Hello Group Inc. [MOMO] Filings

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Emerging growth company

20-F 1 d730224d20f.htm FORM 20-F Form 20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form

20-F

(Mark One)

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

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

For the fiscal year ended December 31, 2023

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

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

Date of event requiring this shell company report

For the transition period from

Commission file number:

001-36765

Hello Group Inc.

(Exact name of Registrant as specified in its charter)

N/A

(Translation of Registrant’s name into English)

Cayman Islands

(Jurisdiction of incorporation or organization)

20th Floor, Block B

Tower 2, Wangjing SOHO

No. 1 Futongdong Street

Chaoyang District, Beijing 100102

People’s Republic of China

(Address of principal executive offices)

Cathy Hui Peng, Chief Financial Officer

Telephone:

+86-10-5731-0567

Email: ir@immomo.com

20th Floor, Block B

Tower 2, Wangjing SOHO

No. 1 Futongdong Street

Chaoyang District, Beijing 100102

People’s Republic of China

(Name, Telephone,

E-mail

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

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


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

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

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

None

(Title of Class)

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

None

(Title of Class)

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

294,720,726 Class A ordinary shares and 80,364,466 Class B ordinary shares, par value US$0.0001 per share, as of December 31, 2023.

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

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

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

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

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

S-T

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

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

non-accelerated

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

12b-2

of the Exchange Act. (Check one):

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

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to

§240.10D-1(b). ☐

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


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

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

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

12b-2

of the Exchange Act).

☐ Yes

☒

(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


INTRODUCTION			1

FORWARD-LOOKING INFORMATION			1

PART I			2
Item 1. Identity of Directors, Senior Management and Advisers			2
Item 2. Offer Statistics and Expected Timetable			2
Item 3. Key Information			2
Item 4. Information on the Company			60
Item 4A. Unresolved Staff Comments			96
Item 5. Operating and Financial Review and Prospects			96
Item 6. Directors, Senior Management and Employees			116
Item 7. Major Shareholders and Related Party Transactions			125
Item 8. Financial Information			128
Item 9. The Offer and Listing			129
Item 10. Additional Information			130
Item 11. Quantitative and Qualitative Disclosures about Market Risk			146
Item 12. Description of Securities Other than Equity Securities			147

PART II			148
Item 13. Defaults, Dividend Arrearages and Delinquencies			148
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds			148
Item 15. Controls and Procedures			148
Item 16A. Audit Committee Financial Expert			150
Item 16B. Code of Ethics			150
Item 16C. Principal Accountant Fees and Services			151
Item 16D. Exemptions from the Listing Standards for Audit Committees			152
Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers			152
Item 16F. Change in Registrant’s Certifying Accountant			152
Item 16G. Corporate Governance			152
Item 16H. Mine Safety Disclosure			153
Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections			153
Item 16J. Insider Trading Policies			153
Item 16K. Cybersecurity			153

PART III			154
Item 17. Financial Statements			154
Item 18. Financial Statements			154
Item 19. Exhibits			154

SIGNATURES			162

INTRODUCTION

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

•

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

•

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

•

“MAUs” refers to monthly active users. We define Tantan MAUs during a given calendar month as Tantan users who were daily active users for at least one day during the 30-day period counting back from the last day of such calendar month. Tantan daily active users are users who accessed our platform through mobile devices and utilized any of the functions on our platform on a given day;

•

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

•

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

•

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

FORWARD-LOOKING INFORMATION

This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by words or phrases such as “may,” “could,” “should,” “would,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to,” “project,” “continue,” “potential” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

•

our goals and strategies;

•

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

•

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

•

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

•

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

•

our monetization strategies;

•

our plans to invest in our technology infrastructure;

•

competition in our industry; and

•

government policies and regulations relating to our industry.

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

Current period amounts in this annual report are translated into U.S. dollars for the convenience of the readers. Unless otherwise stated, all translations of Renminbi into U.S. dollars were made at the rate at RMB7.0999 to US$1.0000, the exchange rate as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System in effect as of December 29, 2023. We make no representation that any RMB or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or RMB, as the case may be, at any particular rate, or at all. The mainland China government imposes control over its foreign currency reserves in part through direct regulation of the conversion of RMB into foreign exchange and through restrictions on foreign trade.

PART I

Item 1.

Identity of Directors, Senior Management and Advisers

Not applicable.

Item 2.

Offer Statistics and Expected Timetable

Not applicable.

Item 3.

Key Information

Our Holding Company Structure and Contractual Arrangements with the VIEs

Hello Group Inc. is not a mainland China operating company, but rather a Cayman Islands holding company with no equity ownership in the consolidated variable interest entities, or the VIEs. Our Cayman Islands holding company does not conduct business operations directly. We conduct our operations in mainland China through (i) our mainland China subsidiaries and (ii) the VIEs with which we have maintained contractual arrangements and their subsidiaries in mainland China. Mainland China laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies that engage in certain value-added telecommunication services, internet audio-video program services and certain other businesses. Accordingly, we operate these businesses in mainland China through the VIEs and their subsidiaries, and rely on contractual arrangements among our mainland China subsidiaries, the VIEs and their nominee shareholders to control the business operations of the VIEs. The VIEs are consolidated for accounting purposes, but are not entities in which our Cayman Islands holding company, or our investors, own equity. This structure involves unique risks to investors. Investors in our ADSs are not purchasing equity interest in the VIEs in mainland China, but instead are purchasing equity interest in a holding company incorporated in the Cayman Islands, and the VIE structure provides contractual exposure to foreign investment in the companies which involve foreign investment restrictions or prohibitions. Revenues contributed by the VIEs accounted for 98.4%, 95.7% and 93.3% of our total revenues for the years ended December 31, 2021, 2022 and 2023, respectively. As used in this annual report, “we,” “us,” “our company,” “our,” or “Hello Group” refers to Hello Group Inc., its subsidiaries, and, in the context of describing our operations and consolidated financial information, the VIEs and their subsidiaries in mainland China, including but not limited to Beijing Momo Technology Co., Ltd., or Beijing Momo, Tianjin Heer Technology Co., Ltd., or Tianjin Heer, Loudi Momo Technology Co. Ltd., or Loudi Momo, Chengdu Momo Technology Co. Ltd., or Chengdu Momo, Hainan Yilingliuer Network Technology Co., Ltd., or Hainan Yilingliuer, Hainan Miaoka Network Technology Co., Ltd., or Hainan Miaoka, Tantan Culture Development (Beijing) Co., Ltd., or Tantan Culture, Tianjin Apollo Exploration Culture Co., Ltd., or Tianjin Apollo, QOOL Media (Tianjin) Co., Ltd., or Tianjin QOOL Media, Beijing Top Maker Technology Co., Ltd. (formerly known as Beijing Fancy Reader Technology Co., Ltd.), or Beijing Top Maker, Beijing Perfect Match Technology Co., Ltd., or Beijing Perfect Match, SpaceTime (Beijing) Technology Co., Ltd., or SpaceTime Beijing, and Tianjin Nishuodedoudui Technology Co., Ltd., or Tianjin Nishuodedoudui.

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

•

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

•

exercise effective control over the VIEs; and

•

hold an exclusive option to purchase all or part of the equity interests in the VIEs when and to the extent permitted by mainland China law.

A series of contractual agreements, including business operation agreements, exclusive call option agreements, equity interest pledge agreements, exclusive cooperation agreements, power of attorney and spousal consent letters, have been entered into by and among our subsidiaries, the VIEs and their respective shareholders. Terms contained in each set of contractual arrangements with the VIEs and their respective shareholders are substantially similar. Despite the lack of legal majority ownership, our Cayman Island holding company is considered the primary beneficiary of the VIEs for accounting purposes and consolidates the VIEs and their subsidiaries as required by Accounting Standards Codification, or ASC, topic 810, Consolidation. Accordingly, we treat the VIEs as the consolidated entities under the accounting principles generally accepted in the United States, or U.S. GAAP, and we consolidate the financial results of the VIEs in the consolidated financial statements in accordance with U.S. GAAP. For more details of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the VIEs and Their Respective Shareholders.”

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

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

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

Other Risks Related to Our Mainland China Operations

We face various risks and uncertainties related to doing business in mainland China. Our business operations are primarily conducted in mainland China, and we are subject to complex and evolving mainland China laws and regulations. For example, we face risks associated with recent statements and regulatory actions by mainland China’s government, such as those related to the use of variable interest entities, regulatory approvals on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments or financing, or list on a United States or other overseas exchange. These risks could result in a material adverse change in our operations and the value of our ADSs, significantly limit or completely hinder our ability to continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. For a detailed description of risks related to doing business in mainland China, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China.”

For example, in December 2021, the Cyberspace Administration of China, or the CAC, together with other authorities, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022 and replaced its predecessor regulation. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services, and operators of network platforms conducting data processing activities must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that network platform operators that hold personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity review before any initial public offering at a foreign stock exchange. Given that the Cybersecurity Review Measures were recently promulgated, there are substantial uncertainties as to its interpretation, application, and enforcement. See “Item 3. Key Information—Risk Factors—Risks Related to Our Business and Industry—Our business is subject to complex and evolving Chinese and international laws and regulations regarding cybersecurity, information security, privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation, and any failure or perceived failure to comply with these laws and regulations could result in claims, changes to our business practices, negative publicity, legal proceedings, increased cost of operations, or declines in user base or engagement, or otherwise harm our business.”

In addition, on February 17, 2023, the China Securities Regulatory Commission, or the CSRC, promulgated Trial Administrative Measures of the Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures and relevant five guidelines, which became effective on March 31, 2023. The Overseas Listing Trial Measures comprehensively improves and reforms the existing regulatory regime for overseas offering and listing of mainland China domestic companies’ securities and regulates both direct and indirect overseas offering and listing of mainland China domestic companies’ securities by adopting a filing-based regulatory regime. According to the Overseas Listing Trial Measures, any of our offering and listing in an overseas market in future may be subject to the filing with the CSRC. See “Item 3. Key Information—Risk Factors—Risks Related to Doing Business in Mainland China—The approval of or filing with the CSRC or other mainland China government authorities may be required in connection with our offshore offerings under mainland China law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval.”

Furthermore, the PRC anti-monopoly regulators have promulgated new anti-monopoly and competition laws and regulations and strengthened the enforcement under these laws and regulations. There remain uncertainties as to how the laws, regulations and guidelines recently promulgated will be implemented and whether these laws, regulations and guidelines will have a material impact on our business, financial condition, results of operations and prospects. We cannot assure you that our business operations comply with such regulations and authorities’ requirements in all respects. If any non-compliance is raised by relevant authorities and determined against us, we may be subject to fines and other penalties. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Any failure or perceived failure by us to comply with the Anti-Monopoly Guidelines for Platforms Economy Sector and other mainland China 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.”

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

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

The Holding Foreign Companies Accountable Act

Pursuant to the Holding Foreign Companies Accountable Act, which was enacted on December 18, 2020 and further amended by the Consolidated Appropriations Act, 2023 signed into law on December 29, 2022, or the HFCAA, if the Securities and Exchange Commission, or the SEC, determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the Public Company Accounting Oversight Board (United States), or the PCAOB, for two consecutive years, the SEC will prohibit our shares or the ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of the annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. For this reason, we were not identified as a Commission-Identified Issuer under the HFCAA after we filed our annual report on Form 20-F for the fiscal year ended December 31, 2022 and do not expect to be identified so after we file this annual report on Form 20-F for the fiscal year ended December 31, 2023.

Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. If PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we continue to use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the Securities and Exchange Commission, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. There can be no assurance that we would not be identified as a Commission-Identified Issuer for any future fiscal year, and if we were so identified for two consecutive years, we would become subject to the prohibition on trading under the HFCAA. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections.” And “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in Mainland China—Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in mainland China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”

Cash Flow Through Our Organization

Hello Group Inc. is a holding company with no operations of its own. We conduct our operations primarily through our mainland China subsidiaries, the VIEs and their subsidiaries in mainland China. As a result, Hello Group Inc.’s ability to pay dividends depends upon dividends paid by our mainland China subsidiaries. If our existing mainland China subsidiaries or any newly formed ones incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, current mainland China regulations permit our mainland China subsidiaries to pay dividends to their respective shareholders only out of their accumulated profits, if any, determined in accordance with mainland China accounting standards and regulations. Furthermore, each of our mainland China subsidiaries and the VIEs is required to set aside at least 10% of its after-tax profits each year, if any, to fund a statutory reserve until such reserve reaches 50% of its registered capital. Each of such entities in mainland China is also required to further set aside a portion of its after-tax profits to fund the employee welfare fund, although the amount to be set aside, if any, is determined at the discretion of its board of directors. These reserves are not distributable as cash dividends. For more details, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.” Our subsidiaries’ ability to distribute dividends is based upon their distributable earnings.

Under mainland China laws and regulations, our mainland China subsidiaries and the VIEs are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of mainland China is also subject to examination by the banks designated by State Administration of Foreign Exchange, or SAFE. The amounts restricted include the paid-up capital and the statutory reserve funds of our mainland China subsidiaries and the net assets of the VIEs in which we have no legal ownership, totaling RMB1.5 billion, RMB1.5 billion and RMB1.5 billion (US$0.2 billion) as of December 31, 2021, 2022 and 2023, respectively. For risks relating to the fund flows of our operations in mainland China, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We may rely on dividends paid by our mainland China subsidiaries to fund cash and financing requirements. Any limitation on the ability of our mainland China subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of the ADSs and our ordinary shares.”

