsible.

Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact our business and investments in our shares.

If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.

We believe that a critical component of our success is our corporate culture, we are comprised of a group of passionate team players, dedicated to bring value to the LGBTQ community. Powered by technological innovation and global expansion, we endeavor to become a platform where the LGBTQ community can find a sense of belonging and enjoy the high-quality products and services we provide. Any failure to preserve our culture could undermine our reputation in the marketplace and negatively impact our ability to retain existing customers and attract new customers, which would in turn jeopardize our future success.

39

Table of Contents

We may need additional capital, and we may be unable to obtain such capital in a timely manner or on acceptable terms, or at all.

To pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, including to improve our brand awareness, develop new services or further improve existing services, expand into new geographic areas and acquire complementary businesses and technologies, we may require additional capital from time to time. However, additional funds may not be available when we need them on reasonable terms, or at all. Our ability to obtain additional capital is subject to a variety of uncertainties, including:

our market position and competitiveness in the LGBTQ-focused social, entertainment and health industries;
our future profitability, overall financial condition, results of operations and cash flows;
general market conditions for capital raising activities by online social networking and live streaming platforms and other internet companies in China; and
economic, political and other conditions in China and internationally.

If we are unable to obtain additional capital in a timely manner or on acceptable terms, or at all, our ability to continue to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, results of operations, financial condition and prospects could be materially and adversely affected. In addition, our future capital needs and other business reasons could require us to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could dilute our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations or our ability to pay dividends to our shareholders.

Foreign currency exchange rate fluctuations could adversely affect our results of operations.

We operate in various international markets, primarily in various jurisdictions within Asia. We translate international revenues into RMB-denominated results of operations. As a result, we expect foreign currency exchange rate fluctuations will affect the period-over-period comparison of our results of operations as the results of our subsidiaries outside China are translated into RMB, our reporting currency. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Foreign Exchange Risk.”

Historically, we have not hedged any foreign currency exposures. The continued growth and expansion of our international operations into new countries increases our exposure to foreign exchange rate fluctuations. Significant foreign exchange rate fluctuations, in the case of one currency or collectively with other currencies, could adversely affect our future results of operations.

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

Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities, our auditor is not currently inspected by the PCAOB. As a result, we and investors in the ADSs are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause investors and potential investors in the ADSs to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

40

Table of Contents

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

The Holding Foreign Companies Accountable Act, or the HFCAA, was signed into law on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection for the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to inspect or investigate completely.

Whether the PCAOB will be able to conduct inspections of our auditor before the issuance of our financial statements on Form 20-F for the year ending December 31, 2023 which is due by April 30, 2024, or at all, is subject to substantial uncertainty and depends on a number of factors out of our, and our auditor’s, control. If our shares and ADSs are prohibited from trading in the United States, there is no certainty that we will be able to list on a non-U.S. exchange or that a market for our shares will develop outside of the United States. Such a prohibition would substantially impair your ability to sell or purchase the ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of the ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects.

On June 22, 2021, the U.S. Senate passed a bill which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two. On February 4, 2022, the U.S. House of Representatives passed a bill which contained, among other things, an identical provision. If this provision is enacted into law and the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA is reduced from three years to two, then our shares and the ADSs could be prohibited from trading in the United States in 2023.

Heightened tensions in international relations, particularly between the United States and China, may adversely impact our business, financial condition, and results of operations.

Recently there have been heightened tensions in international relations, particularly between the United States and China, but also as a result of the war in Ukraine and sanctions on Russia. These tensions have affected both diplomatic and economic ties between the two countries. Heightened tensions could reduce levels of trade, investments, technological exchanges, and other economic activities between the two major economies. The existing tensions and any further deterioration in the relationship between the United States and China may have a negative impact on the general, economic, political, and social conditions in both countries and, given our reliance on the Chinese market, adversely impact our business, financial condition, and results of operations.

Any financial or economic crisis, or perceived threat of such a crisis may materially and adversely affect our business, financial condition and results of operations.

The global financial markets experienced significant disruptions in 2008 and the United States, European and other economies went into recession. The recovery from the lows of 2008 and 2009 was uneven and the global financial markets are facing new challenges, including the escalation of the European sovereign debt crisis since 2011, the hostilities in the Ukraine, the end of quantitative easing by the U.S. Federal Reserve and the economic slowdown in the Eurozone in 2014. It is unclear whether these challenges will be contained and what effects they each may have. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the world’s leading economies, including China’s. Recently there have been signs that the rate of China’s and global economic growth is declining. Any prolonged slowdown in global economic development might lead to tighter credit markets, increased market volatility, sudden drops in business and dramatic changes in business.

41

Table of Contents

Cayman Islands economic substance requirements may have an effect on our business and operations.

Pursuant to the International Tax Cooperation (Economic Substance) Act (Revised) of the Cayman Islands, or the ES Act, that came into force on January 1, 2019, a “relevant entity” is required to satisfy the economic substance test set out in the ES Act. A “relevant entity” includes an exempted company incorporated in the Cayman Islands as is our company. Based on the current interpretation of the ES Act, we believe that our company is a pure equity holding company since it only holds equity participations in other entities and only earns dividends and capital gains. Accordingly, for so long as our company is a “pure equity holding company,” it is only subject to the minimum substance requirements, which require us to (1) comply with all applicable filing requirements under the Companies Act, Cap. 22 (Act 3 of 1961, as consolidated and revised) of the Cayman Islands; and (2) have adequate human resources and adequate premises in the Cayman Islands for holding and managing equity participations in other entities. However, there can be no assurance that we will not be subject to more requirements under the ES Act. Uncertainties over the interpretation and implementation of the ES Act may have an adverse impact on our business and operations.

