Financial Performance - Total revenues for the year ended December 31, 2024, were $30,318,816, a decrease from $31,976,268 in 2023, representing a decline of approximately 5.2%[45] - Third-party revenues increased to $27,520,332 in 2024 from $20,607,850 in 2023, marking an increase of approximately 33.5%[46] - Net income for 2024 was $63,569, a significant improvement compared to a net loss of $2,595,941 in 2023[46] - The company reported a total liabilities of $9,102,078 as of December 31, 2024, down from $9,102,078 in 2023[49] - The company’s total cost of revenues and operating expenses for 2024 was $30,165,475, a decrease from $34,512,100 in 2023, representing a reduction of approximately 12.6%[46] - The equity in income from subsidiaries showed a positive shift, with a contribution of $442,681 in 2024 compared to a loss of $1,215,959 in 2023[46] - The company incurred a negative cash flow from operating activities of US$0.3 million in 2024 and an accumulated deficit of US$216.9 million, raising concerns about its financial sustainability[91] - The company's net revenues decreased from US$83.9 million in 2022 to US$32.0 million in 2023, and further to US$30.3 million in 2024, indicating a significant decline in financial performance[79] Revenue Sources - Revenues contributed by the VIEs accounted for 39%, 18%, and 6% of total revenues for the years ended December 31, 2022, 2023, and 2024, respectively[27] - The VIEs earned various revenues from the WFOE and other subsidiaries, including advertising revenue and reimbursement of expenses[40] - Mobile advertising services accounted for 91.2%, 71.4%, and 28.9% of total revenues in 2022, 2023, and 2024 respectively, indicating a significant decline in reliance on this revenue stream[69] - The top two advertising customers accounted for approximately 13.5% of total revenues in 2024, highlighting the company's dependence on a limited number of advertising exchanges[73] Operational Challenges - The company has not obtained all requisite licenses and permits from PRC authorities that are material for its business operations, which may affect future operations[33] - The company has faced challenges in maintaining relationships with third-party digital distribution platforms, which are crucial for user acquisition and retention[74] - The company has been subject to notices alleging copyright infringement and inappropriate content, which could lead to product suspensions and negatively impact user base and financial performance[75] - The company relies on contractual arrangements with variable interest entities (VIEs) for operations in mainland China, which may not provide effective operational control[64] - The company’s advertising customers typically do not have long-term contracts, increasing the risk of revenue volatility[70] Regulatory Environment - Under the Holding Foreign Companies Accountable Act, if the SEC determines that the company has filed audit reports from a non-compliant firm for two consecutive years, trading of its shares may be prohibited[35] - Regulatory developments in China may impose additional scrutiny and affect the company's ability to raise capital or offer securities outside of mainland China[64] - The company is subject to evolving PRC laws regarding cyber security and data protection, which could materially and adversely affect its business and financial condition[101] - The company must comply with stringent PRC cyber security laws, which require personal information to be stored in mainland China and may involve government reviews[103] - The PRC government has broad discretion in enforcing laws, which could lead to penalties such as revocation of business licenses or fines, potentially disrupting operations[185][186] User Engagement and Product Development - The average daily active users (DAUs) decreased from 1.9 million in December 2023 to 0.9 million in December 2024, primarily due to the suspension and termination of several non-performing mobile apps and games[65] - The company plans to diversify its monetization strategies by focusing on in-app purchases for mobile games and online literature products in 2024, shifting from reliance on mobile advertising[80] - The company has launched over 215 portfolio products as of December 31, 2024, demonstrating its commitment to product development and market expansion[84] - The effectiveness of the company's product development and monetization strategies is highly dependent on its technological capabilities and the ability to analyze user data[78] Financial Support and Investments - CooTek (Cayman) Inc. provided an aggregate amount of US$9.8 million, US$4.8 million, and US$1.0 million as loans or capital investments to subsidiaries for the years ended December 31, 2022, 2023, and 2024, respectively[40] - The VIEs received net proceeds from loans of US$11.4 million in 2022, made net repayments of US$2.5 million in 2023, and received net proceeds of US$2.7 million in 2024[40] - CooTek (Cayman) Inc. received an aggregate repayment of US$16.3 million, US$6.6 million, and US$2.3 million from subsidiaries for the years ended December 31, 2022, 2023, and 2024, respectively[40] Compliance and Legal Issues - The company has been involved in lawsuits for copyright infringement, with claims totaling RMB1,500,000 from two separate cases[134] - A mobile device manufacturer previously sued the company for unfair competition, resulting in a settlement requiring compensation of RMB1,485,955[139] - The company incurred costs of US$1.7 million to compensate victims of alleged illegal advertisements due to failure in supervising advertising content[174] - The company cannot guarantee that all advertisements displayed on its platform are fully compliant with PRC laws, which may negatively impact its reputation and financial condition[224] Future Outlook - The company plans to focus on expanding its market presence and enhancing its product offerings in the upcoming fiscal year[45] - The company expects to incur higher development, operation, and potential acquisition costs as it transitions to focus on mobile games and online literature[98] - The company may require additional financing in the future to meet business requirements, which could significantly dilute current stockholders' equity interests or increase debt service obligations[99]

Financial Performance - Total revenues for the year ended December 31, 2023, were $31,976,268, a decrease from $83,926,614 in 2022, representing a decline of approximately 62%[45] - Third-party revenues for 2023 amounted to $20,607,850, compared to $38,951,993 in 2022, indicating a decrease of about 47%[45] - Net loss for 2023 was $2,595,941, compared to a net income of $515,014 in 2022, reflecting a significant shift in financial performance[45] - The company reported a total cost of revenues and operating expenses of $34,512,100 for 2023, compared to $82,438,886 in 2022, a reduction of approximately 58%[45] - The company incurred a net loss of US$2.6 million and negative cash flows from operating activities of US$6.6 million in 2023, with an accumulated deficit of US$216.9 million[102] - The company’s net revenues decreased from US$272.1 million in 2021 to US$83.9 million in 2022, and further to US$32.0 million in 2023, indicating a significant decline in financial performance[92] - Mobile advertising revenue also saw a decline from US$267.3 million in 2021 to US$76.5 million in 2022, and further down to US$22.8 million in 2023[92] Assets and Liabilities - Total assets as of December 31, 2023, were $9,281,500, down from $9,281,500 in 2022, indicating stability in total asset value despite revenue decline[54] - The company had total liabilities of $9,671,155 as of December 31, 2023, compared to $9,281,500 in 2022, indicating an increase in liabilities[54] - The amount due from intercompany as of December 31, 2023, was $94,200,587, reflecting significant intercompany transactions[54] - As of December 31, 2023, the company's current liabilities exceeded current assets by US$1.2 million, compared to US$0.3 million as of December 31, 2022, highlighting liquidity issues[102] Revenue Sources - Revenues contributed by the VIEs accounted for 37%, 39%, and 18% of total revenues for the years ended December 31, 2021, 2022, and 2023, respectively[27] - Mobile advertising services accounted for 71.4% of total revenues in 2023, down from 91.2% in 2022 and 98.2% in 2021, indicating a significant decline in reliance on this revenue stream[81] - The top two advertising customers, which are advertising exchanges, contributed approximately 26.6% of total revenues in 2023, highlighting the company's dependence on a limited number of clients[85] Regulatory Environment - The PRC government has introduced regulations requiring mainland companies to file with the CSRC for overseas listings, effective March 31, 2023[33] - The PCAOB has not issued a new determination regarding its ability to inspect auditors in mainland China and Hong Kong, which affects the company's compliance with the HFCAA[34] - The company has not obtained all requisite licenses and permits from PRC government authorities that are material for its business operations[32] - The company is subject to evolving PRC laws regarding cyber security and data protection, which could materially and adversely affect its business and financial condition[111] - The PRC Data Security Law, effective from September 1, 2021, mandates a security review for data activities that may affect national security, impacting companies with over one million users' personal information before any public offering on foreign stock exchanges[219] Operational Challenges - The company has faced challenges in maintaining good relationships with third-party digital distribution platforms, which are crucial for user acquisition and retention[87] - The company has been subject to notices alleging copyright infringement and inappropriate content, which could lead to product suspensions and negatively impact user base and financial performance[88] - The company has incurred declining revenue and negative working capital in the past, raising concerns about its ability to sustain or improve profitability[72] - The company faces intense competition in the mobile application market, competing with established companies that may have more resources[132] User Engagement - The average daily active users (DAUs) for the company's portfolio products decreased to 1.9 million in December 2023, down from 6.3 million in December 2022, due to the suspension and termination of several non-performing mobile apps and games[77] - The user base of the company's portfolio products reached an average of 1.9 million daily active users (DAUs) as of December 31, 2023[96] Future Outlook - The company plans to focus on new product development and market expansion strategies to improve future performance[45] - Future revenue growth is dependent on the successful development and commercialization of new products and services, as well as effective user engagement strategies[103] - The company expects to incur higher development, operation, and potential acquisition costs as it transitions to focus on mobile games and online literature[108] Legal and Compliance Risks - The company is facing lawsuits for copyright infringement, with claims totaling RMB1,500,000 from two separate cases in 2022 and 2023[142] - The company is subject to potential intellectual property infringement lawsuits, which could disrupt operations and result in substantial damages or licensing fees[140] - The company may face reputational harm and liability due to the use of open source software in its products[148] Financial Management - The company intends to retain most, if not all, of its available funds and future earnings to operate and expand its business[42] - The company may require additional financing in the future to meet business requirements, which could significantly dilute current stockholders' equity interests or increase debt service obligations[109] - The company has limited business insurance coverage, which may result in substantial costs and resource diversion in case of business interruptions[188]

Ownership Structure - As of March 31, 2023, Mr. Karl Kan Zhang held 57.3% of the Company's aggregate voting power through Kan's Global CoolStuff Investment Inc.[6] - Sequoia Capital China GF Holdco III-A, Ltd. owned 11.5% of the Company's total outstanding shares and held 5.2% of the Company's aggregate voting power as of March 31, 2023[10] - Qiming Venture Partners II, L.P. and Qiming Venture Partners II-C, L.P. collectively owned 11.2% of the Company's total outstanding shares and held 5.0% of the Company's aggregate voting power as of March 31, 2023[10] - SIG China Investments Master Fund III, LLLP owned 8.8% of the Company's total outstanding shares and held 3.9% of the Company's aggregate voting power as of March 31, 2023[10] Regulatory Compliance - CooTek (Cayman) Inc. was conclusively identified by the SEC as a Commission-Identified Issuer under the HFCAA on May 4, 2022[5] - The audit report for the Company's financial statements was issued by Deloitte Touche Tohmatsu Certified Public Accountants LLP[5] - The PCAOB was unable to inspect registered public accounting firms in mainland China until December 2022[5] Governmental Control - The Company believes it is not owned or controlled by a governmental entity in mainland China[6] - The Company is not aware of any governmental entity in mainland China that can direct its management and policies[9] Reporting - The Company filed its annual report on Form 20-F for the year ended December 31, 2021 on April 29, 2022[5]

Inflation and Economic Impact - Inflation in mainland China has shown year-over-year increases in the consumer price index of 0.2% in 2020, 1.5% in 2021, and 1.8% in 2022, but has not materially impacted the company's operations to date [812]. - The company has not been materially affected by inflation in the past, but future inflation rates in China remain uncertain [812]. Cash and Currency Management - As of December 31, 2022, the company held RMB45.2 million in RMB-denominated cash, HKD3.7 million in HKD-denominated cash, and US$2.8 million in U.S. dollar-denominated cash [816]. - An 8% appreciation or depreciation of RMB against the U.S. dollar would result in a change of RMB1.6 million in cash and cash equivalents, while the same change against HKD would result in a change of RMB0.3 million [816]. Foreign Currency Exchange Risk - The company has not entered into any hedging transactions to mitigate foreign currency exchange risk, but may consider derivatives or other financial instruments in the future [817]. - The company has not used any derivative financial instruments to hedge foreign exchange risk, indicating a potential area for future risk management strategies [817]. - The exchange rate between RMB and U.S. dollar has experienced volatility, making future predictions difficult [817]. Interest Rate Risk - Interest rate risk exposure is primarily related to interest expenses on bank borrowings and income from interest-bearing deposits, with no material risks identified to date [818]. - The company has not used any derivative financial instruments to manage interest rate risk exposure, and future interest income may fall short of expectations due to market changes [818]. Other Financial Information - The company did not receive any reimbursement from the depositary for the year ended December 31, 2022 [829].

Financial Performance - Consolidated revenues for the year ended December 31, 2021, were $272.1 million, with revenues from consolidated affiliated entities accounting for 37% of total revenues[30]. - Gross profit for the same period was $239.3 million, with a gross margin of approximately 87.8%[44]. - The company reported a net loss of $13.9 million for the year ended December 31, 2021, compared to a net income of $29.8 million from its subsidiaries[44]. - Net revenues for the year ended December 31, 2020, were $441.51 million, a significant increase from $177.88 million in 2019, representing a growth of approximately 148%[46]. - The net loss for the year ended December 31, 2020, was $47.37 million, compared to a net loss of $36.85 million in 2019, indicating a deterioration in profitability[46]. - The company incurred a net loss and negative cash flows from operating activities in the past, raising concerns about future profitability[52]. - The company incurred net losses of US$36.8 million, US$47.4 million, and US$13.9 million in 2019, 2020, and 2021, respectively[85]. - The company recorded negative working capital of US$42.1 million as of December 31, 2020, and negative working capital of US$11.2 million as of December 31, 2021[85]. Cash Flow and Liquidity - Cash transfers from CooTek (Cayman) Inc. to its subsidiaries amounted to $37.8 million in 2021, while repayments totaled $19.1 million[40]. - Cash and cash equivalents as of December 31, 2021, totaled $18.23 million, a decrease from $24.67 million as of December 31, 2020[47]. - Net cash used in operating activities for the year ended December 31, 2021, was $51.04 million, indicating increased cash outflow compared to previous periods[48]. - The company may require additional financing in the future to meet business requirements, which could significantly dilute current stockholders' equity interests or increase debt service obligations[93]. - The company has a credit facility agreement allowing borrowing up to $10.0 million, collateralized by accounts receivable, with an interest rate based on LIBOR or LPR[174]. - As of December 31, 2021, there was no unused credit facility under the agreements, indicating full utilization of available credit[174]. Expenses and Investments - The company incurred sales and marketing expenses of $200.2 million in 2021, representing a significant investment in growth[44]. - Research and development expenses for the year were $34.4 million, indicating a focus on innovation and product development[44]. - Research and development expenses for the year ended December 31, 2020, were $29.67 million, up from $26.94 million in 2019, showing a continued investment in innovation[46]. - The company has adopted stock incentive plans that may increase share-based compensation expenses, affecting net income[157]. User Engagement and Market Position - The average daily active users (DAUs) decreased from 27.8 million in December 2020 to 18.5 million in December 2021[61]. - The company's mobile advertising services accounted for 98.4%, 99.3%, and 98.2% of total revenues in 2019, 2020, and 2021, respectively[63]. - The user base of the company's portfolio products reached an average of 18.5 million DAUs in December 2021, while the DAUs for TouchPal Smart Input reached 92.9 million[72]. - The company's net revenues fluctuated from US$177.9 million in 2019 to US$441.5 million in 2020, and then decreased to US$272.1 million in 2021[77]. - Mobile advertising revenue increased from US$175.0 million in 2019 to US$438.4 million in 2020, but then decreased to US$267.3 million in 2021[77]. Regulatory and Compliance Risks - The company has not obtained all requisite licenses and permits from PRC authorities, which may impact future operations[36]. - The Holding Foreign Companies Accountable Act poses a risk of delisting if the PCAOB cannot inspect the company's auditor, potentially affecting share value[38]. - The company is subject to evolving PRC laws regarding cyber security and data protection, which could materially impact operations and financial results[95]. - The company may be required to apply for cyber security reviews for future capital raising activities, which could constrain liquidity[98]. - The company faces risks related to the evolving regulatory landscape in China, which may require additional licenses and permits that could disrupt operations[117]. - The company must continuously evaluate and adapt its policies to comply with new laws, which may lead to increased operational costs[115]. - The company may face sanctions from the CSRC or other PRC regulatory authorities if it fails to obtain necessary approvals for offshore offerings, which could adversely affect its business and financial condition[217]. Legal and Operational Challenges - The company faces substantial doubt about its ability to continue as a going concern, as indicated by the auditors' report[87]. - The company is subject to potential legal proceedings that could adversely affect its financial condition and operating results[135]. - The company may face difficulties in attracting and retaining key employees, which could harm its business[143]. - The company may be held liable for third-party content displayed on its applications, which could harm its brand image and business[127]. - The company has identified a material weakness in internal control over financial reporting, which could lead to material misstatements in financial statements[160]. Competition and Market Dynamics - Intense competition exists in the mobile application market, with competitors potentially having more resources and better adaptability to market changes[121]. - The company's mobile applications are primarily designed for Android, making them vulnerable to any decline in the popularity of the Android operating system[124]. - User growth and engagement depend on effective interoperation with mobile devices and operating systems, which the company does not control[125]. - The company faces risks from advertisement-blocking technologies that could limit revenue generation from advertising services, which are primarily based on effective price per impression[154]. Intellectual Property and Content Risks - Unauthorized use of intellectual property by third parties poses a risk to the company's competitive position and reputation[128]. - The company may face expensive intellectual property infringement lawsuits, which could disrupt operations and require substantial payments[129]. - The lengthy patent application process increases uncertainty regarding the company's intellectual property rights, potentially leading to disputes[130]. - The company has contractual obligations to indemnify advertising customers against third-party claims of intellectual property infringement, which could impact financial results[132]. International Operations and Trade Risks - The company is monitoring international trade policies and tensions, which could adversely affect its business operations[139]. - The company may experience challenges in managing growth and maintaining reliable service levels as it expands its user base and product offerings[146]. - The company is exposed to risks from geopolitical tensions, particularly between the United States and China, which could impact its operations[142].

Financial Performance - Net revenues for Q3 2021 were US$51.1 million, a decrease of 52% from US$105.7 million in Q3 2020[6] - Gross profit was US$42.0 million, down 58% from US$98.9 million in the same period last year, with a gross profit margin of 82.2%[11] - CooTek reported net revenues of $51,141 thousand for the three months ended September 30, 2021, a decrease of 38.5% compared to $83,217 thousand for the same period in 2020[31] - The gross profit for the three months ended September 30, 2021, was $41,976 thousand, representing a gross margin of 82.0%[31] - CooTek's net loss for the three months ended September 30, 2021, was $444 thousand, compared to a net income of $264 thousand for the same period in 2020[31] User Engagement - Average daily active users (DAUs) of portfolio products were 18.7 million, a decrease of 32% from 27.7 million in September 2020[6] Advertising Revenue - Mobile advertising revenues were US$49.8 million, a decrease of 53% from US$104.8 million in Q3 2020[8] Operating Expenses - Sales and marketing expenses were US$28.7 million, a decrease of 73% from US$107.8 million in the same period last year[12] - The total operating expenses for the three months ended September 30, 2021, were $40,983 thousand, a decrease of 43.5% from $72,916 thousand in the previous quarter[31] Cash Flow and Liquidity - Cash, cash equivalents, and restricted cash as of September 30, 2021, were US$36.2 million, down from US$39.0 million as of June 30, 2021[19] - Net cash inflow from operating activities was US$5.0 million, compared to a net cash outflow of US$14.4 million in Q3 2020[20] - The company reported a net cash provided by operating activities of $4,985 thousand for the three months ended September 30, 2021, compared to a net cash used in operating activities of $17,540 thousand in the previous quarter[39] Future Outlook - The company launched 14 new mobile games in Q3 2021 and has a pipeline of 15-20 games for Q4 2021[3] - The company is focusing on expanding its overseas mobile games segment, which has shown promising business upside since Q2 2021[3] Financial Position - Cash and cash equivalents as of September 30, 2021, were $36,011 thousand, a slight increase from $35,667 thousand as of June 30, 2021[33] - Total current liabilities decreased to $82,243 thousand as of September 30, 2021, from $100,875 thousand as of June 30, 2021[33] - CooTek's accumulated deficit increased to $213,544 thousand as of September 30, 2021, from $213,099 thousand as of June 30, 2021[36] - CooTek's total assets decreased to $71,940 thousand as of September 30, 2021, from $87,502 thousand as of June 30, 2021[33] Adjusted Financial Metrics - Adjusted net income (Non-GAAP) was US$0.4 million, compared to an adjusted net loss of US$20.5 million in the same period last year[17] - Adjusted EBITDA for the three months ended September 30, 2021, was $3,317 thousand, compared to an Adjusted EBITDA of $3,428 thousand in the previous quarter[41]

Financial Performance - Net revenues for the six months ended June 30, 2021, were $164.77 million, a decrease of 29.4% compared to $233.41 million for the same period in 2020[6]. - Gross profit for the six months ended June 30, 2021, was $147.10 million, down from $223.14 million in 2020, reflecting a gross margin decline[6]. - Net loss attributable to ordinary shareholders for the six months ended June 30, 2021, was $13.50 million, compared to a net loss of $6.62 million in 2020, indicating a significant increase in losses[6]. - The company reported a comprehensive loss of $13.25 million for the six months ended June 30, 2021, compared to a comprehensive loss of $6.44 million in 2020[9]. - For the six months ended June 30, 2021, the net loss was US$12.1 million, compared to a net loss of US$6.6 million for the same period in 2020, indicating an increase in losses of approximately 83%[14]. - The Group's net revenues for the six months ended June 30, 2021, were US$59.2 million, a significant decrease from US$222.1 million for the same period in 2020, representing a decline of approximately 73%[31]. - The Group's net income for the six months ended June 30, 2021, was US$33.3 million, compared to US$21.0 million for the same period in 2020, indicating an increase of approximately 58%[31]. - For the six months ended June 30, 2021, total revenue decreased to US$164,768,953 from US$233,408,923 in the same period of 2020, representing a decline of approximately 29.4%[58]. - Advertising revenue for the same period dropped to US$162,485,069, down from US$232,196,523, a decrease of about 30%[58]. Assets and Liabilities - Total current assets increased from $68.18 million as of December 31, 2020, to $79.43 million as of June 30, 2021[3]. - Total liabilities decreased from $110.70 million as of December 31, 2020, to $101.50 million as of June 30, 2021[3]. - The accumulated deficit as of June 30, 2021, amounted to US$213.1 million, reflecting the ongoing financial challenges faced by the company[19]. - The company’s current liabilities exceeded its current assets by US$21.4 million as of June 30, 2021, indicating liquidity concerns[19]. - As of June 30, 2021, the Group's total assets were US$28.9 million, down from US$53.5 million as of December 31, 2020, reflecting a decrease of approximately 46%[31]. - The Group's accounts receivable decreased from US$16.1 million as of December 31, 2020, to US$11.5 million as of June 30, 2021, a decline of approximately 29%[31]. - The Group's total accrued expenses and other current liabilities decreased to USD 6,684,535 as of June 30, 2021, down from USD 10,686,518 as of December 31, 2020, a reduction of approximately 37.5%[93]. - The Group's property and equipment, net, decreased to USD 4,100,477 as of June 30, 2021, from USD 5,393,742 as of December 31, 2020, a decline of approximately 23.9%[87]. Cash Flow and Liquidity - Cash and cash equivalents rose from $24.67 million as of December 31, 2020, to $35.67 million as of June 30, 2021, indicating improved liquidity[3]. - Net cash used in operating activities for the six months ended June 30, 2021, was US$40.5 million, a significant increase from the previous year's cash provided by operating activities of US$20.4 million[14]. - The company reported a total cash, cash equivalents, and restricted cash of US$38.96 million at the end of June 30, 2021, down from US$64.92 million at the end of June 30, 2020[14]. - The company plans to enhance its operating cash flow and seek capital financing to fund its operations, including marketing activities[20]. - The company has sufficient cash and liquidity to fund its operations for one year from the date of the financial statements issuance[21]. - The company reported a cash inflow of US$27.18 million from the issuance of convertible notes during the six months ended June 30, 2021[14]. - The company’s total cash, cash equivalents, and restricted cash decreased by approximately 40% from the previous year, highlighting a need for improved cash management strategies[14]. Expenses and Investments - Operating expenses for the six months ended June 30, 2021, totaled $157.44 million, down from $229.99 million in 2020, showing a reduction in costs[6]. - Research and development expenses increased from $14.95 million in 2020 to $18.75 million in 2021, reflecting ongoing investment in innovation[6]. - User acquisition costs for advertising and promotion expenses were US$100,148,612 for the six months ended June 30, 2021, compared to US$204,965,757 in 2020, reflecting a reduction of approximately 51%[62]. - Operating lease costs for the six months ended June 30, 2021, were US$893,050, an increase from US$710,590 in the same period of 2020[75]. - The Group recognized revenue of US$3,014,390 by reducing the balance of deferred revenue for the six months ended June 30, 2021, compared to US$3,631,753 in 2020[60]. Shareholder Information - The weighted average shares used in calculating net loss per ordinary share increased from approximately 3.09 billion in 2020 to 3.19 billion in 2021[6]. - The weighted average number of ordinary shares outstanding increased from 3,094,780,922 in June 2020 to 3,187,723,620 in June 2021, reflecting a growth of approximately 3%[128]. - The company incurred share-based compensation expenses of US$2.15 million for the six months ended June 30, 2021, compared to US$2.37 million for the same period in 2020[14]. - The company recognized share-based compensation expense of US$1,255,165 for the six months ended June 30, 2021, down from US$1,428,823 in the same period of 2020, a decrease of 12%[124]. - As of June 30, 2021, there were 324,679,357 options outstanding with a weighted average exercise price of US$0.02, compared to 290,614,107 options at the beginning of the year[121]. - The company had US$2,221,352 in unrecognized compensation costs related to unvested restricted shares as of June 30, 2021, expected to be recognized over a weighted-average period of 1.53 years[127]. Debt and Financing - The Group's short-term bank borrowings increased significantly from US$267,917 as of December 31, 2020, to US$5.1 million as of June 30, 2021[31]. - The Group issued a convertible note for a principal amount of USD 20.0 million in March 2021, receiving cash proceeds of USD 18.2 million[101]. - The convertible note payable and related derivative liabilities amounted to US$17.8 million as of June 30, 2021, which can be settled in cash, ADSs, or a combination of both[22]. - The Group completed an offering in August 2021, issuing 990,034 ADSs for net proceeds of US$1.4 million[22]. - The company had an outstanding equity financing available of US$20.0 million as of June 30, 2021, under the Standby Equity Distribution Agreement[111].

Financial Performance - Net revenues for Q2 2021 were US$83.2 million, a decrease of 34% year-over-year from US$126.4 million, but an increase of 2% quarter-over-quarter from US$81.6 million[7]. - Gross profit was US$74.4 million, down 38% from US$120.7 million year-over-year, with a gross profit margin of 89.4% compared to 95.5% in the same period last year[11]. - The company reported a net loss of US$12.4 million for the second quarter of 2021, compared to a net income of US$3.1 million in the same period of 2020[32]. - Adjusted net loss for the second quarter of 2021 was US$11.1 million, while Adjusted EBITDA was a loss of US$9.9 million[32]. - Adjusted net income (Non-GAAP) was US$1.1 million, compared to an adjusted net loss of US$11.1 million in the previous quarter and adjusted net income of US$4.5 million in the same period last year[18]. User Metrics - Average daily active users (DAUs) of portfolio products were 23.5 million, a decrease of 2% from 23.9 million in June 2020, while monthly active users (MAUs) were 70.0 million, down 16% from 83.5 million[6]. Revenue Streams - Revenues from the IP business of Fengdu Novel recorded 194% quarter-over-quarter growth, indicating strong performance in content distribution[4]. - Mobile advertising revenues were US$82.1 million, a decrease of 35% from US$125.8 million in Q2 2020, but an increase of 2% from US$80.4 million in the previous quarter[8]. Expenses - Research and development expenses increased by 20% year-over-year to US$9.7 million, accounting for 12% of total net revenues[13]. - Sales and marketing expenses were US$59.8 million, a decrease of 44% year-over-year, accounting for 72% of total revenues, down from 84% in the same period last year[12]. - Operating expenses for the second quarter of 2021 were US$72.9 million, a decrease of 38.1% compared to US$117.8 million in the same period of 2020[32]. Cash Flow and Assets - Cash, cash equivalents, and restricted cash as of June 30, 2021, were US$39.0 million, down from US$56.1 million as of March 31, 2021[20]. - Net cash outflow from operating activities during Q2 2021 was US$17.5 million, compared to a net cash inflow of US$5.4 million in the same period in 2020[21]. - Total current assets increased to US$79.4 million as of June 30, 2021, compared to US$71.4 million as of March 31, 2021[34]. - The company had a net cash outflow from financing activities of US$0.1 million in Q2 2021, compared to a net cash inflow of US$3.1 million in Q2 2020[22]. Shareholder Actions - The company repurchased 1.4 million ADSs for a total of US$6.0 million under its share repurchase program, which was terminated on May 17, 2021[23]. Liabilities and Equity - The company’s total liabilities decreased to US$101.5 million as of June 30, 2021, down from US$117.9 million as of March 31, 2021[34]. - Net income for the three months ended June 30, 2021, was $264, a significant improvement from a net loss of $12,398 in the previous quarter[41]. Other Financial Metrics - Interest income for the three months ended June 30, 2021, was $1,336, a notable increase from a net expense of $211 in the previous quarter[41]. - Depreciation and amortization for the six months ended June 30, 2021, totaled $1,844, compared to $1,540 for the same period in 2020[41]. - Share-based compensation related to share options and restricted share units for the three months ended June 30, 2021, was $841[41]. - The company reported zero tax impact to the non-GAAP adjustments[41].

Financial Performance - Net revenues for 2020 reached $441.5 million, a significant increase from $177.9 million in 2019, representing a growth of 148.5%[29] - The company reported a net loss of $47.4 million in 2020, compared to a net loss of $36.8 million in 2019, reflecting an increase in losses of approximately 28.5%[29] - Total liabilities increased to $110.7 million in 2020, up from $62.9 million in 2019, indicating a growth of 76%[30] - Cash and cash equivalents decreased to $24.7 million in 2020 from $59.9 million in 2019, a decline of 58.8%[30] - The company experienced total operating expenses of $465.2 million in 2020, which is an increase of 133.4% from $199.3 million in 2019[29] - Net revenues increased from US$134.1 million in 2018 to US$177.9 million in 2019, and further to US$441.5 million in 2020[53] - Advertising revenue rose from US$131.3 million in 2018 to US$175.0 million in 2019, and further increased to US$438.4 million in 2020, accounting for approximately 99% of total revenue in 2020[55] User Engagement - The average daily active users (DAUs) grew to 27.8 million in December 2020, up from 24.7 million in December 2019, indicating a growth rate of approximately 12.6%[33] - The user base of the company's portfolio products reached an average of 27.8 million DAUs in December 2020, with TouchPal Smart Input achieving 125.3 million DAUs across more than 240 countries and regions[47] - Daily Active Users (DAUs) of portfolio products decreased from 27.6 million in June 2019 to 23.9 million in September 2019 due to suspensions from Google Play Store[46] - The DAU/MAU ratio of portfolio products decreased from 42.4% in June 2019 to 33.1% in December 2019[46] Revenue Sources - Mobile advertising services accounted for 99.3% of total revenues in 2020, highlighting the company's reliance on this revenue stream[37] - The top two advertising customers accounted for approximately 39.5% of total revenues in 2020, indicating a high dependency on a limited number of clients[41] - Revenue derived from the in-house developed advertising platform, CooTek Ads, accounted for approximately 45% of total revenue in 2020[55] Operational Challenges - The company plans to continue expanding its operations globally, facing challenges such as local competition and compliance with various regulations[47][54] - The company aims to improve user acquisition strategies and diversify revenue structures to enhance monetization capabilities[60] - The effectiveness of product development and monetization strategies is highly dependent on the ability to analyze user data and preferences[52] - The company is out of compliance with certain financial covenants in its credit facility agreements, failing to meet minimum quarterly net income requirements as of December 31, 2020[63] - The company may require additional financing in the future to meet business requirements, which could significantly dilute current stockholders' equity interests or increase debt service obligations[67] Regulatory and Compliance Risks - Data privacy concerns and increased regulatory scrutiny may require changes to business practices, potentially resulting in declines in user growth or engagement[69] - The California Consumer Privacy Act (CCPA) and the General Data Protection Regulation (GDPR) impose significant compliance costs and potential liabilities, with fines up to €20 million or 4% of total worldwide annual turnover for non-compliance[72] - The evolving regulatory landscape in various jurisdictions may impose additional compliance burdens and costs, impacting the company's ability to operate effectively[74] - The company faces significant risks from potential security breaches and cyber-attacks, which could lead to legal and financial exposure[85] - The company has not obtained necessary approvals from the NAPP for domestic online games, which could negatively impact operational results[81] Legal and Litigation Issues - The company has been involved in patent infringement lawsuits, including a claim for RMB3,000,000 related to TouchPal Phonebook, which was voluntarily withdrawn[97] - A mobile device manufacturer sued the company for unfair competition, claiming RMB4,900,000 in damages, with a first-instance judgment ordering the suspension of pop-up advertisements and awarding RMB3,000,000 to the plaintiff[102] - The company may face significant costs and management distraction from ongoing and future litigation related to intellectual property claims[98] Economic and Market Conditions - The global financial markets have faced significant disruptions, and the company is concerned about the potential impact of economic slowdowns on its business[105] - The growth rate of the Chinese economy has gradually slowed, which may adversely affect the company's financial condition and results of operations[107] - Changes in international trade policies and trade tensions could increase operating costs and adversely affect consumer confidence, impacting the company's business[108] - Political tensions between the United States and China could materially adversely affect the company's business, prospects, financial condition, and results of operations[109] Internal Controls and Financial Reporting - The company identified material weaknesses in its internal control over financial reporting, which could affect the accuracy of its financial statements[129] - The company identified a material weakness in accounting policies and procedures related to financial reporting in accordance with U.S. GAAP and SEC requirements[131] Foreign Investment and Regulatory Compliance - The company operates through consolidated affiliated entities due to PRC regulations, which may pose risks if these arrangements are deemed non-compliant[149] - The company faces risks related to potential penalties from the PRC government if its operational structure is found non-compliant, which could adversely affect its business[154] - The newly enacted PRC Foreign Investment Law introduces uncertainties that may impact the company's corporate structure and business operations, particularly regarding foreign investment restrictions[168] Currency and Financial Risks - Fluctuations in the value of the RMB against the U.S. dollar can adversely affect the value of investments and dividends payable on ADSs[211] - Limited hedging options in China may increase exposure to foreign currency exchange risk, potentially magnifying currency exchange losses[214] Shareholder and Equity Considerations - The company has granted share-based compensation awards, which may increase expenses and dilute shareholder ownership[127] - The company repurchased ordinary shares for a total consideration of US$9.3 million in 2014[196]

Financial Performance - Net revenues increased from $134.1 million in 2018 to $177.9 million in 2019, representing a growth of approximately 32.5%[19] - The company reported a gross profit of $162.6 million in 2019, up from $119.2 million in 2018, indicating a significant increase of about 36.4%[19] - The company reported a net loss of $36.8 million in 2019, compared to a net income of $10.1 million in 2018, indicating a significant downturn in profitability[19] - Operating expenses rose to $199.3 million in 2019, up from $109.2 million in 2018, representing an increase of approximately 82.5%[19] - The company experienced a net cash used in operating activities of $15.7 million in 2019, compared to a net cash provided of $23.1 million in 2018[20] - The company has identified a material weakness in its internal control over financial reporting, specifically related to accounting policies and procedures, which may affect its ability to accurately report operating results[107] User Engagement and Growth - Active daily users (DAUs) grew to an average of 162.3 million in December 2019, up from 157.7 million in December 2018, reflecting a growth of approximately 3.9%[25] - The company's global daily active users (DAUs) decreased from 27.6 million in June 2019 to 23.9 million in September 2019 due to app suspensions, impacting net revenues from US$37.6 million to US$31.3 million in the same period[37] - The DAU/MAU ratio of portfolio products decreased from 42.4% in June 2019 to 33.1% in December 2019, indicating a decline in user engagement[37] - The company has experienced rapid growth in active users and plans to continue expanding product offerings, but managing this growth requires significant resources[90] Revenue Sources and Advertising - The company generated 98.4% of its revenues from mobile advertising services in 2019, slightly up from 97.9% in 2018[27] - The top two advertising customers accounted for approximately 44.65% of total revenues in 2019, highlighting a significant reliance on a limited number of clients[31] - Advertising revenue from portfolio products accounted for approximately 85% of total advertising revenue in 2019, with the in-house developed advertising platform, CooTek Ads, contributing about 8% of total revenue[44] - The company's revenues are significantly affected by seasonal fluctuations in advertising spending, particularly in the mobile advertising sector[95] - The potential for advertisement-blocking technologies may limit the company's ability to generate revenues from advertising services[99] - Click-through fraud poses a risk to the company's advertising revenues and could lead to loss of advertiser confidence[100] Regulatory and Compliance Risks - Data privacy regulations, such as the California Consumer Privacy Act (CCPA), may increase compliance costs and potential liabilities for the company[52] - The company faces potential fines of up to €20 million or 4% of total worldwide annual turnover for non-compliance with GDPR regulations[53] - Compliance with new data privacy laws may require substantial expenditures and could impose significant burdens on operations[55] - The company has not obtained necessary approvals for domestic online games, which could negatively impact operational results[62] - Regulatory authorities may impose heavy penalties for failure to obtain required licenses, including fines and confiscation of illegal income[63] - The introduction of new products may subject the company to additional laws and regulations, affecting business expansion[58] - The PRC Cybersecurity Law creates substantial uncertainty regarding compliance standards and potential violations[54] - The regulatory landscape for internet services is complex and varies significantly across jurisdictions, increasing compliance risks[58] Market and Economic Conditions - The company has experienced significant disruptions in global financial markets, with a prolonged economic slowdown potentially leading to tighter credit markets and increased market volatility[84] - The growth rate of the Chinese economy has gradually slowed, which may adversely affect the company's business and financial condition[87] - Economic and political changes in China could materially impact the company's business and overall economic growth[152] Intellectual Property and Legal Risks - Intellectual property rights are critical to the company's business, and unauthorized use by third parties could adversely affect its competitive position[75] - The company may face expensive intellectual property infringement lawsuits, which could disrupt its operations and require substantial payments[76][79] - The lengthy application procedures for software-related patents create uncertainty regarding the company's intellectual property rights, increasing the risk of patent disputes[78] - The company may face claims from employees or contractors regarding ownership of intellectual property developed for its technology, which could complicate its legal standing[81] Corporate Governance and Shareholder Issues - The company is a "controlled company," allowing it to rely on exemptions from certain corporate governance requirements, which may not provide the same protections to shareholders[113] - The company operates under a dual-class share structure, with Class A shares having one vote and Class B shares having twenty-five votes, limiting the influence of Class A shareholders[195] - The dual-class structure may prevent inclusion of ADSs in major indices, potentially leading to negative commentary from shareholder advisory firms[197] - The board of directors has discretion over dividend distribution, which may depend on various financial factors[204] - The company does not expect to pay dividends in the foreseeable future, relying on price appreciation for returns on investment[203] Operational Challenges - The company faces potential risks from pending or future litigation, which could adversely impact its financial condition and operating results[105] - The company has limited business insurance coverage, which may result in substantial costs and resource diversion in the event of business interruptions[118] - The company may face challenges in renewing or finding suitable premises for its operations, which could lead to increased rental costs or operational disruptions[114] - The company faces significant regulatory restrictions on loans and capital contributions to its PRC subsidiary, which may adversely affect its liquidity and ability to fund operations[178] Currency and Financial Risks - The fluctuation of the Renminbi (RMB) against the U.S. dollar may materially impact the value of the company's investments and dividends payable in U.S. dollars[180] - The company has not entered into any hedging transactions to mitigate foreign currency exchange risk, which may expose it to significant losses[182] - Changes in the LIBOR benchmark could affect the company's cost of capital and net investment income, impacting its financial results[122]