For the years ended December 31, 2021, 2022 and 2023, the Company declared and distributed cash dividends with amount of US$132.0 million, US$127.3 million and US$136.6 million to its investors, respectively, which was funded by surplus cash on our balance sheet.

For the years ended December 31, 2021 and 2022, Beijing Momo IT declared and distributed dividends with amount of RMB1,300.0 million and RMB3,600.0 million, respectively, to its offshore parent company, Momo HK. For the year ended December 31, 2023, Beijing Momo IT declared dividends with amount of RMB1,800.0 million (US$253.5 million), which was paid in January 2024. Withholding taxes of RMB130.0 million, RMB360.0 million and RMB180.0 million (US$25.4 million) in connection with the dividends were fully paid during the years ended December 31, 2021, 2022 and 2023, respectively.

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

For the years ended December 31, 2021, 2022 and 2023, Hello Group Inc. provided loans with principal amount of RMB820.9 million, RMB6.6 million and nil, respectively, to its subsidiaries, and for the year ended December 31, 2023, the subsidiaries paid RMB145.4 million (US$20.5 million) to Hello Group Inc. as repayment for previous loans outstanding.

For the years ended December 31, 2021, 2022 and 2023, Hello Group Inc. did not provide capital contributions to its subsidiaries.

For the years ended December 31, 2021, 2022 and 2023, the subsidiaries of Hello Group Inc. provided loans with principal of nil, nil and RMB4,600 million (US$647.9 million) to Hello Group Inc., respectively, and there was no repayment from Hello Group Inc. to its subsidiaries.

For the years ended December 31, 2021, 2022 and 2023, subsidiaries of Hello Group Inc. provided loans with principal amount of RMB799.8 million, nil and nil, respectively, to the VIEs and there was no repayment from the VIEs to our subsidiaries.

For the years ended December 31, 2021, 2022 and 2023, the VIEs provided loans with principal amount of nil, RMB1,232.9 million and RMB697.4 million (US$98.2 million), respectively, to our mainland China subsidiaries and there was no repayment from our mainland China subsidiaries to the VIEs.

The VIEs may transfer cash to the subsidiaries of Hello Group Inc. by paying service fees and license fees pursuant to certain contractual arrangements among them, and we intend to settle the services fees and license fees through such contractual arrangements going forward. For the years ended December 31, 2021, 2022 and 2023, subsidiaries of Hello Group Inc. received license fee, technical service fees and non-technical services fees with amount of RMB5,616.2 million, RMB4,369.7 million and RMB3,948.9 million (US$556.2 million), respectively, from the VIEs.

For the years ended December 31, 2021, 2022 and 2023, cash paid by the VIEs to the subsidiaries of Hello Group Inc. for other operation service fees were RMB64.5 million, RMB49.4 million and RMB7.8 million (US$1.1 million), respectively. For the years ended December 31, 2021, 2022 and 2023, cash paid by the subsidiaries of Hello Group Inc. to VIEs for other operation service fees were nil, nil and RMB0.2 million (US$0.03 million), respectively.

We have established stringent controls and procedures for cash flows within our organization. Each transfer of cash between our Cayman Islands holding company and a subsidiary, the VIE or the subsidiaries of the VIE is subject to internal approval. The cash of our group is under the unified management of our finance department, and is dispatched and applied to each operating entity based on the budget and operating conditions of the specific operating entity. Each cash requirement, after raised by an operating entity, is required to go through a two-level review process of our finance department. The funding team of the finance department will allocate the cash to the operating entity after the application for cash requirement is approved by the responsible person in the finance department. For more details regarding our intragroup cash flow, see the condensed consolidating schedules and statements under “Financial Information Related to the VIEs.”

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

Permissions Required from the Mainland China Authorities for Our Operations

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

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

Financial Information Related to the VIEs

The following table presents the condensed consolidating schedule of financial position for Hello Group Inc., its wholly foreign-owned entities, or the WFOEs, that are the primary beneficiaries of the VIEs under U.S. GAAP, or the Primary Beneficiaries of VIEs, its other subsidiaries that are not the Primary Beneficiaries of the VIEs, or the Other Subsidiaries, and the VIEs and their subsidiaries, or the VIEs and Their Consolidated Subsidiaries, as of the dates presented.

Selected Condensed Consolidating Statements of Income Information


	For the Year Ended December 31, 2023
	Hello Group, Inc.			Other Subsidiaries			Primary Beneficiaries of VIEs			VIEs and Their Consolidated Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Third-party revenues		—			798,345			28			11,203,950			—			12,002,323
Inter-company revenues⁽¹⁾		—			—			3,835,910			231			(3,836,141	)		—
Total costs and expenses		(159,257	)		(775,970	)		(2,062,423	)		(10,665,903	)		3,836,141			(9,827,412	)
Income (loss) from subsidiaries and the VIEs⁽²⁾		2,161,383			2,320,998			448,441			—			(4,930,822	)		—
Other (loss) income		(691	)		1,974			371,841			104,326			—			477,450

Income (loss) before income tax expense and share of loss on equity method investments		2,001,435			2,345,347			2,593,797			642,604			(4,930,822	)		2,652,361
Income tax expenses		—			(183,981	)		(270,524	)		(175,518	)		—			(630,023	)
Share of loss on equity method investments		(43,854	)		—			(2,275	)		(24,514	)		—			(70,643	)

Net income (loss)		1,957,581			2,161,366			2,320,998			442,572			(4,930,822	)		1,951,695
Less: net loss attributable to non-controlling interests		—			(17	)		—			(5,869	)		—			(5,886	)

Net income (loss) attributable to Hello Group’s shareholders		1,957,581			2,161,383			2,320,998			448,441			(4,930,822	)		1,957,581


	For the Year Ended December 31, 2022
	Hello Group, Inc.			Other Subsidiaries			Primary Beneficiaries of VIEs			VIEs and Their Consolidated Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Third-party revenues		—			549,310			1,865			12,152,997			—			12,704,172
Inter-company revenues⁽¹⁾		—			—			4,134,173			—			(4,134,173	)		—
Total costs and expenses		(237,702	)		(539,969	)		(2,906,256	)		(11,547,507	)		4,134,173			(11,097,261	)
Income (loss) from subsidiaries and the VIEs⁽²⁾		1,616,391			1,768,959			463,592			—			(3,848,942	)		—
Other income		86,582			2,364			284,091			51,269			—			424,306

Income (loss) before income tax expense and share of loss on equity method investments		1,465,271			1,780,664			1,977,465			656,759			(3,848,942	)		2,031,217
Income tax expenses		—			(164,290	)		(208,425	)		(189,566	)		—			(562,281	)
Share of income (loss) on equity method investments		19,012			(1	)		(82	)		(7,856	)		—			11,073

Net income (loss)		1,484,283			1,616,373			1,768,958			459,337			(3,848,942	)		1,480,009
Less: net loss attributable to non-controlling interests		—			(18	)		—			(4,256	)		—			(4,274	)

Net income (loss) attributable to Hello Group’s shareholders		1,484,283			1,616,391			1,768,958			463,593			(3,848,942	)		1,484,283


	For the Year Ended December 31, 2021
	Hello Group, Inc.			Other Subsidiaries			Primary Beneficiaries of VIEs			VIEs and Their Consolidated Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Third-party revenues		—			238,224			956			14,336,539			—			14,575,719
Inter-company revenues⁽¹⁾		—			—			5,100,060			1,352			(5,101,412	)		—
Total costs and expenses		(248,609	)		(6,257,292	)		(2,025,730	)		(13,711,014	)		5,101,412			(17,141,233	)
(Loss) income from subsidiaries and the VIEs⁽²⁾		(2,629,002	)		3,424,401			587,892			—			(1,383,291	)		—
Other (loss) income		(36,876	)		240,061			84,452			182,813			—			470,450

(Loss) income before income tax expense and share of loss on equity method investments		(2,914,487	)		(2,354,606	)		3,747,630			809,690			(1,383,291	)		(2,095,064	)
Income tax expenses		—			(274,404	)		(323,224	)		(224,928	)		—			(822,556	)
Share of income (loss) on equity method investments		779			—			—			(8,863	)		—			(8,084	)

Net (loss) income		(2,913,708	)		(2,629,010	)		3,424,406			575,899			(1,383,291	)		(2,925,704	)
Less: net loss attributable to non-controlling interests		—			(14	)		—			(11,982	)		—			(11,996	)

Net (loss) income attributable to Hello Group’s shareholders		(2,913,708	)		(2,628,996	)		3,424,406			587,881			(1,383,291	)		(2,913,708	)

Selected Condensed Consolidating Balance Sheets Information


	As of December 31, 2023
	Hello Group, Inc.		Other Subsidiaries		Primary Beneficiaries of VIEs		VIEs and Their Consolidated Subsidiaries		Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Cash and cash equivalents		1,460,863		74,823		1,461,987		2,622,793		—			5,620,466
Short-term deposits		520,626		—		750,000		—		—			1,270,626
Restricted cash		—		—		1,387		8,760		—			10,147
Accounts receivable		—		46,273		—		155,244		—			201,517
Amount due from Group companies⁽³⁾		—		—		3,936,743		1,331,782		(5,268,525	)		—
Other current assets		67,487		30,463		284,435		369,126		(20,889	)		730,622
Long-term deposits		1,774,975		—		2,000,000		150,000		—			3,924,975
Long-term restricted cash		85,199		—		2,567,100		—		—			2,652,299
Investment in subsidiaries and the VIEs⁽²⁾		14,159,352		13,417,132		3,970,536		—		(31,547,020	)		—
Long-term investments		104,335		300,000		86,736		295,840		—			786,911
Other non-current assets		—		4,201		712,122		314,123		—			1,030,446

Total assets		18,172,837		13,872,892		15,771,046		5,247,668		(36,836,434	)		16,228,009

Accounts payable		—		34,041		61,337		521,303		—			616,681
Deferred revenue		—		14,258		—		428,547		—			442,805
Amount due to Group companies⁽³⁾		3,890,817		1,377,708		—		—		(5,268,525	)		—
Other current liabilities		265,081		50,975		360,657		355,821		—			1,032,534
Long-term borrowings		1,938,385		—		—		—		—			1,938,385
Other non-current liabilities		48,458		100,897		32,179		29,280		—			210,814

Total Liabilities		6,142,741		1,577,879		454,173		1,334,951		(5,268,525	)		4,241,219
Total shareholders’ equity		12,030,096		12,295,013		15,316,873		3,912,717		(31,567,909	)		11,986,790

Total liabilities and shareholders’ equity		18,172,837		13,872,892		15,771,046		5,247,668		(36,836,434	)		16,228,009


	As of December 31, 2022
	Hello Group, Inc.		Other Subsidiaries		Primary Beneficiaries of VIEs			VIEs and Their Consolidated Subsidiaries		Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Cash and cash equivalents		578,935		136,570		2,194,376			2,108,248		—			5,018,129
Short-term deposits		—		—		4,450,000			850,000		—			5,300,000
Restricted cash		—		—		—			97,706		—			97,706
Short-term investment		—		—		300,240			—		—			300,240
Accounts receivable		—		34,011		—			154,700		—			188,711
Amount due from Group companies⁽³⁾		686,429		—		236,695			631,607		(1,554,731	)		—
Other current assets		20,683		11,396		406,869			401,702		(20,889	)		819,761
Long-term deposits		—		—		2,600,000			—		—			2,600,000
Investment in subsidiaries and VIEs⁽²⁾		11,794,110		11,430,678		3,522,496			—		(26,747,284	)		—
Long-term investments		143,540		300,000		70,261			380,187		—			893,988
Other non-current assets		82,766		16		236,428			291,842		—			611,052

Total assets		13,306,463		11,912,671		14,017,365			4,915,992		(28,322,904	)		15,829,587

Accounts payable		—		25,010		82,970			509,042		—			617,022
Deferred revenue		—		15,711		(12	)		469,076		—			484,775
Amount due to Group companies⁽³⁾		—		1,554,731		—			—		(1,554,731	)		—
Other current liabilities		2,699,230		57,449		427,978			451,793		—			3,636,450
Non-current liabilities		22,644		94,449		9,550			34,059		—			160,702

Total Liabilities		2,721,874		1,747,350		520,486			1,463,970		(1,554,731	)		4,898,949
Total shareholders’ equity		10,584,589		10,165,321		13,496,879			3,452,022		(26,768,173	)		10,930,638

Total liabilities and shareholders’ equity		13,306,463		11,912,671		14,017,365			4,915,992		(28,322,904	)		15,829,587

Selected Condensed Consolidating Cash Flows Information


	For the Year Ended December 31, 2023
	Hello Group, Inc.			Other Subsidiaries			Primary Beneficiaries of VIEs			VIEs and Their Consolidated Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Net cash provided by (used in) operating activities⁽⁴⁾		4,812,146			(534,417	)		(3,079,557	)		1,078,989			—			2,277,161

Loans to Hello Group companies		—			—			(4,600,000	)		(697,402	)		5,297,402			—
Cash received from repayment for loans to Hello Group companies		145,442			—			—			—			(145,442	)		—
Cash dividends received from subsidiaries		—			180,000			—			—			(180,000	)		—
Cash received from sales of short-term investment		—			—			308,550			—			—			308,550
Purchase of short-term deposits		(1,028,556	)		—			—			—			—			(1,028,556	)
Cash received on maturity of short-term deposits		509,820			—			4,850,000			850,000			—			6,209,820
Purchase of long-term deposits		(1,810,025	)		—			(2,250,000	)		(150,000	)		—			(4,210,025	)
Cash received on maturity of long-term deposits		—			—			1,700,000			—			—			1,700,000
Other investing activities		—			—			(592,796	)		26,076			—			(566,720	)

Net cash (used in) provided by investing activities		(2,183,319	)		180,000			(584,246	)		28,674			4,971,960			2,413,069

Borrowings under loan from Hello Group companies		4,600,000			—			697,402			—			(5,297,402	)		—
Repayment for borrowings from Hello Group companies		—			(145,442	)		—			—			145,442			—
Dividends payment to Hello Group Inc.		—			—			(180,000	)		—			180,000			—
Payment in relation to redemption of convertible bonds		(2,679,942	)		—			—			—			—			(2,679,942	)
Proceeds from bank loan		2,154,000			—			—			—			—			2,154,000
Repurchase of ordinary share		(212,195	)		—			—			—			—			(212,195	)
Dividends payment to Hello Group’s shareholders		(958,052	)		—			—			—			—			(958,052	)
Other financing activities		601			(4,319	)		—			—			—			(3,718	)

Net cash provided by (used in) financing activities		2,904,412			(149,761	)		517,402			—			(4,971,960	)		(1,699,907	)


	For the Year Ended December 31, 2022
	Hello Group, Inc.			Other Subsidiaries			Primary Beneficiaries of VIEs			VIEs and Their Consolidated Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Net cash (used in) provided by operating activities⁽⁴⁾		(61,675	)		(364,460	)		108,819			1,544,207			—			1,226,891

Loans to Hello Group companies		(6,636	)		—			—			(1,232,857	)		1,239,493			—
Cash dividends received from subsidiaries		3,075,912			3,600,000			—			—			(6,675,912	)		—
Payment for short-term investments		—			—			(300,000	)		—			—			(300,000	)
Purchase of short-term deposits		—			—			(900,000	)		(800,000	)		—			(1,700,000	)
Cash received on maturity of short-term deposits		—			—			4,860,000			550,000			—			5,410,000
Purchase of long-term deposits		—			—			(2,750,000	)		—			—			(2,750,000	)
Cash received on maturity of long-term deposits		—			—			500,000			700,000			—			1,200,000
Other investing activities		—			—			(146,083	)		1,928			—			(144,155	)

Net cash provided by (used in) investing activities		3,069,276			3,600,000			1,263,917			(780,929	)		(5,436,419	)		1,715,845

Borrowings under loan from Hello Group companies		—			6,636			1,232,857			—			(1,239,493	)		—
Dividends payment to Hello Group Inc.		—			(3,075,912	)		(3,600,000	)		—			6,675,912			—
Payment for redemption of convertible bonds		(2,136,987	)		—			—			—			—			(2,136,987	)
Repurchase of ordinary shares		(392,374	)		—			—			—			—			(392,374	)
Dividends payment to Hello Group’s shareholders		(840,997	)		—			—			—			—			(840,997	)
Other financing activities		(21,258	)		(40,943	)		—			—			—			(62,201	)

Net cash (used in) provided by financing activities		(3,391,616	)		(3,110,219	)		(2,367,143	)		—			5,436,419			(3,432,559	)


	For the Year Ended December 31, 2021
	Hello Group, Inc.			Other Subsidiaries			Primary Beneficiaries of VIEs			VIEs and Their Consolidated Subsidiaries			Eliminating Adjustments			Consolidated Totals

	(in RMB thousands)
Net cash provided by (used in) operating activities⁽⁴⁾		25,346			(600,005	)		2,283,830			(149,973	)		—			1,559,198

Loans to Hello Group companies		(820,897	)		—			(799,794	)		—			1,620,691			—
Capital injection to subsidiaries		—			(32,293	)		—			—			32,293			—
Cash dividends received from subsidiaries		1,153,506			1,300,000			—			—			(2,453,506	)		—
Purchase of short-term deposits		(516,688	)		—			(3,910,000	)		(550,000	)		—			(4,976,688	)
Cash received on maturity of short-term deposits		2,263,070			—			6,800,000			604,500			—			9,667,570
Purchase of long-term deposits		—			—			(1,850,000	)		—			—			(1,850,000	)
Other investing activities		(115,052	)		(302,336	)		(72,745	)		199,593			—			(290,540	)

Net cash provided by (used in) investing activities		1,963,939			965,371			167,461			254,093			(800,522	)		2,550,342

Borrowings under loan from Hello Group companies		—			820,897			—			799,794			(1,620,691	)		—
Capital injection from parent company		—			—			32,293			—			(32,293	)		—
Dividends payment to Hello Group Inc.		—			(1,153,506	)		(1,300,000	)		—			2,453,506			—
Repurchase of ordinary shares		(862,865	)		—			—			—			—			(862,865	)
Dividends payment to Hello Group’s shareholders		(852,743	)		—			—			—			—			(852,743	)
Other financing activities		(12,181	)		(59,120	)		—			—			—			(71,301	)

Net cash (used in) provided by financing activities		(1,727,789	)		(391,729	)		(1,267,707	)		799,794			800,522			(1,786,909	)

Notes:

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

(2)	Represents the elimination of the investment among Hello Group Inc., other subsidiaries, the primary beneficiaries and the VIEs and their subsidiaries.

(3)	Represents the elimination of intercompany balances among Hello Group Inc., other subsidiaries, the primary beneficiaries and the VIEs and their subsidiaries.

(4)

For the years ended December 31, 2021, 2022 and 2023, cash paid by the VIEs to the primary beneficiaries for license fee, technical service fees and non-technical service fees were RMB5,616.2 million, RMB4,369.7 million and RMB3,948.9 million (US$556.2 million), respectively. For the years ended December 31, 2021, 2022 and 2023, cash paid by the VIEs to the primary beneficiaries for other operation service fee were RMB64.5 million, RMB49.4 million and RMB7.8 million (US$1.1 million), respectively. For the years ended December 31, 2021, 2022 and 2023, cash paid by the primary beneficiaries to VIEs for other operation service fees were nil, nil and RMB0.2 million (US$0.03 million), respectively.

A.	[Reserved]

The following table presents the selected consolidated financial information of our company. The selected consolidated statements of comprehensive income data for the years ended December 31, 2021, 2022 and 2023 and the selected consolidated balance sheets data as of December 31, 2022 and 2023 have been derived from our audited consolidated financial statements included in this annual report beginning on page F-1.

The selected consolidated statements of comprehensive income data for the years ended December 31, 2019 and 2020 and the selected consolidated balance sheets data as of December 31, 2019, 2020 and 2021 have been derived from our audited consolidated financial statements not included in this annual report. Our audited consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historical results do not necessarily indicate results expected for any future period. You should read the following selected financial data in conjunction with the consolidated financial statements and related notes and “Item 5. Operating and Financial Review and Prospects” included elsewhere in this annual report.


	Year Ended December 31,
	2019 RMB			2020 RMB			2021 RMB			2022 RMB			2023 RMB			2023 US$

	(in thousands, except share and share-related data)
Selected Data of Consolidated Statements of Operations
Net Revenues⁽¹⁾		17,015,089			15,024,188			14,575,719			12,704,172			12,002,323			1,690,492
Cost and expenses⁽²⁾
Cost of revenues		(8,492,096	)		(7,976,781	)		(8,383,431	)		(7,421,419	)		(7,025,394	)		(989,506	)
Research and development expenses		(1,095,031	)		(1,167,677	)		(1,131,781	)		(1,006,219	)		(884,590	)		(124,592	)
Sales and marketing expenses		(2,690,824	)		(2,813,922	)		(2,604,309	)		(2,073,617	)		(1,414,949	)		(199,291	)
General and administrative expenses		(1,527,282	)		(763,150	)		(624,700	)		(596,006	)		(502,479	)		(70,773	)
Impairment loss on goodwill and intangible assets		—			—			(4,397,012	)		—			—			—

Total cost and expenses		(13,805,233	)		(12,721,530	)		(17,141,233	)		(11,097,261	)		(9,827,412	)		(1,384,162	)

Other operating income		344,843			228,777			175,947			20,632			130,105			18,325
Income (loss) from operations		3,554,699			2,531,435			(2,389,567	)		1,627,543			2,305,016			324,655
Interest income		407,542			444,471			384,279			368,879			436,253			61,445
Interest expense		(78,611	)		(78,872	)		(73,776	)		(83,530	)		(62,223	)		(8,764	)
Other gain or loss, net		(15,711	)		1,500			(16,000	)		118,325			(26,685	)		(3,759	)

Income (loss) before income tax and share of income on equity method investments		3,867,919			2,898,534			(2,095,064	)		2,031,217			2,652,361			373,577
Income tax expenses		(883,801	)		(755,620	)		(822,556	)		(562,281	)		(630,023	)		(88,737	)

Income (loss) before share of income (loss) on equity method investments		2,984,118			2,142,914			(2,917,620	)		1,468,936			2,022,338			284,840
Share of (loss) income on equity method investments		(23,350	)		(42,522	)		(8,084	)		11,073			(70,643	)		(9,950	)
Net income (loss)		2,960,768			2,100,392			(2,925,704	)		1,480,009			1,951,695			274,890
Less: net loss attributable to non-controlling interest		(10,122	)		(3,092	)		(11,996	)		(4,274	)		(5,886	)		(829	)

Net income (loss) attributable to Hello Group Inc.		2,970,890			2,103,484			(2,913,708	)		1,484,283			1,957,581			275,719


	Year Ended December 31,
	2019 RMB		2020 RMB		2021 RMB			2022 RMB		2023 RMB		2023 US$

	(in thousands, except share and share-related data)
Net income attributable to ordinary shareholders		2,970,890		2,103,484		(2,913,708	)		1,484,283		1,957,581		275,719

Net income (loss) per share attributable to ordinary shareholders
Basic		7.15		5.05		(7.20	)		3.80		5.18		0.73
Diluted		6.76		4.83		(7.20	)		3.65		4.92		0.69
Weighted average shares used in computing net income per ordinary share
Basic		415,316,627		416,914,898		404,701,910			390,176,367		377,639,399		377,639,399
Diluted		451,206,091		452,081,642		404,701,910			423,810,279		401,833,328		401,833,328

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


	Year Ended December 31,
	2019 RMB		2020 RMB		2021 RMB		2022 RMB		2023 RMB		2023 US$

	(in thousands)
Live video service		12,448,131		9,637,579		8,378,945		6,510,460		6,072,871		855,346
Value-added service		4,105,963		5,112,182		5,971,792		6,007,018		5,752,571		810,233
Mobile marketing		331,822		198,197		159,010		124,956		133,677		18,828
Mobile games		92,451		39,564		47,712		55,732		19,610		2,762
Other services		36,722		36,666		18,260		6,006		23,594		3,323

Total		17,015,089		15,024,188		14,575,719		12,704,172		12,002,323		1,690,492

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


	Year Ended December 31,
	2019 RMB		2020 RMB		2021 RMB		2022 RMB		2023 RMB		2023 US$

	(in thousands)
Cost of revenues		23,972		18,449		17,941		14,195		6,307		888
Research and development expenses		175,053		175,870		139,571		88,797		64,561		9,093
Sales and marketing expenses		196,311		158,902		70,821		38,432		29,066		4,094
General and administrative expenses		1,012,896		325,465		247,438		260,060		167,167		23,545

Total		1,408,232		678,686		475,771		401,484		267,101		37,620

The following table presents our selected consolidated balance sheet data as of December 31, 2019, 2020, 2021, 2022 and 2023.


	As of December 31,
	2019 RMB		2020 RMB		2021 RMB		2022 RMB		2023 RMB		2023 US$

	(in thousands)
Selected Consolidated Balance Sheet Data:
Cash and cash equivalents		2,612,743		3,363,942		5,570,563		5,018,129		5,620,466		791,626
Total assets		22,483,681		23,220,556		18,111,238		15,829,587		16,228,009		2,285,669
Total liabilities		8,764,899		8,385,227		7,525,641		4,898,949		4,241,219		597,365
Total equity		13,718,782		14,835,329		10,585,597		10,930,638		11,986,790		1,688,304

B.	Capitalization and Indebtedness

Not applicable.

C.	Reasons for the Offer and Use of Proceeds

Not applicable.

