UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 UNDER
THE SECURITIES EXCHANGE ACT OF 1934
For the month of December 2020
Commission File Number: 001-38665
COOTEK (CAYMAN) INC.
9F, T2 Building, NO.16, Lane 399, Xinlong Road
Shanghai, 201101
People’s Republic of China
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
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Form 20-F ⌧ |
Form 40-F ◻ |
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ◻
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ◻
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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COOTEK (CAYMAN) INC. |
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By: |
/s/ Karl Kan Zhang |
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Name: |
Karl Kan Zhang |
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Title: |
Chairman of the Board of Directors and Chief Technology Officer |
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Date : December 15, 2020 |
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EXHIBIT INDEX
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Exhibit Number |
Description |
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99.1 |
Unaudited Condensed Consolidated Financial Statements for the Nine Months Ended September 30, 2020 |
99.2 |
Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months Ended September 30, 2020 |
99.3 |
Risk Factors |
99.4 |
Earnings Release |
101.INS |
Inline XBRL Instance Document |
101.SCH |
Inline XBRL Taxonomy Extension Schema Document |
101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
Exhibit 99.1
INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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Page |
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Unaudited Condensed Consolidated Balance Sheets as of December 31, 2019 and September 30, 2020 |
F-2 |
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F-3 |
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F-4 |
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F-5 |
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F-6 |
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Notes to the Unaudited Condensed Consolidated Financial Statements |
F-7 |
F-1
COOTEK (CAYMAN) INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
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As of December 31, |
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As of September 30, |
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Note |
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2019 |
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2020 |
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US$ |
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US$ |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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59,905,827 |
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58,478,376 |
Restricted cash |
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60,204 |
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60,209 |
Short-term investments |
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571,508 |
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550,025 |
Accounts receivable, net of allowance for doubtful accounts of US $1,774,192 and US $1,961,728 as of December 31, 2019 and September 30, 2020, respectively |
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3 |
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27,254,634 |
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29,083,216 |
Prepaid expenses and other current assets |
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4 |
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7,847,794 |
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10,764,181 |
Total current assets |
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95,639,967 |
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98,936,007 |
Long term restricted cash |
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— |
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2,472,998 |
Property and equipment, net |
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5 |
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5,669,849 |
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5,597,148 |
Intangible assets, net |
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267,736 |
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419,343 |
Long-term investments |
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— |
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146,841 |
Other non-current assets |
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259,108 |
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756,507 |
TOTAL ASSETS |
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101,836,660 |
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108,328,844 |
LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities (including amounts of the consolidated VIEs without recourse to the Company. See Note 2(b)): |
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Accounts payable |
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37,877,800 |
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64,805,107 |
Short-term bank borrowings |
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6 |
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9,012,645 |
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14,822,161 |
Accrued salary and benefits |
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5,598,425 |
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7,747,460 |
Accrued expenses and other current liabilities |
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7 |
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5,955,956 |
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10,215,400 |
Deferred revenue |
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3,887,908 |
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4,697,267 |
Total current liabilities |
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62,332,734 |
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102,287,395 |
Other non-current liabilities |
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595,563 |
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493,467 |
TOTAL LIABILITIES |
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62,928,297 |
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102,780,862 |
Commitments and contingencies |
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13 |
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Shareholders' equity: |
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Class A ordinary shares (US$0.00001 par value; 13,750,000,000 shares authorized as of December 31, 2019 and September 30, 2020; 2,880,056,332 and 2,844,418,332 shares issued as of December 31, 2019 and September 30, 2020, respectively; 2,870,119,332 and 2,818,991,432 shares outstanding as of December 31, 2019 and September 30, 2020, respectively) |
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28,800 |
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28,444 |
Class B ordinary shares (US$0.00001 par value; 250,000,000 shares authorized; 246,224,465 shares issued and outstanding as of December 31, 2019 and September 30, 2020) |
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2,462 |
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2,462 |
Treasury shares (9,937,000 and 25,426,900 shares as of December 31, 2019 and September 30, 2020, respectively) |
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10 |
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(1,063,547) |
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(3,322,668) |
Additional paid-in capital |
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194,971,827 |
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192,375,859 |
Accumulated deficit |
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(153,598,346) |
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(182,181,327) |
Accumulated other comprehensive loss |
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(1,432,833) |
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(1,354,788) |
Total Shareholders' Equity |
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38,908,363 |
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5,547,982 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
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101,836,660 |
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108,328,844 |
The accompanying notes are an integral part of these consolidated financial statements.
F-2
COOTEK (CAYMAN) INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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For the nine months ended September 30, |
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Note |
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2019 |
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2020 |
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US$ |
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US$ |
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Net revenues |
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108,899,479 |
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339,065,455 |
Cost of revenue (including share-based compensation of US$65,858 and US$198,402 in the nine months ended September 30, 2019 and 2020, respectively) |
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(11,435,005) |
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(17,056,483) |
Gross profit |
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97,464,474 |
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322,008,972 |
Operating expenses: |
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General and administrative expenses (including share-based compensation of US$434,790 and US$1,281,380 in the nine months ended September 30, 2019 and 2020, respectively) |
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(13,504,075) |
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(11,144,938) |
Research and development expenses (including share-based compensation of US$2,564,606 and US$2,157,990 in the nine months ended September 30, 2019 and 2020, respectively) |
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(21,197,631) |
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(23,153,735) |
Sales and marketing expenses (including share-based compensation of US$151,444 and US$168,727 in the nine months ended September 30, 2019 and 2020, respectively) |
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(93,533,363) |
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(316,276,383) |
Other operating income (loss), net |
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8 |
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228,302 |
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(227,540) |
Total operating expenses |
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(128,006,767) |
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(350,802,596) |
Loss from operations |
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(30,542,293) |
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(28,793,624) |
Interest income, net |
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708,370 |
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227,348 |
Foreign exchange losses, net |
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(364,545) |
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(13,505) |
Loss before income taxes |
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(30,198,468) |
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(28,579,781) |
Income tax expense |
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9 |
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(1,714) |
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(3,200) |
Net Loss attributable to ordinary shareholders |
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(30,200,182) |
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(28,582,981) |
Net Loss per ordinary share: |
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12 |
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Basic |
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(0.01) |
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(0.01) |
Diluted |
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(0.01) |
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(0.01) |
Net Loss per ADS (each of ADS represents 50 Class A ordinary shares): |
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Basic |
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(0.48) |
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(0.46) |
Diluted |
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(0.48) |
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(0.46) |
Weighted average shares used in calculating net loss per ordinary share: |
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Basic |
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3,163,501,054 |
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3,086,630,271 |
Diluted |
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3,163,501,054 |
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3,086,630,271 |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
COOTEK (CAYMAN) INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
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For the nine months ended September 30, |
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2019 |
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2020 |
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US$ |
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US$ |
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Net Loss |
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(30,200,182) |
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(28,582,981) |
Other comprehensive (loss) income |
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Foreign currency translation adjustments, net of tax of nil |
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(220,513) |
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78,045 |
Comprehensive Loss |
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(30,420,695) |
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(28,504,936) |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
COOTEK (CAYMAN) INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
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Accumulated |
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Additional |
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other |
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Total |
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Class A |
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Class B |
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paid-in |
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Accumulated |
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comprehensive |
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shareholders' |
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Ordinary shares |
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Ordinary shares |
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Treasury shares |
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capital |
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deficit |
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(loss) income |
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equity |
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Shares |
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US$ |
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Shares |
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US$ |
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Shares |
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US$ |
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US$ |
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US$ |
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US$ |
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US$ |
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Balance at January 1, 2019 |
|
2,949,757,236 |
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29,498 |
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246,224,465 |
|
2,462 |
|
15,550,500 |
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(2,499,167) |
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204,701,187 |
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(116,752,285) |
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(1,158,900) |
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84,322,795 |
Net Loss |
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— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
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(30,200,182) |
|
— |
|
(30,200,182) |
Foreign currency translation adjustments |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(220,513) |
|
(220,513) |
Share-based compensation |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
3,216,698 |
|
— |
|
— |
|
3,216,698 |
Repurchase of ordinary shares |
|
— |
|
— |
|
— |
|
— |
|
56,461,100 |
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(9,741,378) |
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— |
|
— |
|
— |
|
(9,741,378) |
Cancellation of treasury shares |
|
(32,268,350) |
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(323) |
|
— |
|
— |
|
(32,268,350) |
|
5,737,950 |
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(5,737,627) |
|
— |
|
— |
|
— |
Exercise of share options |
|
8,330,150 |
|
84 |
|
— |
|
— |
|
— |
|
— |
|
277,838 |
|
— |
|
— |
|
277,922 |
Issuance of ordinary shares upon vesting of restricted shares |
|
9,397,592 |
|
95 |
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— |
|
— |
|
— |
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— |
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(95) |
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— |
|
— |
|
— |
Balance at September 30, 2019 |
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2,935,216,628 |
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29,354 |
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246,224,465 |
|
2,462 |
|
39,743,250 |
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(6,502,595) |
|
202,458,001 |
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(146,952,467) |
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(1,379,413) |
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47,655,342 |
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|
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Balance at January 1, 2020 |
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2,880,056,332 |
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28,800 |
|
246,224,465 |
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2,462 |
|
9,937,000 |
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(1,063,547) |
|
194,971,827 |
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(153,598,346) |
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(1,432,833) |
|
38,908,363 |
Net Loss |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(28,582,981) |
|
— |
|
(28,582,981) |
Foreign currency translation adjustments |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
78,045 |
|
78,045 |
Share-based compensation |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
3,806,499 |
|
— |
|
— |
|
3,806,499 |
Repurchase of ordinary shares |
|
— |
|
— |
|
— |
|
— |
|
64,770,700 |
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(8,130,513) |
|
— |
|
— |
|
— |
|
(8,130,513) |
Cash settlement on vested share options and restricted shares |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
(823,226) |
|
— |
|
— |
|
(823,226) |
Cancellation of treasury shares |
|
(49,280,800) |
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(492) |
|
— |
|
— |
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(49,280,800) |
|
5,871,392 |
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(5,870,900) |
|
— |
|
— |
|
— |
Exercise of share options |
|
9,415,600 |
|
94 |
|
— |
|
— |
|
— |
|
— |
|
291,701 |
|
— |
|
— |
|
291,795 |
Issuance of ordinary shares upon vesting of restricted shares |
|
4,227,200 |
|
42 |
|
— |
|
— |
|
— |
|
— |
|
(42) |
|
— |
|
— |
|
— |
Balance at September 30, 2020 |
|
2,844,418,332 |
|
28,444 |
|
246,224,465 |
|
2,462 |
|
25,426,900 |
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(3,322,668) |
|
192,375,859 |
|
(182,181,327) |
|
(1,354,788) |
|
5,547,982 |
The accompanying notes are an integral part of these condensed consolidated financial statements.