Risks Related to Our Corporate Structure

If the PRC government finds that the arrangements that establish the structure for operating some 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.

Foreign ownership of certain parts of our businesses, including value-added telecommunications services, is subject to restrictions under current PRC laws and regulations. For example, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (excluding e-commerce, domestic multi-party communication, store-and-forward, and call center), and foreign investors are prohibited from engaging in the internet audio-video program service and internet culture operation (except for music) in accordance with Special Management Measures for the Market Entry of Foreign Investment (Negative List) (2021 Version), or the 2021 Negative List.

We are a Cayman Islands company and our WFOE is considered foreign-invested enterprises. Accordingly, our WFOE is not eligible to operate value-added telecommunication business, internet video, online advertising services and other businesses which foreign-owned companies are prohibited or restricted from conducting in China. As a result, we conduct such business activities through the VIE and its subsidiaries. The VIE holds an ICP License for internet information service (excluding news, publication, education, medical and healthcare, drug and medical instruments, electronic publication services), and an internet culture operation license for operating music products and shows. Each of Mr. Baoli Ma, our founder, chairman and chief executive officer, and Mr. Changyou Ma, a family member of our founder, holds 99.15% and 0.85% equity interests in the VIE, respectively. Our WFOE has entered into a series of contractual arrangements with the VIE and its shareholders, which enables us to:

exercise effective control over the VIE;
receive substantially all of the economic benefits of the VIE; and
have an exclusive option to purchase all or part of the equity interests in the VIE when and to the extent permitted by PRC law.

As a result of these contractual arrangements, we have control over and are the primary beneficiary of the VIE and hence consolidate its financial results and its subsidiaries into our consolidated financial statements under U.S. GAAP. For a detailed discussion of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.”

42

Table of Contents

In the opinion of King & Wood Mallesons, our PRC legal counsel, (i) the ownership structures of our WFOE and the VIE in China are not in violation of PRC laws and regulations currently in effect; and (ii) the contractual arrangements between our WFOE, the VIE and its shareholders and the spouse consent letters governed by PRC law are legal, valid, binding and enforceable against each party thereto in accordance with their terms and applicable PRC laws and regulations currently in effect. However, our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules; accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or the VIE are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including:

revoking the business licenses and/or operating licenses of such entities;
discontinuing or placing restrictions or onerous conditions on our operations;
imposing fines, confiscating the income from our WFOE or the VIE, or imposing other requirements with which we or the VIE may not be able to comply;
requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over the VIE, or imposing restrictions on our right to collect revenues;
shutting down our servers or blocking our app/websites;
imposing additional conditions or requirements with which we may not be able to comply;
requiring us to restructure the operations in such a way as to compel us to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and assets; or
restricting or prohibiting our use of the proceeds of the initial public offering to finance our business and operations in China.

The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business. In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of the VIE in our consolidated financial statements, if the PRC governmental authorities were to find our legal structure and contractual arrangements to be in violation of PRC laws and regulations. If the imposition of any of these government actions causes us to lose our right to direct the activities of the VIE or our right to receive substantially all the economic benefits and residual returns from the VIE and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of the VIE in our consolidated financial statements. Either of these results, or any other significant penalties that might be imposed on us in this event, would have a material adverse effect on our financial condition and results of operations.

Furthermore, it is uncertain whether any new PRC laws, rules or regulations relating to contractual arrangements will be adopted or if adopted, what they would provide. The National People’s Congress promulgated the Foreign Investment Law on March, 15, 2019, which came into effect on January 1, 2020. The Foreign Investment Law does not touch upon the relevant concepts and regulatory regimes that were historically suggested for the regulation of VIE structures, and thus this regulatory topic remains unclear under the Foreign Investment Law. Since the Foreign Investment Law is new, there are substantial uncertainties exist with respect to its implementation and interpretation and it is also possible that variable interest entities will be deemed as foreign invested enterprises and be subject to restrictions in the future. Such restrictions may cause interruptions to our operations, products and services and may incur additional compliance cost, which may in turn materially and adversely affect our business, financial condition and results of operations.

43

Table of Contents

Any of these events could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations. If occurrences of any of these events results in our inability to direct the activities of our consolidated affiliated entities in China that most significantly impact their economic performance, and/or our failure to receive the economic benefits from our consolidated affiliated entities, we may not be able to consolidate the entity in our consolidated financial statements in accordance with U.S. GAAP.

Although we believe we, our WFOE and the VIE comply with current PRC laws and regulations, we cannot assure you that the PRC government would agree that our contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. The PRC government has broad discretion in determining rectifiable or punitive measures for non-compliance with or violations of PRC laws and regulations. If the PRC government determines that we or the VIE does not comply with applicable law, it could revoke the VIE’s business and operating licenses, require the VIE to discontinue or restrict the VIE’s operations, restrict the VIE’s right to collect revenues, block the VIE’s websites, require the VIE to restructure our operations, impose additional conditions or requirements with which the VIE may not be able to comply, impose restrictions on the VIE’s business operations or on their customers, or take other regulatory or enforcement actions against the VIE that could be harmful to their business. Any of these or similar occurrences could significantly disrupt our or the VIE’s business operations or restrict the VIE from conducting a substantial portion of their business operations, which could materially and adversely affect the VIE’s business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of any of the VIE that most significantly impact its economic performance, and/or our failure to receive the economic benefits from any of the VIE, we may not be able to consolidate these entities in our consolidated financial statements in accordance with U.S. GAAP.

Uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law and the State Council approved the Regulation on Implementing the Foreign Investment Law (the “Implementation Regulations”) on December 12, 2019, effective from January 1, 2020, which replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The Supreme People’s Court of China issued a judicial interpretation on the Foreign Investment Law on December 27, 2019, effective from January 1, 2020, to ensure fair and efficient implementation of the Foreign Investment Law. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Investment” for further details. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments.

However, since it is relatively new, uncertainties still exist in relation to its interpretation. For instance, under the Foreign Investment Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entities in China. Though it does not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, the definition contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council to provide for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether our contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations. Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.

44

Table of Contents

We rely on contractual arrangements with the VIE and its shareholders for a portion of our business operations, which may not be as effective as direct ownership in providing operational control.

The VIE contributed a portion of our consolidated total revenues for the years ended December 31, 2019, 2020 and 2021, respectively. We have relied and expect to continue to rely on contractual arrangements with the VIE and its shareholders to conduct our business. For a description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” These contractual arrangements may not be as effective as direct ownership in providing us with control over the VIE. For example, the VIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests.

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 VIE, and our ability to conduct our business may be materially adversely affected. Therefore, these contractual arrangements may not be as effective in providing us with control over the VIE as direct ownership. If we had direct ownership of the VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIE, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, we rely on the performance by the VIE and its shareholders of their obligations under the contracts to exercise control over the VIE. The shareholders of the VIE may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate our business through the contractual arrangements with the VIE. If any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC law and courts and therefore will be subject to uncertainties in the PRC legal system. See “—Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.” Therefore, our contractual arrangements with the VIE may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.

Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.

If the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which may be unsuccessful. For example, if the shareholders of the VIE were to refuse to transfer their equity interest in the VIE to us or our designee when we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, we may have to take legal actions to compel them to perform their contractual obligations.

All of the arrangements under our contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in China is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. See “Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to you and us.” Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a VIE should be interpreted or enforced under PRC law, and as a result it may be difficult to predict how an arbitration panel would view such contractual arrangements. Additionally, under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay.

45

Table of Contents

The VIE holds our ICP License for internet information service (excluding news, publication, education, medical and healthcare, drug and medical instruments, electronic publication services), an internet culture operation license for operating music products and shows, a radio and television programs production and management license for animations, feature films, TV variety shows (excluding political news and similar features and columns). In the event we are unable to enforce our contractual arrangements, we may not be able to exert effective control over the VIE, and our ability to conduct these businesses may be negatively affected.

The shareholders of the VIE may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

The shareholders of the VIE may have potential conflicts of interest with us. For example, Mr. Baoli Ma is one of the shareholders of the VIE. Mr. Baoli Ma is also our founder, chairman and chief executive officer. Any shareholder of the VIE may breach, or cause the VIE to breach, or refuse to renew, the existing contractual arrangements we have with any of them and the VIE, which would have a material and adverse effect on our ability to effectively control the VIE and receive substantially all the economic benefits from them. For example, the shareholders may be able to cause our arrangements with the VIE to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. There can be no assurance that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.

Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the exclusive option agreements with these shareholders to request them to transfer all of their equity interests in the VIE to a PRC entity or individual designated by us, to the extent permitted by PRC law. For individuals who are also our directors and officers, we rely on them to abide by the laws of the Cayman Islands, which provide that directors and officers owe a fiduciary duty to the company that requires them to act in good faith and in what they believe to be the best interests of the company and not to use their position for personal gains. The shareholders of the VIE have executed shareholders’ voting rights proxy agreement to appoint our WFOE or a person designated by our WFOE to vote on their behalf and exercise voting rights as shareholders of the VIE. If we cannot resolve any conflict of interest or dispute between us and the shareholders of the VIE, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.

The shareholders of the VIE may be involved in personal disputes with third parties or other incidents that may have an adverse effect on their respective equity interests in the relevant VIE and the validity or enforceability of our contractual arrangements with the relevant entity and its shareholders. For example, in the event that any of the shareholders of the VIE divorces his spouse, the spouse may claim that the equity interest of the relevant VIE held by such shareholder is part of their community property and should be divided between such shareholder and his or her spouse. If such claim is supported by the court, the relevant equity interest may be obtained by the shareholder’s spouse or another third party who is not subject to obligations under our contractual arrangements, which could result in a loss of the effective control over the relevant VIE by us. Similarly, if any of the equity interests of the VIE is inherited by a third party with whom the current contractual arrangements are not binding, we could lose our control over the relevant VIE or have to maintain such control by incurring unpredictable costs, which could cause significant disruption to our business and operations and harm our financial condition and results of operations.

Contractual arrangements in relation to the VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or the VIE owe additional taxes, which could negatively affected our financial condition and the value of your investment.

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities determine that the VIE contractual arrangements were not entered into on an arm’s-length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust the income of the VIE in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by the VIE for PRC tax purposes, which could in turn increase its tax liabilities. In addition, the PRC tax authorities may impose punitive interest on the VIE for the adjusted but unpaid taxes at the rate of 5% over the basic RMB lending rate published by the People’s Bank of China for a period according to the applicable regulations. Our financial position could be materially and adversely affected if the VIE’s tax liabilities increase or if it is required to pay punitive interest.

46

Table of Contents

We may lose the ability to use and enjoy assets held by the VIE that are material to the operation of certain portion of our business if the VIE goes bankrupt or become subject to a dissolution or liquidation proceeding.