D.	Risk Factors

Summary of Risk Factors

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

Risks Related to Our Business and Industry

•

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

•

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

•

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

•

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

•

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

•

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

•

A severe or prolonged downturn in the Chinese or global economy could materially and adversely affect our business, financial condition and results of operations;

•

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

•

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

Risks Related to Our Corporate Structure

•

We are a Cayman Islands holding company with no equity ownership in the VIEs and we conduct our operations in mainland China through our mainland China subsidiaries and the VIEs. If the mainland China government finds that the agreements that establish the structure for operating certain of our operations in mainland China do not comply with mainland China regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, the VIEs, and investors of our company face uncertainty about potential future actions by the mainland China government that could affect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of the VIEs and our company as a group. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the mainland China government finds that the agreements that establish the structure for operating certain of our operations in mainland China do not comply with mainland China 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;”

•

We rely on contractual arrangements with the VIEs and their respective shareholders for our operations in mainland China, which may not be as effective in providing operational control as direct ownership. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with the VIEs and their respective shareholders for our operations in mainland China, which may not be as effective in providing operational control as direct ownership;” and

•

We may lose the ability to use and enjoy assets held by the VIEs that are important to the operation of our business if the VIEs declare bankruptcy or become subject to a dissolution or liquidation proceeding. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We may lose the ability to use and enjoy assets held by the VIEs that are important to the operation of the business if the VIEs declare bankruptcy or become subject to a dissolution or liquidation proceeding.”

Risks Related to Doing Business in mainland China

•

The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—The PCAOB had historically been unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections of our auditor in the past has deprived our investors with the benefits of such inspections;”

•

Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in mainland China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—Our ADSs may be prohibited from trading in the United States under the HFCAA in the future if the PCAOB is unable to inspect or investigate completely auditors located in mainland China. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment;”

•

The mainland China government’s significant oversight and discretion over our business operations could result in a material adverse change in our operations and the value of our ADSs. The Chinese government may intervene or influence our operations at any time, or may exert more control over offerings conducted overseas and/or foreign investment in China-based issuers, which could result in a material change in our operations and/or the value of our securities. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—The mainland China government’s significant oversight and discretion over our business operations could result in a material adverse change in our operations and the value of our ADSs;”

•

Uncertainties in the interpretation and enforcement of mainland China laws and regulations could limit the legal protections available to you and us. Rules and regulations in China can change quickly with little advance notice. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—Uncertainties in the interpretation and enforcement of mainland China laws and regulations could limit the legal protections available to you and us;”

•

We face uncertainties with respect to the implementation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—We face uncertainties with respect to the implementation of the PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations;”

•

Mainland China’s M&A Rules and certain other mainland China regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in mainland China. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—Mainland China’s M&A Rules and certain other mainland China regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in mainland China;” and

•

The approval of or filing with the CSRC or other mainland China government authorities may be required in connection with our offshore offerings under mainland China law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval. Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or be worthless. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—The approval of or filing with the CSRC or other mainland China government authorities may be required in connection with our offshore offerings under mainland China law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval.”

Risks Related to our ADSs

•

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

•

We believe that we were a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for the taxable year ended December 31, 2023, which could result in significant adverse U.S. federal income tax consequences to U.S. Holders of our ADSs or ordinary shares;

•

If we are deemed to be an investment company under the Investment Company Act of 1940, applicable restrictions could have a material adverse effect on our business and the price of our ADSs and Class A ordinary shares;

•

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

•

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

Risks Related to Our Business and Industry

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

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

•

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

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

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

As the online social networking industry in mainland China is relatively young, prevailing monetization models similar to ours have yet to be proven to be sustainable, and it may be more difficult to predict user and customer behaviors and demands compared to other established industries. Our monetization model has been evolving. We began to generate revenues in the second half of 2013 primarily through membership subscriptions and also game publishing and other services, but we continue to explore and implement new monetization models. While membership subscriptions contributed a majority of our revenues prior to 2016, live video service, which we launched in September 2015 and adopted a virtual items-based revenue model, has replaced membership subscription as our major source of revenues in after 2016. The services that we currently provide, including live video service, value-added service (comprising membership subscriptions and virtual gift service), mobile marketing services, mobile games, and other services, contributed approximately 50.6%, 47.9%, 1.1%, 0.2% and 0.2%, respectively, of our net revenues in 2023. Apart from live video services, from time to time we have launched new services on our platform, explored new monetization models and broadened our revenue sources, and we expect to continue to do so. For example, in the fourth quarter of 2016, we launched a virtual gift service which allows our users to purchase and send virtual gifts to other users outside of live video service. In 2018, we co-produced a TV variety show. In 2018, Tantan launched membership subscriptions and some other premium features on a pay-per-use basis. In 2019, Tantan introduced Quick Chat, which has services based on both the subscription model and the pay-per-use model. In 2020, Tantan launched its live video services with a virtual item-based revenue model. Tantan is also experimenting other monetization models in order to improve its revenues and profits. In 2021, Tantan launched a virtual gift-based Chatroom experience as part of its value-added service. However, there is no assurance that any of these and other new monetization models would be profitable or sustainable. If our strategic initiatives do not enhance our ability to monetize our existing services or enable us to develop new approaches to monetization, we may not be able to maintain or increase our revenues and profits or recover any associated costs.

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

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

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

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

•

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

•

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

•

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

•

develop or implement strategic initiatives to monetize our platforms;

•

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

•

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

•

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

•

attract, retain and motivate talented employees; and

•

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

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

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

In September 2015, Momo launched our live video service with a virtual items-based revenue model, whereby users can enjoy live performances and interact with the broadcasters for free, and have the option of purchasing in-show virtual items. In 2020, Tantan launched its live video services and contributed to our live video service revenue. While we had initial success with this service, which contributed RMB12,448.1 million and RMB9,637.6 million to, or 73.2% and 64.1% of, our net revenues in 2019 and 2020, respectively, this contribution dropped to RMB8,378.9 million, RMB6,510.5 million and RMB6,072.9 million (US$855.3 million) in 2021, 2022 and 2023, respectively, or 57.5%, 51.2% and 50.6% of our net revenues, respectively. While we plan to continue to invest significantly in expanding our live video service, we may not be able to continue to achieve our historical levels of profitability based on the virtual items-based revenue model. In addition, popular broadcasters or talent agencies may cease to use our service and we may be unable to attract new talents that can attract users or cause such users to increase the amount of time spent on our platform or the amount of money spent on in-show virtual items.

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

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

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

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

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

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

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 in China 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 receive negative publicity and/or become subject to penalties, including fines, suspension of business and revocation of required licenses, and our reputation and results of operations could be materially and adversely affected.

The mainland China regulatory and enforcement regime with regard to data security and data protection is evolving and may be subject to different interpretations or rapid changes. Moreover, different mainland China regulatory bodies, including the Standing Committee of the National People’s Congress, the Ministry of Industry and Information Technology, or the MIIT, the CAC, the Ministry of Public Security, and the State Administration for Market Regulation, or the SAMR, have enforced data privacy and protections laws and regulations with varying standards and applications. For certain recent mainland China regulatory activities in this area, see “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Information Security” and “Item 4. Information on the Company—B. Business Overview—Regulations—Regulations Relating to Privacy Protection.”

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. For example, in December 2021, the CAC, together with other authorities, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022 and replaces its predecessor regulation. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services, and operators of network platforms conducting data processing activities must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that network platform operators that hold personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity review before any initial public offering at a foreign stock exchange. Given that the Cybersecurity Review Measures were recently promulgated, there are substantial uncertainties as to its interpretation, application, and enforcement. On November 14, 2021, the CAC published a draft of the Administrative Regulations for Internet Data Security, or the Draft Data Security Regulations, for public comments. The Draft Data Security Regulations provides that data processors conducting the following activities must apply for cybersecurity review: (i) merger, reorganization, or division of internet platform operators that have acquired a large number of data resources related to national security, economic development, or public interests, which affects or may affect national security; (ii) a foreign listing by a data processor processing personal information of over one million users; (iii) a listing in Hong Kong which affects or may affect national security; or (iv) other data processing activities that affect or may affect national security. There have been no further clarifications from the authorities as of the date of this annual report as to the standards for determining such activities that “affects or may affect national security.” The period for which the CAC solicited comments on this draft ended on December 13, 2021, but there is no timetable as to when the draft regulations will be enacted. As such, substantial uncertainties exist with respect to the enactment timetable, final content, interpretation, and implementation of the draft regulations, including the standards for determining activities that “affects or may affect national security.” As the Draft Data Security Regulations has not been adopted and it remains unclear whether the formal version adopted in the future will have any further material changes, it is uncertain how the draft regulations will be enacted, interpreted or implemented and how they will affect us. In addition, the Cybersecurity Review Measures and the Draft Data Security Regulations remain unclear on whether the requirements will be applicable to companies that are already listed in the United States, such as us, if we were to pursue another listing outside of the mainland China. We cannot predict the impact of the Cybersecurity Review Measures and the Draft Data Security 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 Data Security Regulations mandate clearance of cybersecurity review and other specific actions to be taken by issuers like us, we face uncertainties as to whether these additional procedures can be completed by us timely, or at all, which may delay or disallow our future listings (should we decide to pursue them). If we are not able to comply with the cybersecurity and data privacy requirements in a timely manner, or at all, we may be subject to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant operations, or removal of our apps from the relevant application stores, among other sanctions, which could materially and adversely affect our business and results of operations. As of the date of this annual report, we have not been involved in any formal investigations on cybersecurity review made by the CAC on such basis.

We are constantly evaluating the potential impact of the PRC Cyber Security Law, the Data Security Law and other laws, regulations and policies relating to cybersecurity, privacy, data protection and information security on our current business practices. All these laws and regulations may result in additional expenses and obligations to us and any noncompliance with these laws and regulations may subject us to negative publicity, which could harm our reputation and negatively affect the trading price of the ADSs. We expect that these areas will receive greater public scrutiny and attention from regulators and more frequent and rigid investigation or review by regulators, which may increase our compliance costs and subject us to heightened risks and challenges. We place a strong emphasis on data security. To achieve the objective, we have established a data privacy and cybersecurity team to assist the management with respect to privacy and data usage matters, including to oversee compliance with the applicable privacy laws and regulations, periodic assessment of data privacy ethics as well as any related policies with respect to risk assessment and risk management, among other things. We have adopted a series of internal policies on data collection, processing and usage. We conduct regular self-inspections with regard to data privacy and cybersecurity to ensure compliance with applicable laws and regulations. We believe that we are currently in compliance with applicable laws, regulations and policies overseen by the CAC relating to cybersecurity, privacy, data protection and information security.

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

Our business may be subject to laws and regulations regarding cybersecurity, information security, privacy and data protection in jurisdictions other than China. Any failure or perceived failure to comply with these laws and regulations could have a material and adverse impact on our business, financial condition and results of operations.

We face risks inherent in handling and protecting data and are subject to various regulatory requirements relating to the security and privacy of data. See “—Our business is subject to complex and evolving mainland China laws and regulations regarding cybersecurity, information security, privacy and data protection. Many of these laws and regulations are subject to change and uncertain interpretation, and any failure or perceived failure to comply with these laws and regulations could result in claims, changes to our business practices, negative publicity, legal proceedings, increased cost of operations, or declines in user base or engagement, or otherwise harm our business” for details. We may also be subject to overseas cybersecurity, information security, privacy and data protection laws and regulations. Our practices may become inconsistent with new laws or regulations concerning data protection, or the interpretation and application of existing consumer and data protection laws or regulations, which is often uncertain and in flux. If so, in addition to the possibility of fines, this could result in an order requiring that we change our practices, which could have an adverse effect on our business and operating results. For example, the European Union General Data Protection Regulation, or the GDPR, which came into effect on May 25, 2018, includes operational requirements for companies that receive or process personal data of residents of the European Economic Area. The GDPR establishes new requirements applicable to the processing of personal data, affords new data protection rights to individuals and imposes penalties for serious data breaches. Individuals also have a right to compensation under the GDPR for financial or non-financial losses. Although we do not conduct any business in the European Economic Area, in the event that residents of the European Economic Area access our platform and input protected information, we may become subject to provisions of the GDPR. Additionally, California enacted legislation that has been dubbed the first “GDPR-like” law in the U.S. Known as the California Consumer Privacy Act, or CCPA, it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households. The CCPA, which went into effect on January 1, 2020, requires covered companies to provide new disclosures to California consumers, and provides such consumers new ways to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that we expect to increase data breach litigation. With some other conditions, the CCPA requires companies “doing business in California” to follow the CCPA. However, the phrase “doing business in California” is not defined in the CCPA. With reference to the California tax code, the phrase “doing business in California” is described as “actively engaging in any transaction for the purpose of financial or pecuniary gain or profit.” We are currently not actively doing business in California, and thus, there is still uncertainty regarding whether the CCPA will apply to us. If further interpretations or court decisions render us “doing business in California,” the CCPA will apply to us and it may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

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

The mainland China government has promulgated, in recent years, intensified regulations, rules, or guidelines on various aspects of the internet industry in mainland China. For example, in August 2018, the National Office of Anti-Pornography and Illegal Publication, the MIIT, the Ministry of Public Security, the Ministry of Culture and Tourism (previously known as the Ministry of Culture), the National Radio and Television Administration and the CAC jointly issued the Notice on Strengthen the Management of Online Live Broadcast Service, which required the real-name registration system for users to be put in place by online live broadcast service providers. On November 12, 2020, the National Radio and Television Administration promulgated the Circular on Strengthening the Administration of the Online Show Live Broadcast and Online E-commerce Live Broadcast, or the Notice 78, which sets forth registration requirements for platforms providing online show live broadcast or online e-commerce live broadcast to have their information and business operations registered by November 30, 2020. The Notice 78 also sets forth requirements for certain online live broadcast businesses with respect to real-name registration, limits on user spending on virtual gifting, restrictions on minors on virtual gifting, online live broadcast review personnel requirements, content tagging requirements, and other requirements. For example, the Notice 78 requires online live broadcast platforms to set a limit to the number of virtual gifts a user can send per day and per month, as well as the amount that can be gifted at any one time. However, there is currently no clear guidance as to what limits on virtual gifting spending will be imposed by the National Radio and Television Administration pursuant to the Notice 78 and it is unclear how and to what degree any such limits would be imposed on different platforms.

