20-F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 20-F

(Mark One)

☐	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
	OR
☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the fiscal year ended December 31, 2021
	OR
☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to
	OR
☐	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of event requiring this shell company report . . . . . . . . . . . . . . . . . . .        

Commission file number: 001-39364

BlueCity Holdings Limited

(Exact Name of Registrant as Specified in Its Charter)

N/A

(Translation of Registrant’s Name Into English)

Cayman Islands

(Jurisdiction of Incorporation or Organization)

Block 2 Tower B Room 028, No. 22 Pingguo Shequ, Bai Zi Wan Road, Chaoyang District

Beijing 100022

People’s Republic of China

(Address of Principal Executive Offices)

Junchen Sun, Acting Chief Financial Officer

Block 2 Tower B Room 028, No. 22 Pingguo Shequ, Bai Zi Wan Road, Chaoyang District

Beijing 100022

People’s Republic of China

Phone: +86 10 5876-9855

Email: sunjunchen@bluecity.com

(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

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

Title of Each Class	Trading Symbol(s)	Name of Each Exchange On Which Registered
American depositary shares, each two American depositary shares representing one Class A ordinary share	BLCT	Nasdaq Global Market
Class A ordinary shares, par value US$0.0001 per share*		Nasdaq Global Market

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

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

Not Applicable

(Title of Class)

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

Not Applicable

(Title of Class)

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

As of December 31, 2021, there were 18,733,449 ordinary shares outstanding, par value $0.0001 per share, being the sum of 13,618,609 Class A ordinary shares and 5,114,840 Class B ordinary shares.

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

☐ Yes ☒ No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

☐ Yes ☒ No

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Emerging growth company ☒

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

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

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

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

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

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

☐ Item 17 ☐ Item 18

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

☐ Yes ☒ No

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

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

☐ Yes ☐ No

TABLE OF CONTENTS

PART I		4
	ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	4
	ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE	4
	ITEM 3. KEY INFORMATION	4
	ITEM 4. INFORMATION ON THE COMPANY	69
	ITEM 4A. UNRESOLVED STAFF COMMENTS	105
	ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS	106
	ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	119
	ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	130
	ITEM 8. FINANCIAL INFORMATION	132
	ITEM 9. THE OFFER AND LISTING	133
	ITEM 10. ADDITIONAL INFORMATION	134
	ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	148
	ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	149
PART II		151
	ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	151
	ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	151
	ITEM 15. CONTROLS AND PROCEDURES	151
	ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT	153
	ITEM 16B. CODE OF ETHICS	153
	ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES	153
	ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	153
	ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	153
	ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	154
	ITEM 16G. CORPORATE GOVERNANCE	154
	ITEM 16H. MINE SAFETY DISCLOSURE	154
	ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	154
PART III		154
	ITEM 17. FINANCIAL STATEMENTS	154
	ITEM 18. FINANCIAL STATEMENTS	154
	ITEM 19. EXHIBITS	155
SIGNATURES		156

i

INTRODUCTION

Unless otherwise indicated and except where the context otherwise requires, and for the purpose of this annual report on Form 20-F to:

● “ADRs” refer to the American depositary receipts that evidence the ADSs;

● “ADSs” refer to our American depositary shares, each two (2) ADSs represent one (1) Class A ordinary share;

● “ARPPU” refers to average revenue per paying user in a given period;

● “average daily sessions per active user” for any period is calculated by dividing (i) the sum of number of times of opening our Blued mobile app per DAU for each day of such period, by (ii) the number of days in such period;

● “average daily time spent per active user” for any period is calculated by dividing (i) the sum of time spent on our Blued mobile app per DAU for each day of such period, by (ii) the number of days in such period;

● “average DAUs” for any period is calculated by dividing (i) the sum of DAUs (as defined below) for each day of such period, by (ii) the number of days in such period;

● “average MAUs” for any period is calculated by dividing (i) the sum of MAUs (as defined below) for each month of such period, by (ii) the number of months in such period;

● “China” or “the PRC” refers to the People’s Republic of China, excluding, for the purposes of this annual report only, Hong Kong, Macau and Taiwan, and “Greater China” includes Hong Kong, Macau and Taiwan;

● “Class A ordinary shares” are to our Class A ordinary shares of par value US$0.0001 per share;

● “Class B ordinary shares” are to our Class B ordinary shares of par value US$0.0001 per share;

● “BlueCity” are to BlueCity Holdings Limited, our Cayman Islands holding company, and “we,” “us,” “our company” and “our” are to BlueCity Holdings Limited and its subsidiaries, and, in the context of describing our operations and consolidated financial information, the VIE and its subsidiaries;

● “our portfolio apps,” “our portfolio mobile apps,” or “our mobile apps” refer to Blued and Finka;

● “DAUs” or “Daily Active Users” refers to the number of users, including both paying and non-paying users, that logged in to any of our portfolio mobile apps in a given day at least once. We treat each account as a distinct user when calculating DAUs. Starting from December 2020, we count DAUs of Finka into our DAUs without eliminating duplicates among our portfolio apps. We counted DAUs of LESDO into our DAUs in a period from September 2020 to June 2021, without eliminating duplicates among our portfolio apps, as we terminated the operation of this product in October 2021;

● “MAUs” or “Monthly Active Users” refers to the number of users, including both paying and non-paying users, that logged in to any of our portfolio mobile apps in a given month at least once. We treat each account as a distinct user when calculating MAUs. Starting from December 2020, we count MAUs of Finka into our MAUs without eliminating duplicates among our portfolio apps. We counted MAUs of LESDO into our MAUs in a period from September 2020 to June 2021, without eliminating duplicates among our portfolio apps, as we terminated the operation of this product in October 2021;

● “the VIE” refers to Beijing BlueCity Culture and Media Co., Ltd.;

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● “paying users” on our platform are to users who make payments for products and services on our Blued, LESDO and Finka, including payments for live streaming services and membership. Starting from December 2020, we count paying users of Finka into our paying users without eliminating duplicates among our portfolio apps. We counted paying users of LESDO into our paying users in a period from September 2020 to June 2021, without eliminating duplicates among our portfolio apps, as we terminated the operation of this product in October 2021;

● “our WFOE” refers to Beijing BlueCity Information& Technology Co., Ltd.;

● “next-month retention rate,” as applied to the number of unique MAUs of Blued mobile app in a calendar month, is the percentage of these unique MAUs in the next calendar month;

● “registered user” means a user that has registered by providing required information and logged in to our portfolio mobile apps at least once since registration. We calculate the number of registered users as the cumulative number of valid user accounts at the end of the relevant period, and consequently, the number of registered users may not be equal to the number of active user accounts during the relevant period. Each individual user may have more than one registered user account for our portfolio mobile app, and consequently, the number of registered users we present in this annual report may not be equal to the number of distinct individuals who are represented by the registered users;

● “RMB” and “Renminbi” refers to the legal currency of China;

● “ordinary shares” refer to our ordinary shares, par value US$0.0001 per share; and

● “US$,” “U.S. dollars,” “$,” and “dollars” refer to the legal currency of the United States.

Our reporting currency is RMB. This annual report also contains translations of certain foreign currency amounts into U.S. dollars for the convenience of the reader. Unless otherwise stated, all translations from Renminbi to U.S. dollars were made at a rate of RMB6.3726 to US$1.00, the exchange rate in effect as of December 30, 2021 as set forth in the H.10 statistical release of the Board of Governors of the Federal Reserve System. We make no representation that any Renminbi or U.S. dollar amounts referred to in this annual report could have been or could be converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade.

2

FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains forward-looking statements that reflect our current expectations and views of future events. The forward looking statements are contained principally in the sections entitled “Item 3. Key Information — D. Risk Factors,” “Item 6. Directors, Senior Management and Employees” and “Item 4. Information on the Company.” Known and unknown risks, uncertainties and other factors, including those listed under “Item 3. Key Information — D. Risk Factors,” may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

You can identify some of these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements relating to:

● our goals and strategies;

● our ability to retain and increase the number of users, paying members and advertisers, and expand our product and service offerings;

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

● expected changes in our revenues, costs or expenditures;

● competition in our industry and our popularity within the LGBTQ population; and

● relevant government policies and regulations relating to our industry.

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may later be found to be incorrect. Our actual results could be materially different from our expectations. Important risks and factors that could cause our actual results to be materially different from our expectations are generally set forth in “Item 3. Key Information—D. Risk Factors,” “Item 6. Directors, Senior Management and Employees,” “Item 4. Information on the Company,” “Item 4. Information on the Company— B. Business Overview—Regulation” and other sections in this annual report. You should read thoroughly this annual report and the documents that we refer to with the understanding that our actual future results may be materially different from and worse than what we expect. We qualify all of our forward-looking statements by these cautionary statements.