As part of our contractual arrangements with the VIE, the VIE and its subsidiaries hold certain assets that are material to the operation of certain portion of our business. If the VIE goes bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. Under the contractual arrangements, neither the VIE nor the shareholders of the VIE may not, in any manner, sell, transfer, mortgage or dispose of their assets or legal or beneficial interests in the business without our prior consent. If the VIE undergoes a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

If the chops of our WFOE and the VIE are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised.

In China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature. Each legally registered company in China is required to maintain a company chop, which must be registered with the local Public Security Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes. The chops of our WFOE and the VIE are generally held securely by personnel designated or approved by us in accordance with our internal control procedures. To the extent those chops are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so. In addition, if the chops are misused by unauthorized persons, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations.

Risks Related to Doing Business in China

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business, financial condition and results of operations.

A substantial majority of our revenues are sourced from China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies.

The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth in recent decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but some may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments, monetary policy or changes in tax regulations. The growth rate of the Chinese economy has gradually slowed since 2010, and the impact of COVID-19 on the Chinese economy in 2020 is likely to be severe. Any prolonged slowdown in the Chinese economy may reduce the demand for our products and services and materially and adversely affect our business and results of operations.

47

Table of Contents

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

We conduct our business primarily through our WFOE and the VIE and its subsidiaries in China. Our operations in China are governed by PRC laws and regulations. Our WFOE is subject to laws and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. In addition, any new or changes in PRC laws and regulations related to foreign investment in China could affect the business environment and our ability to operate our business in China.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into and could materially and adversely affect our business and results of operations.

Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. Such unpredictability towards our contractual, property and procedural rights could adversely affect our business and impede our ability to continue our operations.

Any failure or perceived failure by us to comply with the Anti-Monopoly Guidelines for the Internet Platform Economy Sector and other PRC anti-monopoly laws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on our business, financial condition and results of operations.

On February 7, 2021, the State Council Anti-Monopoly Committee issued the Anti-Monopoly Guidelines for the Internet Platform Economy Sector, or Anti-monopoly Guide, that aims at specifying some of the circumstances under which an activity of internet platforms may be identified as monopolistic act as well as setting out merger controlling filing procedures involving variable interest entities. Due to the uncertainties associated with the evolving legislative activities and varied local implementation practices of anti-monopoly and competition laws and regulations in the PRC, it may be costly to adjust some of our business practice in order to comply with these laws, regulations, rules, guidelines and implementations.

The PRC anti-monopoly enforcement agencies have strengthened enforcement under the PRC Anti-Monopoly Law in recent years, which may subject us to penalties and fines for transactions closed in the past. Under the PRC Anti-Monopoly Law, companies conducting certain investments and acquisitions relating to businesses in China must file with the anti-monopoly enforcement agency, in advance of any transaction where the parties’ revenues exceed certain thresholds and the buyer would obtain control of, or decisive influence over, the other party. It is unclear whether transactions involving companies with a VIE structure are subject to these requirements, namely the filing of notification of concentration of undertaking. However, the governmental authorities have recently strengthened the enforcement of notification of concentration of undertaking filing requirement by companies with a VIE structure. In December 2020, the SAMR penalized three internet companies each with a VIE structure in the transactions for failure to make the filing of notification of concentration of undertaking. Since then, the SAMR has been reviewing historical cases of concentrations of undertaking of certain major internet companies with a VIE structure, and may impose penalties for past failures to making filings. Any failure or perceived failure to comply with the anti-monopoly laws and regulations, as well as the related government policies and guidance relating to investments in or by us or associated inquiries, investigations and other governmental actions may divert significant management time and attention and our financial resources, bring negative publicity, subject us to liabilities or administrative penalties, and/or materially and adversely affect our financial conditions, operations and business prospects.

48

Table of Contents

We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.

Our business is subject to supervision and regulation by various governmental authorities in China, and such governmental authorities include the CAC, the MOFCOM, the MIIT, the SAMR, the National Health Commission, or the NHC, the MCT, the NRTA, and the corresponding local regulatory authorities. Such governmental authorities promulgate and enforce laws and regulations that cover a variety of business activities that relate to our operations, such as provision of internet information, sales of and internet advertisement, providing live streaming and short videos broadcasting services, online sale of pharmaceutical products, among other things. These regulations in general regulate the entry into, the permitted scope of, as well as approvals, licenses and permits for, the relevant business activities.

We have not obtained certain approvals, licenses and permits that may be required for some aspects of our business operations. For example, our mobile apps offer short videos created by ourselves and our broadcasters. According to the PRC Administrative Provisions on Internet Audio-Visual Program Services, a provider of online audio-visual service is required to obtain a license for online transmission of audio-visual programs, or Audio-Visual License. We have not obtained the Audio-Visual License for providing internet audio-visual program services and content through our platform in China and we may not be eligible for the Audio-Visual License, because the current PRC laws and regulations require an applicant to be a wholly state-owned or state-controlled entity. Although we are looking for suitable licensed targets or partners to work with, identifying, negotiating and maintaining relationships with such licensed entities require significant time and resources. Though we have obtained a pharmaceutical operation license from the local counterpart of the SAMR in February 2020 through acquisition of license-holding targets for conducting pharmaceutical retail business, historically we did not hold the pharmaceutical operation license; we shall obtain a practicing license of medical institutions from the NHC if our health related services are deemed medical diagnosis and treatment services. We have established our own internet hospital, Dezhou He Health Internet Hospital (“He Health Internet Hospital”), which has obtained a medical institution practicing license and completed the registration of internet diagnosis and treatment activities with the NHC in April 2021. We acquired Finka in 2020, which allows users to communicate in real-time on the apps. Finka holds the ICP License for internet information service, which however does not cover real-time information interaction. We are making efforts to obtain all licenses and permits that are necessary to our various business activities, however, there is no assurance that we can timely obtain all such licenses and permits or that we will not be subject to penalty for operating without such licenses and permits.