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

On May 7, 2022, the Central Commission for Guiding Cultural and Ethical Progress of the Communist Party of China, the Ministry of Culture and Tourism, the National Radio and Television Administration and the CAC promulgated the Opinions on Regulating Virtual Gifting during Online Live Broadcasting and Strengthening the Protection of Minors. According to these opinions, online live broadcasting platforms shall, among others (1) prohibit minors from virtual gifting, and strength the implementation of real-name registration; (2) not provide online live broadcaster account registration service to minors under 16 and shall obtain the consent from guardians before allowing minors between 16 and 18 to register as a broadcaster on their platforms; (3) continue to upgrade the youth mode of the platform and establish an exclusive customer service team for minors to prioritize the settlement of complaints and disputes related to minors; (4) strengthen the administration on key functions of the platform and prohibit virtual gifting amount from being the sole criteria for the ranking of broadcasters or the criteria for the ranking of users; and (5) suspend all services under youth mode after 10:00 p.m. every day to ensure the rest time of minors.

The National Radio and Television Administration and the Ministry of Culture and Tourism jointly issued the Code of Conduct for Online Live Broadcasters on June 8, 2022, to regulate the conduct of broadcasters who provide online live broadcasting programs and audio/video program services through the Internet, including those who live broadcast on the online platforms, conduct real-time interactions with users, and perform through pre-uploaded audio or video programs. For live broadcasting content that requires a high level of professionalism (such as medical and healthcare, finance, law, education), the broadcasters should obtain corresponding qualifications and report to the live broadcasting platform, and the live broadcasting platform shall review and record the qualifications of the broadcasters.

In addition, new laws and regulations, rules or guidelines may be adopted in mainland China from time to time to address new issues that come to the authorities’ attention. Some new laws, regulations, rules, or guidelines have or may in the future put additional restrictions on our users, broadcasters, content, product or service offerings, and may negatively impact our businesses, results of operations, or financial condition. For example, we are subject to a variety of regulatory restrictions concerning the age limit for broadcasters, as well as restrictions on our products’ features. The existing and future regulations rules and guidelines that could affect us are beyond our control, and their potential impact on us is difficult to predict. We may incur substantial financial, operational and managerial costs in response to and in anticipation to the regulatory and policy risks, and we may not be able to effectively predict, estimate or manage those risks in a timely and cost-efficient manner. Furthermore, we may not timely obtain or maintain all the required licenses or approvals or to satisfy all the requirements posed by the authorities in the future. We also cannot assure you that we will be able to obtain the required licenses or approvals or to satisfy all the requirements posed by the authorities if we plan to expand into other internet businesses. If we fail to timely obtain or maintain any of the required licenses or approvals, we may be subject to various penalties, which may disrupt our business operations or derail our business strategy, and materially and adversely affect our business, financial condition and results of operations.

The mainland China government has adopted regulations governing internet and wireless access and the distribution of information over the internet and wireless telecommunications networks. Under these regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet or wireless networks content that, among other things, violates the principle of the PRC Constitution, laws and regulations, impairs the national dignity of mainland China or the public interest, or is obscene, superstitious, fraudulent or defamatory. Furthermore, internet content providers are also prohibited from displaying content that may be deemed by the government authorities as instigating ethnical hatred and harming ethnical unity, harming the national religious policy, “socially destabilizing” or leaking “state secrets” of mainland China. Failure to comply with these requirements may result in the revocation of licenses to provide internet content or other licenses, the closure of the concerned platforms and reputational harm. The operator may also be held liable for any censored information displayed on or linked to their platform.

On December 15, 2019, the CAC released the Provisions on Ecological Governance of Network Information Content, which came into force on March 1, 2020. The Provisions on Ecological Governance of Network Information Content is one of the latest regulations governing the distribution of information over the internet and wireless telecommunications networks in which it classifies the network information into three categories, namely the “encouraged information,” the “illegal information” and the “undesirable information.” While illegal information is strictly prohibited from distribution, the internet content providers are required to take measures to prevent and resist the production and distribution of undesirable information. The Provisions on Ecological Governance of Network Information Content further clarifies the duties owed by the internet content providers in preventing the display of content in violation of it, such as obligations to improve the systems for users registration, accounts management, information release review, follow-up comments review, websites ecological management, real-time inspection, emergency response and disposal mechanism for cyber rumor and black industry chain information.

On April 12, 2022, the Online Audio/Video Program Administration Division of the National Radio and Television Administration and the Publishing Bureau of the Publicity Department of the Central Committee of the Communist Party of China jointly promulgated the Notice on Strengthening the Administration of Live Broadcasting of Game-Playing on the Online Audio/Video Program Platforms, which stipulated that, among other things, (i) it is not allowed to live broadcast online games that have not been approved by the competent authorities in online audio/video programs or attract users to such games by any means, including through online live broadcasting, (ii) all online live broadcast platforms shall strengthen the management of online game live broadcast programs in terms of content and publicity, shall establish and improve management systems for information release, comments, and emergency response related to game-playing live broadcast program, and shall improve program monitoring and public opinion monitoring mechanisms, (iii) the online live broadcast platforms shall strengthen the management of the behavior of game broadcasters and those who conducted illegal and immoral behaviors are not allowed to be shown to the public through live broadcasting, (iv) the online live broadcast platforms are urged to establish and implement mechanisms for the protection of minors, and (v) the launch, broadcasting and layout of game-playing live broadcast programs shall be submitted to the competent radio and television administrative department in accordance with the requirements of live broadcast programs, and online live broadcast platforms’ (including various domestic and overseas individual and institution accounts registered on such platforms) live broadcasting overseas game-playing programs or competitions shall be approved in advance.

The Administrative Provisions on Comment Threading Services on the Internet were amended by the CAC on November 16, 2022 and became effective on December 15, 2022. The Administrative Provisions on Comment Threading Services on the Internet require that the comment threading service providers shall (1) verify the real identity information of the registered users under the principle of “using real name at back end and using alias or real name voluntarily at front end” and not provide comment threading services to users who have not verified their real identity information or fraudulently use the identity information of organizations or others; (2) establish and improve the system for the protection of the personal information of users, follow the principles of “legitimacy, appropriateness, necessity and good faith” in the processing of the personal information of users, disclose the rules for processing personal information, inform the users of the purpose and method of processing, type of personal information to be processed, storage period and other matters, and obtain individuals’ consents according to the law, unless otherwise provided for by laws or administrative regulations; (3) establish the system of “censorship before release” for comment threading services provided for news information; (4) provide the corresponding static version of information content at the same time on the same platform and page if the comment threading services are provided by way of bullet screens; (5) establish and improve a system of review and management of comments posted, real-time inspection, emergency response and reporting acceptance and other information security management systems, timely identify and dispose of illegal and negative information, and report to the cyberspace administration; (6) innovate the management methods for comments posted, research and develop information security management technology for comments posted and improve the ability to dispose of illegal and negative information, timely identify risks such as security defects and loopholes in the comment threading services, take remedial measures and report the same to the cyberspace administrations; (7) be staffed with a review editorial team that adapts to the scale of service, strengthen the review trainings and improve the professionalism of review editors; (8) cooperate with the cyberspace administrations in conducting supervision and inspection in accordance with the law and provide necessary technical and data support and assistance.

We have designed and implemented procedures to monitor content on our social networking platform, including the live video shows hosted by us or our users, in order to comply with the laws and regulations. However, it may not be possible to determine in all cases the types of content that could result in our liability as a distributor of such content and, if any of the content posted or displayed on our social networking platform is deemed by the mainland China government to violate any content restrictions, we would not be able to continue to display such content and could become subject to penalties, including confiscation of income, fines, suspension of business and revocation of required licenses, which could materially and adversely affect our business, financial condition and results of operations.

Regulatory authorities may conduct various reviews and inspections on our business operations, especially those related to content distribution, from time to time. If any non-compliance incidents in our business operations are identified, we may be required to take certain rectification measures in accordance with applicable laws and regulations, or we may be subject to other regulatory actions such as administrative penalties. We have been subject to administrative measures for the content posted or displayed on our platforms, which has negatively affected our business operations and financial results. We cannot guarantee that such inspections and administrative measures will not happen again in the future, the occurrence of which will adversely affect our business, financial condition and results of operations.

We may also be subject to potential liability for any unlawful actions by our users on our platform. It may be difficult to determine the type of content or actions that may result in liability to us and, if we are found to be liable, we may be prevented from operating our business in mainland China. Moreover, staying in compliance with the regulatory requirements may result in limitation to our scope of service, reduction in user engagement or loss of users, diversion of our management team’s attention and increased operational costs and expenses. The costs of compliance with these regulations may continue to increase as a result of more content being made available by an increasing number of users of our social networking platform, which may adversely affect our results of operations. Although we have adopted internal procedures to monitor content and to remove offending content once we become aware of any potential or alleged violation, we may not be able to identify all the content that may violate the laws and regulations or third-party intellectual property rights. Even if we manage to identify and remove offensive content, we may still be held liable.

The mobile social and dating industry is an evolving and competitive market, with low switching costs and a consistent stream of new products and entrants, and innovation by Tantan’s competitors may disrupt its business.

The mobile social and dating industry in mainland China is evolving and competitive, and has experienced a consistent stream of new products and market entrants within recent years. Tantan’s competitors may hold stronger competitive positions in certain geographical regions or with certain user demographics that we currently serve or may serve in the future. These advantages could enable these competitors to offer features and services that are more appealing to current users and potential users than our features and services or to respond more quickly and/or cost-effectively than us to new or changing opportunities.

In addition, within the mobile social and dating industry generally, costs for consumers to switch between products and apps are low, and consumers have demonstrated a propensity to try new approaches to connecting with people. As a result, new products, entrants and business models are likely to continue to emerge. It is possible that a new app could gain rapid scale at the expense of existing brands through harnessing a new technology or distribution channel, creating a new approach to connecting people or some other means. If we are not able to compete effectively against our current or future competitors and other apps, products and services that may emerge, the size and level of engagement of our user base may decrease, which could have a material adverse effect on our business, financial condition and results of operations.

We may be unsuccessful in monetizing Tantan’s social and dating services.

We may be unable to successfully monetize Tantan’s social and dating services due to, among other reasons, COVID-19’s negative impact on Tantan’s user retention and engagement, Tantan’s users ceasing to use mobile technology for dating and socializing, Tantan’s users opting to forgo paid services on the app, perceived or actual privacy concerns, the introduction of new regulations on the use and monetization of user data, any interruption of Tantan’s business operations from the inspection and administrative measures taken by the governmental authorities, and the introduction of competition offering services at lower cost or additional or different features. If we are unable to successfully monetize Tantan’s business, our business, reputation, results of operations and financial condition could be materially adversely affected.

Tantan’s growth and profitability rely, in part, on its ability to attract and retain users, which involves considerable expenditure. Any failure in these efforts could adversely affect our business, financial condition and results of operations.

Tantan commenced monetization of its business in July 2017, and had not been profitable until 2023. In order to continue to grow its business and eventually become profitable, Tantan will need to continue to attract and retain users for Tantan’s app, which will involve considerable expenditures.

Tantan’s marketing expenditures consist primarily of investments in paid marketing channels to acquire more users and drive traffic to the app. To continue to reach potential users and grow the Tantan business, we must identify and invest in evolving marketing channels. The opportunities in and effectiveness of new marketing channels are relatively unproven, making it difficult to assess returns on investment associated with such channels, and there can be no assurance that we will be able to continue to appropriately manage and fine-tune our marketing efforts in response to these and other trends in the industry. Any failure to do so could have a material adverse effect on our business, results of operations and financial condition.

Negative publicity may harm our brand and reputation and have a material adverse effect on our business and operating results.

Negative publicity involving us, our users, our management, our social networking platform or our business model may tarnish our reputation and materially and adversely harm our brand and our business. We cannot assure you that we will be able to defuse negative publicity about us, our management and/or our services to the satisfaction of our investors, users, customers and platform partners. There has been negative publicity about our company and the misuse of our services, which has adversely affected our brand, public image and reputation. 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.

Any legal action, regardless of its merits, could be time consuming and could divert the attention of our management away from our business and a failure of any legal action may bring negative impact on our reputation and cause a loss of our brand equity, which would reduce the use of our platform and demand for our services. Moreover, any attempts to rebuild our reputation and restore the value of our brand may be costly and time consuming, and such efforts may not ultimately be successful.

User misconduct and misuse of our platform may adversely impact our brand image, and we may be held liable for information or content displayed on, retrieved from or linked to our platform, which may materially and adversely affect our business and operating results.

Our platform allows mobile users to freely contact and communicate with people nearby, and our live video service allows users to host and view live shows. Because we do not have full control over how and what users will use our platform to communicate, our platform may be misused by individuals or groups of individuals to engage in immoral, disrespectful, fraudulent or illegal activities. For example, on a daily basis we detect spam accounts through which illegal or inappropriate content is posted and illegal or fraudulent activities are conducted. Media reports and internet forums have covered some of these incidents, which have in some cases generated negative publicity about our brand and platform. We have implemented control procedures to detect and block illegal or inappropriate content and illegal or fraudulent activities conducted through the misuse of our platform, but such procedures may not prevent all such content from being broadcasted or posted or activities from being carried out. Moreover, as we have limited control over real-time and offline behaviors of our users, to the extent such behaviors are associated with our platform, our ability to protect our brand image and reputation may be limited. Our business and the public perception of our brand may be materially and adversely affected by misuse of our platform.

In addition, if any of our users suffers or alleges to have suffered physical, financial or emotional harm following contact initiated on our platform, we may face civil lawsuits or other liabilities initiated by the affected user, or governmental or regulatory actions against us. For example, we are or may continue to be involved in disputes relating to refunding to users’ spouses all or part of funds consumed by users for purchase of in-show virtual items in our mobile applications based on claim of unauthorized disposition of commonwealth property. We believe such type of claims is groundless and lacks merit, because from a contractual perspective, users purchase and send virtual gifts to broadcasters in exchange for the live performance delivered to them or for the interaction between them and the broadcasters, and it is entirely up to the users to purchase in-show virtual items. We therefore will defend against such claims vigorously.

In response to allegations of illegal or inappropriate activities conducted through our platform or any negative media coverage about us, mainland China government authorities may hold us liable for non-compliance with mainland China 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 mobile application. Therefore, our business may be subject to investigations or subsequent penalties if contents generated by our users are deemed to be illegal or inappropriate under mainland China laws and regulations. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—If we fail to obtain and maintain the requisite licenses and approvals required under the complex regulatory environment applicable to our businesses in mainland China, or if we are required to take compliance actions that are time-consuming or costly, our business, financial condition and results of operations may be materially and adversely affected.” As a result, our business may suffer, our user base, revenues and profitability may be materially and adversely affected, and the price of our ADSs may decline.

The market in which we operate is fragmented and highly competitive. If we are unable to compete effectively for users or user engagement, our business and operating results may be materially and adversely affected.

As a social networking platform that provides multiple services, including live video service, value-added service, mobile marketing services and other services, we are subject to intense competition from providers of similar services, as well as potential new types of online services. Our competitors may have substantially more cash, traffic, technical, broadcasters, business networks and other resources, as well as broader product or service offerings and can leverage their relationships based on other products or services to gain a larger share of marketing budgets. We may be unable to compete successfully against these competitors or new market entrants, which may adversely affect our business and financial performance.

We believe that our ability to compete effectively depends upon many factors both within and beyond our control, including:

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the popularity, usefulness, ease of use, performance and reliability of our services compared to those of our competitors, and the research and development abilities of us and our competitors;

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changes mandated by, or that we elect to make to address, legislation, regulations or government policies, some of which may have a disproportionate effect on us;

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acquisitions or consolidation within our industry, which may result in more formidable competitors;

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our ability to monetize our services;

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our ability to attract, retain, and motivate talented employees;

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our ability to manage and grow our operations cost-effectively; and

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our reputation and brand strength relative to our competitors.

We have limited experience in international markets. If we fail to meet the challenges presented by our international operations, our business, financial condition and results of operations may be adversely affected.

We have limited experience in international markets and we expect to enter into and expand our operations into international markets. For example, our Soulchill currently has footprint in overseas markets such as Middle East and North Africa. Tantan also has footprint beyond mainland China such as Southeast Asia, East Asia and North America. Our international operations may expose us to a number of risks, including:

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lack of acceptance of our product and service offerings, and challenges of localizing our offerings to appeal to local tastes;

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compliance with applicable laws and regulations in multiple jurisdictions, including, but not limited to, internet content provider licenses and other applicable licenses or governmental authorizations;

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challenges in identifying appropriate local business partners and establishing and maintaining good working relationships with them. Our business partners primarily include popular talents and their agencies, third parties that promote our platform and applications and third parties that provide us technology support;

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challenges in commercializing our platforms in international markets without infringing, misappropriating or otherwise violating the intellectual property rights of third parties;

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challenges in formulating effective marketing strategies targeting users from various jurisdictions and cultures, who have a diverse range of preferences and demands;

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challenges in replicating or adapting our company policies and procedures to operating environments that are different from each other, including technology infrastructure;

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challenges in managing compliance with local labor regulations and risks associated with labor dispute across different jurisdictions;

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fluctuations in currency exchange rates;

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increased competition with local players in different markets and sub-markets;

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political instability and general economic or political conditions in particular countries or regions, including territorial or trade disputes, war and terrorism;

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boycotts and embargoes that may be imposed by the international community on countries in which we offer our mobile applications;

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exposure to different tax jurisdictions that may subject us to greater fluctuations in our effective tax rate and assessments in multiple jurisdictions on various tax-related assertions, including transfer pricing adjustments and permanent establishment;

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compliance with privacy laws and data security laws, including heightened restrictions and barriers on the transfer of data between different jurisdictions;

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regulatory regime and business practices that essentially favor domestic companies, such as tariffs, protectionism, subsidies and restrictions on foreign ownership, which could, among other things, give rise to competitive disadvantage for us and hinder our ability to execute our business strategies;

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actions by local governments or others to restrict access to our products and services or to cause us to discontinue our operations in a particular market, regardless of whether these actions are taken for political, security or other reasons;

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other actions or interventions by local governments, including various forms of exchange controls, expropriation of assets and cancellation of contractual rights; and

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increased costs associated with doing business in multiple jurisdictions.

There is no assurance we will be able to manage these risks and challenges as we continue to grow our international businesses. Failure to manage these risks and challenges could negatively affect our ability to expand our international and cross-border businesses and operations as well as materially and adversely affect our business, financial condition and results of operations.

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

We operate in a market 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 the services on our platform 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 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.

Introducing new technologies into our systems involves numerous technical challenges, substantial amounts of capital and personnel resources and often takes many months to complete. For example, the market for mobile devices in mainland China is highly fragmented, and the lower resolution, functionality, operating system compatibility and memory currently associated with the kaleidoscopic models of mobile devices in the Chinese marketplace may make the use of our services through these devices more difficult and impair the user experience. 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 services. Such technologies, even if integrated, may not function as expected or may be unable to attract and retain a substantial number of mobile device users to use our Momo mobile app. 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 operating results.

If we fail to effectively control our costs and expenses, our business and operating results could be harmed.

Given the rapidly evolving market in which we compete, we may encounter difficulties as we establish and manage our operations, product development, sales and marketing, and general and administrative capabilities. We face significant competition for talented employees from other high-growth companies, which include both publicly traded and privately held companies, and we may not be able to hire new talents quickly enough to meet our needs and support our operations. If we fail to effectively manage our hiring needs and successfully integrate our new hires, our efficiency and ability to meet our forecasts and our employee morale, productivity and retention could suffer, and our business and operating results could be adversely affected.

Due to the ever-evolving market that we operate in, our costs and expenses may increase in the future as we seek to broaden our user base and increase user engagement, and develop and implement new features and services. We may also have difficulties in maintaining reliable service levels for our users and customers, develop and improve our operational, financial, legal and management controls, and enhance our reporting systems and procedures. If we are unable to generate adequate revenues and to manage our expenses, we may again incur significant losses in the future and may not be able to regain profitability. Our expenses may grow faster than our revenues, and our expenses may be greater than we anticipate. Managing our business in the evolving and developing market will require significant expenditures and the allocation of valuable management resources. If we fail to achieve the necessary level of efficiency in our organization as we adapt, our business, operating results and financial condition could be harmed.

Techniques employed by short sellers may drive down the market price of our listed securities.

Short selling is the practice of selling securities that a seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. Short sellers hope to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as short sellers expect to pay less in that purchase than they received in the sale. As it is in short sellers’ interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions and allegations regarding the issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.

Public companies listed in the United States that have substantially all of their operations in mainland China have been the subject of short selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.

Any allegations or reports published by short sellers against our company may be followed by periods of instability in the market price of our ADSs and negative publicity. Regardless of whether such allegations and information in such reports are proven to be true or untrue, we may have to expend a significant amount of resources to investigate such allegations and/or defend ourselves against negative information in such reports, including in connection with class actions or regulatory enforcement actions derivative of such allegations. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the short sellers by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could divert management’s attention from the day-to-day operations of our company. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact the market price of our securities and our business operations.

The continuing and collaborative efforts of our senior management and key employees are crucial to our success, and our business may be harmed if we were to lose their services.

We depend on the continued contributions of our senior management, especially the executive officers listed in “Item 6. Directors, Senior Management and Employees—A. Directors and Senior Management” section of this annual report, and other key employees, many of whom are difficult to replace. The loss of the services of any of our executive officers or other key employees could materially harm our business. Competition for qualified talents in mainland China is intense. Our future success is dependent on our ability to attract a significant number of qualified employees and retain existing key employees. If we are unable to do so, our business and growth may be materially and adversely affected and the trading price of our ADSs could suffer. Our need to significantly increase the number of our qualified employees and retain key employees may cause us to materially increase compensation-related costs, including stock-based compensation.

We may not be able to adequately protect our intellectual property, which could cause us to be less competitive and third-party infringements of our intellectual property rights may adversely affect our business.

We rely on a combination of patent, copyright, trademark and trade secret laws and restrictions on disclosure to protect our intellectual property rights. See also “Item 4. Information on the Company—B. Business Overview.” Despite our efforts to protect our proprietary rights, third parties may attempt to copy or otherwise obtain and use our intellectual property or seek court declarations that they do not infringe upon our intellectual property rights. Monitoring unauthorized use of our intellectual property is difficult and costly, and we cannot be certain that the steps we have taken will prevent misappropriation of our intellectual property. From time to time, we may have to resort to litigation to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources. The legal regime relating to the recognition and enforcement of intellectual property rights in mainland China is limited, and does not protect intellectual property rights to the same extent as federal and state laws in the United States. Legal proceedings to enforce our intellectual property in mainland China may progress slowly, during which time infringement may continue largely unimpeded.

We have been and may be subject to intellectual property infringement claims or other allegations by third parties for information or content displayed on, retrieved from or linked to our platform, or distributed to our users, 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 parties for services we provide or for information or content displayed on, retrieved from or linked to our platform, or distributed to our users, which may materially and adversely affect our business, financial condition and prospects.

Companies in the internet, technology and media 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, including in mainland China, are uncertain and still evolving. We have faced, from time to time, and expect to face in the future, allegations that we have infringed the trademarks, copyrights, patents and other intellectual property rights of third parties, including our competitors, or allegations that we are involved in unfair trade practices. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings.” As we face increasing competition and as litigation becomes a more common method for resolving commercial disputes in mainland China, we face a higher risk of being the subject of intellectual property infringement claims.

We allow users to upload text, graphics, audio, video and other content to our platform and download, share, link to and otherwise access games and other content on our platform. We have procedures designed 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 of copyrighted content. Therefore, we may face liability for copyright or trademark infringement, defamation, unfair competition, libel, negligence, and other claims based on the nature and content of the materials that are delivered, shared or otherwise accessed through our platform.

Defending intellectual property litigation is costly and can impose a significant burden on our management and employees, and there can be no assurances 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.

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

We make our services available across a variety of mobile operating systems and devices. We are dependent on the interoperability of our services with popular mobile devices and mobile operating systems that we do not control, such as Android, iOS and Windows. Any changes in such mobile operating systems or devices that degrade the functionality of our services or give preferential treatment to competitive services could adversely affect usage of our services. Further, if the number of platforms for which we develop our services increases, which is typically seen in a dynamic and fragmented mobile services market such as mainland China, it will result in an increase in our costs and expenses. In order to deliver high-quality services, it is important that our services work well across a range of mobile operating systems, networks, mobile devices and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in developing services that operate effectively with these operating systems, networks, devices and standards. In the event that it is difficult for our users to access and use our services, particularly on their mobile devices, our user base and user engagement could be harmed, and our business and operating results could be adversely affected.

Our operations depend on the performance of the internet infrastructure and fixed telecommunications networks in mainland China.

Almost all access to the internet in mainland China 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 mainland China’s internet infrastructure or the fixed telecommunications networks provided by telecommunications service providers. Web traffic in mainland China has experienced significant growth during the past few years. Effective bandwidth and server storage at internet data centers in large cities such as Beijing 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. We cannot assure you that the internet infrastructure and the fixed telecommunications networks in mainland China will be able to support the demands associated with the continued growth in internet usage. If we cannot increase our capacity to deliver our online services, we may not be able to keep up with 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 our ADS price.

In addition, we have no control over the costs of the services provided by telecommunications 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 decelerate. Such deceleration may adversely affect our ability to continue to expand our user base.

Our business and operating results may be harmed by service disruptions, cybersecurity related threats or by our failure to timely and effectively scale and adapt our existing technology and infrastructure.

