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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

(Mark One)

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

OR

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

For the fiscal year ended December 31, 2021.

OR

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

OR

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

Date of event requiring this shell company report

For the transition period from                 to

Commission file number: 001-39902

RLX Technology 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)

19/F, Building 1, Junhao Central Park Plaza

No. 10 South Chaoyang Park Avenue

Chaoyang District, Beijing 100026

People’s Republic of China

(Address of principal executive offices)

Chao Lu, Chief Financial Officer

E-mail: ir@relxtech.com

 19/F, Building 1, Junhao Central Park Plaza

No. 10 South Chaoyang Park Avenue

Chaoyang District, Beijing 100026

People’s Republic of China

Telephone: +86 10 2173 7265

(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
representing one Class A ordinary share,
par value US$0.00001 per share

RLX 

New York Stock Exchange

Class A ordinary shares,
par value US$0.00001 per share*

New York Stock Exchange

*

Not for trading, but only in connection with the listing on the New York Stock Exchange of our American depositary shares, each American depositary share representing one Class A ordinary share.

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.

As of December 31, 2021, there were 1,565,730,837 ordinary shares outstanding, par value US$0.00001 per share, being the sum of 947,559,047 Class A ordinary shares and 618,171,790 Class B ordinary shares.

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

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

Large accelerated filer

Accelerated filer

Non-accelerated filer

Emerging growth company

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

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

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

 Yes    No

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

U.S. GAAP

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

Other

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

Item 17 Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes No

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes No

TABLE OF CONTENTS

INTRODUCTION

1

FORWARD-LOOKING INFORMATION

2

PART I.

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

3

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

3

ITEM 3.

KEY INFORMATION

3

ITEM 4.

INFORMATION ON THE COMPANY

70

ITEM 4.A.

UNRESOLVED STAFF COMMENTS

109

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

109

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

126

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

134

ITEM 8.

FINANCIAL INFORMATION

136

ITEM 9.

THE OFFER AND LISTING

137

ITEM 10.

ADDITIONAL INFORMATION

138

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND CONCENTRATION RISK

149

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

150

PART II.

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

152

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

152

ITEM 15.

CONTROLS AND PROCEDURES

153

ITEM 16.A.

AUDIT COMMITTEE FINANCIAL EXPERT

154

ITEM 16.B.

CODE OF ETHICS

154

ITEM 16.C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

155

ITEM 16.D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

155

ITEM 16.E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

155

ITEM 16.F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

155

ITEM 16.G.

CORPORATE GOVERNANCE

155

ITEM 16.H.

MINE SAFETY DISCLOSURE

156

ITEM 16.I.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

156

PART III.

ITEM 17.

FINANCIAL STATEMENTS

156

ITEM 18.

FINANCIAL STATEMENTS

156

ITEM 19.

EXHIBITS

156

i

INTRODUCTION

Unless otherwise indicated or the context otherwise requires, references in this annual report to:

“ADRs” are to the American depositary receipts evidencing the ADSs;
“ADSs” are to the American depositary shares, each of which represents one Class A ordinary share;
“China” or the “PRC” are to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan;
“Class A ordinary shares” are to our Class A ordinary shares, par value US$0.00001 per share;
“Class B ordinary shares” are to our Class B ordinary shares, par value US$0.00001 per share;
“NYSE” are to the New York Stock Exchange;
“ordinary shares” are to our Class A and Class B ordinary shares, par value US$0.00001 per share;
“our WFOE” are to Beijing Yueke Technology Co., Ltd.;
“Restructuring” are to the establishment of RLX Technology Inc., the transfer of the offshore holding company holding Relx Inc.’s business in China from Relx Inc. to RLX Technology Inc., and our issuance of an additional 143,681,555 ordinary shares concurrently with deemed settlement of amount due to Relx Inc. of RMB600 million provided to us as capital support in the form of advances, each of those shares was subdivided into ten ordinary shares as a result of the 10-for-1 share subdivision effected by us on January 11, 2021;
“RMB” and “Renminbi” are to the legal currency of China;
“the consolidated VIE” and “the consolidated variable interest entity” are to Beijing Wuxin Technology Co., Ltd.;
“US$,” “U.S. dollars,” “$,” and “dollars” are to the legal currency of the United States; and
“we,” “us,” “our company” and “our” are, prior to the completion of the Restructuring, to the business operated by Relx Inc. inside China and, after the completion of the Restructuring, to RLX Technology Inc., a Cayman Islands holding company and its subsidiaries, and, in the context of describing our operations and consolidated financial information, risk factors and financial results, also include the consolidated variable interest entity Beijing Wuxin Technology Co., Ltd. and its subsidiaries.

Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report are made at a rate of RMB6.3726 to US$1.00, the exchange rate in effect as of December 30, 2021 as set forth in the H.10 statistical release of The Board of Governors of the Federal Reserve System. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all.

1

FORWARD-LOOKING INFORMATION

This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. The forward-looking statements are contained principally in the sections entitled “Item 3. Key Information—D. Risk Factors,” “Item 4. Information on the Company—B. Business Overview,” and “Item 5. Operating and Financial Review and Prospects.” Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information—D. Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

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

our mission, goals and strategies;
our future business development, financial condition and results of operations;
the expected growth of China’s e-vapor industry;
our expectations regarding demand for and market acceptance of our e-vapor products;
our expectations regarding our relationships with users, distributors, retailers, suppliers, manufacturers and other partners;
competition in our industry;
our proposed use of proceeds; and
relevant government policies and regulations relating to our industry.