Our mobile platform, Blued, is operated by the VIE, which holds an ICP license and a Network Culture Operation License and offers value-added telecommunication services through Blued, including features to show users profile at the top of the “nearby user list” and push users’ selected posts to the “now trending” section to bring them more viewership and fans, while our WFOE collected payment from such users for such services and recognized live streaming revenue and membership revenue prior to May 20, 2020. Since May 20, 2020, the VIE has started to collect payments and provided live streaming and membership services. Accordingly, we expect the revenue of the VIE will significantly increase. Due to the uncertainty regarding the interpretation of relevant concepts of value-added telecommunication services and cyber performance operation services, it is not clear whether our WFOE as a party receiving payments for such services rather than the actual business operator will also be deemed to be a service provider and be required to obtain an ICP license or a Network Culture Operation License. Although we consider that our WFOE was providing technical support rather than offering telecommunication services, and that our WFOE did not offer network culture products, there is no assurance that the governmental authorities, future legislations, interpretations and enforcement of law will reach the same conclusion.

We generate a substantial portion of our revenues from the live streaming services. On June 4, 2009, Ministry of Culture, the predecessor of the MCT, and the MOFCOM jointly issued Notice on the Strengthening of the Administration of Online Game Virtual Currency, or the Virtual Currency Notice, which defines what virtual currency is and requires that entities obtain the approval from the Ministry of Culture prior to issuing virtual currency and engaging in transactions using virtual currency in connection with online games. Although we do not think the Virtual Currency Notice applies to the operation of our live streaming business, given the wide discretion of the governmental authorities and uncertainties in the regulatory environment, there is no assurance that the governmental authorities will not in the future interpret the Virtual Currency Notice in a different way and subject our operation of live streaming business to the scope of the Virtual Currency Notice or issue new rules to regulate the virtual currency in the live streaming industry. In that case, our business may be materially and adversely affected.

49

Table of Contents

We pay broadcasters through their talent agencies and the fees are determined based on a percentage of revenue from virtual gift sales that is attributed to the broadcasters’ live streams. Although we consider the nature of our relation with the talent agencies and the broadcasters as that between procurer and suppliers of services and that the users are purchasing the virtual gifts on our platform using virtual currencies, there is no assurance that the governmental authorities will view it in the same way. If the PRC governmental authorities consider that we are receiving the payment on behalf of the broadcasters or their talent agencies for their performance, we may be deemed as third-party payment service providers and be required to either obtain a license to conduct third-party payment business or to work with licensed payment service providers.

If the PRC governmental authorities consider that we are operating without proper approvals, licenses or permits, or new laws and regulations are promulgated that require us to obtain additional approvals or licenses or impose additional restrictions on the operation of any part of our business, the PRC governmental authorities have the power, among other things, to order timely rectification, impose fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material adverse effect on our business, results of operations and financial condition.

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

Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC persons or entities to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and our offshore offerings may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.

The PRC government authorities has recently indicated an intent to exert more oversight and control over securities offerings and other capital markets activities that are or have been conducted overseas and foreign investment in China-based companies like us. On July 6, 2021, the relevant PRC government authorities issued the Securities Activities Opinions. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As a follow-up, on December 24, 2021, the CSRC issued a draft of the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies, and a draft of Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies for public comments. These draft measures propose to establish a new filing-based regime to regulate overseas offerings and listings by domestic companies. Specifically, an overseas offering and listing by a PRC company, whether directly or indirectly, an initial or follow-on offering, must be filed with the CSRC. The issuer or its affiliated PRC entity, as the case may be, shall file with the CSRC for its initial public offering, follow-on offering and other equivalent offing activities. The examination and determination of an indirect offering and listing will be conducted on a substance-over-form basis, and an offering and listing shall be deemed as a PRC company’s indirect overseas offering and listing if the issuer meets the following conditions: (i) any of the operating income, gross profit, total assets, or net assets of the PRC enterprise in the most recent fiscal year was more than 50% of the relevant line item in the issuer’s audited consolidated financial statement for that year; and (ii) senior management personnel responsible for business operations and management are mostly PRC citizens or are ordinarily resident in the PRC, and the principal place of business is in the PRC or carried out in the PRC. It is unclear based on these draft measures whether either or both of the above criteria need to be satisfied. Particularly, the issuer shall submit the filing with respect to its initial public offering and listing within three business days after its initial filing of the listing application, and submit the filing with respect to its follow-on offering within three business days after the completion of the follow-on offering. Failure to comply with the filing requirements may result in fines to the relevant PRC companies, suspension of their businesses, revocation of their business licenses and operation permits and fines on the controlling shareholder and other responsible persons. These draft measures also set forth certain regulatory red lines for overseas offerings and listings by PRC enterprises.