People use our platform for real-time communication, socializing, entertainment and information. 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 as follows:

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our technology, system, networks and our users’ devices have been subject to, and may continue to be the target of, cyber-attacks, computer viruses, malicious code, phishing attacks or information security breaches that could result in an unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees or sensitive information provided by our users, or otherwise disrupt our, our users’ or other third parties’ business operations;

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we periodically encounter attempts to create false accounts or use our platform to send targeted and untargeted spam messages to our users, or take other actions on our platform for purposes such as spamming or spreading misinformation, and we may not be able to repel spamming attacks;

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the use of encryption and other security measures intended to protect our systems and confidential data may not provide absolute security, and losses or unauthorized access to or releases of confidential information may still occur;

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our security measures may be breached due to employee error, malfeasance or unauthorized access to sensitive information by our employees, who may be induced by outside third parties, and we may not be able to anticipate any breach of our security or to implement adequate preventative measures; and

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we may be subject to information technology system failures or network disruptions caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, or other events or disruptions.

Any disruption or failure in our services and infrastructure could also hinder our ability to handle existing or increased traffic on our platform or cause us to lose content stored on our platform, which could significantly harm our business and our ability to retain existing users and attract new users.

As the number of our users increases and our users generate more content on our platform, we may be required to expand and adapt our technology and infrastructure to continue to reliably store and analyze this content. It may become increasingly difficult to maintain and improve the performance of our services, especially during peak usage times, as our services become more complex and our user traffic increases. If our users are unable to access our mobile application in a timely fashion, or at all, our user experience may be compromised and the users may seek other mobile social networking tools to meet their needs, and may not return to our platform or use our services as often in the future, or at all. This would negatively impact our ability to attract users and maintain the level of user engagement.

Existing or future strategic alliances, long-term investments and acquisitions may have a material and adverse effect on our business, reputation and results of operations.

We have made and intend to continue to make long-term investments in third-party companies. From time to time we evaluate and enter into discussions regarding potential long-term investments. Our existing and any future long-term investments could have a material impact on our financial condition and results of operations. If our long-term investments are unable to implement or remediate the necessary controls, procedures and policies, do not perform as we have expected or become less valuable to our business due to a change in our overall business strategy or other reasons, we may not be able to realize the anticipated benefits of investments and we may have to incur unanticipated liabilities, expenses, impairment charges or write-offs.

We may also in the future enter into strategic alliances with various third parties. Strategic alliances with third parties could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by a counterparty and an increase in expenses incurred in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have little ability to control or monitor their actions and to the extent strategic third parties suffer 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 such third parties.

In addition, we may acquire additional assets, 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. Acquired assets or businesses may not generate the financial or operating results we expect. 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 the governmental authorities in mainland China for the acquisitions and comply with applicable mainland China laws and regulations, which could result in increased costs and delays. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the incurrence of debt, the incurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Such use of cash may add significant liquidity pressure on us by materially reducing our existing cash balance and adversely affecting our working capital. The sale of equity or equity linked securities may further dilute our existing shareholders. Debt financings may subject us to restrictive covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

We rely on assumptions and estimates to calculate certain key operating metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.

The respective number of monthly active users and paying users of Momo and Tantan is calculated using internal company data that has not been independently verified. While these metrics are based on what we believe to be reasonable calculations for the applicable periods of measurement, there are inherent challenges in measuring usage and user engagement across our large user base. For example, there exist a number of false or spam accounts on our platforms. Although we constantly combat spam by suspending or terminating these accounts, our active user number may include a number of false or spam accounts and therefore may not accurately represent the actual number of active accounts. In addition, we treat each account as a separate user for the purposes of calculating our active and paying users, because it may not always be possible to identify people that have set up more than one account. Accordingly, the calculations of our monthly active users and paying users may not accurately reflect the actual number of people using Momo and Tantan, or paying for their services.

Our measures of user base and user engagement may differ from estimates published by third parties or from similarly titled metrics used by our competitors due to differences in methodology. If customers or platform partners do not perceive our user metrics to be accurate representations of our user base or user engagement, or if we discover material inaccuracies in our user metrics, our reputation may be harmed and customers and platform partners may be less willing to allocate their resources or spending to Momo or Tantan, which could negatively affect our business and operating results.

We have granted, and expect to continue to grant, share options under our share incentive plans, which may result in increased share-based compensation expenses.

We have adopted several share incentive plans as of the date of this annual report for the purpose of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. In November 2012, we adopted a share incentive plan, or the 2012 Plan, which was amended and restated in October 2013. In November 2014, we adopted the 2014 share incentive plan, or the 2014 Plan, pursuant to which a maximum aggregate of 14,031,194 Class A ordinary shares may be issued pursuant to all awards granted thereunder. Beginning in 2017, the number of shares reserved for future issuances under the 2014 Plan would be increased by a number equal to 1.5% of the total number of outstanding shares on the last day of the immediately preceding calendar year, or such lesser number of Class A ordinary shares as determined by our board of directors on the first day of each calendar year during the term of the 2014 Plan. With the adoption of the 2014 Plan, we will no longer grant any incentive shares under the 2012 Plan. In March 2015, Tantan adopted the 2015 Share Incentive Plan, or the Tantan 2015 Plan, and in July 2018, Tantan adopted the 2018 Share Incentive Plan, or the Tantan 2018 Plan. With the adoption of the Tantan 2018 Plan, we will no longer grant any incentive awards under the Tantan 2015 Plan. As of March 31, 2024, options to purchase 28,706,914 Class A ordinary shares (excluding those already forfeited and expired) had been granted under the 2012 Plan, 2,886,224 of which remained outstanding. In addition, as of March 31, 2024, options to purchase 52,027,897 Class A ordinary shares (excluding those already forfeited and canceled) and 1,015,001 restricted share units (excluding those already forfeited) had been granted under the 2014 Plan, of which 25,713,001 options and 193,750 restricted share units remained outstanding. As of March 31, 2024, options to purchase 860,058 ordinary shares of Tantan (adjusted retrospectively for share split and excluding those that have been forfeited or redeemed) remained outstanding under the Tantan 2015 Plan and options to purchase 2,928,678 ordinary shares of Tantan (adjusted retrospectively for share split and excluding those that have been forfeited or redeemed) remained outstanding under the Tantan 2018 Plan. See “Item 6. Directors, Senior Management and Employees—B. Compensation” for a detailed discussion. We expect to incur share-based compensation expenses of RMB168.7 million, RMB111.1 million and RMB103.1 million in 2024, 2025, and after 2025, respectively, in connection with the currently outstanding share-based awards, and we may grant additional share-based awards under our share incentive plans, which will further increase our share-based compensation expenses. We believe the granting of share-based awards is of significant importance to our ability to attract and retain our employees, and we will continue to grant share-based 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.

If we fail to implement and maintain an effective system of internal controls, 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 our ADSs may be materially and adversely affected.

We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, has adopted rules requiring every public company to include a report of management in its annual report that contains management’s assessment of the effectiveness of such company’s internal controls over financial reporting. In addition, an independent registered public accounting firm must attest to and report on the effectiveness of the company’s internal control over financial reporting.

Our management has concluded that our internal controls over financial reporting were effective as of December 31, 2023. Our independent registered public accounting firm has issued an attestation report, which has concluded that our internal control over financial reporting was effective in all material aspects as of December 31, 2023. However, if we fail to maintain effective internal controls over financial reporting in the future, our management and our independent registered public accounting firm may not be able to conclude that we have effective internal controls over financial reporting at a reasonable assurance level. This could result in a loss of investor confidence in the reliability of our financial conditions which in turn could negatively impact the trading price of our ADSs and result in lawsuits being filed against us by our shareholders or otherwise harm our reputation. Furthermore, we have incurred and anticipate that we will continue to incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

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

COVID-19 had a severe and negative impact on the Chinese and the global economy from 2020 through 2022, and the global macroeconomic environment still faces numerous challenges. The challenges in China’s real estate sector and the related debt problems pose significant risks to the macroeconomic growth prospects and could lead to soft consumer sentiment and potentially a stagnation in aggregate consumer demand. The Federal Reserve and other central banks outside of China have raised interest rates. The Russia-Ukraine conflict, the Hamas-Israel conflict and the attacks on shipping in the Red Sea have heightened geopolitical tensions across the world. The impact of the Russia-Ukraine conflict on Ukraine food exports has contributed to increases in food prices and thus to inflation more generally. There have also been concerns about the relationship between China and other countries which may potentially have economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to a wide range of issues including trade policies, treaties, government regulations and tariffs. Economic conditions in China are sensitive to global economic conditions, as well as changes in 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 economy may materially and adversely affect our business, financial condition and results of operations.

Increasing focus with respect to environmental, social and governance matters may impose additional costs on us or expose us to additional risks. Failure to comply with the laws and regulations on environmental, social and governance matters may subject us to penalties and adversely affect our business, financial condition and results of operations.

The mainland China government and public advocacy groups have been increasingly focused on environment, social and governance, or ESG, issues in recent years, making our business more sensitive to ESG issues and changes in governmental policies and laws and regulations associated with environment protection and other ESG-related matters. Investor advocacy groups, certain institutional investors, investment funds, and other influential investors are also increasingly focused on ESG practices and in recent years have placed increasing importance on the implications and social cost of their investments. Regardless of the industry, increased focus from investors and the mainland China government on ESG and similar matters may hinder access to capital, as investors may decide to reallocate capital or to not commit capital as a result of their assessment of a company’s ESG practices. Any ESG concern or issue could increase our regulatory compliance costs. If we do not adapt to or comply with the evolving expectations and standards on ESG matters from investors and the mainland China government or are perceived to have not responded appropriately to the growing concern for ESG issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and the business, financial condition, and the price of our ADSs could be materially and adversely effected.

We face risks related to health epidemics, severe weather conditions and other outbreaks.

Our business could be adversely affected by the effects of avian influenza, severe acute respiratory syndrome (SARS), the influenza A virus, Ebola virus, severe weather conditions or other epidemics or outbreaks. Health or other government regulations adopted in response to an epidemic, severe weather conditions such as snowstorms, floods or hazardous air pollution, or other outbreaks may require temporary closure of our offices. Such closures may disrupt our and the VIE’s business operations and adversely affect our results of operations.

In recent years, there have been outbreaks of epidemics in China and globally. The COVID-19 pandemic created challenges to many aspects of our business, especially our users’ demand for social network platforms. Although most of the travel restrictions and quarantine requirements related to COVID-19 have been lifted in China since December 2022, there remains uncertainty around potential developments with respect to the COVID-19 pandemic. The extent to which the pandemic impacts our results of operations going forward will depend on future developments, including the frequency, duration and extent of future outbreaks of COVID-19, the appearance of new variants with different characteristics, the effectiveness of efforts to contain or treat cases, and future actions that may be taken in response to these developments.

We are also vulnerable to natural disasters and other calamities. Although we have servers that are hosted in an offsite location, our backup system does not capture data on a real-time basis and we may be unable to recover certain data in the event of a server failure. We cannot assure you that any backup systems will be adequate to protect us from the effects of fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events. Any of the foregoing events may give rise to server interruptions, breakdowns, system failures, technology platform failures or internet failures, which could cause the loss or corruption of data or malfunctions of software or hardware as well as adversely affect our ability to provide services on our platform.

We have limited insurance coverage.

The insurance industry in mainland China is still at an early stage of development and business and litigation insurance products offered in mainland China are limited. Other than the directors and officers liability insurance and certain real estate property insurance, we do not maintain any third-party liability, property, business interruption or key-man life insurance. The costs of insuring for these risks and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. In addition, any insurance policies that we maintain may not adequately cover our actual loss and we may not be able to successfully claim our losses under the insurance policies at all or on a timely basis. Any business disruption, litigation or natural disaster may cause us to incur substantial costs and divert our resources.

Risks Related to Our Corporate Structure

If the mainland China government finds that the agreements that establish the structure for operating certain of our operations in mainland China do not comply with mainland China 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 telecommunication businesses and certain other businesses, such as provision of internet video and online game services, is subject to restrictions under current mainland China laws and regulations. For example, foreign investors are generally not allowed to own more than 50% of the equity interests in a commercial internet content provider or other value-added telecommunication service provider (other than operating e-commerce, domestic multi-party communication, store-and-forward, and call center).

In addition, foreign investors are prohibited from investing in companies engaged in internet video, culture (other than music) and publishing business and film/radio and television drama production and operation (including importation) business. We are a Cayman Islands company and our mainland China subsidiaries are considered as foreign-invested enterprises. Accordingly, none of our mainland China subsidiaries are eligible to operate internet video and other businesses which foreign-owned companies are prohibited or restricted from conducting in mainland China. To comply with mainland China laws and regulations, we conduct such business activities through the VIEs in mainland China, including Beijing Momo, Tantan Culture, Hainan Miaoka, Hainan Yilingliuer, Tianjin QOOL Media, Beijing Top Maker, Beijing Perfect Match, SpaceTime Beijing and Tianjin Nishuodedoudui, and their respective subsidiaries. Our WFOEs, including Beijing Momo IT, QOOL Media Technology (Tianjin) Co., Ltd., Beijing Yiliulinger Information Technology Co., Ltd., Tantan Technology (Beijing) Co., Ltd. and Beijing Wozaixiangxiang have entered into contractual arrangements with the VIEs and their respective shareholders, and such contractual arrangements enable us to exercise effective control over, receive substantially all of the economic benefits of, and have an exclusive option to purchase all or part of the equity interest and assets in the VIEs when and to the extent permitted by mainland China law. Because of these contractual arrangements, we are the primary beneficiary of the VIEs in mainland China and hence consolidate their financial results as our variable interest entities under U.S. GAAP. We conduct our operations in mainland China through (i) our mainland China subsidiaries and (ii) the VIEs with which we maintained these contractual arrangements and their subsidiaries in mainland China. Investors in our ADSs thus are not purchasing equity interest in the VIEs in mainland China but instead are purchasing equity interest in a Cayman Islands holding company with no equity ownership in the VIEs.