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

3

PART I

ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3. KEY INFORMATION

Our Holding Company Structure and VIE Contractual Arrangements

BlueCity Holdings Limited is not an operating company in China but a Cayman Islands holding company with no equity ownership in its VIE or subsidiaries. We conduct our business primarily through our WFOE, the VIE and its subsidiaries in China. Our WFOE is not eligible to operate value-added telecommunication business, internet video, online advertising services and other businesses which foreign-owned companies are prohibited or restricted from conducting in China. As a result, we conduct such business activities through the VIE and its subsidiaries, and rely on contractual arrangements among our WFOE, the VIE and its shareholders to control the business operations of the VIE. The VIE is consolidated for accounting purposes, but is not an entity in which our Cayman Islands holding company, or our investors, own equity. Revenues contributed by the VIE accounted for 5.5%, 63.1% and 90.5% of our total revenues for the fiscal years 2019, 2020 and 2021, respectively. As used in this annual report, “BlueCity” are to BlueCity Holdings Limited, our Cayman Islands holding company, and “we,” “us,” “our company” and “our” are to BlueCity Holdings Limited and its subsidiaries, and, in the context of describing our operations and consolidated financial information, the VIE and its subsidiaries in China, including Beijing BlueCity Culture and Media Co., Ltd., Beijing BlueCity Youning Health Management Co., Ltd., Danlan (Beijing) Media Co., Ltd., City of Glory Chengdu Information Technology Co., Ltd., Shandong Youping Pharmacy Chain Co., Ltd., Beijing Asphere Interactive Network Technology Co., Ltd., Shandong He Health Internet Hospital Co., Ltd., Chongqing Changyuan Pharmaceutical Co., Ltd., Guangzhou Yingyoutianxia Networks Technology Co., Ltd., Beijing Youji Technology and Culture Co., Ltd., Beijing Aiyou Jiuyou Internet Technology Co., Ltd., Beijing Lanpengyou Catering Management Co., Ltd. and Beijing Duoyuanyin Culture and Media Co., Ltd. Holders of the ADSs hold equity interest in BlueCity Holdings Limited, our Cayman Islands holding company, and do not have direct or indirect equity interests in the VIE or its subsidiaries.

4

The following diagram illustrates our corporate structure, including our principal subsidiaries and consolidated affiliated entities, as of the date of this annual report:

Note:

(1) Mr. Baoli Ma, our founder, chairman and chief executive officer, and Mr. Changyou Ma, a family member of Mr. Baoli Ma, hold 99.15% and 0.85% equity interests in the VIE, respectively.

A series of contractual arrangements, including powers of attorney, equity interest pledge agreement, spouse consent letters, exclusive consulting and services agreement, and equity option agreement, have been entered into by and among our WFOE, the VIE and its respective shareholders. As a result of the contractual arrangements, we have effective control over and are considered the primary beneficiary of the VIE, and we have consolidated the financial results of the VIE in our consolidated financial statements. For more details of these contractual arrangements, see “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions—Contractual Arrangements with Our Consolidated Affiliated Entities and Their Respective Shareholders.”

The contractual arrangements may not be as effective as direct ownership in providing us with control over the VIE, and we may incur substantial costs to enforce the terms of the arrangements. In addition, these arrangements have not been tested in PRC courts. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—We rely on contractual arrangements with the VIE and its shareholders for a portion of our business operations, which may not be as effective as direct ownership in providing operational control.”

There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules regarding the status of the rights of our Cayman Islands holding company with respect to its contractual arrangements with the VIE and its shareholders. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or the VIE is found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—If the PRC government finds that the arrangements that establish the structure for operating some of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “—Uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.”

5

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

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

Risks and uncertainties arising from the legal system in China, including risks and uncertainties regarding the enforcement of laws and quickly evolving rules and regulations in China, could result in a material adverse change in our operations and the value of the ADSs. For more details, see “Item 3. Key Information—D. Risk Factors— Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to you and us” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

Permissions Required from the PRC Authorities for Our Operations

We conduct our business primarily through our WFOE, the VIE and its subsidiaries in China. Our operations in China are generally governed by PRC laws and regulations. As of the date of this annual report, our WFOE and the VIE have obtained the requisite licenses and permits from the PRC government authorities that are material for our business operations in China. The VIE holds an ICP License for internet information service (excluding news, publication, education, medical and healthcare, drug and medical instruments, electronic publication services), and an internet culture operation license for operating music products and shows. Given the uncertainties of interpretation and implementation of relevant laws and regulations and the enforcement practice by relevant government authorities, we may be required to obtain additional licenses, permits, filings or approvals for the functions and services of our platform in the future. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

Furthermore, recent legal developments in PRC laws have created uncertainties on compliance with respect to our issuance of securities to foreign investors. The PRC governmental authorities have recently promulgated laws, regulations and regulatory rules related to cybersecurity review and overseas listing. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of, or filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.” In connection with our previous issuance of securities to foreign investors, we have not been involved in investigations on cybersecurity review made by the Cyberspace Administration of China, or the CAC, and we have not received any inquiry, notice, warning, or sanctions in such respect, however, we cannot assure you that we would be able to comply with the existing or new regulatory guidance or requirements relating to our future overseas capital raising activities. See also “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to M&A and Overseas Listing.” Any failure to obtain or delay in obtaining such approval or completing such procedures would subject us to sanctions by the China Securities Regulatory Commission, or the CSRC, CAC or other PRC regulatory authorities. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of the ADSs.

6

The PRC government has recently indicated an intent to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers. For more detailed information, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The approval of, or filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing,” “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business is subject to complex and evolving laws and regulations in various countries and regions where we have business. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business” and “Item 3. Key Information—Risks Related to Our Business and Industry—Our business generates and processes a large amount of data, and we are required to comply with PRC and other applicable laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects.”

The Holding Foreign Companies Accountable Act

The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the Public Company Accounting Oversight Board (United States), or the PCAOB, for three consecutive years beginning in 2021, the SEC shall prohibit our shares or the ADSs from being traded on a national securities exchange. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to inspect or investigate completely. The related risks and uncertainties could cause the value of our ADSs to significantly decline. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections”, “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—The ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment ”, and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—It may be difficult for overseas regulators to conduct investigation or collect evidence within China.”

Cash Flows through Our Organization

The following table presents the cash flows among BlueCity Holdings Limited, its subsidiaries and the VIE in the years ended December 31, 2019, 2020 and 2021:

	For the Year Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
The Company received from Subsidiaries	36,974	25,598	30,353
The Company transferred to Subsidiaries	(34,959)	(278,095)	(264,577)
Subsidiaries received from VIE	16,000	136,600	222,550
Subsidiaries transferred to VIE	(18,007)	(39,129)	(52,634)

BlueCity Holdings Limited is a holding company with no operations of its own. We conduct our business primarily through our WFOE, the VIE and its subsidiaries in China. As a result, BlueCity Holdings Limited’s ability to pay dividends depends upon dividends paid by our WFOE. If our WFOE or any newly formed PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiaries in China are permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Further, each of our WFOE, the VIE and its subsidiaries in China is required to make appropriations to certain statutory reserve funds or may make appropriations to certain discretionary funds, which are not distributable as cash dividends and can only be used for specific purposes. For more details, see “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources—Holding Company Structure.”

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Under PRC laws and regulations, our WFOE and the VIE are subject to certain restrictions with respect to paying dividends or otherwise transferring any of their net assets to us. Remittance of dividends by a wholly foreign-owned enterprise out of China is also subject to examination by the banks designated by the State Administration of Foreign Exchange. The amounts restricted include the paid-up capital and the statutory reserve funds of our PRC subsidiaries and the net assets of the VIE in which we have no legal ownership. For risks relating to the fund flows of our operations in China, see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure —We may rely on dividends and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have, and any limitation on the ability of our WFOE to make payments to us could have a material and adverse effect on our ability to conduct our business.”

Under PRC laws, BlueCity Holdings Limited and its offshore subsidiaries may provide funding to our WFOE only through capital contributions or loans, and to the VIE only through loans, subject to satisfaction of applicable government registration and approval requirements. The VIE may transfer cash to our WFOE by paying service fess according to the exclusive consulting and services agreement. Pursuant to the agreement, the VIE agrees to pay the applicable subsidiaries consulting and service fees, subject to conditions therein.