50

Table of Contents

There are substantial uncertainties as to whether these draft measures to regulate direct or indirect overseas offering and listing would be further amended, revised or updated, their enactment timetable and final content. As the CSRC may formulate and publish guidelines for filings in the future, these draft measures do not provide for detailed requirements of the substance and form of the filing documents. In a Q&A released on CSRC’s official website on December 24, 2021, the respondent CSRC official indicated that the proposed new filing requirement will start with new issuers and listed companies seeking follow-on financing and other financing activities. As for the filings for other listed companies, the regulator will grant adequate transition period and apply separate arrangements. The Q&A also pointed out that, if compliant with relevant PRC laws and regulations, companies with compliant VIE structure may seek overseas listing after completion of the CSRC filings. Nevertheless, the Q&A did not specify what would qualify as a “compliant VIE structure” and what relevant PRC laws and regulations are required to be complied with. The draft Provisions on Strengthening the Confidentiality and Archives Administration of Overseas Securities Issuance and Listing by Domestic Enterprises does not provide for a clear scope of government work secrets or the documents and materials that, if divulged, will jeopardize national security or public interest, and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable laws. Given the substantial uncertainties surrounding the latest CSRC filing requirements at this stage, we cannot assure you that, if ever required, we would be able to complete the filings and fully comply with the relevant new rules on a timely basis, if at all.

On December 27, 2021, the NDRC and the MOFCOM jointly issued the 2021 Negative List, which became effective on January 1, 2022. Pursuant to the Special Administrative Measures, if a PRC company engaging in the prohibited business stipulated in the 2021 Negative List seeks an overseas offering and listing, it shall obtain the approval from the competent governmental authorities. Besides, according the further explanation of the NDRC, the foreign investors of the direct overseas offering and listing company shall not be involved in the company’s operation and management, and their shareholding percentages shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities investments by foreign investors. As the 2021 Negative List is relatively new, there remain substantial uncertainties as to the interpretation and implementation of these new requirements, and it is unclear as to whether and to what extent listed companies like us will be subject to these new requirements. If we are required to comply with these requirements and fail to do so on a timely basis, if at all, our business operation, financial conditions and business prospect may be adversely and materially affected.

In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, including the cybersecurity review under the laws, regulations and provisions described above, are required for our future offshore offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected. Any failure to obtain or delay in obtaining such approval or completing such filing procedures for our offshore offerings, or a rescission of any such approval or filing if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to seek CSRC approval or filing or other government authorization for our offshore offerings. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our listed securities. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities.

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 the ADSs.

We conduct our business primarily in China. Our operations in China are governed by PRC laws and regulations. The PRC government has significant oversight and discretion over the conduct of our business, and may intervene or influence our operations as the government deems appropriate to advance regulatory and societal goals and policy positions. The PRC government has recently published new policies that significantly affected certain industries and we cannot rule out the possibility that it will in the future release regulations or policies that directly or indirectly affect our industry or require us to seek additional permission to continue our operations, which could result in a material adverse change in our operation and/or the value of the ADSs. Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC government affecting our business.

51

Table of Contents

Currently there is no law or regulation specifically governing virtual asset property rights and therefore it is not clear what liabilities, if any, live streaming platforms may have for virtual assets.

While participating on our platform, our users acquire, purchase and accumulate some virtual assets, such as gifts or certain status. Such virtual assets can be important to users and have monetary value and, in some cases, are sold for actual money. In practice, virtual assets can be lost for various reasons, often through unauthorized use of the user account of one user by other users and occasionally through data loss caused by delay of network service, network crash or hacking activities. Under the Civil Code effective in January 2021, ownership of data and virtual assets are civil rights protected by laws. However, there is currently no further PRC law or regulation specifically governing virtual asset property rights. As a result, there is uncertainty as to who the legal owner of virtual assets is, whether and how the ownership of virtual assets is protected by law, and whether an operator of live streaming platform such as us would have any liability, whether in contract, tort or otherwise, to users or other interested parties, for loss of such virtual assets. Based on recent PRC court judgments, the courts have typically held online platform operators liable for losses of virtual assets by platform users, and ordered online platform operators to return the lost virtual items to users or pay damages and losses. In case of a loss of virtual assets, we may be sued by our users and held liable for damages, which may negatively affect our reputation and business, financial condition and results of operations.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based on foreign laws.

We are a company incorporated under the laws of the Cayman Islands, we generate a substantial majority of our revenues from China and substantially all of our assets are located in China. In addition, all of our senior executive officers reside within China for a significant portion of the time and all are PRC nationals. As a result, it may be difficult for you to effect service of process upon us or those persons inside the mainland of China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors as none of them currently resides in the U.S. or has substantial assets located in the U.S. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of reciprocal arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the U.S.

52

Table of Contents

It may be difficult for overseas regulators to conduct investigation or collect evidence within China.

There are significant legal and other obstacles in China to providing information needed for regulatory investigations or litigation initiated by regulators outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States involves uncertainty. The PRC government authorities have strengthened the supervision of cross-border information provision recently. For example, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation, evidence collection and other activities within the territory of the PRC. Furthermore, pursuant to the draft of Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) issued by the CSRC on April 2, 2022, if any overseas securities regulators and competent overseas authorities requests to investigate, including to collect evidence for investigation purpose, or inspects a domestic company that has been listed or offered securities in an overseas market or securities companies and securities service providers that undertake securities business for such domestic companies, such investigation and inspection shall be conducted under a cross-border regulatory cooperation mechanism, and the CSRC and competent authorities will provide necessary assistance pursuant to bilateral and multilateral cooperation mechanisms. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to M&A and Overseas Listing.” While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated and the draft of Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) have not been formally adopted, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

We may rely on dividends and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have, and any limitation on the ability of our WFOE to make payments to us could have a material and adverse effect on our ability to conduct our business.

We are a Cayman Islands holding company and we rely principally on dividends and other distributions on equity from our WFOE for our cash requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders for services of any debt we may incur. If any of our WFOE, the VIE and its subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Under PRC laws and regulations, our WFOE may pay dividends only out of its respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to a staff welfare and bonus fund. These reserve fund and staff welfare and bonus fund cannot be distributed to us as dividends.