Our holding company in the Cayman Islands, the VIEs, and investments in our Company face uncertainty about potential future actions by the mainland China government that could affect the enforceability of the contractual arrangements with the VIEs and, consequently, the business, financial condition, and results of operations of the VIEs and our Company as a group. In addition, our ADSs may decline in value or become worthless if we are unable to assert our contractual control rights over the assets of the VIEs which contributed 93.3% of our revenues in 2023. If the mainland China government finds that our contractual arrangements do not comply with its restrictions on foreign investment in internet content and online game providers and other foreign-restricted services, or if the mainland China government otherwise finds that we, the VIEs, or any of their subsidiaries are in violation of mainland China laws or regulations or lack the necessary permits or licenses to operate our business, the mainland China regulatory authorities, including but not limited to the CAC, the MIIT, the National Radio and Television Administration, the State Film Bureau, the National Press and Publication Administration, (formerly known as the General Administration of Press and Publication), the Ministry of Culture and Tourism and the Ministry of Commerce, would have authority in dealing with such violations or failures.

In the opinion of our mainland China counsel, Jingtian & Gongcheng, the ownership structure of our mainland China subsidiaries and the VIEs are in compliance with existing mainland China laws, rules and regulations. There are, however, substantial uncertainties regarding the interpretation and application of current or future mainland China laws and regulations. Thus, we cannot assure you that the mainland China government will not ultimately take a view contrary to the opinion of our mainland China counsel. If we are found to be in violation of any mainland China laws or regulations or if the contractual arrangements among our mainland China subsidiaries, the VIEs and their respective shareholders are determined to be illegal or invalid by the mainland China court, arbitral tribunal or regulatory authorities, the governmental authorities would have discretion in dealing with such violation, including, without limitation:

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revoke our business and operating licenses;

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require us to discontinue or restrict operations;

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restrict our right to collect revenues;

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block our websites;

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require us to restructure the operations in such a way as to compel us to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and assets;

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requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with the VIEs and deregistering the equity pledges of the VIEs, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over the VIEs;

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restricting or prohibiting our use of the proceeds of any of our offshore financings to finance our business and operations in mainland China;

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impose additional conditions or requirements with which we may not be able to comply; or

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take other regulatory or enforcement actions against us that could be harmful to our business.

If the mainland China government determines that the contractual arrangements constituting part of our ownership structure do not comply with mainland China regulations, or if these regulations change or are interpreted differently in the future, our ADSs may decline in value if we are unable to assert our contractual control rights over the assets of the VIEs, which conducts substantially all our business operations that generate external revenues. Our holding company in the Cayman Islands, the VIEs, and investors of our company face uncertainty about potential future actions by the mainland China government that could affect the enforceability of the contractual arrangements with the VIEs and, consequently, significantly affect the financial performance of our company.

Any of the aforementioned events or penalties 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 the VIEs in mainland China that most significantly impact their economic performance, or our failure to receive the economic benefits from the VIEs, we may not be able to consolidate the entity in the consolidated financial statements in accordance with U.S. GAAP.

On February 17, 2023, the CSRC released the Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic Companies, or the Overseas Listing Trial Measures, and five supporting guidelines, which came into effect on March 31, 2023. Officials from the CSRC clarified that, as for companies seeking overseas listings with contractual arrangements, the CSRC will seek opinions from other competent regulatory authorities and complete the filings of the overseas listings of such companies if they duly meet the compliance requirements, and support the development and growth of these companies by enabling them to utilize two markets and two kinds of resources. If we fail to complete filings with the CSRC in a timely manner or at all, for any future offshore offering or listing, or any other capital raising activities, our ability to raise or utilize funds could be materially and adversely affected, and we may even need to unwind our contractual arrangements or restructure our business operations in order to complete such filings. However, given that the Overseas Listing Trial Measures were recently promulgated, there remains substantial uncertainties as to their interpretation, application, and enforcement and how they will affect our operations and our future financing.

Due to the mainland China restrictions or prohibitions on foreign ownership of internet and other related businesses in mainland China, we operate our business in mainland China through a number of the VIEs, in which we have no ownership interest. We rely on a series of contractual arrangements with the VIEs and their respective shareholders, including the powers of attorney, to control and operate the business.

Our ability to control the VIEs depends on the powers of attorney, pursuant to which our mainland China subsidiaries can vote on all matters requiring shareholder approval in the VIEs. We believe these powers of attorney are legally enforceable but may not be as effective as direct equity ownership. These contractual arrangements are intended to provide us with effective control over the VIEs and allow us to obtain economic benefits from them. See “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the VIEs and Their Respective Shareholders” for more details about these contractual arrangements.

Although we have been advised by our mainland China counsel, Jingtian & Gongcheng, that these contractual arrangements are valid, binding and enforceable under existing mainland China laws and regulations, these contractual arrangements may not be as effective in providing control over the VIEs as direct ownership. If the VIEs or their respective shareholders fail to perform their respective obligations under the contractual arrangements, we may incur substantial costs and expend substantial resources to enforce our rights. All of these contractual arrangements are governed by and interpreted in accordance with mainland China law, and disputes arising from these contractual arrangements will be resolved through arbitration in mainland China. However, the legal system in mainland China, particularly as it relates to arbitration proceedings, is still developing and evolving. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in Mainland China—Uncertainties in the interpretation and enforcement of mainland China laws and regulations could limit the legal protections available to you and us.” There are very few precedents and little official guidance as to how contractual arrangements in the context of a variable interest entity, or a VIE, should be interpreted or enforced under mainland China law. There remain uncertainties regarding the ultimate outcome of arbitration should legal action become necessary. These uncertainties could limit our ability to enforce these contractual arrangements. In addition, arbitration awards are final and can only be enforced in mainland China courts through arbitration award recognition proceedings, which could cause additional expenses and delays. In the event we are unable to enforce these contractual arrangements or we experience significant delays or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over the VIEs and may lose control over the assets owned by the VIEs. As a result, we may be unable to consolidate the VIEs in the consolidated financial statements, our ability to conduct our business may be negatively affected, and our business operations could be severely disrupted, which could materially and adversely affect our results of operations and financial condition.

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

The VIEs hold certain assets that are important to our business operations, including the ICP license, the internet culture operation license and the internet audio/video program transmission license. Under our contractual arrangements, the respective shareholders of the VIEs may not voluntarily liquidate the VIEs or approve them to sell, transfer, mortgage or dispose of their respective assets or legal or beneficial interests exceeding certain threshold in the business in any manner without our prior consent. However, in the event that the shareholders breach this obligation and voluntarily liquidate the VIEs, or the VIEs declare bankruptcy, or all or part of their assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business operations, which could materially and adversely affect our business, financial condition and results of operations. Furthermore, if the VIEs undergo a voluntary or involuntary liquidation proceeding, their respective shareholders or unrelated third-party creditors may claim rights to some or all of its assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

Contractual arrangements we have entered into with the VIEs may be subject to scrutiny by the mainland China tax authorities. A finding that we owe additional taxes could significantly reduce the consolidated net income and the value of your investment.

Pursuant to applicable mainland China laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the mainland China tax authorities. We may be subject to adverse tax consequences if the mainland China tax authorities determine that the contractual arrangements among our mainland China subsidiaries, the VIEs and their respective shareholders are not on an arm’s length basis and therefore constitute favorable transfer pricing. As a result, the mainland China tax authorities could require that the VIEs adjust their taxable income upward for mainland China tax purposes. Such an adjustment could adversely affect us by increasing the VIEs’ tax expenses without reducing the tax expenses of our mainland China subsidiaries, subjecting the VIEs to late payment fees and other penalties for under-payment of taxes, and resulting in our mainland China subsidiaries’ loss of their preferential tax treatment. The consolidated results of operations may be adversely affected if the VIEs’ tax liabilities increase or if they are subject to late payment fees or other penalties.

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

In mainland China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature. Each legally registered company in mainland China is required to maintain a company chop, which must be registered with the local Public Security Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes. The chops of our mainland China subsidiaries and the VIEs are generally held securely by personnel we designate or approve in accordance with our internal control procedures. To the extent those chops are not kept safe, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so.

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

Some of the shareholders of the VIEs are also our directors or officers. Conflicts of interest may arise between the roles of these individuals as directors or officers of our company and as shareholders of the VIEs. We rely on these individuals to abide by the laws of the Cayman Islands, which provide that directors and officers owe a fiduciary duty to our company to act in good faith and in the best interest of our company and not to use their positions for personal gain. The shareholders of the VIEs have executed powers of attorney to appoint our mainland China subsidiaries, or a person designated by our mainland China subsidiaries to vote on their behalf and exercise voting rights as shareholders of the VIEs. We cannot assure you that when conflicts arise, shareholders of the VIEs will act in the best interest of our company or that conflicts will be resolved in our favor. If we cannot resolve any conflicts of interest or disputes between us and these shareholders, we would have to rely on legal proceedings, which may be expensive, time-consuming and disruptive to our operations. There is also substantial uncertainty as to the outcome of any such legal proceedings.

We may rely on dividends paid by our mainland China subsidiaries to fund cash and financing requirements. Any limitation on the ability of our mainland China subsidiaries to pay dividends to us could have a material adverse effect on our ability to conduct our business and to pay dividends to holders of the ADSs and our ordinary shares.

We are a holding company, and we may rely on dividends to be paid by our mainland China subsidiaries for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to the holders of the ADSs and our ordinary shares and service any debt we may incur. If our mainland China subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us.

Under mainland China laws and regulations, a foreign-invested enterprise in mainland China, such as Beijing Momo Information Technology Co., Ltd., or Beijing Momo IT, may pay dividends only out of its accumulated profits as determined in accordance with mainland China accounting standards and regulations. In addition, any company, including a foreign-invested enterprise is required to set aside 10% of its after-tax profits each year to fund certain statutory common reserve funds, until the aggregate amount of such funds reach 50% of its registered capital. If the statutory common reserve funds are not sufficient to make up its losses in previous years (if any), the company shall use the profits of the current year to make up the losses before accruing the statutory common reserve funds. At the discretion of the shareholders of a foreign-invested enterprise, it may, after accruing the statutory common reserve funds, allocate a portion of its after-tax profits based on mainland China accounting standards to discretionary common reserve funds. These statutory common reserve funds and discretionary common reserve funds are not distributable as cash dividends. Any limitation on the ability of our wholly-owned mainland China subsidiaries to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

Risks Related to Doing Business in Mainland China

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 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. The auditor is located in mainland China, a jurisdiction where the PCAOB was historically unable to conduct inspections and investigations completely before 2022. As a result, we and investors in the ADSs were deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in mainland China in the past has made 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 mainland China that are subject to the PCAOB inspections. On December 15, 2022, the PCAOB issued a report that vacated its December 16, 2021 determination and removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. However, if the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong, and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the Securities and Exchange Commission, we and investors in our ADSs would be deprived of the benefits of such PCAOB inspections again, which could cause investors and potential investors in the ADSs to lose confidence in our auditor’s audit procedures and reported financial information and the quality of our financial statements.

Pursuant to the HFCAA, if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspections by the PCAOB for two consecutive years, the SEC will prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States.

On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong and our auditor was subject to that determination. In May 2022, the SEC conclusively listed us as a Commission-Identified Issuer under the HFCAA following the filing of our annual report on Form 20-F for the fiscal year ended December 31, 2021. On December 15, 2022, the PCAOB removed mainland China and Hong Kong from the list of jurisdictions where it is unable to inspect or investigate completely registered public accounting firms. For this reason, we were not identified as a Commission-Identified Issuer under the HFCAA after we filed our annual report on Form 20-F for the fiscal year ended December 31, 2022 and do not expect to be identified so after we file this annual report on Form 20-F for the fiscal year ended December 31, 2023.

Each year, the PCAOB will determine whether it can inspect and investigate completely audit firms in mainland China and Hong Kong, among other jurisdictions. If the PCAOB determines in the future that it no longer has full access to inspect and investigate completely accounting firms in mainland China and Hong Kong and we use an accounting firm headquartered in one of these jurisdictions to issue an audit report on our financial statements filed with the Securities and Exchange Commission, we would be identified as a Commission-Identified Issuer following the filing of the annual report on Form 20-F for the relevant fiscal year. In accordance with the HFCAA, our securities would be prohibited from being traded on a national securities exchange or in the over-the-counter trading market in the United States if we are identified as a Commission-Identified Issuer for two consecutive years in the future. If our shares 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. A prohibition of being able to trade in the United States would substantially impair your ability to sell or purchase our ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of our ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects.

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

We conduct our business primarily in mainland China. Our operations in mainland China are governed by mainland China laws and regulations. The mainland China government has significant oversight and discretion over the conduct of our business, and may intervene or influence our operations. We cannot rule out the possibility that the mainland China government 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 our ADSs. Therefore, investors of our company and our business face potential uncertainty from actions taken by the mainland China government affecting our business.