None of our subsidiaries, the VIE and its subsidiaries in China made cash dividends or other distributions to BlueCity Holdings Limited, the holding company, or its offshore subsidiaries, in the years ended December 31, 2019, 2020 and 2021. Going forward, our subsidiaries and the VIE intend to retain most, if not all, of their available funds and any future earnings.

BlueCity Holdings Limited has not declared or paid any cash dividends, nor does it have any present plan to pay any cash dividends on our ordinary shares in the foreseeable future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business. See “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Dividend Policy.” For the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in the ADSs or ordinary shares, see “Item 10. Additional Information—E. Taxation.”

In the years ended December 31, 2019, 2020 and 2021, no assets other than cash were transferred through our organization.

Financial Information Related to The VIE and Its Subsidiaries

The following table presents the condensed consolidating schedule of financial position for BlueCity Holdings Limited, its subsidiaries, the VIE and its subsidiaries during the periods and as of the dates presented.

Selected Condensed Consolidated Statements of Income Information

	For the Year Ended December 31, 2021
	BlueCity
	Holdings	Company	VIE and its		Consolidated
	Limited	Subsidiaries	subsidiaries	Eliminations	Total
	(RMB, in thousands)
Total revenues	—	299,369	974,103	(196,881)	1,076,591
Net (loss) income	(309,624)	(326,669)	31,858	294,811	(309,624)

	For the Year Ended December 31, 2020
	BlueCity
	Holdings	Company	VIE and its		Consolidated
	Limited	Subsidiaries	subsidiaries	Eliminations	Total
	(RMB, in thousands)
Total revenues	—	590,159	651,070	(209,906)	1,031,323
Net loss	(221,853)	(136,652)	(79,743)	216,395	(221,853)

	For the Year Ended December 31, 2019
	BlueCity
	Holdings	Company	VIE and its		Consolidated
	Limited	Subsidiaries	subsidiaries	Eliminations	Total
	(RMB, in thousands)
Total revenues	—	716,881	42,007	—	758,888
Net loss	(52,930)	(43,636)	(8,857)	52,493	(52,930)

8

Selected Condensed Consolidated Balance Sheets Information

	As of December 31, 2021
	BlueCity
	Holdings	Company	VIE and its		Consolidated
	Limited	Subsidiaries	subsidiaries	Eliminations	Total
	(RMB, in thousands)
Cash and cash equivalents	15,988	306,962	26,836	—	349,786
Accounts receivable, net	—	2,510	10,368	—	12,878
Inventories	—	—	7,402	—	7,402
Prepayment and other current assets	4,286	46,805	48,686	—	99,777
Amounts due from related parties	—	98,986	—	(98,986)	—
Total current assets	20,274	455,263	93,292	(98,986)	469,843
Investment in subsidiaries Investment in subsidiaries and consolidated VIE	437,336	—	—	(437,336)	—
Intangible assets, net	—	—	44,204	—	44,204
Goodwill	—	81,752	—	—	81,752
Other non-current assets	—	7,465	6,898	—	14,363
Total non-current assets	437,336	89,217	51,102	(437,336)	140,319
Total assets	457,610	544,480	144,394	(536,322)	610,162
Accounts payable	—	17,062	11,445	—	28,507
Deferred revenue	—	579	35,217	—	35,796
Income tax payable	—	3,587	1,460	—	5,047
Accrued expenses and other current liabilities	11,664	44,052	27,246	—	82,962
Amounts due to related parties	—	—	98,986	(98,986)	—
Total current liabilities	11,664	65,280	174,354	(98,986)	152,312
Deferred income tax liabilities	—	—	9,603	—	9,603
Other non-current liabilities	—	—	2,300	—	2,300
Total non-current liabilities	—	—	11,903	—	11,903
Total liabilities	11,664	65,280	186,257	(98,986)	164,215
Total shareholders’ equity (deficit)	445,946	479,200	(41,863)	(437,336)	445,947

	As of December 31, 2020
	BlueCity
	Holdings	Company	VIE and its		Consolidated
	Limited	Subsidiaries	subsidiaries	Eliminations	Total
	(RMB, in thousands)
Cash and cash equivalents	261,878	135,598	42,017	—	439,493
Term Deposit	—	172,257	—	—	172,257
Prepayment and other current assets	1,483	24,650	44,938	—	71,071
Amounts due from related parties	—	129,873	—	(129,873)	—
Total current assets	263,361	462,378	86,955	(129,873)	682,821
Investment in subsidiaries and consolidated VIE	517,612	—	—	(517,612)	—
Intangible assets, net	—	—	52,085	—	52,085
Goodwill	—	192,948	3,055	—	196,003
Other non-current assets	—	7,127	6,794	—	13,921
Total non-current assets	517,612	200,075	61,934	(517,612)	262,009
Total assets	780,973	662,453	148,889	(647,485)	944,830
Accrued expenses and other current liabilities	23,779	45,865	49,315	—	118,959
Amount due to related parties	—	—	129,873	(129,873)	—
Other current liabilities	—	16,701	41,651	—	57,722
Total current liabilities	23,779	61,936	220,839	(129,873)	176,681
Deferred income tax liabilities	—	—	10,955	—	10,955
Total non-current liabilities	—	—	10,955	—	10,955
Total liabilities	23,779	61,936	231,794	(129,873)	187,636
Total shareholders’ equity (deficit)	757,194	600,517	(82,905)	(517,612)	757,194

9

Selected Condensed Consolidated Cash Flows Information

	For the Year Ended December 31, 2021
	BlueCity
	Holdings	Company	VIE and its		Consolidated
	Limited	Subsidiaries	subsidiaries	Eliminations	Total
	(RMB, in thousands)
Net cash provided by (used in) operating activities	(6,796)	(169,905)	(34,200)	—	(210,901)
Net cash (used in) provided by investing activities	(234,224)	111,333	(11,745)	264,988	130,352
Net cash provided by (used in) financing activities	64	234,224	30,764	(264,988)	64

	For the Year Ended December 31, 2020
	BlueCity
	Holdings	Company	VIE and its		Consolidated
	Limited	Subsidiaries	subsidiaries	Eliminations	Total
	(RMB, in thousands)
Net cash provided by (used in) operating activities	1,961	(62,968)	20,705	—	(40,302)
Net cash used in by investing activities	(252,497)	(323,230)	(12,533)	299,522	(288,738)
Net cash provided by (used in) financing activities	532,995	252,497	17,510	(299,522)	503,480

	For the Year Ended December 31, 2019
	BlueCity
	Holdings	Company	VIE and its		Consolidated
	Limited	Subsidiaries	subsidiaries	Eliminations	Total
	(RMB, in thousands)
Net cash (used in) provided by operating activities	(702)	(42,208)	11,268	—	(31,642)
Net cash provided by (used in) investing activities	2,015	265,157	(2,902)	21,324	285,594
Net cash (used in) provided by financing activities	(921)	(2,015)	2,008	(21,324)	(22,252)

A.[Reserved]

B.Capitalization and Indebtedness

Not applicable.

C.Reasons for the Offer and Use of Proceeds

Not applicable.

D.Risk Factors

Summary of Risks Factors

An investment in the ADSs involves significant risks. Below is a summary of material risks we face, organized under relevant headings. These risks are discussed more fully in the section entitled “Item 3. Key Information—D. Risk Factors.”

Risks Related to Our Business and Industry

● If we fail to retain our existing users or acquire new users, or if user engagement declines, our business, results of operations and prospects may be materially and adversely affected.

● We have a limited operating history and we may not be able to sustain our rapid growth, effectively manage our growth or implement our business strategies.

● We cannot guarantee that our monetization strategies will be successfully implemented or generate sustainable revenues and profit.

10

● We have substantial overseas operations and we plan to continue expanding our operations abroad. If we fail to meet the challenges presented by our increasing international operations, our business, financial condition and results of operations may be materially and adversely affected.

● Our business is subject to complex and evolving laws and regulations in various countries and regions where we have business. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

● We face uncertainties with respect to the enactment, interpretation and implementation of laws, regulations and rules related to live streaming.

● The success of our business depends in part on our ability to develop and provide our users with new and innovative products and services.

● We have incurred, and may continue to incur net losses in the future.

Risks Related to Our Corporate Structure

● We are a Cayman Islands holding company with no equity ownership in our variable interest entities and we conduct our operations in China through our WFOE, the VIE, with which we have maintained contractual arrangements, and its subsidiaries in China. Holders of the ADSs hold equity interest in BlueCity Holdings Limited, our Cayman Islands holding company, and do not have direct or indirect equity interests in the VIE or its subsidiaries. If the PRC government finds that the arrangements that establish the structure for operating our business do not comply with PRC laws and regulations, or if these regulations or their interpretations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. Our holding company, the VIE and investors of our company face uncertainties about potential future actions by the PRC government that could affect the enforceability of the contractual arrangements with the VIE and, consequently, significantly affect the financial performance of the VIE and our company as a whole. The PRC regulatory authorities could disallow the variable interest entities structure, which would likely result in a material adverse change in our operations, and our Class A ordinary shares or the ADSs may decline significantly in value.

● Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.

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

Risks Related to Doing Business in China

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

● Recent regulatory developments in China may subject us to additional regulatory review and disclosure requirement, expose us to government interference, or otherwise restrict our ability to offer securities and raise capitals outside China, all of which could materially and adversely affect our business and the value of our securities.

● Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business, financial condition and results of operations.

● The approval of, or filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.

● The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections.

11

● The ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.

Risks Related to The ADSs

● The market price for the ADSs has been and may continue to be volatile.

● There can be no assurance that any definitive offer will be made with respect to the going private transaction proposed by Mr. Baoli Ma and Metaclass Management ELP, that any definitive agreement will be executed or that this or any other similar transaction will be approved or consummated. Potential uncertainty involving the proposed going private transaction may adversely affect our business and the market price of the ADSs.

Risks Related to Our Business and Industry

If we fail to retain our existing users or acquire new users, or if user engagement declines, our business, results of operations and prospects may be materially and adversely affected.

Our ability to maintain and grow our user base while keeping our users highly engaged is critical to the continued success and growth of our business. Since our inception in 2011, we have strived to create a trusted community and deliver more diversified products and services to attract new users and keep our existing users engaged. To maintain and improve the level of engagement of our users and expand our user base, we must continue to innovate our products and services, respond promptly to evolving user preferences and lifetime needs, implement new technologies and strategies, curate interesting content created by popular broadcasters and stimulate interactions in our community, all of which will require us to incur substantial costs and expenses. If such costs and expenses fail to effectively translate into larger user base and improved user engagement, we may not be able to achieve all these goals and our results of operations may be materially and adversely affected.

If we are not successful in our efforts to retain or grow our user base, the engagement level of our users may decrease, which may in turn reduce our monetization opportunities and have a material and adverse effect on our business, financial condition and results of operations. If we fail to convert users into paying users, or if the number of our paying users declines, our revenues may decline and our results of operations may be materially and adversely affected.

In particular, there is no assurance that our platform will be able to remain popular within the LGBTQ community. A number of factors could negatively affect user retention, growth and engagement, such as:

● failure to provide new products and services that are attractive to users;

● failure to adapt our products, services or business model to the needs of the LGBTQ community, new industry standards or emerging technologies;

● changes of service patterns or protocols that are required by, or that we elect to make to stay compliant with, legislation, regulations or government policies;

● failure to combat spam on or inappropriate or abusive use of our platform, which may lead to declined user trust in us, negative publicity about us and our brand or even cause us to incur legal liabilities;

● failure to protect our brand reputation;

● failure of our abilities to attract new and maintain existing broadcasters who could keep our users engaged;

● failure to address user concerns related to privacy and communication, safety, security or other factors; and

● failure to successfully compete with existing competitors or new market entrants.

12

We have a limited operating history and we may not be able to sustain our rapid growth, effectively manage our growth or implement our business strategies.

We have experienced rapid growth since our inception in 2011. As we grow our user base, increase the level of user engagement, broaden our mix of products and services and expand overseas, we may incur increasing costs related to our expansion domestically and internationally. If such expansion is not properly managed, it may adversely affect our financial condition and results of operations.

As we have a limited operating history, it is difficult to assess our future prospects or forecast our future results of operations. You should consider our business and prospects in light of the risks and challenges we encounter or may encounter in this developing and rapidly evolving market, some of which are beyond our control. These risks and challenges include, among other things:

● the emergence of alternative business models, changes in rules, regulations, government policies or general economic conditions;

● our ability to develop and deploy diversified and unique features, products and services for our users;

● our ability to hire, retain and motivate talented employees and attract management talents that are compatible with our business expansion both domestically and internationally;

● decreasing user spending, decreasing user engagement, increasing competition, and declining growth of our overall market or industries;

● our ability to increase the number of users;

● our ability to expand into new geographic markets that are amenable to our business model;

● our ability to develop a reliable, scalable, secure, high-performance technology infrastructure that can efficiently handle increased usage and enlarged user base;

● the ability of our broadcasters to deliver engaging content on our platform;

● our ability to develop or implement strategic initiatives to monetize our platform;

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

● our ability to defend ourselves against litigation and/or claims relating to regulatory compliance, intellectual property, privacy or other matters.

Many aspects of our business are unique, evolving and relatively unproven. Our business and prospects depend on the continuing development of the industries in which we operate, in each case, especially among the LGBTQ community. The market for our products and services is relatively new and rapidly developing and is subject to significant challenges. Our business relies upon our ability to create a vibrant and interactive platform addressing the needs of the LGBTQ population and to successfully monetize our user base, so as to increase revenues from various sources, including live streaming, membership, advertising, merchandise sales and health-related services. In addition, our rapid growth and expansion has placed, and will continue to place, significant strain on our management and resources. This level of significant growth may not be sustainable or achievable at all in the future. We believe that our continued growth will depend on many factors, including our ability to develop new sources of revenues, diversify monetization methods, continue developing innovative technologies in response to user demand, increase brand awareness, expand into new market segments, and adjust to the rapidly changing regulatory environment globally. There can be no assurance that we will achieve any of the above, and our failure to do so may materially and adversely affect our business and results of operations.

13

We cannot guarantee that our monetization strategies will be successfully implemented or generate sustainable revenues and profit.

We are in the early stage of our business and our monetization model is new and evolving. We began monetizing our business in 2016. Currently, we generate a significant majority of our revenues from live streaming services. In 2019, 2020 and 2021, respectively, we generated RMB671.4 million, RMB868.9 million and RMB820.8 million (US$128.8 million) of revenues from live streaming, representing 88.5%, 84.3% and 76.2% of our total revenues for the same period, respectively. The remaining revenues are generated from membership services, advertising services, merchandise sales and others. As we continue to develop our business and expand overseas, we are making efforts to adjust our revenue mix by continuing to convert our non-paying users into paying users, grow our health-related businesses and explore various new and innovative revenue streams. As a result, our revenue is affected by our ability to expand into new markets, increase user engagement and convert non-paying users to paying users, which in turn depends on our ability to offer high-quality products and services. If we fail to generate revenues from users in our new markets, monetize our existing or new services or develop new approaches to monetization, we may not be able to maintain or increase our revenues and profits or recover any associated costs. We monitor market developments and may adjust our monetization strategies accordingly from time to time, which may result in decreases of our overall revenue or revenue contributions from some monetization channels. In addition, we may have limited or no experience with the new revenue streams that we may introduce in the future. If these new revenue streams fail to engage our users, customers or business partners, we may fail to retain or attract users or generate sufficient revenues to justify our investment, and our business and results of operations may suffer as a result.

We have substantial overseas operations and we plan to continue expanding our operations abroad. If we fail to meet the challenges presented by our increasing international operations, our business, financial condition and results of operations may be materially and adversely affected.

We began to expand our business operations overseas in 2017 and we currently have Blued users in approximately 170 countries and regions. As we continue to expand our business internationally, we will face risks associated with expanding into markets where we have limited or no experience and where we may be less well-known or have fewer local resources. If we fail to execute our global expansion strategy, we may be subject to a variety of risks inherent in doing business internationally, including:

● political, social and economic instability of each foreign jurisdiction where we operate;

● bias and negative social sentiment towards the LGBTQ community;

● fluctuations in currency exchange rates;

● compliance challenges due to different laws and regulatory environments, particularly in the case of privacy and data security;

● potential non-compliance with tax regulations in multiple tax jurisdictions;

● risks related to the overall legal and regulatory environment in foreign jurisdictions, including with respect to cybersecurity, privacy and personal information, difficulties understanding and ensuring compliance with multiple, conflicting and changing laws, rules and regulations by both our employees and our business partners, over whom we exert no control, and unexpected changes in law, regulatory requirements and enforcement;

● potential damage to our brand and reputation due to compliance with local laws, including potential censorship and/or requirements to provide user information to local authorities;

● difficulties in staffing and managing global operations and the increased travel, infrastructure and compliance costs associated with multiple international locations; and

● differing levels of technology development in different countries, including third party payment platforms.

14

As we expand further into new and existing countries, regions and markets, these risks could intensify, and efforts we make to expand our businesses and operations internationally may not be successful. Failure to expand internationally and manage the complexity of our global operations successfully could materially and adversely affect our business, financial condition and results of operations.

We are still in the early stage of generating revenue from our users outside of China. Despite our global footprint, approximately 6.6%, 10.0% and 11.9% of our total revenues for 2019, 2020 and 2021, respectively, were contributed by users outside China. There can be no assurance we will be as effective or efficient in generating revenue from our users outside China as we were in generating revenue from our users in China. We have devoted, and will need to continue to devote, substantial managerial, financial and human resources to devise and implement monetization strategies and product and service offerings that are suitable for diverse overseas markets with different user needs, competitive landscapes and operational requirements. If we fail to generate revenue from our users outside of China in an effective and efficient manner, our business, financial condition, and results of operations may be materially and adversely affected.

Our business is subject to complex and evolving laws and regulations in various countries and regions where we have business. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.

We are subject to a variety of laws and regulations that involve matters important to or may otherwise impact our business, including, among others, provision of internet information, sales of internet advertising, providing live streaming and short video broadcasting services, online sale of pharmaceutical products, providing health-related services, cybersecurity, user privacy, data protection, protection of minors, foreign exchange and taxation. See also “Item 4. Information on the Company—B. Business Overview—Regulation.” The introduction of new products and services, expansion of our activities in certain jurisdictions, past and future acquisitions, partnerships or alliance or other actions that we may take may subject us to additional laws, regulations, other government scrutiny or additional compliance costs. In addition, foreign laws and regulations can impose different obligations or be more restrictive than those in the PRC.

These laws and regulations are continuously evolving and can be subject to significant change. As a result, the application, interpretation, and enforcement of these laws and regulations are often uncertain, particularly in the rapidly evolving industries in which we operate and any new jurisdiction into which we enter. In addition, these laws and regulations may be interpreted and applied inconsistently by different agencies or authorities and in different jurisdictions, and inconsistently with our current policies and practices. These laws and regulations may be costly to comply with, and such compliance or any associated inquiries or investigations or any other government actions may delay or impede our development of new products and services, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to remedies, administrative penalties and even criminal liabilities that may harm our business, including fines assessed for our current or historical business operations, or demands or orders that we modify or cease existing business practices.

The promulgation of new laws or regulations, or the new interpretation of existing laws and regulations, in each case that restrict or otherwise unfavorably impact the ability or manner in which we provide our products and services could require us to change certain aspects of our business and operations to ensure compliance, which could decrease demand for products and services, reduce revenues, increase costs, require us to obtain more licenses, permits, approvals or certificates, subject us to additional liabilities, or lead to any of our portfolio apps being removed or disabled from the app stores. To the extent any new or more stringent measures are required to be implemented, our business, financial condition and results of operations could be adversely affected.

15

As our international operations continue to expand, we face significant challenges to ensure the content and communications on our platform are in compliance with various local jurisdictions’ regulatory frameworks and social environment, many of which could be substantially different from those of China and each other due to differences in, among others, legal systems, political environment, culture and religion. Such differences may impose more stringent requirements and restrictions on the content we present outside of China. Our experience gained from our operations in China may not apply to our overseas operations. In addition, the regulatory framework for live streaming and social networking services is still developing and remains uncertain in many countries where we offer our services. New laws and regulations may also be adopted from time to time to address new issues that come to the attention of local government authorities. Considerable uncertainties still exist with respect to the interpretation and implementation of existing and any future laws and regulations governing our business activities in these areas. In addition, we may be required to impose more stringent content monitoring measures, be in compliance with relevant content regulatory regimes, obtain relevant licenses or permits or renew or expand the coverage of our existing licenses, and we cannot assure you that we will be able to timely obtain or maintain all the required licenses or permits or make any necessary filings applicable in the future, or comply with other relevant regulatory requirements. If we fail to obtain, hold or maintain any of the required licenses or permits or make necessary filings on time or at all, or fail to comply with other regulatory requirements, we may be subject to various penalties. Cultural differences may also pose additional challenges to our efforts in content control. Therefore, such different and possibly more stringent regulatory and cultural environments may increase the risk exposure to our daily operations in foreign jurisdictions.

Due to the uncertainties in the regulatory environment of the industries in which we operate, there can be no assurance that we have obtained or applied for all the approvals, permits and licenses required for conducting our business and all activities, or that we would be able to maintain our existing approvals, permits and licenses or obtain any new approvals, permits and licenses if required by any future laws or regulations. If we fail to obtain and maintain approvals, licenses or permits required for our business, or to comply with relevant laws and regulations, we could be subject to liabilities, fines, penalties and operational disruptions, or we could be required to modify our business model, which could materially and adversely affect our business, financial condition and results of operations. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

We face uncertainties with respect to the enactment, interpretation and implementation of laws, regulations and rules related to live streaming.

On November 12, 2020, the National Radio and Television Administration, or the NRTA, issued the Notice on Strengthening the Management of Online Show Live Streaming and E-commerce Live Streaming, or Notice 78. In February 2021, the National Internet Information Office, the National Office against Pornographic and Illegal Publications, the Ministry of Industry and Information Technology, or the MIIT, the Ministry of Public Security, or the MPS, the Ministry of Culture and Tourism, or the MCT, the State Administration for Market Regulation, or the SAMR, and the NRTA promulgated the Guiding Opinion on Strengthening the Management of Online Show Live Streaming, or Notice 3. Notice 78 and Notice 3 set forth requirements for certain live streaming businesses with respect to real-name registration, limits on user spending on virtual gifting, restrictions on minors on virtual gifting, live streaming review personnel requirements, content tagging requirements, and other requirements. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Live Streaming Service.”

According to Notice 78, platforms providing online show live streaming or e-commerce live streaming services shall, among other things, register their information and business operations by November 30, 2020, ensure real-name registration for all broadcasters and virtual gifting users, prohibit users that are minors or without real-name registration from virtual gifting, and set a limit on the maximum amount of virtual gifting per time, per day, and per month. We have applied for registration in the National Internet Audio-visual Platforms Information Management System as requested, which application is currently under government authorities’ review.

16

The PRC government may further tighten the real-name registration and identity verification requirements for minors or impose a higher standard with respect to the registration and identity verification for all users on our platform in the future, which may require us to upgrade our system, purchase additional services from third-party service providers and incur additional costs. For example, on August 30, 2021, the MCT promulgated the Measures for the Administration of Online Performance Brokerage Agencies, or the Online Performance Brokerage Agencies Measures, which took effect on the same date, pursuant to which, online performance brokerage agencies are not allowed to provide online performance brokerage services to minors under the age of 16, and when providing such services to minors over the age of 16, online performance brokerage agencies must verify their identity information and obtain written consent from their guardians. The Notice 78 and Online Performance Brokerage Agencies Measures further restrict the methods online performance brokerage agencies could use to incentivize user spending on the live streaming platforms. On March 25, 2022, the CAC, the STA and the SAMR jointly issued the Notice on Further Standardizing the Profit-Making Behavior of Live Streaming to Promote the Healthy Development of the Industry, which required live streaming platforms to authenticate the identity of each live streaming publisher and report various information of those publishers that have profit-making behaviours to local provincial-level network department and tax authorities semi-annually.

As of the date of this annual report, there is no explicit provisions as to what limits on virtual gifting will be imposed by the NRTA or other relevant departments pursuant to Notice 78, Notice 3 and Online Performance Brokerage Agencies Measures, and it is unclear how and to what degree any such limits would be imposed on different platforms. Given there is no explicit provisions on how to set the limit on virtual gifting, we have not been able to set such limit on our platform and we are currently not able to assess the impact this requirement under Notice 78 will have on the virtual gifting spending activities on our platform. We derived 88.5%, 84.3% and 76.2% of our revenues from live streaming services in 2019, 2020 and 2021, respectively. Any such limits ultimately imposed may materially and adversely impact our revenues derived from virtual gifting, live streaming business, and our results of operations.

Since some of the requirements in such new laws, regulations and rules remain unclear and have no explicit provisions or implementation standards, we are still in the process of getting further guidance from regulatory authorities and evaluating the applicability and effect of the various requirements under Notice 78 and Notice 3 on our business. Any further rulemaking under Notice 78, Notice 3 or other intensified regulation with respect to live streaming may increase our compliance burden in the live streaming business, and may have an adverse impact on our business and results of operations.

The success of our business depends in part on our ability to develop and provide our users with new and innovative products and services.

Our business is growing and becoming more complex, and our ability to engage, retain, increase and engage our user base and to increase our revenue will depend heavily on our ability to quickly and successfully develop and launch new and innovative products and services. The industries in which we operate are evolving rapidly and users expect to see new features and experience new products and services offered by us within a relatively short period of time. Over the years, we have been continuously upgrading our social networking platform. Users can enjoy our premium services by subscribing for our membership services, communicate with each other in various means, such as text, pictures, videos, voice and gaymojis, share their lives or view the lives of other users, enjoy talent shows, interact with broadcasters and send virtual gifts to broadcasters. We have also started offering health-related services to our users to address their growing needs. We may introduce significant changes to our existing products and services or develop and introduce new and unproven products and services. Developing and integrating new products and services could also be expensive and time-consuming, and these efforts may not yield the benefits we expect to achieve at all. If new or enhanced products or services fail to engage our users, customers or business partners, we may fail to attract or retain users or to generate sufficient revenue, operating margin, or other value to justify our investments, any of which may seriously harm our business.

We have incurred, and may continue to incur net losses in the future.

We recorded net losses of RMB52.9 million, RMB221.9 million and RMB309.6 million (US$48.6 million) in 2019, 2020 and 2021, respectively. Our ability to achieve profitability is affected by various factors, many of which are beyond our control, such as the continual development of the industries in which we operate, both in China and other countries and regions, changes in the macroeconomic and regulatory environment or competitive dynamics and our inability to respond to these changes in a timely and effective manner. We also expect our costs to increase on an absolute basis due to our continued investment in services, products, technology and development and our continued sales and marketing initiatives. If we cannot successfully offset our increased costs with a significant increase in total revenues, our financial condition and results of operations may be materially and adversely affected. We may continue to incur net losses in the future.

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Difficulties in identifying, consummating and integrating acquisitions and strategic alliances and potential write-offs in connection with our investments or acquisitions may have a material and adverse effect on our business and results of operations.

We have acquired, and may in the future acquire, companies that are complementary to our business. From time to time, we may also make alternative investments and enter into strategic partnerships or alliances as we see fit. For example, in 2020, we acquired the business of Finka, a gay social networking app in China targeting younger generations, through the acquisition of 100% equity interests of its operating entity, iRainbow Hong Kong Limited and all of its subsidiaries and other entities under its control, for an aggregate consideration equivalent to RMB237 million in cash. In 2020, we acquired the business of LESDO, a lesbian social networking service provider in China, and we terminated the operation of this product in October 2021. LESDO contributed less than 1% of our total revenue in 2021. In March 2021, one of the VIE’s subsidiaries entered into a License Purchase Agreement with Chongqing Changyuan Pharmaceutical Co., Ltd., whereby we purchased a license of drug operation permit for RMB2.6 million.

While we have completed the acquisitions of Finka, Finka still remains as a stand-alone brand and the process of integrating certain aspects of their operations into our own operations is still continuing as of the date of this annual report. We cannot assure you that the standards of certain operation aspects of Finka, including without limitation, the aspects of technology, finance, compliance, etc., have been fully in line with those of our Blued mobile app. The on-going integration could result in unforeseen operating difficulties, divert significant management attention and require significant resources that would otherwise have been available for the ongoing development of our existing operations.

Moreover, past and future acquisitions, partnerships or alliances may expose us to potential risks, including risks associated with:

● the difficulty in retaining and increasing the user base of the acquired businesses following the acquisitions;

● the need to integrate certain operations, systems, technologies, and personnel, the inefficiencies that may result if such integration is delayed or not implemented as expected, and unforeseen difficulties and expenditures that may arise in connection with such integration;

● the difficulty in successfully evaluating and utilizing the technology and features of the acquired businesses;

● the difficulty in integrating potentially contrasting corporate cultures and management philosophies;

● diversion of our management’s and personnel’s attention from our existing businesses and initiatives;

● the difficulty in retaining employees following the acquisition;

● the difficulties relating to achieving the expected synergies of the transaction;

● the administrative penalties and criminal liabilities due to the non-compliance relating to the historical operations of the acquired businesses;

● the incurrence of unforeseen obligations or liabilities, which may entail significant expense; and

● the difficulty in integrating financial reporting of the acquired businesses, which may affect our ability to maintain effective controls and procedures over our consolidated financial reporting.

Moreover, we may not be able to achieve our intended strategic goals or attain the synergies from the transaction. If we are unable to successfully integrate Finka and any future investment and manage the larger business, or are unable to achieve the expected benefits of the transaction, we may be required to record substantial impairment charges to goodwill. Any such negative development could have a material adverse effect on our business, reputation, results of operations and financial condition.

We may incur impairment charges for our intangible assets and goodwill.

Goodwill represents the excess of the purchase consideration over the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed from the acquired entity as a result of our business combinations. The balance of our goodwill was RMB196.0 million and RMB81.8 million (US$12.8 million) as of December 31, 2020 and 2021, respectively.

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We are required to test our goodwill for impairment annually or more frequently if events or changes in circumstances indicate that they may be impaired. Based on the result of test, we recorded the impairment of goodwill of RMB106.9 million (US$16.8 million) for the year ended December 31, 2021. We may record additional impairment of goodwill acquired in connection with our acquisitions if the carrying value of our goodwill acquired in connection with our past or future acquisitions are determined to be impaired.

Our intangible assets consist primarily of intangible assets acquired through business combination. Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they satisfy either the “contractual-legal” or “separability” criterion. Intangible assets are subsequently measured at cost less accumulated amortization and impairment. Intangible assets should be tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. We recorded the impairment loss of intangible assets of RMB2.9 million (US$0.5 million) for the year ended December 31, 2021. We cannot guarantee that we will not record additional impairment losses of intangible assets in the future. Material impairment of intangible assets could negatively affect our financial condition and results of operations.

The availability of our mobile apps in countries and regions with anti-LGBTQ public policies, negative sentiment toward the LGBTQ community or where homosexuality is illegal may subject our users to danger, and may lead to our application being blocked or banned, which could have an adverse effect on our reputation and business.

Our mobile apps are or may become available in certain countries and regions with anti-LGBTQ public policies, negative cultural, social or religious sentiment toward the LGBTQ community, and where homosexuality is illegal. Legal consequences for same-sex activities and relationships in countries and regions where same-sex relationships are illegal vary depending on the local law, with the most severe being the death penalty. In countries and regions with anti-LGBTQ public policies or negative sentiment toward the LGBTQ community but same-sex relationships are not explicitly illegal, governmental authorities generally have discretion to block LGBTQ platforms on broad moral grounds. For example, in early 2018, dozens of apps for the LGBTQ community, including Blued, were blocked by the Google app store upon the request of the Indonesian government. Finally, while we do not expect that any government that permits us to carry on our business activities will reverse that policy, we cannot guarantee that we will continue to be able to provide our services in any jurisdiction where we currently have legal authority to do so. If any of our users in these countries and regions are subjected to penalties as a result of using our products and services or if any of our products and services were to be banned in any of these countries and regions, we may be unable to retain existing users and attract new users, and we may be subject to heightened regulatory scrutiny, which would in turn have a material adverse effect on our reputation and business.

Our business generates and processes a large amount of data, and we are required to comply with PRC and other applicable laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects.

Our business generates and processes a large quantity of data. We face risks inherent in handling and protecting large volume of data. In particular, we face a number of challenges relating to data from transactions and other activities on our platforms, including:

● protecting the data in and hosted on our system, including against attacks on our system by outside parties or fraudulent behavior or improper use by our employees;

● addressing concerns related to privacy and sharing, safety, security and other factors; and

● complying with applicable laws, rules and regulations relating to the collection, use, storage, transfer, disclosure and security of personal information, including any requests from regulatory and government authorities relating to these data.

In general, we expect that data security and data protection compliance will receive greater attention and focus from regulators, both domestically and globally, as well as attract continued or greater public scrutiny and attention going forward, which could increase our compliance costs and subject us to heightened risks and challenges associated with data security and protection. If we are unable to manage these risks, we could become subject to penalties, including fines, suspension of business and revocation of required licenses, and our reputation and results of operations could be materially and adversely affected.

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The PRC regulatory and enforcement regime with regard to data security and data protection is evolving and may be subject to different interpretations or significant changes. Moreover, different PRC regulatory bodies, including the Standing Committee of the National People’s Congress, the MIIT, the CAC, the MPS and the SAMR, have enforced data privacy and protections laws and regulations with varying standards and applications. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Internet Information Security and Privacy Protection.” The following are examples of certain recent PRC regulatory activities in this area:

Data Security

● In June 2021, the Standing Committee of the National People’s Congress promulgated the Data Security Law, which took effect in September 2021. The Data Security Law, among other things, provides for security review procedure for data-related activities that may affect national security. In July 2021, the state council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1, 2021. Pursuant to this regulation, critical information infrastructure means key network facilities or information systems of critical industries or sectors, such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defense science, the damage, malfunction or data leakage of which may endanger national security, people’s livelihoods and the public interest. In December 2021, the CAC, together with other authorities, jointly promulgated the Cybersecurity Review Measures, which became effective on February 15, 2022 and replaces its predecessor regulation. Pursuant to the Cybersecurity Review Measures, critical information infrastructure operators that procure internet products and services must be subject to the cybersecurity review if their activities affect or may affect national security. The Cybersecurity Review Measures further stipulates that network platform operators that hold personal information of over one million users shall apply with the Cybersecurity Review Office for a cybersecurity review before any public listing in a foreign country. As of the date of this annual report, no detailed rules or implementation rules have been issued by any authority and we have not been informed that we are a critical information infrastructure operator by any government authorities. Furthermore, the exact scope of “critical information infrastructure operators” under the current regulatory regime remains unclear, and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable laws. Therefore, it is uncertain whether we would be deemed to be a critical information infrastructure operator under PRC law. If we are deemed to be a critical information infrastructure operator under the PRC cybersecurity laws and regulations, we may be subject to obligations in addition to what we have fulfilled under the PRC cybersecurity laws and regulations.

● In November 2021, the CAC released the Regulations of Internet Data Security Management (Draft for Comments), or the Draft Regulations. The Draft Regulations provide that data processors refer to individuals or organizations that, during their data processing activities such as data collection, storage, utilization, transmission, publication and deletion, have autonomy over the purpose and the manner of data processing. In accordance with the Draft Regulations, data processors shall apply for a cybersecurity review for certain activities, including, among other things, (i) the listing in a foreign country of data processors that process the personal information of more than one million users and (ii) any data processing activity that affects or may affect national security. However, there have been no clarifications from the relevant authorities as of the date of this annual report as to the standards for determining whether an activity is one that “affects or may affect national security.” In addition, the Draft Regulations requires that data processors that process “important data” or are listed overseas must conduct an annual data security assessment by itself or commission a data security service provider to do so, and submit the assessment report of the preceding year to the municipal cybersecurity department by the end of January each year. As of the date of this annual report, the Draft Regulations was released for public comment only, and their respective provisions and anticipated adoption or effective date may be subject to change with substantial uncertainty.

Personal Information and Privacy

● In October 2020, the Standing Committee of the National People’s Congress revised and promulgated the Law of the PRC on the Protection of Minors (2020 Revision), which took effect on June 1, 2021, according to which, information processors must follow the principles of legality, legitimacy and necessity when processing personal information of minors via internet, and must obtain consent from minors’ parents or other guardians when processing personal information of minors under age of 14. Internet service providers must also promptly alert upon the discovery of publishing private information by minors via the internet and take necessary protective measures.

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● In August 2021, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law, which integrates the scattered rules with respect to personal information rights and privacy protection and took effect on November 1, 2021. We update our privacy policies from time to time to meet the latest regulatory requirements of PRC government authorities and adopt technical measures to protect data and ensure cybersecurity in a systematic way. Nonetheless, the Personal Information Protection Law elevates the protection requirements for personal information processing, and many specific requirements of this law remain to be clarified by the regulatory authorities, and courts in practice. We may be required to make further adjustments to our business practices to comply with the personal information protection laws and regulations.

Many of the data-related legislations are relatively new and certain concepts thereunder remain subject to interpretation by the regulators. If any data that we possess belongs to data categories that are subject to heightened scrutiny, we may be required to adopt stricter measures for protection and management of such data. The Cybersecurity Review Measures and the Draft Regulations remain unclear on whether the relevant requirements will be applicable to companies that are already listed in the United States, such as us. We cannot predict the impact of the Cybersecurity Review Measures and the Draft Regulations, if any, at this stage, and we will closely monitor and assess any development in the rule-making process. If the Cybersecurity Review Measures and the enacted version of the Draft Regulations mandate clearance of cybersecurity review and other specific actions to be taken by issuers like us, we face uncertainties as to whether these additional procedures can be completed by us timely, or at all, which may subject us to government enforcement actions and investigations, fines, penalties, suspension of our non-compliant operations, or removal of our app from the relevant application stores, and materially and adversely affect our business and results of operations. As of the date of this annual report, we have not been involved in any formal investigations on cybersecurity review made by the CAC on such basis.

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

In addition, regulatory authorities around the world have adopted or are considering a number of legislative and regulatory proposals concerning data protection. These legislative and regulatory proposals, if adopted, and the uncertain interpretations and application thereof could, in addition to the possibility of fines, result in an order requiring that we change our data practices and policies, which could have an adverse effect on our business and results of operations. The European Union General Data Protection Regulation (“GDPR”), which came into effect on May 25, 2018, includes operational requirements for companies that receive or process personal data of residents of the European Economic Area. The GDPR establishes new requirements applicable to the processing of personal data, affords new data protection rights to individuals and imposes penalties for serious data breaches. Individuals also have a right to compensation under the GDPR for financial or non-financial losses. Although we do not conduct any business in the European Economic Area, in the event that residents of the European Economic Area access our website or our mobile platform and input protected information, we may become subject to provisions of the GDPR.

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

We operate in markets characterized by rapidly changing technologies, evolving industry standards, new product and service announcements, new generations of product enhancements, and changing user expectations.

Accordingly, our performance and the ability to further monetize our products and services will depend on our ability to adapt to these rapidly changing technologies and industry standards, and our ability to continually innovate in response to both evolving demands of the marketplace and competitive services. There may be occasions when we may not be as responsive as our competitors in adapting our products and services to changing industry standards and the needs of our users. Historically, new features may be introduced by one player in the industry, and if they are perceived as attractive to users, they are often quickly copied and improved upon by others.

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Introducing new technologies into our systems involves numerous technical challenges, substantial amounts of capital and personnel resources and often takes many months to complete. We intend to continue to devote resources to the development of additional technologies and services. We may not be able to effectively integrate new technologies on a timely basis or at all, which may decrease user satisfaction with our products and services. Such technologies, even if integrated, may not function as expected or may be unable to attract and retain a substantial number of users to use our platform. We also may not be able to protect such technology from being copied by our competitors. Our failure to keep pace with rapid technological changes may cause us to fail to retain or attract users or generate revenues, and could have a material and adverse effect on our business and results of operations.

We face risks related to natural disasters, health epidemics and other outbreaks, such as the COVID-19 pandemic, which could significantly disrupt our operations.

In recent years, there have been outbreaks of epidemics in China and globally, including the outbreak of COVID-19. In March 2020, the World Health Organization declared the COVID-19 a pandemic. COVID-19 has resulted in quarantines, travel restrictions, and the temporary closure of businesses and facilities in China and worldwide.