Our WFOE, the VIE and its subsidiaries generate primarily all of their revenue in RMB, which is not freely convertible into other currencies. As result, any restriction on currency exchange may limit the ability of our WFOE to use their RMB revenues to pay dividends to us.

The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by the State Administration of Foreign Exchange, or the SAFE, for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our WFOE to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

53

Table of Contents

There are significant uncertainties under the PRC Enterprise Income Tax Law relating to the withholding tax liabilities of our WFOE, and dividends payable by our WFOE to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.

Under the PRC Enterprise Income Tax Law and its implementation rules, the profits of a foreign-invested enterprise generated through operations, which are distributed to its immediate holding company outside of China, will be subject to a withholding tax rate of 10%. Pursuant to a special arrangement between Hong Kong and China, such rate may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. Our WFOE is wholly owned by BlueCity Holdings Hong Kong Limited, our Hong Kong subsidiary. Accordingly, BlueCity Holdings Hong Kong Limited may qualify for a 5% tax rate in respect of distributions from our WFOE. Under the Notice of the State Administration of Taxation on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated in 2009, the taxpayer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These conditions include: (i)the taxpayer must be the beneficial owner of the relevant dividends, and (ii)the corporate shareholder to receive dividends from our WFOE must have met the direct ownership thresholds during the 12 consecutive months preceding the receipt of the dividends. Further, the State Administration of Taxation, or the SAT, promulgated the Notice on How to Understand and Recognize the “Beneficial Owner” in Tax Treaties in 2009, which limits the “beneficial owner” to individuals, enterprises or other organizations normally engaged in substantive operations, and sets forth certain detailed factors in determining “beneficial owner” status.

Entitlement to a lower tax rate on dividends according to tax treaties or arrangements between the PRC central government and governments of other countries or regions is subject to the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, which provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. As a result, there can be no assurance that we will be entitled to any preferential withholding tax rate under tax treaties for dividends received from our WFOE.

There are uncertainties with respect to value-added tax rates relating to the tax liabilities of our WFOE.

The PRC Ministry of Finance, or the MOF, the SAT and the General Administration of Customs promulgated the Announcement on Policies to Deepen Value-Added Tax Reform on March 20, 2019, which provides that the current value-added tax rate of 16% in manufacturing and other industries will be reduced to 13%, the current value-added tax rate of 10% in transportation and other industries will be reduced to 9%, and the value-added tax rate in value-added telecommunication service and other industries will remain at 6% from April, 2019. We are subject to value-added tax at a rate of 13% on our sale of medications and screening kits from April, 2019, less any deductible value-added tax we have already paid or borne. It is uncertain whether the value-added tax rate will be raised in the future, which could have a material adverse effect on our financial condition and results of operations. If we fail to comply with these regulations, we may be subject to sanctions including corrective orders, imposition of fines and confiscation of illegal gains.

PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of the initial public offering to make loans or additional capital contributions to our WFOE, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

We are an offshore holding company conducting our operations in China through our WFOE, the VIE and its subsidiaries. We may make loans to our WFOE, the VIE and its subsidiaries subject to the approval, registration, and filing with governmental authorities and limitation of amount, or we may make additional capital contributions to our wholly foreign-owned subsidiaries in China. Any loans to our wholly foreign-owned subsidiaries in China, which are treated as foreign-invested enterprises under PRC law, are subject to foreign exchange loan registrations. In addition, a foreign invested enterprise shall use its capital pursuant to the principle of authenticity and self-use within its business scope. The capital of a foreign invested enterprise shall not be used for the following purposes: (i) directly or indirectly used for payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; (ii) directly or indirectly used for investment in securities or investments other than banks’ principal-secured products unless otherwise provided by relevant laws and regulations; (iii) the granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) paying the expenses related to the construction and purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).

54

Table of Contents

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, there can be no assurance that we will be able to complete the necessary government registrations or obtain the necessary government approvals or filings on a timely basis, if at all, with respect to future loans by us to our WFOE or the VIE or with respect to future capital contributions by us to our WFOE. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from the initial public offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Implementation of the labor laws and regulations in China may adversely affect our business and results of operations.

Pursuant to the Labor Contract Law that took effect in January 2008, its implementation rules that took effect in September 2008 and its amendment that took effect in July 2013, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. Due to lack of detailed interpretative rules and uniform implementation practices and broad discretion of the local competent authorities, it is uncertain as to how the labor contract law and its implementation rules will affect our current employment policies and practices. Our employment policies and practices may violate the labor contract law or its implementation rules, and we may thus be subject to related penalties, fines or legal fees. Compliance with the labor contract law and its implementation rules may increase our operating expenses, in particular our personnel expenses. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the labor contract law and its implementation rules may also limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations.

We expect our labor costs to increase due to the implementation of these laws and regulations. As the interpretation and implementation of these laws and regulations are still evolving, there can be no assurance that our employment practices will at all times be deemed in full compliance with labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business, financial condition and results of operations could be materially and adversely affected.

Further, labor disputes, work stoppages or slowdowns at our company or any of our third-party service providers could significantly disrupt our daily operation or our expansion plans and have a material adverse effect on our business.

Our business may be negatively affected by the potential obligations to make additional social insurance and housing fund contributions.