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Item 3. Key Information—D. Risk Factors,” “Item 4. Information on the Company—B. Business Overview,” and “Item 5. Operating and Financial Review and Prospects,” and other sections in this annual report. You should read this annual report and the documents that we refer to thoroughly with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.

This annual report contains certain data and information that we obtained from various government and private publications. Statistical data in these publications also include projections based on a number of assumptions. The e-vapor industry may not grow at the rate projected by market data, or at all. Failure of this market to grow at the projected rate may have a material and adverse effect on our business and the market price of the ADSs. In addition, the rapidly evolving nature of this industry results in significant uncertainties for any projections or estimates relating to the growth prospects or future condition of our market. Furthermore, if any one or more of the assumptions underlying the market data are later found to be incorrect, actual results may differ from the projections based on these assumptions. You should not place undue reliance on these forward-looking statements.

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

2

PART I.

ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.KEY INFORMATION

Our Holding Company Structure and Contractual Arrangements With the Consolidated Variable Interest Entity

RLX Technology Inc. is not an operating company, but rather a Cayman Islands holding company with no equity ownership in the consolidated variable interest entity. Our Cayman Islands holding company does not conduct business operations directly. We conduct our operations in China through (i) our PRC subsidiary and (ii) the consolidated VIE with which we have maintained contractual arrangements and its subsidiaries. According to the Several Policies and Measures in Relation to Promoting the Legalization and Standardization of the E-cigarettes Industry (for Trial Implementation), or the E-cigarettes Industrial Policies and Measures (for Trial Implementation), which were issued by the State Tobacco Monopoly Administration on April 25, 2022 and came into effect on the same day, foreign investors are prohibited from investing in the wholesale or retailing business of e-cigarette products, and foreign investment in the production of e-cigarette products is subject to regulatory approval. In addition, according to the Special Administrative Measures (Negative List) for Foreign Investment Access (2021 Version), our provision of value-added telecommunication service falls within the restricted category and the equity ownership percentage of foreign investment in the enterprises operating value-added telecommunication service, except for the investment in the e-commerce operation business, a domestic multi-party communication business, an information storage and re-transmission business or a call center business, cannot exceed 50%. Accordingly, we operate our businesses in China through the consolidated VIE, and rely on contractual arrangements among our PRC subsidiary, the consolidated VIE and its shareholders to control the business operations of the consolidated VIE. The consolidated VIE is consolidated for accounting purposes, but is not an entity in which our Cayman Islands holding company, or our investors, own equity. Revenues contributed by the consolidated variable interest entity accounted for all of our total revenues for the years of 2019, 2020 and 2021. As used in this annual report, “we,” “us,” “our company” and “our” refer to RLX Technology Inc., our Cayman Islands holding company and its subsidiaries, and, in the context of describing our operations and consolidated financial information, risk factors and financial results, also include the consolidated variable interest entity Beijing Wuxin Technology Co., Ltd. and its subsidiaries. Investors in our ADSs are not purchasing equity interest in the consolidated VIE in China, but instead are purchasing equity interest in a holding company incorporated in the Cayman Islands.

A series of contractual agreements, including exclusive business cooperation agreement, power of attorney, equity interest pledge agreements, exclusive option agreement, and exclusive assets option agreement have been entered into by and among our subsidiary, the consolidated VIE and its shareholders. Despite the lack of legal majority ownership, our Cayman Island holding company consolidates the consolidated variable interest entity as required by Accounting Standards Codification topic 810, Consolidation. Accordingly, we treat the consolidated variable interest entity and its subsidiaries as our consolidated entities under U.S. GAAP and we consolidate the financial results of the consolidated variable interest entity and its subsidiaries in our consolidated financial statements in accordance with U.S. GAAP. For more details of these contractual arrangements, see “Item 4. Information on the Company—A. History and Development of the Company.”

3

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

There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the consolidated VIE and its shareholders. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or the consolidated VIE is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—Any failure by the consolidated VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.”

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

We face various risks and uncertainties related to doing business in China. Our business operations are primarily conducted in China, and we are subject to complex and evolving PRC laws and regulations. For example, we face risks associated with regulatory approvals on offshore offerings, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact our ability to conduct certain businesses, accept foreign investments, or list on a United States or other foreign 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. For a detailed description of risks relating to doing business in China, please refer to risks disclosed under “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China.”

PRC government’s significant authority in regulating our operations and its oversight over offerings conducted overseas by, and foreign investment in, China-based issuers could significantly limit or completely hinder our ability to offer or continue to offer securities to investors. Implementation of industry-wide regulations, including data security or anti-monopoly related regulations, may cause the value of such securities to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Our business is subject to complex and evolving PRC laws and regulations regarding data privacy and cybersecurity. Failure to protect confidential information of our users, business partners and network against security breaches could damage our reputation and brand and substantially harm our business and results of operations” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.”

4

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

The Holding Foreign Companies Accountable Act

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

Permissions Required From the PRC Authorities for Our Operations

We conduct our business primarily through our subsidiaries and the consolidated variable interest entity in China. Our operations in China are governed by PRC laws and regulations. On March 11, 2022, the State Tobacco Monopoly Administration issued the Administrative Measures for E-Cigarettes, or the E-Cigarettes Administrative Measures, which will come into effect on May 1, 2022. According to the E-Cigarettes Administrative Measures, e-cigarette manufacturing enterprises as well as enterprises holding e-cigarette brands and e-cigarette OEM enterprises (collectively referred to as “e-cigarette manufacturing enterprises”) are required to apply with the department of tobacco monopoly administration under the State Council (i.e., the State Tobacco Monopoly Administration) for a Tobacco Monopoly License for Manufacturing Enterprise. According to a Q&A released on the official website of the State Tobacco Monopoly Administration, a transition period ending September 30, 2022 is granted to e-cigarette manufacturers and operators that existed before November 10, 2021 (collectively referred to as the “existing e-cigarette manufacturers and operators”) in respect of the implementation and enforcement of the E-Cigarettes Administrative Measures, the National Standards and the relevant implementing policies and rules. During such transition period, the existing e-cigarette manufacturers and operators are allowed to continue with their current business, provided that they fully comply with the instructions and requirements imposed by the department of tobacco monopoly administration. For details of the regulatory requirements, see “Item 4. Information on the Company—B. Business Overview—Government Regulations—Regulations related to our Products.” As an e-vapor brand manufacturer, we are obligated to apply for a Tobacco Monopoly License for Manufacturing Enterprise and comply with all applicable requirements. As of the date of this annual report, we are preparing for the application for such license. Though we believe that we satisfy the relevant application requirements, we cannot assure you that the department of tobacco monopoly administration under the State Council will grant us a Tobacco Monopoly License for Manufacturing Enterprise in a timely fashion, or at all. If we fail to obtain the requisite licenses by the expiration of the transition period and comply with the then applicable regulatory requirements, we may have to cease our business operation that is not fully compliant and may be subject to penalties for any non-compliance of our business operations. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future. See “Item 3. Key Information—D. Risk Factors—Risks Relating to our Business and Industry—Changes in existing laws, regulations and policies and the issuance of new laws, regulations, policies and any other entry barriers in relation to the e-vapor industry have materially and adversely affected and may further materially and adversely affect our business, prospects, results of operations and financial performance.”

5

Furthermore, in connection with offering and listing in an overseas market, as of the date of this annual report, we, our PRC subsidiary and the consolidated VIE, (i) are not required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, (ii) have not been required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, and (iii) have not been involved in any formal investigations on cybersecurity review made by the CAC on such basis. However, the PRC government has recently indicated an intent to exert more oversight over offerings that are conducted overseas and foreign investment in China-based issuers. We, our PRC subsidiary and the consolidated VIE may be required to fulfill filing procedures and obtain approval from the CSRC, in connection with offering and listing in an overseas market, and may be required to go through cybersecurity review by the CAC. If we fail to obtain the relevant approval or complete other filing procedures for any future offshore offering or listing, we may face sanctions by the CSRC, the CAC or other PRC regulatory authorities, which may include fines and penalties on our operations in China, limitations on our operating privileges in China, restrictions on or prohibition of the payments or remittance of dividends by our subsidiaries in China, restrictions on or delays to our future financing transactions offshore, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ADSs. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—The approval of and filing with the CSRC or other PRC government authorities may be required in connection with our offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing” and “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—Our business is subject to complex and evolving PRC laws and regulations regarding data privacy and cybersecurity. Failure to protect confidential information of our users, business partners and network against security breaches could damage our reputation and brand and substantially harm our business and results of operations.”

Cash and Asset Flows Through Our Organization

RLX Technology Inc. is a holding company with no operations of its own. We conduct our operations in China primarily through our subsidiaries and the consolidated variable interest entity. As a result, although other means are available for us to obtain financing at the holding company level, RLX Technology Inc.’s ability to pay dividends to the shareholders and to service any debt it may incur may depend upon dividends paid by our PRC subsidiary and license and service fees paid by the consolidated VIE and its subsidiaries. If any of our subsidiaries incurs debt on its own behalf in the future, the instruments governing such debt may restrict its ability to pay dividends to RLX Technology Inc. In addition, our PRC subsidiary is permitted to pay dividends to RLX Technology Inc. only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Further, our PRC subsidiary and VIE are required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends except in the event of a solvent liquidation of the companies. Furthermore, cash transfers from our PRC subsidiaries to parent companies outside of China are subject to PRC government control of currency conversion. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiary and the consolidated variable interest entity to remit sufficient foreign currency to pay dividends or other payments to RLX Technology Inc., or otherwise satisfy our foreign currency denominated obligations. For more details, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.”

Under PRC laws and regulations, our PRC subsidiary and the consolidated variable interest entity are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by the banks designated by SAFE. The amounts restricted include the paid-up capital and the statutory reserve funds of our PRC subsidiary and the net assets of the consolidated variable interest entity in which we have no legal ownership, totaling RMB35.8 million, RMB51.6 million and RMB51.1 million (US$8.0 million) as of December 31, 2019, 2020 and 2021, respectively. For risks relating to the fund flows of our operations in China, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—We may rely on dividends and other distributions on equity paid by our PRC subsidiaries to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.”

6

Under PRC law, RLX Technology Inc. may provide funding to our PRC subsidiary only through capital contributions or loans, and to our PRC consolidated variable interest entity only through loans, subject to satisfaction of applicable government registration and approval requirements. For the years ended December 31, 2019, 2020 and 2021, RLX Technology Inc. provided capital contributions of nil, nil and nil, respectively, to our intermediate holding companies and subsidiaries. For the years ended December 31, 2019, 2020 and 2021, RLX Technology Inc. provided loans of nil, nil, and RMB9,460.6 million (US$1,484.6 million), respectively, to our intermediate holding companies and subsidiaries, and received repayments of nil, nil and RMB1,916.1 million (US$300.7 million), respectively. For the years ended December 31, 2019, 2020 and 2021, the consolidated variable interest entity received nil, nil and nil as loans provided by RLX Technology Inc., respectively, and repaid nil, nil and nil, respectively. For the years ended December 31, 2019, 2020 and 2021, no assets other than cash were transferred between the Cayman Islands holding company and a subsidiary, a PRC consolidated variable interest entity or its subsidiary of our Group, and no subsidiaries paid dividends or made other distributions to the holding company. For details of the financial position, cash flows and results of operations of our PRC consolidated variable interest entity, see “—Financial Information Related to the Consolidated Variable Interest Entity” and page F-13 of this annual report on Form 20-F.

RLX Technology Inc. has not declared or paid any cash dividends. Even though we currently plan to retain most, if not all, of our available funds and future earnings to operate and expand our business, we may contemplate paying cash dividends on our ordinary shares in the future as we deem appropriate. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For PRC and United States federal income tax considerations of an investment in our ADSs, see “Item 10. Additional Information—E. Taxation.”

According to Maples and Calder (Hong Kong) LLP, our Cayman Islands counsel, under the currently effective laws of the Cayman Islands, RLX Technology Inc. is not subject to tax on income or capital gains. Upon payments of dividends to our shareholders, no Cayman Islands withholding tax will be imposed. For the purposes of illustration, the following discussion reflects the hypothetical taxes that might be required to be paid in mainland China and Hong Kong, assuming that: (i) we have taxable earnings in the consolidated VIE, and (ii) we determine to pay a dividend in the future:

Hypothetical pre-tax earnings in the consolidated VIE (1)

    

RMB 100.00

Tax on earnings at statutory rate of 25% at WFOE level (2)

 

RMB (25.00)

Amount to be distributed as dividend from WFOE to Relx HK Limited (3)

 

RMB 75.00

Withholding tax at tax treaty rate of 5%

RMB (3.75)

Amount to be distributed as dividend at Relx HK Limited level and net distribution to RLX Technology Inc. (4)

 

RMB 71.25

Notes:

(1)For the purposes of this example, the tax calculation has been simplified. The hypothetical book pre-tax earnings amount is assumed to equal Chinese taxable income in RMB.
(2)Certain of our subsidiaries and the consolidated VIE qualify for a 15% preferential income tax rate in China. However, such rate is subject to qualification, is temporary in nature, and may not be available in a future period when distributions are paid. For the purposes of this hypothetical example, the table above reflects a maximum tax scenario under which the full statutory rate would be effective.
(3)China’s Enterprise Income Tax Law imposes a withholding income tax of 10% on dividends distributed by a Foreign Invested Enterprise to its immediate holding company outside of mainland China. A lower withholding income tax rate of 5% is applied if the Foreign Invested Enterprise’s immediate holding company is registered in Hong Kong or other jurisdictions that have a tax treaty arrangement with mainland China, subject to a qualification review at the time of the distribution. There is no incremental tax at Relx HK Limited level for any dividend distribution to RLX Technology Inc.
(4)If a 10% withholding income tax rate is imposed, the withholding tax will be RMB7.5 and the amount to be distributed as dividend at Relx HK Limited level and net distribution to RLX Technology Inc. will be RMB67.5.

7

The table above has been prepared under the assumption that all profits of the consolidated VIE will be distributed as fees to our PRC subsidiaries under tax neutral contractual arrangements. If, in the future, the accumulated earnings of the consolidated VIE exceed the service fees paid to our PRC subsidiaries (or if the current and contemplated fee structure between the intercompany entities is determined to be non-substantive and disallowed by Chinese tax authorities), the consolidated VIE could make a non-deductible transfer to our PRC subsidiaries for the amounts of the stranded cash in the consolidated VIE. This would result in such transfer being a non-deductible expense for the consolidated VIE but still taxable income for the PRC subsidiaries. This would have the impact of reducing the amount available above from 71.25% to approximately 53% of pre-tax income, respectively. Our management believes that there is only a remote possibility that this scenario would happen.

Financial Information Related to the Consolidated Variable Interest Entity

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

Condensed Consolidating Statements of Income Information

    

For the Year Ended December 31, 2021

RLX

    

Technology

Other 

    

Primary Beneficiary of 

    

Consolidated VIE 

    

Eliminating

    

Consolidated

Inc.

Subsidiaries

the Consolidated VIE

and its Subsidiaries

Adjustments

Total

(RMB in thousands)

Third-party revenues

 

 

 

 

8,520,978

 

 

8,520,978

Inter-group revenues (1)

47,897

74,744

(122,641)

Third-party cost of revenues

 

 

(346)

 

(382)

 

(4,848,190)

 

 

(4,848,918)

Third-party operating expenses

 

(24,292)

 

(78,528)

 

(88,043)

 

(1,182,492)

 

 

(1,373,355)

Inter-group operating expenses (1)

(73)

(122,568)

122,641

Equity in income of subsidiaries/VIE(2)

 

1,991,644

 

1,983,337

 

1,997,006

 

 

(5,971,987)

 

Other income/ (expense)

57,361

39,357

12

(367,311)

(270,581)

Net income

 

2,024,713

 

1,991,644

 

1,983,337

 

2,000,417

 

(5,971,987)

 

2,028,124

Less: net income attributable to noncontrolling interests

 

 

 

 

(3,411)

 

 

(3,411)

Net income attributable to RLX Technology Inc.

 

2,024,713

 

1,991,644

 

1,983,337

 

1,997,006

 

(5,971,987)

 

2,024,713

   

For the Year Ended December 31, 2020

   

RLX

    

    

    

    

    

Technology

Other

Primary Beneficiary of

Consolidated VIE 

Eliminating

Consolidated

Inc.

 Subsidiaries

the Consolidated VIE

and its Subsidiaries

Adjustments

Total

(RMB in thousands)

Third-party revenues

3,819,712

3,819,712

Third-party cost of revenues

 

 

 

(2,292,153)

 

 

(2,292,153)

Third-party total operating expenses

(204)

 

(499)

 

185

 

(1,513,892)

 

 

(1,514,410)

Equity in loss of subsidiaries/VIE(2)

(127,897)

 

(172,752)

 

(172,862)

 

 

473,511

 

Other income/ (expense)

45,354

(75)

(186,529)

(141,250)

Net loss

(128,101)

 

(127,897)

 

(172,752)

 

(172,862)

 

473,511

 

(128,101)

8

For the Year Ended December 31, 2019

    

RLX

    

    

    

    

    

Technology

Other

Primary Beneficiary of

Consolidated VIE

Eliminating

Consolidated

Inc.

Subsidiaries

the Consolidated VIE

and its Subsidiaries

Adjustments

Total

(RMB in thousands)

Third-party revenues

1,991

1,547,363

1,549,354

Inter-group revenues(1)

26,823

(26,823)

Third-party cost of revenues

 

 

(1,210)

 

(25,553)

 

(941,647)

 

 

(968,410)

Inter-group cost of revenues(1)

(26,823)

26,823

Third-party Total operating expenses

 

 

(153)

 

(1,667)

 

(522,738)

 

 

(524,558)

Equity in income of subsidiaries/VIE(2)

 

47,748

 

46,706

 

46,885

 

 

(141,339)

 

Other income/ (expense)

414

218

(9,270)

(8,638)

Net income

 

47,748

 

47,748

 

46,706

 

46,885

 

(141,339)

 

47,748

Notes:

(1)Representing the elimination of the inter-group service charge and goods transaction at the consolidation level.

Inter-group Revenues between Other Subsidiaries, Primary Beneficiary of the Consolidated VIE and Consolidated VIE and its Subsidiaries

The subsidiaries of our company and the primary beneficiary of the consolidated VIE provide operation supporting services to entities within our corporate structure. For the years ended December 31, 2019, 2020 and 2021, the service fees charged by other group companies to the consolidated VIE were nil, nil and RMB122.6 million, respectively. The inter-group service charge is eliminated at the consolidation level.

Inter-group Revenues between Primary Beneficiary of the Consolidated VIE and Consolidated VIE and its Subsidiaries

Historically, the primary beneficiary of the consolidated VIE sold e-vapor products to the consolidated VIE and its subsidiaries. For the year ended December 31, 2019, inter-group revenues of the primary beneficiary of the consolidated VIE from sales of e-vapor products were RMB26.8 million. The inter-group sales revenue is eliminated at the consolidation level. Starting from 2020, there is no such sales arrangement between the primary beneficiary of the consolidated VIE and the consolidated VIE and its subsidiaries.

(2)Representing the investment of RLX Technology Inc., other subsidiaries, primary beneficiary of the consolidated VIE, and the consolidated VIE and its subsidiaries.

9

Condensed Consolidating Balance Sheets Information

As of December 31, 2021

RLX

Technology

Other

Primary Beneficiary of

Consolidated VIE 

Eliminating

Consolidated

    

Inc.

    

Subsidiaries

    

the Consolidated VIE

and its Subsidiaries

    

Adjustments

    

Total

(RMB in thousands)

Assets:

Cash and cash equivalents

239,536

4,575,049

6,972

387,410

5,208,967

Restricted cash

500

500

Receivables from online payment platforms

10,006

10,006

Short-term bank deposits, net

 

2,116,141

 

1,466,078

 

 

439,900

 

 

4,022,119

Accounts and notes receivable, net

14,024

14,024

Inventory, net

 

 

 

 

589,088

 

 

589,088

Amounts due from related parties

 

 

 

 

1,936

 

 

1,936

Amounts due from group companies(1)

 

8,144,282

 

161,557

 

50,622

 

75,769

 

(8,432,230)

 

Prepayments and other current assets, net

 

49,015

 

17,926

 

3,313

 

412,405

 

 

482,659

Short-term investments

 

 

 

 

3,621,637

 

 

3,621,637

Investment in subsidiaries and VIE(2)

 

3,123,291

 

3,088,597

 

3,054,120

 

 

(9,266,008)

 

Deferred income tax assets

83

22

20,751

20,856

Property, equipment and leasehold improvement, net

 

 

 

498

 

142,657

 

 

143,155

Intangible assets, net

2,366

6,000

8,366

Right-of-use assets, net

 

 

 

1,674

 

174,584

 

 

176,258

Long-term investments

12,000

12,000

Long-term Deposits

 

 

1,964,606

 

 

39,987

 

 

2,004,593

Other assets

404

48,557

48,961

Total assets

 

13,672,265

 

11,273,896

 

3,119,991

 

5,997,211

 

(17,698,238)

 

16,365,125

Liabilities:

 

  

 

  

 

  

 

  

 

  

 

  

Notes and accounts payable

 

 

 

 

1,288,845

 

 

1,288,845

Contract liabilities

 

 

 

 

286,651

 

 

286,651

Salary and welfare benefits payable

 

 

39,284

 

23,495

 

107,614

 

 

170,393

Tax payable

 

 

3,468

 

3,575

 

590,718

 

 

597,761

Amounts due to group companies(1)

 

152,875

 

8,106,148

 

 

173,207

 

(8,432,230)

 

Accrued expenses and other current liabilities

 

4,438

 

1,705

 

2,659

 

304,594

 

 

313,396

Lease liabilities-current

 

 

 

263

 

80,319

 

 

80,582

Deferred income tax liabilities

4,513

4,513

Lease liabilities-non current

 

 

 

1,402

 

102,830

 

 

104,232

Total liabilities

 

157,313

 

8,150,605

 

31,394

 

2,939,291

 

(8,432,230)

 

2,846,373

Total RLX Technology Inc. shareholders’ equity(2)

 

13,514,952

 

3,123,291

 

3,088,597

 

3,054,120

 

(9,266,008)

 

13,514,952

Noncontrolling interests

 

 

 

 

3,800

 

 

3,800

Total shareholders’ equity

 

13,514,952

 

3,123,291

 

3,088,597

 

3,057,920

 

(9,266,008)

 

13,518,752

10

As of December 31, 2020

    

RLX

    

    

Technology

Other

Primary Beneficiary of the

    

Consolidated VIE and its

    

Eliminating

    

Consolidated

Inc.

Subsidiaries

Consolidated VIE

Subsidiaries

Adjustments

Total

 

(RMB in thousands)

Assets:

Cash and cash equivalents

 

36

 

238,403

 

792

 

874,757

 

 

1,113,988

Restricted cash

340,813

340,813

Receivables from online payment platforms

862

862

Short-term bank deposits, net

 

 

493,282

 

 

 

 

493,282

Accounts and notes receivable, net

20,089

20,089

Inventory, net

 

 

 

 

329,123

 

 

329,123

Amounts due from related parties

 

 

 

 

21,006

 

 

21,006

Amounts due from group companies(1)

 

599,805

 

90,042

 

213,060

 

197,854

 

(1,100,761)

 

Prepayments and other current assets, net

 

23

 

15,577

 

591

 

58,192

 

 

74,383

Short-term investments

 

 

 

 

1,473,349

 

 

1,473,349

Investment in subsidiaries and VIE(2)

 

908,834

 

898,799

 

864,100

 

 

(2,671,733)

 

Deferred income tax assets

85

22

5,893

6,000

Other assets

72

186,918

186,990

Total assets

 

1,508,698

 

1,736,188

 

1,078,637

 

3,508,856

 

(3,772,494)

 

4,059,885

 

 

 

 

 

 

Liabilities:

 

  

 

  

 

  

 

  

 

  

 

  

Notes and accounts payable

 

 

 

344

 

1,459,438

 

 

1,459,782

Contract liabilities

 

 

 

 

320,434

 

 

320,434

Salary and welfare benefits payable

 

 

 

 

179,558

 

 

179,558

Tax payable

 

 

 

184

 

363,460

 

 

363,644

Amounts due to related parties

11,174

11,174

Amounts due to group companies(1)

55

827,354

179,310

94,042

(1,100,761)

Accrued expenses and other current liabilities

 

10

 

 

 

116,919

 

 

116,929

Lease liabilities-current

 

 

 

 

45,073

 

 

45,073

Deferred income tax liabilities

5,210

5,210

Lease liabilities-non current

 

 

 

 

49,448

 

 

49,448

Total liabilities

 

65

 

827,354

 

179,838

 

2,644,756

 

(1,100,761)

 

2,551,252

Total shareholders’ equity(2)

 

1,508,633

 

908,834

 

898,799

 

864,100

 

(2,671,733)

 

1,508,633

Notes:

(1)Representing the elimination of inter-group balances among RLX Technology Inc., other subsidiaries, primary beneficiary of the consolidated VIE, and the consolidated VIE and its subsidiaries.
(2)Representing the investment of RLX Technology Inc., other subsidiaries, primary beneficiary of the consolidated VIE, and consolidated VIE and its subsidiaries.

11

Condensed Consolidating Cash Flows Information

For the Year Ended December 31, 2021

   

RLX 

    

    

 

    

    

    

Technology

Other

Primary Beneficiary of

Consolidated VIE 

Eliminating

Consolidated

Inc.

 Subsidiaries

the Consolidated VIE

and its Subsidiaries

 Adjustments

 Total

(RMB in thousands)

Net cash (used in)/provided by operating activities

 

(5,918)

 

14,688

 

(51,765)

 

1,842,887

 

 

1,799,892

Loans to group companies

 

(9,460,565)

(171,250)

(96,058)

9,727,873

Repayment of loans from group companies

 

1,916,087

191,620

(2,107,707)

Other investing activities

(2,132,679)

(2,978,645)

(4,012)

(2,755,324)

-

(7,870,660)

Net cash used in investing activities

 

(9,677,157)

 

(3,149,895)

 

(4,012)

 

(2,659,762)

 

7,620,166

 

(7,870,660)

Repayment of loans to group companies

 

(1,916,087)

(191,620)

2,107,707

Borrowings from group companies

 

9,474,296

253,577

(9,727,873)

Other financing activities

10,042,422

(127,516)

(10,785)

9,904,121

Net cash provided by(used in) financing activities

 

10,042,422

 

7,430,693

 

61,957

 

(10,785)

 

(7,620,166)

 

9,904,121

    

For the Year Ended December 31, 2020

    

RLX 

    

    

    

    

    

Technology 

Other 

Primary Beneficiary of

Consolidated VIE 

Eliminating 

Consolidated 

Inc.

Subsidiaries

 the Consolidated VIE

and its Subsidiaries

Adjustments

Total

(RMB in thousands)

Net cash (used in)/ provided by operating activities

(227)

 

13,949

 

(702)

 

2,576,363

 

 

2,589,383

Loans to group companies

 

(194)

 

(33,507)

 

(179,027)

 

212,728

 

Repayment of loans to group companies

 

321,321

 

176,000

 

 

(497,321)

 

Other investing activities

(295,744)

(72)

(1,517,078)

(1,812,894)

Net cash provided by/(used in) investing activities

 

25,383

 

142,421

 

(1,696,105)

 

(284,593)

 

(1,812,894)

Borrowings under loans from group companies

194

 

3,727

 

175,300

 

33,507

 

(212,728)

 

Repayment of borrowings under loans from group companies

 

 

(321,300)

 

(176,021)

 

497,321

 

Other financing activities

66

175,113

(298)

174,881

Net cash provided by/(used in) financing activities

260

 

178,840

 

(146,000)

 

(142,812)

 

284,593

 

174,881

12

    

For the Year Ended December 31, 2019

    

RLX 

    

    

    

    

    

Technology 

Other 

Primary Beneficiary of

Consolidated VIE and

Eliminating 

Consolidated

Inc.

Subsidiaries

Consolidated VIE

its Subsidiaries

Adjustments

Total

(RMB in thousands)

Net cash provided by/(used in) operating activities

1,254

(29,747)

366,618

338,125

Cash contributed to group companies

(34,771)

34,771

Loans to group companies

(321,250)

(321,201)

642,451

Other investing activities

 

(288,652)

(209,184)

(497,836)

Net cash used in investing activities

(644,673)

(321,201)

(209,184)

677,222

(497,836)

Capital contribution from group companies

34,771

(34,771)

Borrowings under loans from group companies

321,250

321,201

(642,451)

Other financing activities

644,913

(68,511)

576,402

Net cash provided by financing activities

644,913

356,021

252,690

(677,222)

576,402

Selected Consolidated Financial Data

The following tables present the selected consolidated financial information for our business. You should read the following information in conjunction with “Item 5. Operating and Financial Review and Prospects” below. The selected consolidated statements of comprehensive income/(loss) data for the years ended December 31, 2019, 2020 and 2021, selected consolidated balance sheets data as of December 31, 2020 and 2021, and selected consolidated statements of cash flows data for the years ended December 31, 2019, 2020 and 2021 have been derived from our audited consolidated financial statements included elsewhere in this annual report beginning on page F-1. Our consolidated financial statements are prepared and presented in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. Our historical results are not necessarily indicative of results expected for future periods.

13

The following table presents our selected consolidated statements of comprehensive income/(loss) data for the years ended December 31, 2019, 2020 and 2021:

For the Year Ended December 31,

2019

2020

2021

    

RMB

    

RMB

    

RMB

    

US$

 

(in thousands, except for share amounts and per share data)

Selected Consolidated Statements of Comprehensive (Loss)/Income Data:

Net revenues

 

1,549,354

 

3,819,712

 

8,520,978

 

1,337,127

Cost of revenues

 

(968,410)

 

(2,292,153)

 

(4,848,918)

 

(760,901)

Gross profit

 

580,944

 

1,527,559

 

3,672,060

 

576,226

Operating expenses:(1)

 

  

 

  

 

  

 

  

Selling expenses

 

(359,404)

 

(443,154)

 

(520,694)

 

(81,708)

General and administrative expenses

 

(133,221)

 

(771,971)

 

(672,748)

 

(105,569)

Research and development expenses

 

(31,933)

 

(299,285)

 

(179,913)

 

(28,232)

Total operating expenses

 

(524,558)

 

(1,514,410)

 

(1,373,355)

 

(215,509)

Income from operations

 

56,386

 

13,149

 

2,298,705

 

360,717

Other income:

 

  

 

  

 

 

Interest income, net

 

745

 

32,407

 

72,414

 

11,363

Investment income

 

 

20,352

 

94,222

 

14,785

Others, net

 

16,541

 

36,523

 

194,209

 

30,476

Income before income tax

 

73,672

102,431

2,659,550

 

417,341

Income tax expense

 

(25,924)

(230,532)

(631,426)

 

(99,085)

Net (loss)/income

 

47,748

(128,101)

2,028,124

 

318,256

Other comprehensive (loss)/ income:

 

 

Foreign currency translation adjustments

 

(805)

141

(149,188)

 

(23,411)

Total other comprehensive (loss)/ income

 

(805)

141

(149,188)

 

(23,411)

Total comprehensive income/(loss)

 

46,943

(127,960)

1,878,936

 

294,845

Net (loss)/ income per ordinary share/ADS

 

 

Basic

 

0.033

(0.089)

1.445

 

0.227

Diluted

 

0.033

(0.089)

1.436

 

0.225

Weighted average number of ordinary shares/ADS

 

  

 

  

 

  

 

  

Basic

 

1,436,815,570

 

1,436,815,570

 

1,401,371,494

 

1,401,371,494

Diluted

 

1,436,815,570

 

1,436,815,570

 

1,409,690,879

 

1,409,690,879

Non-GAAP Financial Measure:

 

  

 

 

 

Adjusted net income(2)

 

100,462

 

800,997

 

2,251,469

 

353,304

Notes:

(1)Share-based compensation expenses were allocated as follows:

For the Year Ended December 31,

2019

2020

2021

    

RMB

    

RMB

    

RMB

    

US$

(in thousands)

Selling expenses

 

6,250

 

142,325

 

(19,653)

 

(3,084)

General and administrative expenses

 

45,205

 

593,473

 

302,070

 

47,401

Research and development expenses

 

1,259

 

193,300

 

(59,072)

 

(9,270)

(2)For discussions of net income and reconciliation of adjusted net income to net (loss)/income, see “Item 5. Operating and Financial Review and Prospects—A. Operating Results—Non-GAAP Financial Measure.”

14

The following table presents our summary consolidated balance sheets data as of December 31, 2020 and 2021:

As of December 31,

2020

2021

    

RMB

    

RMB

    

US$

(in thousands)

Selected Consolidated Balance Sheets Data:

Cash and cash equivalents

 

1,113,988

 

5,208,967

 

817,401

Restricted cash

 

340,813

 

500

 

78

Short-term bank deposits, net

 

493,282

 

4,022,119

 

631,158

Receivables from online payment platforms

862

10,006

1,570

Short-term investments

 

1,473,349

 

3,621,637

 

568,314

Accounts and notes receivable, net

 

20,089

 

14,024

 

2,201

Inventories, net

 

329,123

 

589,088

 

92,441

Amounts due from related parties

 

21,006

 

1,936

 

304

Prepayments and other current assets, net

 

74,383

 

482,659

 

75,740

Total current assets

 

3,866,895

 

13,950,936

 

2,189,207

Total assets

 

4,059,885

 

16,365,125

 

2,568,046

Accounts and notes payable

 

1,459,782

 

1,288,845

 

202,248

Amounts due to related parties

 

11,174

 

 

Total current liabilities

 

2,496,594

 

2,737,628

 

429,594

Lease liabilities—non-current portion

 

49,448

 

104,232

 

16,356

Total liabilities

 

2,551,252

 

2,846,373

 

446,658

Total shareholders’ equity

 

1,508,633

 

13,518,752

 

2,121,388

Total liabilities and shareholders’ equity

 

4,059,885

 

16,365,125

 

2,568,046

The following table presents our summary consolidated statements of cash flows data for the years ended December 31, 2019, 2020 and 2021:

For the Year Ended December 31,

2019

2020

2021

    

RMB

    

RMB

    

RMB

    

US$

(in thousands)

Selected Consolidated Statements of Cash Flows Data:

Net cash generated from/(used in) operating activities

 

338,125

 

2,589,383

 

1,799,892

 

282,442

Net cash (used in)/ generated from investing activities

 

(497,836)

 

(1,812,894)

 

(7,870,660)

 

(1,235,078)

Net cash generated from/ (used in) financing activities

 

576,402

 

174,881

 

9,904,121

 

1,554,173

Effect of foreign exchange rate changes on cash, cash equivalents and restricted cash

 

(805)

 

19,339

 

(78,687)

 

(12,348)

Net increase in cash, cash equivalents and restricted cash

 

415,886

 

970,709

 

3,754,666

 

589,189

Cash, cash equivalents and restricted cash at the beginning of the year

 

68,206