F-5
COOTEK (CAYMAN) INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the nine months ended September 30, |
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|
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2019 |
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2020 |
|
|
US$ |
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US$ |
|
|
|
|
|
Cash flows from operating activities: |
|
|
|
|
Net Loss |
|
(30,200,182) |
|
(28,582,981) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
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Depreciation and amortization |
|
2,096,190 |
|
2,738,487 |
Provision for allowance of doubtful accounts |
|
4,665,322 |
|
322,361 |
Share-based compensation |
|
3,216,698 |
|
3,806,499 |
Loss on disposal of property and equipment |
|
91 |
|
15,124 |
Changes in assets and liabilities: |
|
|
|
|
Accounts receivable |
|
(370,877) |
|
(1,404,021) |
Prepaid expenses and other current assets |
|
(1,612,532) |
|
(3,421,313) |
Other non-current assets |
|
238,762 |
|
(506,082) |
Accounts payable |
|
3,146,856 |
|
24,826,554 |
Accrued salary and benefits |
|
(544,028) |
|
1,578,215 |
Accrued expenses and other current liabilities |
|
507,323 |
|
4,592,654 |
Deferred revenue |
|
242,373 |
|
2,105,852 |
Other non-current liabilities |
|
(285,690) |
|
(102,097) |
Net cash (used in) provided by operating activities |
|
(18,899,694) |
|
5,969,252 |
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
Purchases of property, equipment and intangible assets |
|
(4,097,269) |
|
(2,237,794) |
Purchases of short-term investments |
|
— |
|
(13,000,000) |
Maturity of short-term investments |
|
— |
|
13,022,268 |
Purchases of long-term investments |
|
— |
|
(146,841) |
Net cash (used in) investing activities |
|
(4,097,269) |
|
(2,362,367) |
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
Proceeds from short-term bank borrowings |
|
5,040,813 |
|
15,240,004 |
Repayment of short-term bank borrowings |
|
— |
|
(9,515,198) |
Proceeds from issuance of ordinary shares upon exercise of share options |
|
277,922 |
|
291,795 |
Cash paid to settle vested share options and restricted shares |
|
— |
|
(823,226) |
Cash paid for deferred issuance costs |
|
(809,952) |
|
— |
Payments of share repurchases |
|
(9,741,378) |
|
(8,130,513) |
Net cash (used in) financing activities |
|
(5,232,595) |
|
(2,937,138) |
|
|
|
|
|
Net (decrease) increase in cash, cash equivalents, and restricted cash |
|
(28,229,558) |
|
669,747 |
Cash, cash equivalents, and restricted cash at beginning of period |
|
84,859,915 |
|
59,966,031 |
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
(360,608) |
|
375,805 |
Cash, cash equivalents, and restricted cash at end of period |
|
56,269,749 |
|
61,011,583 |
Supplemental disclosure of cash flow information: |
|
|
|
|
Income taxes paid |
|
1,714 |
|
3,200 |
Interest paid |
|
42,691 |
|
417,882 |
Supplemental disclosure of noncash investing and financing activities: |
|
|
|
|
Purchases of property and equipment included in payables |
|
54,814 |
|
224,410 |
Reconciliation in amounts on consolidated balance sheets: |
|
|
|
|
Cash and cash equivalents |
|
56,269,749 |
|
58,478,376 |
Restricted cash |
|
— |
|
2,533,207 |
Total cash, cash equivalents, and restricted cash |
|
56,269,749 |
|
61,011,583 |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
1. Organization and Principal Activities
CooTek (Cayman) Inc. (the "Company") was incorporated in the Cayman Islands on March 5, 2012. The Company, its subsidiaries, its consolidated Variable Interest Entities ("VIEs") and VIEs’ subsidiaries (collectively referred to as the "Group") are a fast-growing mobile internet company with a global vision, offering mobile applications including a portfolio of content-rich mobile applications.
History of the Group and reorganization
The Group’s history began in August 2008 with the commencement of operations of Shanghai Han Xiang (CooTek) Information Technology Co., Ltd ("Han Xiang"), a limited liability company incorporated in the People’s Republic of China ("PRC") by certain individuals. In October 2010, three outside investors acquired an aggregate of 24.24% equity interest of Han Xiang. In 2012, Han Xiang and its shareholders undertook a reorganization which was conducted to establish a Cayman holding company for the existing business to obtain investment from outside investors and in preparation of an overseas initial public offering. The Group has recognized the net assets of Han Xiang on a historical cost with no change in basis in the consolidated financial statements upon the completion of the reorganization. The shareholders’ rights and obligations remained the same after the reorganization.
On October 2, 2018 the Group completed its initial public offering ("IPO") and issued 4,350,000 American depositary shares representing 217,500,000 of the Group’s ordinary shares. Net proceeds from the IPO after deducting underwriting discount and offering costs were US$45.1 million.
2. Summary of Significant Accounting Policies
(a) Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC"), regarding interim financial reporting, and include all normal and recurring adjustments that management of the Group considers necessary for a fair presentation of its financial position and operating results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these financial statements should be read in conjunction with the Group’s annual consolidated financial statements and notes thereto, included in the Company’s 2019 Annual Report on Form 20-F filed with the SEC on April 20, 2020, referred to as the Company’s 2019 Annual Report.
(b) Principles of Consolidation
The consolidated financial statements include the financial information of the Company, its wholly owned subsidiaries, its consolidated VIEs and VIEs’ subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.
Applicable PRC laws and regulations currently limit foreign ownership of companies that provide internet content distribution services and any other restrictions. The Company is deemed a foreign legal person under PRC laws and accordingly subsidiaries owned by the Company are not eligible to engage in provisions of internet content or online services. The Group therefore conducts its online business through the following major consolidated VIEs:
● | Shanghai Chu Bao (CooTek) Information Technology Co., Ltd. ("Chu Bao") |
● | Yingsun Information Technology (Ningbo) Co., Ltd. ("Yingsun") |
● | Shanghai Qiaohan Technology Co., Ltd. ("Qiaohan") |
● | Molihong (Shenzhen) Internet Technology Co., Ltd. ("Molihong") |
● | Shanghai Dengyong Information Technology Co., Ltd. ("Dengyong") |
F-7
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
(b) Principles of Consolidation (Continued)
The following consolidated financial statement balances and amounts of the Group’s VIEs were included in the accompanying unaudited condensed consolidated financial statements after the elimination of intercompany balances and transactions among the Company, its subsidiaries and its VIEs.
The VIEs’ assets are comprised of recognized and unrecognized revenue-producing assets. The recognized revenue producing assets mainly include purchased servers and software, which are presented in the account of "Property and equipment, net" and "Intangible assets, net". The unrecognized revenue-producing assets mainly consist of the Internet Content Provider license ("ICP" license), trademarks, copyrights and registered patents, which are not recognized in the consolidated balance sheets.
Revenues of VIEs included in the consolidated financial statements mainly include revenue of advertising services. The VIEs contributed 35% and 88% of the Group’s consolidated net revenues for the nine months ended September 30, 2019 and 2020, respectively. As of December 31, 2019 and September 30, 2020, the VIEs accounted for an aggregate of 38% and 54% respectively, of the consolidated total assets, and 65% and 62% respectively, of the consolidated total liabilities.
F-8
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
(b) Principles of Consolidation (Continued)
There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs were ever to need financial support, the Group may, at its option and subject to statutory limits and restrictions, provide financial support to its VIE through loans to the shareholders of the VIEs.
The Group believes that there are no assets held in the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and the PRC statutory reserves. As the VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs. Relevant PRC laws and regulations restrict the VIEs from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends.
(c) Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group's financial statements including but not limited to allowance for doubtful accounts, valuation allowances of deferred tax assets, and valuation of share-based compensation. Actual results may differ materially from those estimates.
(d) Fair Value
Fair value reflects the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the assets or liabilities.
The Group applies a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This guidance specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:
● | Level 1— Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured. |
● | Level 2— Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques. |
● | Level 3— Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Group’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. |
The fair value guidance describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.
F-9
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
(d) Fair Value (Continued)
When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates.
Beginning January 1, 2019, the Group’s equity investments without readily determinable fair values, which do not qualify for NAV practical expedient and over which the Group does not have the ability to exercise significant influence through the investments in common stock or in substance common stock, are accounted for under the measurement alternative upon the adoption of Accounting Standards Update ("ASU") 2016-01 Recognition and Measurement of Financial Assets and Liabilities (the "Measurement Alternative"). Under the Measurement Alternative, the carrying value is measured at cost, less any impairment, plus and minus changes resulting from observable price changes in orderly transactions for identical or similar investments. After management’s assessment of each of the long-term investments, management concluded that investments do not have readily determinable fair values, and elects the measurement alternative.
Financial instruments not reported at fair value include cash and cash equivalents, restricted cash, short-term investments, accounts receivable, accounts payable, other current liabilities and short-term bank borrowings. The carrying amounts of these financial instruments as of December 31, 2019 and September 30, 2020 were considered representative of their fair values due to their short-term nature.
(e) Foreign Currency Translation
The functional currency of the Group is the United States Dollar ("US$"). The functional currency of the subsidiaries and the VIEs in the PRC is Renminbi ("RMB"). The functional currency of all the other subsidiaries is US$.
Foreign currency transactions have been translated into the functional currency at the exchange rates prevailing on the date of transactions. Foreign currency denominated monetary assets and liabilities are re-measured into the functional currency at exchange rates prevailing on the balance sheet date. Exchange gains and losses have been included in the determination of net income.
The Group has chosen the US$ as its reporting currency. Assets and liabilities have been translated using exchange rates prevailing on the balance sheet date. Equity accounts are translated at historical exchange rates. Income statement items have been translated using the average exchange rate for the year. Translation adjustments have been reported as cumulative translation adjustments and are shown as a component of other comprehensive income/loss in the consolidated statements of comprehensive (loss) income and consolidated statements of changes in shareholders’ equity.
(f) Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents consist of cash on hand, demand deposits and floating rate financial instruments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased.
The Group's current-portion restrict cash represents amounts held in Group's bank account as guarantee deposit for payments processing services provided by the bank.
Certain bank accounts were frozen by the PRC local authority in connection with an ongoing investigation of alleged misconducts of third-party advertisers perpetrated on the Group's advertising platform. As of September 30, 2020, cash held in these frozen bank accounts amounted to US$2,472,998. These funds are presented as long-term restricted cash on the consolidated balance sheet as of September 30, 2020 as the Group cannot control the timing of its release. In October 2020, an additional US$18.4 million was deposited into these frozen bank accounts. The Group is still in the process of cooperating with the relevant authority on such investigation and expect the funds to be released upon the completion of such investigation.
(g) Short-term Investments
Short-term investments primarily comprises of the time deposits with banks maturities between three months and one year. The Group states the short-term investments at amortized cost.
F-10
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
(h) Revenue Recognition
Mobile Advertising
The Group generates substantially all of its revenue through mobile advertising. As of January 1, 2019, the Group adopted ASU 2014-09 Revenue from Contracts with Customers - Topic 606 and all subsequent ASUs that modified ASC 606. The Group has elected to apply the ASU and all related ASUs under the modified retrospective method to all contracts that were not completed as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Group did not note any effects of applying the new revenue standard as an adjustment to the opening balance of retained earnings at the beginning of 2019.
In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.
The Group provides advertising services to customers for promotion of their brands and products through its mobile applications, including a portfolio of content-rich mobile applications. The Group has two general pricing models for its advertising products: cost over a time period and cost for performance basis including per impression basis. For advertising contracts over a time period, the Group generally recognizes revenue ratably over time, because the customer simultaneously receives and consumes the benefits as the Group performs throughout a fixed contract term. For contracts that are charged on the cost for performance basis, the Group charges an agreed-upon fee to its customers determined based on the effectiveness of advertising links, which is typically measured by clicks, transactions, installations, user registrations, and other actions originating from the Group’s mobile applications. Revenue is recognized at a point in time when there is an effective click, transaction, installations, user registrations, and other actions originating from the Group’s mobile applications. For contracts that are charged on the cost per impression basis, the Group recognizes the revenue at a point in time when the impressions are delivered. Revenue for performance-based advertising services is recognized at a point in time when all the revenue recognition criteria are met.
The Group launched in-house developed advertising platform, CooTek Ads, to provide tailored advertising services from late 2019. Customers engaged through CooTek Ads are required to pay a deposit before using Group's services. The deposits received are recorded as deferred revenue on the consolidated balance sheets. The amounts due to the Group are deducted from the deposited amounts when performance criteria have been satisfied.
Others
The Group also generates other revenues through cloud call business, licensing of its Smart Inputs products and membership fee from the users. The revenue is recognized when service is rendered.
F-11
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
(h) Revenue Recognition (Continued)
Sales Incentives
The Group provides sales incentives to certain customers on the CooTek Ads in the form of sales rebates which entitle them to receive reductions in the price by meeting certain cumulative consumption requirement or replenishing required amount of deposit. The Group accounts for these incentives granted to customers as variable consideration and records it as reduction of revenue. The amount of variable consideration is measured based on the most likely amount of incentives to be. For the nine months ended September 30, 2019 and 2020, the rebates recorded by the Group were nil and US$48,491,685, respectively.
Disaggregation of Revenue
In the following table, revenue is disaggregated by revenue streams and geographic location of customers’ headquarters.
|
|
|
|
|
|
|
For the nine months ended September 30, |
||
|
|
2019 |
|
2020 |
|
|
US$ |
|
US$ |
|
|
|
|
|
Revenue: |
|
|
|
|
Advertising revenue |
|
106,575,374 |
|
337,037,822 |
Other revenue |
|
2,324,105 |
|
2,027,633 |
Total |
|
108,899,479 |
|
339,065,455 |
Contract Balances
Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced, and revenue recognized prior to invoicing when the Group has satisfied its performance obligations and has the unconditional right to payment.
F-12
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
(h) Revenue Recognition (Continued)
Contract liabilities include payments received in advance of performance under the contract or for differences between the amount billed to a customer and the revenue recognized for the completed performance obligation which is presented as deferred revenue on the consolidated balance sheets. Due to the generally short-term duration of the Group’s contracts, the majority of the performance obligations are satisfied in one year. The movements of the Group’s accounts receivable and deferred revenue are as follows:
The Group recognized revenue of US$263,383 and US$3,637,328 by the reducing the balance of deferred revenue in the nine months ended September 30, 2019 and 2020, respectively, which were included in the balance of deferred revenue at the beginning of the each period.
(i) Sales and Marketing Expenses
Sales and marketing expenses primarily consist of advertising expenses, salaries and benefits of sales and marketing personnel and fees paid to mobile device manufacturers to pre-install the Group’s Smart Input products. Advertising expenses represent payment to the third parties for online user acquisition of the Group’s products via social media and demand-side platforms. Advertising expenses are expensed as sales and marketing expenses when the services are received. Such expenses amounted to US$86,189,395 and US$310,602,100 for the nine months ended September 30, 2019 and 2020, respectively.
(j) Concentration and Risks
Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, short-term investments, accounts receivable and prepayments. The Group places its cash and cash equivalents and short-term investments with financial institutions with high-credit ratings and quality. The Group conducts credit evaluations of customers, and generally does not require collateral or other security from its customers. The Group establishes an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. With respect to prepayments, the Group performs on-going credit evaluations of the financial condition of these suppliers and has noted no significant credit risk.
F-13
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
(j) Concentration and Risks (Continued)
Concentration of Customers
The following customers accounted for 10% or more of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
For the nine months ended September 30, |
|
||||||
|
|
2019 |
|
2020 |
|
||||
|
|
US$ |
|
% |
|
US$ |
|
% |
|
|
|
|
|
|
|
|
|
|
|
Company A |
|
21,335,698 |
|
20 |
% |
* |
|
* |
|
Company B |
|
21,731,172 |
|
20 |
% |
* |
|
* |
|
Company C |
|
11,088,217 |
|
10 |
% |
* |
|
* |
|
Company D |
|
16,873,890 |
|
16 |
% |
* |
|
* |
|
Company E |
|
* |
|
* |
|
91,588,390 |
|
27 |
% |
The following customers accounted for 10% or more of accounts receivable:
Concentration of Vendors
The Group uses certain vendors to acquire users and those cost are recorded as sales and marketing expenses. Vendors accounted for 10% or more are listed as below:
The following vendors accounted for 10% or more of accounts payable:
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
As of September 30, |
|
||||
|
|
2019 |
|
2020 |
|
||||
|
|
US$ |
|
% |
|
US$ |
|
% |
|
|
|
|
|
|
|
|
|
|
|
Company H |
|
* |
|
* |
|
8,433,642 |
|
13 |
% |
Company J |
|
* |
|
* |
|
7,378,433 |
|
11 |
% |
* |
Less than 10%. |
F-14
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
(j) Concentration and Risks (Continued)
Business and Economic Risks
The Group participates in the dynamic and competitive high technology industry and believes that changes in any of the following areas could have a material adverse effect on the Group's future financial position, results of operations and cash flows: changes in the overall demand for services and products; competitive pressures due to existing and new entrants; advances and new trends in new technologies and industry standards; changes in certain strategic relationships or customer relationships; regulatory considerations; copyright regulations; brand maintenance and enhancement; and risks associated with the Company's ability to attract and retain employees necessary to support its growth.
The Group's operations could be adversely affected by significant political, economic and social uncertainties in the PRC.
Foreign Currency Risk
The RMB is not a freely convertible currency. The State Administration for Foreign Exchange in the PRC, under the authority of the Peoples Bank of China, controls the conversion of RMB into other currencies. The value of the RMB is subject to changes in central government policies, international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. The Group's cash and cash equivalents and restricted cash denominated in RMB amounted to RMB139,905,845 (amounted to US$20,054,735) and RMB292,519,950 (amounted to US$42,953,841) as of December 31, 2019 and September 30, 2020, respectively.
(k) Recent Accounting Pronouncements
New accounting pronouncements recently adopted
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which changes certain disclosure requirements, including those related to Level 3 fair value measurements. The provisions of ASU 2018-13 relating to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The remaining provisions should be applied retrospectively to all periods presented upon their effective date. The Group has adopted this ASU on January 1, 2020, which did not have a material impact on its unaudited condensed consolidated financial statements and related disclosures.
In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. Under the new guidance, to determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportionate basis, rather than in their entirety. ASU 2018-17 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted in any interim period. ASU 2018-17 is required to be applied retrospectively from the date the guidance is first applied. The Group has early adopted this ASU on January 1, 2020 and did not have a material impact on its unaudited condensed consolidated financial statements and related disclosures.
F-15
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
2. Summary of Significant Accounting Policies (Continued)
(l) Recent Accounting Pronouncements (Continued)
New accounting pronouncements not yet adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on balance sheet and disclose key information about lease arrangements. The new standard establishes a right-of-use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with terms of longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The standard is effective on January 1, 2019, with early adoption permitted, for public business entity ("PBE"). And it is effective on January 1, 2020 for non-issuers and PBEs that meet the definition of a PBE solely because their financial statements or financial information is included in a filing with the SEC. In July 2018, the FASB issued an update that provided an additional transition option that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the consolidated financial statements. Companies that elect this option would record a cumulative-effect adjustment to the opening balance of retained earnings on the date of adoption. In November 19, 2019, the FASB issued ASU 2019-10 to amend the effective date for ASU 2016-02 to be January 1, 2021 for non-issuers. The Group as an EGC has elected to adopt the new lease standard as of the effective date applicable to nonissuers and will implement the new lease standard on January 1, 2021 using the modified retrospective method. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. In addition, the Group will elect the transition practical referred to as the "package of three", that must be taken together and allows entities to (1) not reassess whether existing contracts contain leases, (2) carryforward the existing lease classification, and (3) not reassess initial direct costs associated with existing leases. The Group is in the process of evaluating the impact on its consolidated financial statements, as well as the impact of adoption on policies, practices, systems and financial statement disclosures. As of September 30, 2020, the Group has US$2.9 million of future minimum operating lease commitments that are not currently recognized on its consolidated balance sheets (see note 13).
In June 2016, the FASB issued ASU 2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments. This ASU provides more useful information about expected credit losses to financial statement users and changes how entities will measure credit losses on financial instruments and timing of when such losses should be recognized. This ASU is effective for annual and interim periods beginning after December 15, 2019 for the public business entities. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, and interim periods therein. In November 2019, the FASB issued ASU No. 2019-10 which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the U.S. Securities and Exchange Commission) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. The Company is currently assessing the impact the guidance will have on its consolidated financial statements.
3. Accounts Receivable, net
Accounts receivable, net, consisted of the following:
F-16
4. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following:
|
|
|
|
|
|
|
As of December 31, |
|
As of September 30, |
|
|
2019 |
|
2020 |
|
|
US$ |
|
US$ |
|
|
|
|
|
Value added tax recoverable |
|
3,750,491 |
|
4,649,736 |
Other receivables |
|
1,575,467 |
|
3,856,326 |
Advance to suppliers |
|
1,545,793 |
|
952,760 |
Others |
|
976,043 |
|
1,305,359 |
Prepaid expenses and other current assets |
|
7,847,794 |
|
10,764,181 |
5. Property and Equipment, net
Property and equipment, net, consisted of the following:
For the nine months ended September 30, 2019 and 2020 depreciation expenses were US$2,077,516 and US$2,656,359, respectively.
6. Short-term Bank Borrowings
The Group’s bank borrowings consisted of the following:
|
|
|
|
|
|
|
As of December 31, |
|
As of September 30, |
|
|
2019 |
|
2020 |
|
|
US$ |
|
US$ |
|
|
|
|
|
Short-term borrowings |
|
9,012,645 |
|
14,822,161 |
In July 2016, the Group entered into a credit facility agreement with a commercial bank under which the Group can draw-down up to US$6.0 million by October, 2018. In October 2019, the Group renewed the bank credit facility under which the Group can borrow up to US$6.0 million collateralized by its accounts receivable by October, 2020. In 2019, the Group has aggregately drawn down the credit facility of US$7.7 million and repaid US$1.9 million. The weighted average interest rate for borrowings drawn under such credit facility was 5.53% for the year ended December 31, 2019. In June 2020, the Group renewed the bank credit facility under which the Group can borrow up to US$11.0 million collateralized by its accounts receivable by June 2021. The interest rate for this credit facility is the LPR base interest rate plus 1.30%. For the nine months ended September 30, 2020, the Group has aggregately drawn down the credit facility of US$11.1million and repaid US$6.3 million, and the weighted average interest rate for borrowings drawn under such credit facility was 5.15%. The loan contains maximum quarterly net loss as financial covenants which the Group failed to fulfill as of September 30, 2020. The Group is negotiating for the waiver of the financial covenants with the bank.
F-17
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. Short-term Bank Borrowings (Continued)
In July 2018, the Group entered into a credit facility agreement with a commercial bank under which the Group can draw-down up to US$4.0 million by July, 2019. In October 2019, the Group renewed the bank credit facility under which the Group can borrow up to US$4.0 million collateralized by its accounts receivable by October 2020. In 2019, the Group has aggregately drawn down the credit facility of US$6.4 million and repaid US$3.2 million. The weighted average interest rate for borrowings drawn under such credit facility was 6.12% for the year ended December 31, 2019. In June 2020, the Group renewed the bank credit facility under which the Group can borrow up to US$4.0 million collateralized by its accounts receivable by June 2021. The interest rate for this credit facility is Libor plus 3.5%, determined on the draw-down date. For the nine months ended September 30, 2020, the Group has aggregately drawn down the credit facility of US$4 million and repaid US$3.2million, and the weighted average interest rate for borrowings drawn under such credit facility was 3.84%. The loan contains maximum quarterly net loss as financial covenants which the Group failed to fulfill as of September 30, 2020. The Group is negotiating for the waiver of the financial covenants with the bank.
As of September 30, 2020, the Group has fully utilized the credit facility.
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
Note 1: Other tax payables as of September 30, 2020, mainly consisted of value-added tax payable of US$4.6 million and other taxes such as individual income tax and stamp duty tax.
Note 2: Accrued expenses mainly consisted of accrued professional service fees and other miscellaneous accrued marketing and operation expenses.
8. Other Operating Income (Loss), net
Other operating loss, net for the nine months ended September 30, 2020, primarily consisted of government subsidies received by the Group, compensation payment of US$1.6 million to victims of alleged misconducts of certain third-party advertisers perpetrated on the Group's platform that the Group deposited to an escrow account controlled by a local authority conducting investigation on the advertisers and contingent liabilities for intellectual property infringement and unfair competition lawsuits during operations. Other operating income, net for the nine months ended September 30, 2019, primarily consisted of government subsidies received by the Group and contingent liabilities for intellectual property infringement lawsuit during operations.
F-18
9. Income Taxes Expense
The current and deferred portion of income tax expenses included in the consolidated statements of operations are as follows:
|
|
|
|
|
|
|
For the nine months ended September 30, |
||
|
|
2019 |
|
2020 |
|
|
|
|
|
Current tax expenses |
|
1,714 |
|
3,200 |
Deferred tax benefits |
|
— |
|
— |
Total |
|
1,714 |
|
3,200 |
The Group’s effective tax rates were nil for the nine months ended September 30, 2019 and 2020, respectively.
The Group recorded a full valuation allowance against deferred tax assets of all its consolidated entities because all entities were in a cumulative loss position as of December 31, 2019 and September 30, 2020. No unrecognized tax benefits and related interest and penalties were recorded in any of the periods presented.
10. Treasury Shares
Treasury shares represent shares repurchased by the Group that are no longer outstanding and are held by the Group. For the nine months ended September 30, 2020, under the repurchase plan, the Group had repurchased an aggregate of 64,770,700 ordinary shares on the open market for a total cash consideration of US$8,130,513, which were accounted for as the cost of the treasury shares.
As of September 30, 2020, 135,205,550 treasury shares have been cancelled.
11. Share-Based Compensation
Share Options
The options have a contractual term of ten years. The vesting date starts on the grant date or the commencement date of a participant’s employment agreement. The options vest 20% on each of the five anniversary dates of the vesting date and upon continued employment. In the event of termination of a participant’s employment, the unvested options shall be terminated immediately. The participant’s right to exercise the vested options shall be terminated 2 or 3 months after the termination of the employment.
The Group uses the binomial option pricing model and the following assumptions to estimate the fair value of the options at the date of granted:
On November 6, 2018, the Board of Directors approved an option modification to reduce the exercise price of certain options granted to employees. All other terms of the share options granted remain unchanged. The modification resulted in incremental compensation cost of US$285,661, of which US$68,530 and US$42,867 was recorded during the nine months ended September 30, 2019 and the nine months ended September 30, 2020, respectively. The remaining US$141,977 will be amortized over the remaining vesting period of the modified options, ranging from the remaining of 2020 to 2021.
F-19
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Share-Based Compensation (Continued)
Share Options (Continued)
The risk-free rate of interest is based on the US Treasury yield curve as of valuation date. Volatility is estimated based on annualized standard deviation of daily stock price return of comparable companies for the period before valuation date and with similar span as the expected expiration term. The Group has never declared or paid any cash dividends on its capital stock, and the Group does not anticipate any dividend payments in the foreseeable future.
A summary of the aggregate option activity and information regarding options outstanding as of September 30, 2020 is as follows:
The weighted average grant date fair values of options granted during the nine months ended September 30, 2019 and the nine months ended September 30, 2020 were US$0.10 and US$0.10, respectively.
For the nine months ended September 30, 2020, 15,220,000 of options were exercised with an aggregate intrinsic value of US$944,105. For the nine months ended September 30, 2019, 8,330,150 of options were exercised with an aggregate intrinsic value of US$545,013.
For the nine months ended September 30, 2019 and 2020 excluding the incremental compensation cost resulted from the modification discussed above, the Group recognized share-based compensation expense of US$439,601 and US$2,292,252, respectively. As of September 30, 2020, there was US$12,686,969 in total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 3.28 years.
Restricted Share Units
In the nine months ended September 30, 2020, the Group granted to certain employees 1,578,500 Restricted Share Units ("RSUs"). The RSUs have a contractual term of ten years and vest 25% on each anniversary over four years from the grant date. The vesting of these RSUs is conditioned on continued employment. Compensation expense based on fair value is amortized over the requisite service period of award using the straight line vesting attribution method.
F-20
11. Share-Based Compensation (Continued)
Restricted Share Units (Continued)
A summary of the RSUs activity for the nine months ended September 30, 2020 is as follows:
|
|
|
|
|
|
|
|
|
Weighted average |
|
|
Number of |
|
grant date |
|
|
restricted shares |
|
fair value |
|
|
|
|
|
Unvested restricted shares outstanding at January 1, 2020 |
|
50,725,912 |
|
0.20 |
Granted |
|
1,578,500 |
|
0.10 |
Vested |
|
(11,331,332) |
|
0.22 |
Forfeited |
|
(11,779,000) |
|
0.17 |
Unvested restricted shares outstanding at September 30, 2020 |
|
29,194,080 |
|
0.19 |
Expected to vest at September 30, 2020 |
|
29,194,080 |
|
0.19 |
The share-based compensation expense related to RSUs of US$2,708,567 and US$1,471,380 were recognized by the Group for the nine months ended September 30, 2019 and 2020, respectively.
As of September 30, 2020, there was US$4,477,292 in unrecognized compensation costs, net of actual forfeitures, related to unvested restricted shares, which is expected to be recognized over a weighted-average period of 2.30 years.
In June 2020, the Group cash settled certain vested share options and RSUs at fair value amounted to US$823,226. Given the transaction is an one-time transaction, negotiated after the award is vested, and not pursuant to a pre-existing right of the Group, the Group accounted for it as a repurchase of equity with amount of cash paid recorded as additional paid in capital.
12. Net Loss Per Share
Net loss per share was computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding for the nine months ended September 30, 2019 and 2020:
F-21
COOTEK (CAYMAN) INC.
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. Net Loss Per Share (Continued)
As a result of the Group’s net loss for the nine months ended September 30, 2019 and 2020, diluted net loss per share does not include the following instruments as their inclusion would be antidilutive:
|
|
|
|
|
|
|
For the nine months ended September 30, |
||
|
|
2019 |
|
2020 |
|
|
|
|
|
Share options |
|
160,139,359 |
|
284,044,974 |
Restricted shares units |
|
60,108,963 |
|
29,194,080 |
Total |
|
220,248,322 |
|
313,239,054 |
13. Commitments and Contingencies
Lease Commitments
The Group leases certain office premises under operating leases. The term of each lease agreement vary and may contain renewal options. Rental payments under operating leases are charged to operating expenses on a straight-line basis over the period of the lease based on contract terms. Rental expenses under operating leases for the nine months ended September 30, 2019 and 2020 were US$1,338,427, and US$1,096,762, respectively.
Future lease payments under operating leases as of September 30, 2020 were as follows:
|
|
|
Year ending December 31 |
|
US$ |
|
|
|
The remaining of 2020 |
|
494,753 |
2021 |
|
1,590,357 |
2022 |
|
741,411 |
2023 |
|
60,455 |
Total |
|
2,886,976 |
The Group did not have other significant capital commitments or significant guarantees as of December 31, 2019 and September 30, 2020, respectively.
Contingencies
From time to time, the Group is a party to various legal actions arising in the ordinary course of business. The Group accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Group's management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have a material adverse impact on the Group's consolidated financial position, results of operations and cash flows.
14. Segment Information
The Group has only one reportable segment since the Group does not distinguish revenues, costs and expenses between segments in its internal reporting, and reports costs and expenses by nature as a whole.
The Group’s chief operating decision maker, who has been identified as the Chief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole. The Group does not distinguish among markets or segments for the purpose of internal reports.
F-22
14. Segment Information (Continued)
Information about the Group’s non-current assets is presented based on the geographical location of the assets as follows:
|
|
|
|
|
|
|
As of December 31, |
|
As of September 30, |
|
|
2019 |
|
2020 |
|
|
US$ |
|
US$ |
|
|
|
|
|
PRC |
|
2,655,953 |
|
4,258,416 |
USA |
|
3,540,740 |
|
2,661,423 |
Total |
|
6,196,693 |
|
6,919,839 |
15. Subsequent Event
Pursuant to the repurchase shares program announced on May 18, 2020, 5,486,350 shares (equivalent to 109,727 ADSs) of the Group’s Class A ordinary shares were purchased from October 1, 2020 through December 14, 2020 for a total cash consideration of US$0.5 million from the public market.
F-23
Exhibit 99.2
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
This management’s discussion and analysis is designed to provide you with a narrative explanation of our financial condition and results of operations for the nine months ended September 30, 2019 and 2020. This section should be read in conjunction with our unaudited condensed consolidated financial statements for the nine-month periods ended September 30, 2019 and 2020 and related notes thereto, or the Unaudited Condensed Consolidated Financial Statements, included as Exhibit 99.1 to the report on Form 6-K to which this discussion is included. We also recommend that you read our management’s discussion and analysis and our audited consolidated financial statements for fiscal year 2019, and the notes thereto, which appear in our annual report on Form 20-F for the year ended December 31, 2019, or the Annual Report, filed with the U.S. Securities and Exchange Commission, or the SEC.
Unless otherwise indicated or the context otherwise requires, all references to “our company,” “we,” “our,” “ours,” “us” or similar terms refer to CooTek (Cayman) Inc., its subsidiaries and its consolidated affiliated entities, as the context requires; all references to "VIEs" refer to Shanghai Chubao (CooTek) Information Technology Co., Ltd., Shanghai Hanxiang (CooTek) Information Technology Co., Ltd. and two other domestic companies; all references to “DAUs” refer to the number of active users of our products during a given day; and all references to “MAUs” refer to the number of active users of our products during a given month. For each individual product, we treat each mobile device on which at least one of the following actions is taken during a given day or month as one active user for that day or month: (1) activating or launching such product, (2) logging in with the user account for such product, or (3) any other actions that result in a successful network access to our services through such product. The DAUs of multiple products during a given day is the sum of active users of each such product for that day, and the MAUs of multiple products during a given month is the sum of active users of each such product for that month. "Average daily reading time" for any day is calculated by dividing (1) the sum of time spent on reading books on our Fengdu Novel for such day, by (2) the number of Fengdu Novel users who spent time on reading books for such day. "Average daily reading time" for any month is calculated by dividing (1) the sum of average daily reading time for each day in such month, by (2) the number of days in such month.
All such financial statements were prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. We have made rounding adjustments to some of the figures included in this management’s discussion and analysis. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors.
Key Operating Metrics
We regularly review several key operating metrics to evaluate our business and measure our performance.
Average DAUs of our portfolio products were 27.7 million in September 2020, representing a 16% increase from 23.9 million in September 2019. Our portfolio products mainly focus on three categories: online literature, scenario-based content apps and casual games. Average DAUs of our online literature were 10.0 million in September 2020, representing a significant increase from 2.0 million in September 2019. The key product of our online literature apps is Fengdu Novel (originally known as Crazy Reading Novel). The average daily reading time of Fengdu Novel’s users was approximately 130 minutes in September 2020.
Average DAUs and MAUs of our TouchPal Smart Input were 130.0 million and 169.4 million, respectively, in September 2020.
The following table sets forth the average DAUs and MAUs of our portfolio products with the average DAUs and MAUs of online literature separately presented for each of the months indicated.
Results of Operations
The following table sets forth a summary of our consolidated statements of comprehensive loss, both in absolute amount and as a percentage of our net revenues, for the periods indicated. This information has been derived from and should be read together with our Unaudited Condensed Consolidated Financial Statements. The results of operations in any period are not necessarily indicative of the results that may be expected for any future period.
2
(1) |
Share-based compensation was allocated in costs of revenues and operating expenses as follows. |
Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2020
Net Revenues. Our net revenues increased significantly from US$108.9 million in the nine months ended September 30, 2019 to US$339.1 million in the nine months ended September 30, 2020, primarily due to an increase in mobile advertising revenue.
· |
Mobile Advertising Revenue. Our mobile advertising revenue increased significantly from US$106.6 million in the nine months ended September 30, 2019 to US$337.0 million in the nine months ended September 30, 2020. The increase was driven primarily by our strategic transition to the content-rich portfolio products offering and entertainment content ecosystem which have contributed to the increases in our user base and number of our portfolio products. Fengdu Novel, our key product in China, ranked third in terms of MAUs in free online literature market in China according to Quest Mobile, a professional business intelligence services provider in China’s mobile internet market. Our portfolio products contributed approximately 99% of our total net revenues in the nine months ended September 30, 2020,compared to approximately 77% in the nine months ended September 30, 2019. Among our portfolio products, online literature accounted for approximately 35% of our total net revenues in the nine months ended September 30, 2020, scenario-based content apps accounted for approximately 24%, and casual games accounted for approximately 40%. |
· |
Other Revenues. We generate other revenues through cloud call business, licensing of our TouchPal Smart Input and membership fee from the users. Our other revenues decreased by 12.8% from US$2.3 million in the nine months ended September 30, 2019 to US$2.0 million in the nine months ended September 30, 2020, primarily due to the decrease in cloud call business as a result of our shift in business focus to portfolio products. |
Cost of Revenues. Our cost of revenues increased by 49.2% from US$11.4 million in the nine months ended September 30, 2019 to US$17.1 million in the nine months ended September 30, 2020,
3
primarily due to an increase in our content costs paid to freelancers and third-party content distributors and IT infrastructure, bandwidth and server costs and maintenance costs, all of which were generally in line with our continuous business growth, and partially offset by a decrease in VoIP-related expenses.
Gross Profit. As a result of the foregoing, our gross profit increased significantly from US$97.5 million in the nine months ended September 30, 2019 to US$322.0 million in the nine months ended September 30, 2020, primarily due to the rise in revenues.
Operating Expenses. Our total operating expenses increased significantly from US$128.0 million in the nine months ended September 30, 2019 to US$350.8 million in the nine months ended September 30, 2020.
· |
Sales and marketing expenses. Our sales and marketing expenses increased significantly from US$93.5 million in the nine months ended September 30, 2019 to US$316.3 million in the nine months ended September 30, 2020, primarily due to increased investment in user acquisition in connection with our continuous efforts to grow the user base. |
· |
Research and development expenses. Our research and development expenses increased by 9.2% from US$21.2 million in the nine months ended September 30, 2019 to US$23.2 million in the nine months ended September 30, 2020, primarily due to an increase in costs associated with technology R&D staff and share-based compensation expenses which reflected our continuous efforts in improving our big data analytics and expand our product offerings. |
· |
General and administrative expenses. Our general and administrative expenses decreased by 17.5% from US$13.5 million in the nine months ended September 30, 2019 to US$11.1 million in the nine months ended September 30, 2020, primarily due to the decrease in bad debt provision. |
· |
Other operating income/ loss, net. We recorded other operating loss, net of US$0.2 million in the nine months ended September 30, 2020, which primarily consisted of government subsidies of US$1.7 million, compensation payment of US$1.6 million to victims of alleged misconducts of certain third-party advertisers perpetrated on our platform that we deposited to an escrow account controlled by a local authority conducting investigation on the advertisers and contingent liabilities for intellectual property infringement and unfair competition lawsuits during the ordinary course of business. We recorded other operating income, net of US$0.2 million in the nine months ended September 30, 2019, which, primarily consisted of government subsidies of US$0.3 million and contingent liabilities for intellectual property infringement lawsuit during the ordinary course of business. |
Loss from operations. As a result of the foregoing, we recorded loss from operations of US$30.5 million and US$28.8 million in the nine months ended September 30, 2019 and 2020, respectively.
Interest income, net. We had interest income of US$0.7 million and US$0.2 million in the nine months ended September 30, 2019 and 2020, respectively. Interest income represents interest earned on our cash, cash equivalents and restricted cash, net of the interest expenses primarily related to our bank borrowings.
Foreign exchange losses, net. We incurred foreign exchange losses of US$0.4 million and US$13,505 in the nine months ended September 30, 2019 and 2020, respectively, which primarily represents costs incurred on foreign exchange conversion.
4
Income tax expense. We recorded income tax expense of US$1,714 and US$3,200 in the nine months ended September 30, 2019 and 2020, respectively.
Net loss. As a result of the foregoing, we recorded net loss of US$30.2 million and US$28.6 million in the nine months ended September 30, 2019 and 2020, respectively.
Liquidity and Capital Resources
Historically, we have financed our operations primarily through funding from private issuances of preferred shares, loans from commercial banks and our initial public offering. As of September 30, 2019 and 2020, we had US$56.3 million and US$61.0 million in cash, cash equivalents and restricted cash, respectively. Our cash and cash equivalents consist of cash on hand, demand deposits and floating rate financial instruments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased. Our restricted cash represents amounts held in our bank account as guarantee deposit for payments processing services provided by the bank and amounts held in our bank accounts which were frozen by the PRC local authority in connection with an ongoing investigation of alleged misconducts of third-party advertisers conducted on our advertising platform. As of December 11, 2020, US$20.9 million out of total US$49.7 million bank balance was frozen and not available for use due to the ongoing investigation. We are still in the process of cooperating with the relevant authority on such investigation and expect the funds to be released upon the completion of such investigation, the timing of which is out of our control.
We had net loss of US$30.2 million and negative cash flows from operations of US$18.9 million for the nine months ended September 30, 2019. We had net loss of US$28.6 million and positive cash flows from operations of US$6.0 million for the nine months ended September 30, 2020. We had positive working capital, which equals the result of current assets minus current liabilities, of US$41.3 million as of September 30, 2019 and negative working capital of US$3.4 million as of September 30, 2020.
The total outstanding balance of our short-term bank borrowings as of September 30, 2020 was US$14.8 million. We have entered into the following short-term loan transactions, and fully utilized the credit facilities as of September 30, 2020.
· |
We entered into a credit facility agreement with a commercial bank initially in July 2016, which was renewed in October 2019 and further renewed in June 2020, under which agreement we can borrow up to US$11.0 million to be collateralized by our accounts receivable by June 2021. The loan contains maximum quarterly net loss as financial covenants which we failed to fulfill as of September 30, 2020. We are negotiating a waiver of the financial covenant with the bank. |
· |
We entered into a credit facility agreement with a commercial bank initially in July 2018, which was renewed in October 2019 and further renewed in June 2020, under which agreement we can borrow up to US$4.0 million to be collateralized by our accounts receivable by June 2021. The loan contains maximum quarterly net loss as financial covenants which we failed to fulfill as of September 30, 2020. We are negotiating a waiver of the financial covenant with the bank. |
5
If we are not able to obtain the waiver, the short-term bank borrowings are subject to acceleration under the terms of the borrowing agreements.
While there can be no assurance that we will be able to refinance our short-term bank borrowings as they become due, we are negotiating for the waiver of the financial covenants with the bank, and historically, we have renewed or rolled over most of our short-term bank loans upon the maturity of such loans and believe we will continue to be able to do so. Meanwhile, we will seek additional credit facility with more financing banks. Additionally, we continue to monitor the daily expenditure regarding matters such as launching new products or upgrading existing products for experimental features, investing in R&D and IT infrastructure, spending in user acquisition and marketing expenses and determine the future business development plan when the necessary financial resources are available.
We believe that our current cash, cash equivalents and restricted cash, the available credit under our existing credit facilities, and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for the next 12 months. We may, however, need additional capital for business expansion in the future.
As of September 30, 2020, 71% of our cash, cash equivalents and restricted cash were held in China, among which 60% were held by our VIEs and denominated in Renminbi. Most of the remaining cash and cash equivalents we held as of September 30, 2020 were held in Hong Kong and mainly denominated in Hong Kong dollars and U.S. dollars. Although we consolidate the results of our VIEs, we only have access to the assets or earnings of our VIEs through our contractual arrangements with our VIEs and their shareholders.
To utilize the proceeds we received from our initial and any subsequent public offerings, we may make additional capital contributions to our PRC subsidiary, establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, or make loans to the PRC subsidiaries. However, most of these uses are subject to PRC regulations. Foreign direct investment and loans must be approved by and/or registered with SAFE and its local branches. The total amount of loans we can make to our PRC subsidiary cannot exceed statutory limits and must be registered with the local counterpart of SAFE. The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by the Ministry of Commerce or its local counterpart and the amount of registered capital of such foreign-invested company.
A portion of our future revenues are likely to continue to be in the form of Renminbi. Under existing PRC foreign exchange regulations, Renminbi may be converted into foreign exchange for current account items, including profit distributions, interest payments and trade-and service-related foreign exchange transactions without prior SAFE approval by following certain routine procedural requirements. However, current PRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. Our PRC subsidiary is required to set aside at least 10% of its after-tax profits after making up previous years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. These reserves are not distributable as cash dividends.
The following table sets forth a summary of our cash flows for the periods indicated.
Operating Activities
Net cash provided by operating activities in the nine months ended September 30, 2020 was US$6.0 million, as compared to net loss of US$28.6 million in the same period. The difference was primarily due to the increase of US$26.9 million in accounts payable during the nine months ended September 30, 2020, driven primarily by the increase of our
6
user acquisition costs. The principal non-cash items affecting the difference between our net loss and our net cash provided by operating activities primarily consisted of (1) US$3.8 million in share-based compensation expenses, (2) US$2.7 million in depreciation expenses, and (3) US$0.3 million in provision for allowance of doubtful accounts.
Net cash used in operating activities in the nine months ended September 30, 2019 was US$18.9 million, as compared to net loss of US$30.2 million in the same period. The difference was primarily due to the non-cash items, which primarily consisted of (1) US$4.7 million in provision for allowance of doubtful accounts, (2) US$3.2 million in share-based compensation expenses, and (3) US$2.1 million in depreciation expenses.
Investing Activities
Net cash used in investing activities in the nine months ended September 30, 2020 was US$2.4 million, primarily due to purchase of property, plant and equipment of US$2.2 million and purchases of long-term investments of US$0.1 million.
Net cash used in investing activities in the nine months ended September 30, 2019 was US$4.1 million, primarily due to purchase of property, plant and equipment of US$4.1 million.
Financing Activities
Net cash used in financing activities in the nine months ended September 30, 2020 was US$2.9 million, primarily due to payment of share repurchase of US$8.1 million and partially offset by the aggregate effect of proceeds from and repayment of bank borrowings of US$5.7 million.
Net cash used in financing activities in the nine months ended September 30, 2019 was US$5.2 million, primarily due to payment of share repurchase of US$9.7 million, and payment of issuance costs for the initial public offering of US$0.8 million and partially offset by proceeds from bank borrowings of US$5.0 million.
Capital Expenditures
We made capital expenditures of US$2.2 million and US$4.1 million in the nine months ended September 30, 2019 and 2020, respectively. In these periods, our capital expenditures were mainly used for purchases equipment, including servers and other IT equipment. We plan to continue to make capital expenditures to meet the needs that result from the expected growth of our business.
Off-balance Sheet Arrangements
We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our
7
shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
Cautionary Statement Regarding Forward Looking Statements
We have made statements in this report that constitute forward-looking statements. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “could” and similar expressions. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.
Examples of forward-looking statements include:
· |
our mission and strategies; |
· |
our future business development, financial conditions and results of operations; |
· |
the expected growth of the mobile internet industry and mobile advertising industry; |
· |
the expected growth of mobile advertising; |
· |
our expectations regarding demand for and market acceptance of our products and services; |
· |
competition in our industry; and |
· |
relevant government policies and regulations relating to our industry. |
The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. Many factors could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Consequently, you should not place undue reliance on these forward-looking statements.
The forward-looking statements speak only as of the date on which they are made, and, except as required by law; we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.
In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update this forward-looking information. Nonetheless, we reserve the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.
8
Exhibit 99.3
Risk Factors
This section includes material updates in certain risks relating to us since the date of our Annual Report, any of which we believe could materially and adversely affect our business, financial condition and results of operations. This section is a supplement to and should be read in conjunction with the section titled “Risk Factors” included in the Annual Report.
We have incurred net loss and negative cash flows from operating activities in the past, and we may not achieve or sustain profitability.
We recorded net loss of US$30.2 million and negative cash flows from operations of US$18.9 million for the nine months ended September 30, 2019. We recorded net loss of US$28.6 million and positive cash flows from operations of US$6.0 million for the nine months ended September 30, 2020. We cannot assure you that we will be able to generate net profit or positive cash flows from operating activities in the future. Our future revenue growth and profitability will depend on a variety of factors, many of which are beyond our control. These factors include market acceptance of our products, effectiveness of our monetization strategy, our ability to control cost and expenses and to manage our growth effectively, market competition, macroeconomic and regulatory environment. We also expect our cost and expenses to increase in the future as we continue to expand our operations and to increase our investments in research and development, which will place significant demands on our management and our operational and financial resources. Continuous expansion may increase the complexity of our business, and we may encounter various difficulties. We may fail to develop and improve our operational, financial and managerial controls, enhance our financial reporting systems and procedures, recruit, train and retain skilled professional personnel, or maintain customer satisfaction to effectively support and manage our growth. If we invest substantial time and resources to expand our operations but fail to manage the growth of our business and capitalize on our growth opportunities effectively, we may not be able to achieve profitability, and our business, financial condition, results of operations and prospects would be materially and adversely affected.
We are out of compliance with certain financial covenants in our credit facility agreements. If we fail to receive any required waiver, we may be in default, which could impose operating and financial restrictions on us.
We entered into two credit facility agreements with a commercial bank, both of which were further renewed in June 2020, under which we can borrow up to a total of US$15.0 million collateralized by our accounts receivable by June 2021. See “—Liquidity and Capital Resources.” In the nine months ended September 30, 2020, we had in the aggregate drawn down US$15.1 million and repaid US$9.5 million under these two credit facilities. The total outstanding balance of our short-term bank borrowings as of September 30, 2020 was US$14.8 million. These credit facility agreements contain financial covenants which require us to maintain a minimum net profit of US$1.00 on a consolidated basis in the three months ended September 30, 2020. We failed to meet such financial covenants as of September 30, 2020 and are negotiating a waiver of such financial covenants with the counterparty, which, if granted, will waive the financial covenants for such period.
We cannot assure you that we would be able to obtain such waivers in a timely manner, on acceptable terms or at all. If we were not able to obtain such waiver under any one or more of these credit facilities, we would be in default of such agreements, and the relevant counterparty could elect to declare the loans, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral securing such loans. If the loans under certain of our credit facility agreements that we entered into were to be accelerated, even though we believe that our assets would be sufficient to repay our loans in full, our business and liquidity could nevertheless be subject to adverse effects. In addition, such waiver, even if granted, may lead to increased costs, increased interest rates, additional restrictive covenants and other available counterparty protections that would be applicable to us under these credit facilities, including the granting of additional security our interests in collateral, which could adversely affect our business, financial condition, results of operations and our ability to acquire additional capital resources.
Our ability to comply with financial or other restrictive covenants under our credit facility agreements may be affected by factors beyond our control, including prevailing economic, financial and industry conditions, and our ability to issue additional equity. We may continue to fall out of compliance with such or other covenants in the future, which could materially and adversely affect our business, financial condition and results of operations.
Non-compliance on the part of third parties with whom we conduct business could disrupt our business and adversely affect our financial conditions and operating results.
We may be implicated by the non-compliant or improper activities of our users, advertising customers and business partners. For example, we may be involved in litigation related to user-generated content uploaded to our mobile applications. Similarly, we may also be subject to disputes related to advertisements displayed on our mobile applications. Although we have adopted a comprehensive internal control and screening procedure over the content of advertisements, a third party may find advertisements displaying on our mobile applications improper or illegal, and may take actions against us over such advertisements. As of December 11, 2020, bank accounts with a total balance of US$20.9 million were frozen by a local authority in connection with an ongoing investigation of alleged illegal advertisements posted by certain third-party advertisers on our platform. To facilitate the investigation, bank accounts through which our transactions with such advertisers took place were frozen by the local authority. In addition, we incurred costs of US$1.6 million to compensate victims of the alleged illegal advertisements for our failure to supervise advertising contents displayed on our platform in compliance with relevant PRC laws and regulations.
In addition, we may be impacted by lawsuits against our business partners, such as mobile devices manufacturers that have contractual arrangements with us. Although we have no control over the design, system, network or standard of the manufacturing of smartphones by these business partners, any lawsuits against them claiming infringement of intellectual property and any cessation of handset production resulting from such lawsuits may interrupt our collaborative operations and result in the reduction of our delivery of products and services to potential users.
Exhibit 99.4
CooTek Announces Third Quarter 2020 Unaudited Results
SHANGHAI, China, December 15, 2020 – CooTek (Cayman) Inc. (NYSE: CTK) ("CooTek" or the "Company"), a fast-growing global mobile internet company, today reported unaudited financial results for the third quarter ended September 30, 2020.
Third Quarter 2020 Highlights
● | Net revenue was US$105.7 million, an increase of 238% from US$31.3 million during the same period last year. |
● | Gross profit was US$98.9 million, an increase of 261% from US$27.4 million during the same period last year. |
● | Gross profit margin was 93.6%, an increase of 6% year-over-year. |
● | Net loss was US$22.0 million, compared with net loss of US$16.2 million during the same period last year. |
● | Adjusted net loss1 (Non-GAAP) was US$20.5 million, compared with adjusted net loss (Non-GAAP) of US$15.4 million during the same period last year. |
● | The Company’s Portfolio Products2 contributed approximately 99% of total revenues, with a focus on three main categories: online literature, scenario-based content apps, and casual games. |
September 2020 Operational Highlights
● | Average daily active users (“DAUs”) of the Company’s Portfolio Products were 27.7 million, an increase of 16% from 23.9 million in September 2019. Monthly active users (“MAUs”) of the Company’s Portfolio Products were 94.8 million, an increase of 40% from 67.5 million in September 2019. |
● | Average DAUs of the Company’s online literature products were 10.0 million, increased significantly from 2.0 million in September 2019. MAUs of the Company’s online literature products were 29.5 million, increased significantly from 11.0 million in September 2019. The average daily reading time3 of the key product Fengdu Novel users further increased to 130 minutes in September 2020 from 110 minutes in June 2020. |
● | Average DAUs of the Company’s TouchPal Smart Input were 130.0 million. MAUs of the Company’s TouchPal Smart Input were 169.4 million. |
“I am pleased to report a resilient third quarter with revenue of US$105.7 million compared to US$31.3 million a year ago,” commented Mr. Karl Zhang, CooTek’s Chairman. “Driven by the strategic enhancement of our content ecosystem, we further upgraded and strengthened our core products aiming at delivering the sustainable business growth. We reinforced the market position of Fengdu Novel which ranked 3rd in terms of MAUs in free online literature market in China4 with continuous growth in our user base. With its DAUs exceeding 10 million during the third quarter of 2020, Fengdu Novel constituted the core component of our content-rich portfolio with a strong emphasis on balancing its user expansion and user retention. We have been rapidly developing its customized content production model which contribute to its competitive user stickiness. Going forward, we will strive to further expand our content ecosystem by leveraging the core strength of Fengdu Novel and the growth synergy that we can achieve among the three main business segments of content-rich mobile apps.”
Mr. Robert Cui, CooTek’s CFO further commented, “Despite the growth pressure in global mobile internet advertising market, we still increased our revenue by 238% during the third quarter of 2020 compared to the same period in 2019. More importantly, we have witnessed solid growth in our online literature business in terms of its user base and revenue since the first quarter of 2019. We will continue to invest in the content and user expansion of Fengdu Novel by maintaining a reasonable return on investment level. We are convinced that our development strategy will result in building up a synergetic and diversified content ecosystem.”
1 “Adjusted net income (loss)” (Non-GAAP) is a non-GAAP measure, which is defined as net income (loss) excluding share-based compensation. For further information, please see “Non-GAAP Financial Measures” and “Reconciliations of GAAP and non-GAAP results” at the bottom of this release.
2 “Portfolio Products” is to the mobile applications that we develop and provide to our users and business partners, which exclude TouchPal Smart Input and TouchPal Phonebook.
3 “Average daily reading time” for any day is calculated by dividing (i) the sum of time spent on reading books on our Fengdu Novel for such day, by (ii) the number of Fengdu Novel users who spent time on reading books for such day. The average daily reading time for any month is calculated by dividing (i) the sum of average daily reading time for each day in such month, by (ii) the number of days in such month.
4 According to Quest Mobile, a professional business intelligence services provider in China’s mobile internet market.
1 / 9
Third Quarter 2020 Financial Results
Net Revenues
|
|
|
|
|
|
|
|
|
|
|
|
(in US$ thousands, except percentage) |
|
3Q 2020 |
|
2Q 2020 |
|
3Q 2019 |
|
QoQ % Change |
|
YoY % Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile Advertising Revenue |
|
104,842 |
|
125,774 |
|
30,548 |
|
(17) |
% |
243 |
% |
Other Revenue |
|
815 |
|
622 |
|
722 |
|
31 |
% |
13 |
% |
Total Net Revenues |
|
105,657 |
|
126,396 |
|
31,270 |
|
(16) |
% |
238 |
% |
Net revenues were US$105.7 million, an increase of 238% from US$31.3 million during the third quarter of 2019 and a decrease of 16% from US$126.4 million in the previous quarter. The fluctuation was primarily due to changes in our mobile advertising revenue.
Mobile advertising revenue was US$104.8 million, an increase of 243% from US$30.5 million during the third quarter of 2019 mainly due to increase in our user base and number of portfolio products, and a decrease of 17% from US$125.8 million in the previous quarter mainly due to restructuring of our portfolio products.
Our portfolio products focus on three categories: online literature, scenario-based content apps and casual games. Online literature accounted for approximately 34%, scenario-based content apps accounted for approximately 24%, and casual games accounted for approximately 41% of total net revenue.
Cost and Operating Expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3Q 2020 |
|
2Q 2020 |
|
3Q 2019 |
|
QoQ % |
|
YoY % |
|
||||||
(in US$ thousands, except percentage) |
|
US$ |
|
% of revenue |
|
US$ |
|
% of revenue |
|
US$ |
|
% of revenue |
|
Change |
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
6,784 |
|
6 |
% |
5,691 |
|
5 |
% |
3,912 |
|
13 |
% |
19 |
% |
73 |
% |
Sales and marketing |
|
107,842 |
|
102 |
% |
105,999 |
|
84 |
% |
33,463 |
|
107 |
% |
2 |
% |
222 |
% |
Research and development |
|
8,204 |
|
8 |
% |
8,103 |
|
6 |
% |
6,933 |
|
22 |
% |
1 |
% |
18 |
% |
General and administrative |
|
3,707 |
|
4 |
% |
4,136 |
|
3 |
% |
3,387 |
|
11 |
% |
(10) |
% |
9 |
% |
Other operating loss (income), net |
|
1,064 |
|
1 |
% |
(446) |
|
(0) |
% |
(58) |
|
0 |
% |
(339) |
% |
(1934) |
% |
Total Cost and Expenses |
|
127,601 |
|
121 |
% |
123,483 |
|
98 |
% |
47,637 |
|
153 |
% |
3 |
% |
168 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation expenses by function |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
75 |
|
0.1 |
% |
71 |
|
0.1 |
% |
25 |
|
0.1 |
% |
6 |
% |
200 |
% |
Sales and marketing |
|
59 |
|
0.1 |
% |
61 |
|
0.0 |
% |
32 |
|
0.1 |
% |
(3) |
% |
84 |
% |
Research and development |
|
815 |
|
0.8 |
% |
862 |
|
0.7 |
% |
700 |
|
2.2 |
% |
(5) |
% |
16 |
% |
General and administrative |
|
492 |
|
0.5 |
% |
430 |
|
0.3 |
% |
129 |
|
0.4 |
% |
14 |
% |
281 |
% |
Total share-based compensation expenses |
|
1,441 |
|
1.5 |
% |
1,424 |
|
1.1 |
% |
886 |
|
2.8 |
% |
1 |
% |
63 |
% |
Cost of revenues was US$6.8 million, an increase of 73% from US$3.9 million during the same period last year, and an increase of 19% from US$5.7 million in the previous quarter. The year-over-year increase was mainly due to an increase in content costs paid to freelancers and third-party content distributors. The sequential increase was mainly due to the investment in operational workforce and maintenance-related expenses.
Gross profit was US$98.9 million, an increase of 261% from US$27.4 million during the same period last year, and a decrease of 18% from US$120.7 million in the previous quarter. Gross profit margin was 93.6%, compared with 87.5% in the same period last year and 95.5% in the previous quarter.
Sales and marketing expenses were US$107.8 million, an increase of 222% from US$33.5 million during the same period last year, and an increase of 2% from US$106.0 million in the previous quarter. As a percentage of total revenue, sales and marketing expenses accounted for 102%, compared with 107% during the same period last year, and 84% in the previous quarter. The sequential and year-over-year increases in sales and marketing expenses were primarily due to increased investment in user acquisition.
Research and development expenses were US$8.2 million, an increase of 18% from US$6.9 million during the same period last year and an increase of 1% from US$8.1 million in the previous quarter. The year-over-year increase was primarily due to an increase in costs associated with technology R&D staff. As a percentage of total net revenue, research and development expenses accounted for 8%, compared with 22% during the same period last year and 6% in the previous quarter.
General and administrative expenses were US$3.7 million, an increase of 9% from US$3.4 million during the same period last year and a decrease of 10% from US$4.1 million in the previous quarter. The year-over-year increase was mainly due to an increase in costs associated with G&A staff and share-based compensation expenses. The sequential decrease was mainly due to the reversal of accrued provision for bad debts on the collection of accounts receivables. As a percentage of total net revenue, general and administrative expenses accounted for 4%, compared with 11% during the same period last year and 3% in the previous quarter.
Other operating loss, net was US$1.1 million, compared with other operating income, net US$0.06 million during the same period last year and other operating income, net US$0.4 million in the previous quarter. The other operating loss during this quarter mainly relates to compensation payment to victims of alleged misconducts of certain third-party advertisers perpetrated on the Company's platform that the Company deposited to an escrow account controlled by a local authority conducting investigation on the advertisers.
2 / 9
Net loss was US$22.0 million, compared with net loss of US$16.2 million during the same period last year and a net income of US$3.1 million in the previous quarter.
Adjusted net loss was US$20.5 million, compared with adjusted net loss of US$15.4 million in the same period last year and adjusted net income of US$4.5 million in the previous quarter.
Basic and diluted net loss per ADS were US$0.36 and US$0.36, and basic and diluted Adjusted net loss (Non-GAAP) per ADS were US$0.33 and US$0.33.
Balance Sheet and Cash Flows
As of September 30, 2020, cash, cash equivalents and restricted cash were US$61.0 million, compared with US$64.9 million as of June 30, 2020. As of September 30, 2020, current portion of restricted cash were US$0.06 million, representing amounts held in Company's bank account as guarantee deposit for payments processing services provided by the bank. Amount of US$2.4 million, held in Company's bank accounts were frozen by the PRC local authority in connection with its investigation of alleged misconducts of certain third-party advertisers perpetrated on the Company's platform. In October 2020, an additional US$18.4 million was deposited into these frozen bank accounts. The Company is still in the process of cooperating with the relevant authority on such investigation and expect the funds to be released upon the completion of such investigation, the timing of which is out of the Company's control. In the interim, the Company cannot dispose of cash and cash equivalents in the frozen bank accounts.
Net cash outflow from operating activities during the third quarter of 2020 was US$14.4 million, compared with net cash outflow from operating activities of US$6.7 million for the same period in 2019 and net cash inflow from operating activities of US$5.4 million during the previous quarter. Cash outflow from operating activities during the third quarter of 2020 was mainly due to loss from operations.
Share Repurchase Plan
On May 18, 2020, the Company announced a share repurchase program (the “2020 Program”) whereby the Company is authorized to repurchase its class A ordinary shares in the form of ADSs with an aggregate value of up to US$20 million during the 12-month period starting from May 18, 2020. The Company expects to fund the repurchases under this program with its existing cash balance. As of September 30, 2020, the Company had used an aggregate of US$3.3 million to repurchase 0.5 million ADSs under the 2020 Program and recorded as treasury stock.
Business Outlook
For the fourth quarter of 2020, the Company expects total revenue to be approximately US$106 million, representing a year-over-year increase of approximately 54%. For the fiscal year of 2020, the Company expects total revenue to be approximately US$445 million, representing a year-over-year increase of approximately 150%. This outlook is based on information available as of the date of this press release and reflects the Company’s current and preliminary expectations, which are subject to change in light of various uncertainties, including those related to the ongoing COVID-19 pandemic.
Conference Call and Webcast
The Company management team will host a conference call at 8:00 AM U.S. Eastern Time on December 15, 2020 (9:00 PM Beijing Time on the same day), following the results announcement.
The dial-in details for the live conference call are:
United States: 1-888-346-8982
Hong Kong: 800-905-945
Mainland China: 4001-201-203
International: 1-412-902-4272
Please dial in 15 minutes before the call is scheduled to begin. When prompted, ask to be connected to the CooTek (Cayman) Inc. call.
A live webcast and archive of the conference call will be available on the Investor Relations section of the Company’s website at https://ir.cootek.com/.
3 / 9
About CooTek (Cayman) Inc.
CooTek is a fast-growing mobile internet company with a global vision, that offers content-rich mobile applications, focusing on three categories: online literature, scenario-based content apps and casual games. CooTek’s mission is to empower everyone to enjoy relevant content seamlessly. CooTek’s user-centric and data-driven approach has enabled it to release appealing products to capture mobile internet users' ever-evolving content needs and helps it rapidly attract targeted users.
Non-GAAP Financial Measure
To supplement the unaudited consolidated financial information prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), the Company uses non-GAAP financial measure of adjusted net (loss) income that is adjusted from results based on GAAP to exclude the impact of share-based compensation, and Adjusted EBITDA that is net (loss) income excluding interest income and expense, income taxes, depreciation and amortization, and share-based compensation. The measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.
The Company believes that the non-GAAP measure help identify underlying financial and business trends relating to the Company’s results of operations that could otherwise be distorted by the effect of certain expenses that the Company include in (loss) income from operations and net (loss) income. By making the Company’s financial results comparable period over period, the Company believes adjusted net (loss) income and Adjusted EBITDA provides useful information to better understand the Company’s historical business operations and future prospects and allows for greater visibility with respect to key metrics used by the management in financial and operational decision-making. In order to mitigate these limitations, the Company has provided specific information regarding the GAAP amounts excluded from the non-GAAP measure. The table at the bottom of this press release includes details on the reconciliation between GAAP financial measure that is most directly comparable to the non-GAAP financial measure the Company has presented.
Safe Harbor Statement
This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. CooTek may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about CooTek's beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: CooTek’s mission and strategies; future business development, financial conditions and results of operations; the expected growth of the mobile internet industry and mobile advertising industry; the expected growth of mobile advertising; expectations regarding demand for and market acceptance of our products and services; competition in mobile application and advertising industry; relevant government policies and regulations relating to the industry and the development and impacts of COVID-19. Further information regarding these and other risks, uncertainties or factors is included in CooTek’s filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and CooTek does not undertake any obligation to update such information, except as required under applicable law.
For investor enquiries, please contact:
CooTek (Cayman) Inc.
Mr. Robert Yi Cui
Email: IR@cootek.com
ICA (Institutional Capital Advisory)
Mr. Kevin Yang
Phone: +86-021-8028-6033
E-mail: cootek@icaasia.com
4 / 9
CooTek (Cayman) INC.
Unaudited Condensed Consolidated Statement of Operations
(in thousands, except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
||
|
|
2019 |
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
|
|
US$ |
|
US$ |
|
US$ |
|
US$ |
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
31,270 |
|
126,396 |
|
105,657 |
|
108,900 |
|
339,066 |
|
Cost of revenues |
|
(3,912) |
|
(5,691) |
|
(6,784) |
|
(11,435) |
|
(17,057) |
|
Gross Profit |
|
27,358 |
|
120,705 |
|
98,873 |
|
97,465 |
|
322,009 |
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
Sales and marketing expenses |
|
(33,463) |
|
(105,999) |
|
(107,842) |
|
(93,534) |
|
(316,277) |
|
Research and development expenses |
|
(6,933) |
|
(8,103) |
|
(8,204) |
|
(21,198) |
|
(23,154) |
|
General and administrative expenses |
|
(3,387) |
|
(4,136) |
|
(3,707) |
|
(13,504) |
|
(11,144) |
|
Other operating income, net |
|
58 |
|
446 |
|
(1,064) |
|
229 |
|
(228) |
|
Total operating expenses |
|
(43,725) |
|
(117,792) |
|
(120,817) |
|
(128,007) |
|
(350,803) |
|
(Loss) income from operations |
|
(16,367) |
|
2,913 |
|
(21,944) |
|
(30,542) |
|
(28,794) |
|
Interest income, net |
|
118 |
|
211 |
|
(7) |
|
709 |
|
227 |
|
Foreign exchange gain (loss) |
|
3 |
|
(2) |
|
(13) |
|
(365) |
|
(13) |
|
(Loss) income before income taxes |
|
(16,246) |
|
3,122 |
|
(21,964) |
|
(30,198) |
|
(28,580) |
|
Income tax expense |
|
— |
|
(3) |
|
— |
|
(2) |
|
(3) |
|
Net (loss) income |
|
(16,246) |
|
3,119 |
|
(21,964) |
|
(30,200) |
|
(28,583) |
|
Net (loss) income per ordinary share |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
(0.005) |
|
0.001 |
|
(0.007) |
|
(0.01) |
|
(0.01) |
|
Diluted |
|
(0.005) |
|
0.001 |
|
(0.007) |
|
(0.01) |
|
(0.01) |
|
Weighted average shares used in calculating net (loss) income per ordinary share |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
3,148,392,266 |
|
3,084,894,043 |
|
3,070,510,051 |
|
3,163,501,054 |
|
3,086,630,271 |
|
Diluted |
|
3,148,392,266 |
|
3,222,716,303 |
|
3,070,510,051 |
|
3,163,501,054 |
|
3,086,630,271 |
|
Non-GAAP Financial Data |
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net (Loss) income |
|
(15,360) |
|
4,543 |
|
(20,523) |
|
(26,983) |
|
(24,777) |
|
Adjusted EBITDA |
|
(14,469) |
|
5,123 |
|
(19,318) |
|
(25,594) |
|
(22,263) |
|
5 / 9
Unaudited Condensed Consolidated Balance Sheets
(in thousands, except for share and per share data)
|
|
|
|
|
|
|
|
As of |
|
||
|
|
June 30, |
|
September 30, |
|
|
|
2020 |
|
2020 |
|
|
|
US$ |
|
US$ |
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
64,861 |
|
58,478 |
|
Restricted cash |
|
60 |
|
60 |
|
Short-term investment |
|
13,550 |
|
550 |
|
Accounts receivable, net of allowance for doubtful accounts of $2,262 as of June 30, 2020 and $1,962 as of September 30, 2020, respectively |
|
34,043 |
|
29,083 |
|
Prepaid expenses and other current assets |
|
9,900 |
|
10,764 |
|
Total current assets |
|
122,414 |
|
98,935 |
|
Long-term restricted cash |
|
— |
|
2,473 |
|
Long-term investments |
|
141 |
|
147 |
|
Property and equipment, net |
|
5,544 |
|
5,597 |
|
Intangible assets, net |
|
352 |
|
420 |
|
Other non-current assets |
|
787 |
|
757 |
|
TOTAL ASSETS |
|
129,238 |
|
108,329 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
Current liabilities |
|
|
|
|
|
Accounts payable |
|
64,408 |
|
64,805 |
|
Short-term bank borrowings |
|
14,686 |
|
14,822 |
|
Accrued salary and benefits |
|
6,618 |
|
7,748 |
|
Accrued expenses and other current liabilities |
|
8,433 |
|
10,215 |
|
Deferred revenue |
|
6,160 |
|
4,697 |
|
Total current liabilities |
|
100,305 |
|
102,287 |
|
Other non-current liabilities |
|
562 |
|
494 |
|
TOTAL LIABILITIES |
|
100,867 |
|
102,781 |
|
6 / 9
Unaudited Condensed Consolidated Balance Sheets (continued):
(in thousands, except for share and per share data)
|
|
|
|
|
|
|
|
As of |
|
||
|
|
June 30,
|
|
September 30,
|
|
|
|
US$ |
|
US$ |
|
|
|
|
|
|
|
Shareholders’ Equity: |
|
|
|
|
|
Ordinary shares |
|
31 |
|
31 |
|
Treasury Stock |
|
(6,935) |
|
(3,323) |
|
Additional paid-in capital |
|
196,750 |
|
192,376 |
|
Accumulated deficit |
|
(160,217) |
|
(182,181) |
|
Accumulated other comprehensive loss |
|
(1,258) |
|
(1,355) |
|
Total Shareholders' Equity |
|
28,371 |
|
5,548 |
|
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
|
129,238 |
|
108,329 |
|
7 / 9
Unaudited Condensed Consolidated Statement of Cash Flows
(in thousands, except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
||
|
|
2019 |
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
|
|
US$ |
|
US$ |
|
US$ |
|
US$ |
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities |
|
(6,689) |
|
5,402 |
|
(14,393) |
|
(18,899) |
|
5,969 |
|
Net cash (used in) provided by investing activities |
|
(775) |
|
(13,859) |
|
12,266 |
|
(4,097) |
|
(2,362) |
|
Net cash provided by (used in) financing activities |
|
1,494 |
|
3,100 |
|
(2,183) |
|
(5,233) |
|
(2,937) |
|
Net (decrease) increase in cash and cash equivalents |
|
(5,970) |
|
(5,357) |
|
(4,310) |
|
(28,229) |
|
670 |
|
Cash, cash equivalents, and restricted cash at beginning of period |
|
62,774 |
|
70,026 |
|
64,921 |
|
84,860 |
|
59,966 |
|
Effect of exchange rate changes on cash and cash equivalents |
|
(534) |
|
252 |
|
400 |
|
(361) |
|
375 |
|
Cash, cash equivalents, and restricted cash at end of period |
|
56,270 |
|
64,921 |
|
61,011 |
|
56,270 |
|
61,011 |
|
8 / 9
Reconciliations of GAAP and Non-GAAP Results
(in thousands, except for share and per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||
|
|
September 30, |
|
June 30, |
|
September 30, |
|
September 30, |
|
||
|
|
2019 |
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
|
|
US$ |
|
US$ |
|
US$ |
|
US$ |
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
(16,246) |
|
3,119 |
|
(21,964) |
|
(30,200) |
|
(28,583) |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
Share-based compensation related to share options and restricted share units |
|
886 |
|
1,424 |
|
1,441 |
|
3,217 |
|
3,806 |
|
Adjusted Net (Loss) Income (Non-GAAP)* |
|
(15,360) |
|
4,543 |
|
(20,523) |
|
(26,983) |
|
(24,777) |
|
Add: |
|
|
|
|
|
|
|
|
|
|
|
Interest income, net |
|
(118) |
|
(211) |
|
7 |
|
(709) |
|
(227) |
|
Income taxes |
|
— |
|
3 |
|
— |
|
2 |
|
3 |
|
Depreciation and amortization |
|
1,009 |
|
788 |
|
1,198 |
|
2,096 |
|
2,738 |
|
Adjusted EBITDA (Non-GAAP)* |
|
(14,469) |
|
5,123 |
|
(19,318) |
|
(25,594) |
|
(22,263) |
|
* The tax impact to the non-GAAP adjustments is zero.
9 / 9