We are required by PRC labor laws and regulations to pay various statutory employee benefits, including pensions insurance, medical insurance, work-related injury insurance, unemployment insurance, maternity insurance and housing fund, to designated government agencies for the benefit of our employees and associates. The relevant government agencies may examine whether an employer has made adequate payments of the requisite statutory employee benefits, and employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. If the relevant PRC authorities determine that we shall make supplemental social insurance and housing fund contributions or that we are subject to fines and legal sanctions in relation to our failure to make social insurance and housing fund contributions in full for our employees, our business, financial condition and results of operations may be adversely affected.

We may be subject to fines for failing to register and file lease agreements with the relevant governmental authorities in China.

According to the Administrative Measures for Commodity Housing Tenancy promulgated by the Ministry of Housing and Urban-Rural Development, all leases are to be registered and filed with the relevant real estate administration bureaus in China. As of the date of the annual report, certain leases relating to our offices in China had not been registered and filed with the relevant land and real estate administration bureaus in China. Our PRC legal advisers have advised us that failure to complete the registration and filing of lease agreements will not affect the validity of such leases or impede our use of the relevant properties but could result in the imposition of fines up to RMB10,000 for each leased property that is unregistered if we fail to rectify the noncompliance within the time frame prescribed by the relevant authorities.

55

Table of Contents

Fluctuation in exchange rates could have a material and adverse effect on our results of operations and the value of your investment.

The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. We cannot assure you that Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future.

A substantial majority of our revenues and costs is denominated in RMB. Any significant depreciation of the RMB may materially adversely affect the value of, and any dividends payable on, the ADSs in U.S. dollars. For example, when we convert our U.S. dollars denominated funds into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or the ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. In addition, appreciation or depreciation in the value of the Renminbi relative to U.S. dollars would affect our financial results reported in U.S. dollar terms regardless of any underlying change in our business or results of operations.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive a substantial majority of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from our WFOE to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our WFOE in China may be used to pay dividends to our company. However, approval from or registration with appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our WFOE and the VIE to pay off their respective debt in a currency other than Renminbi owed to entities outside of China, or to make other capital expenditure payments outside of China in a currency other than Renminbi.

In light of the flood of capital outflows of China, the PRC government may from time to time impose more restrictive foreign exchange policies and step up scrutiny of major outbound capital movement. More restrictions and substantial vetting process may be required by SAFE or other governmental authorities to regulate cross-border transactions falling under the capital account. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the ADSs.

56

Table of Contents

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

Among other things, the M&A Rules adopted by six PRC regulatory agencies in 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise and involves any of the following circumstances: (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. The Anti-Monopoly Law promulgated by the Standing Committee of the National People's Congress which became effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by MOFCOM before they can be completed. In addition, PRC national security review rules that became effective in September 2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. On December 14, 2020, the SAMR announced three cases of administrative penalties for the failures of acquirers to make proper concentration declarations to authorities about their past acquisitions. This is also the first time that the SAMR imposed administrative penalties for illegal concentration declarations on entities structured in a VIE arrangement.

We have made strategic acquisitions, and we may in the future grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in China, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited.

PRC regulations relating to offshore investment activities by PRC residents may limit our WFOE’s ability to change its registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC laws.

In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities as well as foreign individuals that are deemed as PRC residents for foreign exchange administration purpose) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 further requires amendment to the SAFE registrations in the event of any changes with respect to the basic information of the offshore special purpose vehicle, such as change of a PRC individual shareholder, name and operation term, or any significant changes with respect to the offshore special purpose vehicle, such as increase or decrease of capital contribution, share transfer or exchange, or mergers or divisions. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.

If our shareholders who are PRC residents fail to make the required registration or to update the previously filed registration, our WFOE may be prohibited from distributing their profits or the proceeds from any capital reduction, share transfer or liquidation to us, and we may also be prohibited from making additional capital contributions into our WFOE.

In February 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, effective in June 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.

57

Table of Contents

We may not be informed of the identities of all the PRC residents holding direct or indirect interest in our company, and we cannot provide any assurance that these PRC residents will comply with our request to make or obtain any applicable registrations or continuously comply with all requirements under SAFE Circular No. 37 or other related rules. The failure or inability of the relevant shareholders to comply with the registration procedures set forth in these regulations may subject us to fines and legal sanctions, such as restrictions on our cross- border investment activities, on the ability of our wholly foreign-owned subsidiaries in China to distribute dividends and the proceeds from any reduction in capital, share transfer or liquidation to us. Moreover, failure to comply with the various foreign exchange registration requirements described above could result in liability under PRC law for circumventing applicable foreign exchange restrictions. As a result, our business operations and our ability to distribute profits to you could be materially and adversely affected.

Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas-listed company, and complete certain other procedures. In addition, an overseas-entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted options are subject to these regulations when our company becomes an overseas-listed company. Failure to complete SAFE registrations may subject them to fines of up to RMB300,000 for entities and up to RMB50,000 for individuals, and legal sanctions and may also limit our ability to contribute additional capital into our WFOE and limit our WFOE’s ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law. See “Item 4. Information on the Company— B. Business Overview—Regulation—Regulations Relating to Foreign Exchange—Regulations on Stock Incentive Plans.”

In addition, the SAT has issued certain circulars concerning employee share options and restricted shares. Under these circulars, our employees working in China who exercise share options or are granted restricted shares will be subject to PRC individual income tax. Our WFOE has obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities. See “Item 4. Information on the Company— B. Business Overview—Regulation—Regulations Relating to Foreign Exchange—Regulations on Stock Incentive Plans.”

If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or the ADS holders.

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de facto management body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the SAT issued a circular, known as SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled