Sound Group(SOGP) - 2024 Q4 - Annual Report

Introduction This section provides definitions for key terms used throughout the annual report, such as 'active users', 'MAUs' (monthly active users), and 'paying users'), and specifies the currency translation rate used for financial figures, which is RMB7.2993 to US$1.00 as of December 31, 2024 Definitions and Conventions This section provides definitions for key terms used throughout the annual report, such as 'active users', 'MAUs' (monthly active users), and 'paying users'. It also specifies the currency translation rate used for financial figures, which is RMB7.2993 to US$1.00 as of December 31, 2024 - An 'active user' is defined as a user who visited the company's platforms at least once in a given period, measured by the number of unique mobile devices that launched the mobile apps. This means a single individual with multiple devices could be counted as multiple users[16] - A 'paying user' is a user who has purchased virtual items or other products and services at least once during the relevant period. The company notes that a unique user may have multiple paying accounts[16] - All translations from RMB to U.S. dollars in the report are made at a rate of RMB7.2993 to US$1.00, the exchange rate on December 31, 2024[19] Forward-Looking Information This section contains a standard disclaimer regarding forward-looking statements, identifying signal words and listing factors that could cause actual results to differ materially Forward-Looking Statements Disclaimer This section contains a standard disclaimer regarding forward-looking statements. It identifies words that signal such statements (e.g., 'anticipate,' 'believe,' 'expect') and lists factors that could cause actual results to differ materially, including government policies, economic conditions, and other risks detailed in 'Item 3.D. Risk Factors' - The report contains forward-looking statements concerning the company's goals, strategies, future business development, and financial condition[22][23] - Key uncertainties affecting these statements include government regulations, economic conditions in China and overseas, and other risk factors discussed in the report[26] PART I Item 3. Key Information This section details the company's Variable Interest Entity (VIE) structure, its financial contribution, status under the Holding Foreign Companies Accountable Act (HFCAA), and an extensive overview of various risks Corporate Structure, Operational Risks, and Cash Flows The company operates in China through a Variable Interest Entity (VIE) structure to comply with PRC foreign investment restrictions, posing unique risks as the company controls VIEs contractually, which generated 99.8% of total net revenues and 41.5% of consolidated total assets in 2024 - The company operates in China through a VIE structure, where its PRC subsidiaries have contractual control over the VIEs (Guangzhou Lizhi and Guangzhou Huanliao) that hold key operating licenses[30][31] VIE Financial Contribution | Metric | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | VIE Revenue as % of Total | 98.6% | 99.9% | 99.8% | | VIE Assets as % of Total | N/A | 35.6% | 41.5% | - In 2024, the VIEs transferred RMB 176.0 million (US$24.5 million) to the company's PRC subsidiaries as payment for technical development service fees[37] - The company faces significant oversight from the PRC government, which could impact operations and the value of its ADSs. Future offshore offerings may require filing with the CSRC[33][35] Condensed Consolidating Financial Schedules This section provides detailed consolidating financial schedules, breaking down statements of operations, balance sheets, and cash flows by entity type, illustrating financial interplay and significant concentration of third-party revenues within VIEs Condensed Consolidating Statement of Operations (Year Ended Dec 31, 2024, RMB in thousands) | Entity Type | Third-party revenues (RMB in thousands) | Gross profit (RMB in thousands) | Net (loss)/income (RMB in thousands) | | :--- | :--- | :--- | :--- | | Sound Group Inc. | — | — | (69,580) | | Other Subsidiaries | 5,062 | 23,441 | (62,897) | | WFOEs | 80 | 161,413 | 15,074 | | VIEs and VIEs' Subsidiaries | 2,026,664 | 569,648 | (56,416) | | Consolidated Total | 2,031,806 | 556,858 | (80,976) | Condensed Consolidating Balance Sheet (As of Dec 31, 2024, RMB in thousands) | Entity Type | Cash and cash equivalents (RMB in thousands) | Total assets (RMB in thousands) | Total liabilities (RMB in thousands) | | :--- | :--- | :--- | :--- | | Sound Group Inc. | 132,787 | 493,953 | 258,664 | | Other Subsidiaries | 90,914 | 235,263 | 462,543 | | WFOEs | 30,464 | (22,639) | 113,678 | | VIEs and VIEs' Subsidiaries | 187,693 | 284,498 | 711,903 | | Consolidated Total | 441,858 | 521,440 | 307,135 | - The VIEs hold unrecognized revenue-producing assets, including the ICP License and the Internet Culture Operating License, which are crucial for the company's operations[58] Holding Foreign Companies Accountable Act (HFCAA) The company addresses its status under the Holding Foreign Companies Accountable Act (HFCAA), noting that its current auditor is subject to PCAOB inspection, thus mitigating the risk of a trading prohibition - The company was previously identified under the HFCAA in May 2022 because its former auditor was in a jurisdiction the PCAOB could not inspect[62] - The company's current auditor, Enrome LLP, is based in Singapore and is subject to PCAOB inspection. As a result, the company believes it is not currently at risk of a trading prohibition under the HFCAA[63] Risk Factors This section outlines principal risks, including internal control weaknesses, complexities of operating in China, online audio industry challenges, VIE structure risks, and ADS price volatility - The company completed an independent investigation in October 2024 regarding a US$12.8 million deposit, which uncovered internal control weaknesses[69][74] - Two material weaknesses in internal control over financial reporting were identified as of December 31, 2024, related to insufficient accounting personnel and inadequate risk monitoring of financial assets[69][76] - Significant risks are associated with the PRC government's oversight, data privacy regulations (like the Cybersecurity Law), and anti-monopoly laws, which could adversely affect business operations[69] - The company's reliance on its VIE structure is a major risk, as PRC government actions could render the contractual arrangements unenforceable, potentially causing the company to lose control over its China operations[71] - The company was likely a Passive Foreign Investment Company (PFIC) for 2024 and faces a significant risk of being a PFIC in 2025, which has adverse U.S. federal income tax consequences for U.S. investors[367] Item 4. Information on the Company This section provides a comprehensive overview of Sound Group Inc., detailing its history, business operations, corporate structure, and reliance on a VIE structure for China operations History and Development of the Company The company, founded in 2010, launched its LIZHI App in 2013, listed on Nasdaq in January 2020, and changed its name to 'Sound Group Inc.' in January 2024, operating globally through a VIE structure in China amidst regulatory uncertainties - In January 2024, the company changed its corporate name from 'LIZHI INC.' to 'Sound Group Inc.' and its Nasdaq ticker symbol from 'LIZI' to 'SOGP'[386] - The company completed its IPO in January 2020 and a follow-on offering in April 2021. It also authorized a US$3.0 million share repurchase program in December 2023[382][385] - The company faces significant regulatory uncertainty from recent PRC rules on cybersecurity, data security, and overseas listings, including the CSRC's Trial Measures effective March 2023, which may require filings for future offerings[389][390][399] - The company's ability to pay dividends and service debt depends on payments from its PRC subsidiaries, which are subject to PRC regulations on profit distribution and foreign exchange controls[404][406] Business Overview Sound Group Inc. is a global audio-centric social and entertainment company focusing on audio entertainment, social networking, and podcasts, with revenue primarily from virtual gift sales, leveraging proprietary technologies and facing intense competition - The company's business focuses on audio entertainment, social networking, and podcasts, with a mission to build the world's largest audio platform[409] Key Operating Metrics (Annual) | Metric | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Average Total Mobile MAUs (millions) | 50.4 | 43.3 | 34.2 | | Average Total Monthly Paying Users (thousands) | 483.9 | 418.3 | 391.3 | Revenue Breakdown (2024) | Revenue Source | Amount (RMB million) | % of Total | | :--- | :--- | :--- | | Audio entertainment | 2,018.6 | 99.4% | | Podcast, advertising and others | 13.2 | 0.6% | | Total Net Revenues | 2,031.8 | 100.0% | - The company has developed proprietary technologies including DOREME (real-time communication), VoderX (instant messaging), Voice Cloud (hybrid cloud), and is exploring voice AI and AIGC[420][421][422][423] - As of December 31, 2024, the company held 65 patents in China, 466 trademarks in China, 496 trademarks overseas, and 133 software copyrights in China[434][438] Organizational Structure This section outlines the company's corporate structure, centered around its Cayman Islands holding company and its operations in China through Wholly Foreign-Owned Enterprises (WFOEs) and Variable Interest Entities (VIEs), controlled via contractual arrangements due to PRC foreign ownership restrictions - The company uses a VIE structure to operate in China due to legal restrictions on foreign ownership in the value-added telecommunication services sector[555] - The contractual arrangements with the VIEs (Guangzhou Lizhi and Guangzhou Huanliao) and their shareholders are designed to give the company effective control and entitle it to substantially all economic benefits[558] - Key agreements in the VIE structure include: Equity Pledge Agreement, Exclusive Equity Transfer Option Agreement, Exclusive Technical Consulting and Service Agreement, and Power of Attorney[559][560][561][562][563] - In 2024, revenues from the VIEs accounted for 99.8% of the company's total net revenues, and service fees paid from the VIEs to PRC subsidiaries amounted to RMB 176.0 million[555] Property, Plant and Equipment The company's principal executive offices are in Singapore, with most of its leased office space in Guangzhou, and its IT infrastructure relies on leased Internet data centers and content delivery networks from major domestic providers - As of December 31, 2024, the company leased a total of approximately 8,476 square meters of office space, with about 69% located in Guangzhou[572] - The company's main IT infrastructure, including data centers and content delivery networks, is leased from major domestic providers[573] Item 5. Operating and Financial Review and Prospects (MD&A) This section provides management's discussion and analysis of the company's financial condition and results of operations, detailing factors affecting performance, year-over-year analysis, liquidity, capital resources, R&D efforts, and critical accounting policies Operating Results The company's operating results are primarily affected by its ability to expand its user base, retain hosts, and monetize its platform, with net revenues decreasing to RMB 2,031.8 million in 2024 but net loss narrowing to RMB 81.0 million Quarterly Average Total Mobile MAUs (in thousands) | Quarter | 2023 | 2024 | | :--- | :--- | :--- | | Q1 | 49,622 | 35,776 | | Q2 | 45,607 | 35,564 | | Q3 | 42,138 | 32,251 | | Q4 | 36,022 | 33,173 | Quarterly Average Total Monthly Paying Users (in thousands) | Quarter | 2023 | 2024 | | :--- | :--- | :--- | | Q1 | 471.5 | 363.7 | | Q2 | 433.7 | 388.8 | | Q3 | 402.6 | 398.9 | | Q4 | 365.3 | 413.6 | Consolidated Results of Operations (RMB in thousands) | Metric | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Net revenues (RMB in thousands) | 2,185,266 | 2,071,772 | 2,031,806 | | Gross profit (RMB in thousands) | 716,345 | 585,375 | 556,858 | | Operating income/(loss) (RMB in thousands) | 66,651 | (147,668) | (89,703) | | Net income/(loss) (RMB in thousands) | 86,504 | (134,515) | (80,976) | | Net (loss) per ADS (Basic) | 16.69 | (23.48) | (13.55) | - Net loss for 2024 was RMB 81.0 million, an improvement from a net loss of RMB 134.5 million in 2023. The change was driven by decreased R&D and G&A expenses, which offset a 29% increase in selling and marketing expenses[611][612][613][614][616] Liquidity and Capital Resources The company's liquidity is primarily sourced from operations, shareholder contributions, and bank loans, with RMB 441.9 million in cash and cash equivalents and a positive working capital of RMB 186.6 million as of December 31, 2024 Consolidated Cash Flows Summary (RMB in thousands) | Cash Flow Item | 2022 | 2023 | 2024 | | :--- | :--- | :--- | :--- | | Net cash from/(used in) operating activities (RMB in thousands) | 136,267 | (117,045) | (26,469) | | Net cash (used in)/from investing activities (RMB in thousands) | (122,783) | 105,653 | (11,974) | | Net cash from/(used in) financing activities (RMB in thousands) | 4,771 | (71,674) | (2,995) | | Cash at end of year (RMB in thousands) | 578,515 | 497,617 | 453,163 | - As of December 31, 2024, the company had cash and cash equivalents of RMB 441.9 million (US$60.5 million) and a positive working capital of RMB 186.6 million (US$25.6 million)[672][673] Contractual Obligations as of Dec 31, 2024 (RMB in thousands) | Obligation Type | Less than 1 year (RMB in thousands) | 1-3 years (RMB in thousands) | Total (RMB in thousands) | | :--- | :--- | :--- | :--- | | Lease obligations | 9,641 | 5,087 | 14,728 | | Short-term loans | 7,188 | — | 7,188 | - The company conducts its operations primarily through its PRC subsidiaries and VIEs. As of Dec 31, 2024, RMB 132.8 million of cash was held by the parent company, with the rest held by its subsidiaries and VIEs, subject to PRC restrictions on fund transfers[698][700] Critical Accounting Estimates This section highlights the provision for income taxes and the valuation allowance for deferred tax assets as critical accounting estimates, requiring significant management judgment due to complex tax laws and realizability assumptions - The company identifies the provision for income taxes and the valuation allowance for deferred tax assets as a critical accounting estimate due to the complexity and judgment involved[708] - Management must make assumptions about interpreting complex tax laws and the timing of taxable income, which are subject to review by tax authorities[709] - A full valuation allowance has been established against the company's deferred tax assets, as management does not believe their recoverability is more likely than not[712] Item 6. Directors, Senior Management and Employees This section provides information on the company's leadership, compensation, board structure, and employees, highlighting the dual-class share structure that gives the founder substantial voting control Directors and Senior Management The company's leadership includes founder, CEO, and Chairman Mr. Jinnan (Marco) Lai, co-founder and CTO Mr. Ning Ding, and a board of five directors, including three independent directors - The board is led by founder, CEO, and Chairman Mr. Jinnan (Marco) Lai[716] - The board includes three independent directors: Mr. Yipeng Li, Mr. Ming Zhang, and Mr. Xiang Wang[716] Compensation For fiscal year 2024, aggregate compensation paid to executive officers was RMB 13.0 million and to non-executive directors was RMB 2.6 million, with a share incentive plan authorizing up to 170,000,000 Class A ordinary shares for awards FY2024 Compensation | Recipient Group | Aggregate Compensation (RMB) | | :--- | :--- | | Executive Officers | 13.0 million | | Non-Executive Directors | 2.6 million | - The Second Amended and Restated 2019 Share Incentive Plan authorizes up to 170,000,000 Class A ordinary shares for awards[732][734] - As of February 28, 2025, 58,748,670 options and restricted share units were outstanding under the share incentive plan[733] Board Practices The board consists of five directors, three of whom are independent, and the company utilizes the 'home country practice' exemption, establishing an audit, compensation, and nominating committee - The board has five directors, three of whom are independent. The company relies on the 'home country practice' exemption and does not have a majority-independent board[747] - The Audit Committee is composed of three independent directors: Mr. Yipeng Li (Chairman), Mr. Ming Zhang, and Mr. Xiang Wang. Mr. Yipeng Li is the designated 'audit committee financial expert'[751] - The Compensation Committee and Nominating and Corporate Governance Committee are chaired by CEO Mr. Jinnan (Marco) Lai and include non-independent directors[752][754] Employees As of December 31, 2024, the company had 563 employees, with 65.5% in research and development, and maintains good working relationships with no significant labor disputes reported Employee Breakdown by Function (as of Dec 31, 2024) | Function | Number of employees | % of total | | :--- | :--- | :--- | | Research and development | 369 | 65.5% | | Operations and products | 60 | 10.7% | | Sales and marketing | 62 | 11.0% | | General and administration | 72 | 12.8% | | Total | 563 | 100.0% | - The company had 563 employees as of December 31, 2024. None are represented by labor unions[759][763] Share Ownership As of February 28, 2025, the founder controlled 62.7% of total voting power due to the dual-class share structure, giving management substantial influence, with 80.8% of outstanding shares held by Deutsche Bank Trust Company Americas as the ADS depositary - Due to the dual-class share structure (Class A: 1 vote, Class B: 10 votes), the company's leadership holds significant voting control[768] Beneficial Ownership and Voting Power (as of Feb 28, 2025) | Shareholder | % of Total Shares | % of Aggregate Voting Power | | :--- | :--- | :--- | | Mr. Jinnan (Marco) Lai | 19.5% | 62.7% | | Mr. Ning Ding | 4.0% | 12.7% | | All Directors & Executive Officers (as a group) | 25.9% | 76.2% | - As of February 28, 2025, Deutsche Bank Trust Company Americas held 80.8% of total outstanding shares as the depositary for the ADS program[772] Item 7. Major Shareholders and Related Party Transactions This section refers to other parts of the report for details on major shareholders and their differential voting rights, confirming key related party transactions include VIE contractual arrangements, employment agreements, and the share incentive plan - The company's major shareholders have different voting rights due to the dual-class share structure, as detailed in Item 6.E[776] - Significant related party transactions include the contractual arrangements with the VIEs, employment agreements, and the share incentive plan[777][779] Item 8. Financial Information This section contains key financial information, including details of an independent investigation completed in October 2024 into a US$12.8 million deposit, which uncovered internal control weaknesses and led to a full provision for potential loss, with no plans for future dividends - An independent investigation was completed in October 2024 regarding the recoverability of a US$12.8 million deposit at a third-party financial institution[783][784] - The investigation identified internal control weaknesses related to account opening, fund withdrawal documentation, and data retention. The company is implementing remedial measures[786][787] - Due to the uncertainty of recovery, the company has fully provided for the US$12.8 million deposit as a credit loss[788] - The company has no plan to declare or pay dividends in the near future and intends to retain earnings for business operations and expansion[789] Item 9. The Offer and Listing This section provides details about the company's American Depositary Shares (ADSs), each representing two hundred (200) Class A ordinary shares, listed on the Nasdaq Capital Market under the ticker symbol 'SOGP' since January 25, 2024 - The company's ADSs trade on the Nasdaq Capital Market under the ticker symbol 'SOGP' since January 25, 2024[792][795] - Each ADS represents two hundred (200) Class A ordinary shares[793] Item 10. Additional Information This section provides further details on the company's corporate governance and legal framework, including share classes, voting rights (1 vote for Class A, 10 votes for Class B), dividend rights, anti-takeover provisions, exchange controls, and the material U.S. federal income tax consideration that the company was likely a Passive Foreign Investment Company (PFIC) for 2024, with a significant risk of being a PFIC in 2025 - The company's shares are divided into Class A (1 vote per share) and Class B (10 votes per share). Class B shares are convertible to Class A, but not vice-versa[807][808] - The company is an exempted company under Cayman Islands law and is subject to the Cayman Islands Beneficial Ownership Transparency Act, 2023 (BOTA)[826][828] - The company was likely a Passive Foreign Investment Company (PFIC) for its 2024 taxable year and there is a significant risk it will be a PFIC for 2025. This status carries adverse U.S. federal income tax consequences for U.S. Holders[845][367] - If the company is a PFIC, U.S. Holders are subject to punitive tax rules on gains and 'excess distributions', and favorable dividend tax rates would not apply[847][851] Item 11. Quantitative and Qualitative Disclosures About Market Risk This section discusses the company's exposure to various market risks, primarily foreign exchange risk, as most revenues are in Renminbi (RMB) while holding U.S. dollar-denominated cash, with a 10% depreciation of the U.S. dollar against the RMB resulting in a decrease of RMB 16.9 million in cash and cash equivalents - The company's primary market risk is foreign exchange risk, as most revenues are in RMB while it holds cash in U.S. dollars and other currencies[872] - As of December 31, 2024, the company held US$23.5 million in U.S. dollar-denominated cash and cash equivalents. A 10% depreciation of the USD against the RMB would result in a decrease of RMB 16.9 million in cash[874] - The company has not entered into any hedging transactions to mitigate foreign currency exchange risk[873] Item 12. Description of Securities Other Than Equity Securities This section details the fees and expenses associated with holding the company's American Depositary Shares (ADSs), including service fees paid to the depositary bank, Deutsche Bank Trust Company Americas, and payments made by the company for ADS ratio changes ADS Holder Service Fees | Service | Fee | | :--- | :--- | | Issuance of ADSs | Up to US$0.05 per ADS | | Cancellation of ADSs | Up to US$0.05 per ADS | | Cash dividend distribution | Up to US$0.05 per ADS held | | Depositary services | Up to US$0.05 per ADS held on record date | - In 2020, the company received a payment of US$1.0 million from the depositary bank. In 2023 and 2024, the company paid approximately US$1.5 million to the depositary bank for services related to an ADS ratio change[889] PART II Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds This section details the use of proceeds from the company's January 2020 initial public offering (IPO), which generated US$38.1 million for product development, marketing, and general corporate purposes, and its April 2021 follow-on offering, which generated US$28.5 million, with US$10.8 million used for general corporate purposes - The company received net proceeds of approximately US$38.1 million from its January 2020 IPO. As of the report date, all of these proceeds have been used for product development, sales and marketing, and general corporate purposes[894][895] - The company received net proceeds of approximately US$28.5 million from its April 2021 follow-on offering. As of the report date, US$10.8 million of these proceeds have been used for general corporate purposes[898][899] Item 15. Controls and Procedures Management concluded that as of December 31, 2024, the company's disclosure controls and procedures were not effective due to two material weaknesses in internal control over financial reporting, though the weakness related to financial asset risk monitoring has been remediated - Management concluded that disclosure controls and procedures were not effective as of December 31, 2024, due to two material weaknesses[902] - Material Weakness 1: Lack of sufficient financial reporting and accounting personnel with appropriate U.S. GAAP and SEC reporting experience[903] - Material Weakness 2: Lack of a comprehensive and continuous assessment and risk monitoring mechanism for financial assets and collection risk with third-party financial institutions[905] - As of December 31, 2024, management determined that the material weakness related to financial asset risk monitoring had been remediated by updating fund management policies and providing training[910][911] Item 16. [RESERVED] This section covers various governance and compliance topics, including the audit committee financial expert, code of ethics, auditor fees (RMB 3.1 million in 2024), auditor change, a US$3.0 million share repurchase program, reliance on 'home country' practices, and cybersecurity risk management - Mr. Yipeng Li is the designated 'audit committee financial expert'[916] Auditor Fees (RMB in thousands) | Year | Audit Fees (RMB in thousands) | | :--- | :--- | | 2022 | 7,300 | | 2023 | 14,741 | | 2024 | 3,139 | - In July 2024, the company engaged Enrome LLP as its new independent registered public accounting firm, dismissing PricewaterhouseCoopers Zhong Tian LLP[920] - A share repurchase program of up to US$3.0 million was authorized in December 2023. As of March 2024, a total of 483,643 ADSs had been repurchased for approximately US$1.4 million[922][925] - The company relies on 'home country practice' exemptions from certain Nasdaq corporate governance rules, such as not having a majority-independent board or a compensation committee composed entirely of independent directors[928][930] PART III Item 18. Financial Statements This section contains the company's audited consolidated financial statements for the fiscal years ended December 31, 2022, 2023, and 2024, prepared in accordance with U.S. GAAP, including the independent auditor's report and detailed notes Consolidated Balance Sheets The consolidated balance sheets show total assets decreased from RMB 566.6 million in 2023 to RMB 521.4 million (US$71.4 million) in 2024, while total liabilities increased from RMB 276.6 million to RMB 307.1 million (US$42.1 million), resulting in a decrease in total shareholders' equity from RMB 290.0 million to RMB 214.3 million (US$29.4 million) Consolidated Balance Sheet Summary (RMB in thousands) | Account | Dec 31, 2023 (RMB in thousands) | Dec 31, 2024 (RMB in thousands) | | :--- | :--- | :--- | | Cash and cash equivalents | 494,965 | 441,858 | | Total Assets | 566,574 | 521,440 | | Total Liabilities | 276,561 | 307,135 | | Total Shareholders' Equity | 290,013 | 214,305 | Consolidated Statements of Operations and Comprehensive (Loss) Income The consolidated statements of operations show net revenues of RMB 2,031.8 million in 2024, a slight decrease from RMB 2,071.8 million in 2023, but a significant improvement in net loss to RMB 81.0 million from RMB 134.5 million in 2023, with diluted net loss per ADS at US$1.86 Key Performance Indicators (RMB in thousands) | Metric | 2022 (RMB in thousands) | 2023 (RMB in thousands) | 2024 (RMB in thousands) | | :--- | :--- | :--- | :--- | | Net revenues (RMB in thousands) | 2,185,266 | 2,071,772 | 2,031,806 | | Gross profit (RMB in thousands) | 716,345 | 585,375 | 556,858 | | Operating income/(loss) (RMB in thousands) | 66,651 | (147,668) | (89,703) | | Net income/(loss) (RMB in thousands) | 86,504 | (134,515) | (80,976) | | Net (loss) per ADS (Basic) | 16.69 | (23.48) | (13.55) | Consolidated Statements of Changes in Shareholders' Equity These statements detail changes in equity for 2022, 2023, and 2024, showing a decrease in total shareholders' equity from RMB 290.0 million as of Dec 31, 2023, to RMB 214.3 million as of Dec 31, 2024, driven by net loss, share repurchases, and share-based compensation - Total shareholders' equity decreased from RMB 290.0 million as of Dec 31, 2023, to RMB 214.3 million as of Dec 31, 2024[968][971] - In 2024, the company repurchased common shares for RMB 9.2 million and recorded share-based compensation expense of RMB 13.1 million[971] Consolidated Statements of Cash Flows The consolidated statements of cash flows show net cash used in operating activities was RMB 26.5 million in 2024, with net cash used in investing activities at RMB 12.0 million and financing activities at RMB 3.0 million, resulting in a RMB 44.5 million decrease in cash and cash equivalents, ending the year at RMB 453.2 million Cash Flow Summary (RMB in thousands) | Cash Flow Activity | 2022 (RMB in thousands) | 2023 (RMB in thousands) | 2024 (RMB in thousands) | | :--- | :--- | :--- | :--- | | Net cash from/(used in) Operating Activities (RMB in thousands) | 136,267 | (117,045) | (26,469) | | Net cash (used in)/from Investing Activities (RMB in thousands) | (122,783) | 105,653 | (11,974) | | Net cash from/(used in) Financing Activities (RMB in thousands) | 4,771 | (71,674) | (2,994) | | Cash at End of Year (RMB in thousands) | 578,515 | 497,617 | 453,163 | Notes to the Consolidated Financial Statements The notes provide detailed explanations of accounting policies and figures, including the VIE structure, revenue recognition, share-based compensation, income tax calculations, and commitments, notably a full provision for a US$12.8 million deposit and pending litigation - The company's business is primarily conducted through its VIEs in the PRC. The contractual arrangements that give the company control are detailed, along with the associated risks[977][985][1006] - Revenue from consumable virtual items is recognized at the point of consumption, while revenue from time-based items and podcast subscriptions is recognized ratably over the service period[1064][1066] - The company recorded a full allowance for credit loss of RMB 90.7 million (US$12.8 million) for a deposit at a third-party financial institution due to difficulties in recovery[1123] - As of Dec 31, 2024, the company had net operating tax loss carryforwards of RMB 961.8 million, for which a full valuation allowance has been provided[1142][1143] - The company is involved in pending litigation, including a music copyright infringement claim for RMB 9.1 million and a fraud-related claim requiring a refund of RMB 8.4 million, for which a provision has been made[1181]