Our results of operations have been, and could continue to be adversely, and may be materially, affected, to the extent that the COVID-19 or any other epidemic harms the Chinese and global economy in general. Any potential impact to our results will depend on, to a large extent, future developments and new information that may emerge regarding the duration and severity of the COVID-19 and the actions taken by government authorities and other entities to contain the COVID-19 or treat its impact, including the effectiveness of the vaccine programs, almost all of which are beyond our control. For the COVID-19’s impact on our financial results, please see “Item 5. Operating and Financial Review and Prospects.” As it has historically, the COVID-19 pandemic may continue to, among other things, have following impact:

● temporary closure of offices, travel restrictions or suspension of services of our customers and suppliers have negatively affected, and could continue to negatively affect, the demand for our services;

● cancellation and postponement of various offline promotional events and community activities, which may have an adverse impact on the implementation of our marketing and business expansion initiatives, including discouraging our users from engaging in offline social networking activities initiated through our social networking platform;

● our customers in industries that are negatively impacted by COVID-19, including healthcare, travel, offline education, franchising, auto/transportation and real estate/home furnishing sectors, may reduce their budgets on online advertising and marketing, which may materially adversely impact our revenue from advertising services;

● our customers may require additional time to pay us or fail to pay us at all, which could significantly increase the amount of accounts receivable and require us to record additional allowances for doubtful accounts;

● the business operations of talent agencies have been and could continue to be negatively impacted by the pandemic, which may negatively impact our live streaming services;

● any disruption of our supply chain, logistics providers or customers could adversely impact our business and results of operations, including causing us or our suppliers to cease manufacturing Mr. Heer products and other products available on our platform for a period of time or materially delay delivery to customers, which may also lead to loss of customers, as well as reputational, competitive and business harm to us;

● the global stock markets have experienced, and may continue to experience, significant decline from the COVID-19 pandemic and the private and public companies that we have invested in could be materially adversely affected, which may lead to significant impairment in the fair values of our investments and in turn materially adversely affect our financial condition and operating results; and

● initiatives we put forth in response to COVID-19 and many other efforts to leverage our technology, products and services to help contain the pandemic, may increase our operating costs and expenses, thus negatively affect our financial condition and operating results.

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In general, our business could be adversely affected by the effects of epidemics, including, but not limited to, the COVID-19, avian influenza, severe acute respiratory syndrome (SARS), the influenza A virus, Ebola virus, severe weather conditions such as a snowstorm, flood or hazardous air pollution, or other outbreaks. In response to an epidemic, severe weather conditions, or other outbreaks, government and other organizations may adopt regulations and policies that could lead to severe disruption to our daily operations, including temporary closure of our offices and other facilities. These severe conditions may cause us and/or our partners to make internal adjustments, including, but not limited to, temporarily closing down business, limiting business hours, and setting restrictions on travel and/or visits with clients and partners for a prolonged period of time. Various impact arising from a severe condition may cause business disruption, resulting in material, adverse impact to our financial condition and results of operations.

Our operating metrics are subject to inherent challenges in measurement, and real or perceived inaccuracies in those metrics may materially and adversely affect our business and operating results.

We regularly review metrics, including our daily and monthly active users, paying users, user next-month retention rate, and ARPPU, to evaluate growth trends, measure our performance and make strategic decisions. These metrics are calculated using internal company data and have not been validated by an independent third party. While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement, there are inherent challenges in measuring usage and user engagement across our large user base. We treat each account as a separate user for the purposes of calculating our active users, because it may not always be possible to identify people that have set up more than one account. Accordingly, the calculations of our active users may not accurately reflect the actual number of people using our mobile apps, including Blued and Finka. We are also facing inherent challenges when assessing the geographic distribution of our user base because using their IP addresses and the country or currency in which they download apps or make purchases from Apple App store or Google Play Store may not reflect the actual geolocation of users. Errors or inaccuracies in our metrics could result in incorrect business decisions and inefficiencies. For example, if a significant understatement or overstatement of daily or monthly active users were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract a sufficient number of users to satisfy our growth strategies.

Our measures of operating metrics may differ from estimates published or adopted by third parties, including but not limited to business partners, market and investment research organizations (including short-selling research firms), investors and media, or from similarly titled metrics used by our competitors or other companies in the relevant industries due to differences in methodology and assumptions. If these third parties do not perceive our operating metrics to be accurate representations of operations, or if we discover material inaccuracies in our operating metrics, our brand value and reputation may be materially harmed, our users and business partners may be less willing to allocate their resources or spending to us, and we may face lawsuits or disputes in relation to the inaccuracies. As a result, our business and operating results may be materially and adversely affected.

Our business depends on our ability to maintain and scale our technology infrastructure. Any service disruption in our service could damage our reputation, result in a potential loss of users and decrease in user engagement, and seriously harm our business.

The popularity of our platform and our ability to further monetize user traffic depend on our ability to adapt to rapidly changing technologies as well as our ability to continually innovate in response to evolving user demands and expectations and intense market competition. Our ability to provide a superior user experience on our platform depends on the continuous and reliable operation of our IT systems and infrastructures.

As our user base and the volume and types of information shared on our platform continue grow, we will need an increasing amount of technology infrastructure, including network capacity and computing power, to continue to satisfy our users’ needs. For example, in China, almost all access to the internet is maintained through state-owned telecommunication operators under the administrative control and regulatory supervision of the MIIT. Moreover, we primarily rely on a limited number of telecommunication service providers to provide us with data communications capacity through local telecommunications lines and internet data centers to host our servers. We have limited access to alternative networks or services in the event of disruptions, failures or other problems with internet infrastructure or the fixed telecommunications networks provided by telecommunication service providers. Web traffic in most countries around the world has experienced significant growth during the past few years. Effective bandwidth and server storage at internet data centers in large cities are scarce. With the expansion of our business, we may be required to upgrade our technology and infrastructure to keep up with the increasing traffic on our platform. There can be no assurance that the internet infrastructure and the fixed telecommunications networks in countries where we operate will be able to support the demands associated with the continued growth in internet usage. If we cannot increase our capacity to deliver our services, we may not be able to the increases in traffic we anticipate from our expanding user base, and the adoption of our services may be hindered, which could adversely impact our business and impede our growth.

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In addition, we have no control over the costs of the services provided by telecommunication service providers. If the prices we pay for telecommunications and internet services rise significantly, our results of operations may be materially and adversely affected. Furthermore, if internet access fees or other charges to internet users increase, some users may be prevented from accessing the mobile internet and thus cause the growth of mobile internet users to decrease, which may in turn adversely affect our ability to continue to expand our user base.

Our IT systems and content delivery network are also vulnerable to damage or interruption as a result of fire, floods, earthquakes, power losses, telecommunication failures, undetected errors in software, computer viruses, hacking or other attempts to harm our IT systems. We have experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes and cybersecurity-related threats, if we fail to address these issues promptly and in a way satisfactory to our users, our user experience may be negatively affected, which in turn may have a material and adverse effect on our reputation and business.

We currently rely on Tencent Cloud for all of our computing, storage, bandwidth and other services both in and outside of China. Any transition of the cloud services currently provided by Tencent Cloud to other cloud providers would be difficult to implement and will cause us to incur significant time and expense. Any significant disruption of or interference with our use of Tencent Cloud would negatively impact our operation and our business would be seriously harmed. If our users or partners are not able to access our mobile platform through Tencent Cloud or encounter difficulties in doing so, we may lose users, partners or revenues. The level of service provided by Tencent Cloud may also impact the usage of and our users’ and partners’ satisfaction with our mobile platform and could seriously harm our business and reputation. If Tencent Cloud experience interruptions in service regularly or for a prolonged basis, or other similar issues, our business would be seriously harmed. Hosting costs will also increase as our user base and user engagement grows and may seriously harm our business if we are unable to grow our revenues faster than the cost of utilizing the services of Tencent Cloud or similar providers.

We cooperate with talent agencies to manage all of our broadcasters. If we are not able to maintain our relationship with talent agencies, our operations may be materially and adversely affected.

We cooperate with talent agencies to manage all broadcasters on our platform. Substantially all of our live streaming revenues are contributed by broadcasters managed by talent agencies. Cooperation with talent agencies increases our operational efficiency in terms of discovering, supporting and managing broadcasters in a more organized and structured manner, and turning amateur broadcasters to full-time broadcasters.

We pay talent agencies certain fees determined based on a percentage of revenue from virtual gift sales that are attributed to the broadcasters’ live streams. If the talent agencies fail to reach or maintain satisfactory cooperation arrangements with such broadcasters or ensure timely payments to the broadcasters, we may not be able to retain or attract broadcasters.

In addition, some talent agencies do not have exclusive cooperative relationships with us. If other platforms offer better incentives to these talent agencies, such talent agencies may choose to devote more of their resources to broadcasters who stream on the other platforms, or they may encourage their broadcasters to use or even enter into an exclusive agreement with other platforms, any of which could materially and adversely affect our business, financial condition and results of operations.

We may fail to attract, cultivate and retain top broadcasters, which may negatively affect our user retention and our business and results of operations.

The size and engagement level of our user base as well as the quality of the live streaming content offered on our platform are critical to our success and are closely linked to the broadcasters who perform on our platform.

In 2021, our top 20 most popular broadcasters in terms of user spending attributable to their respective live streams contributed approximately 26.8% of our total live streaming revenues. Although these broadcasters are subject to exclusivity provisions, if any of them decides to breach the agreement or chooses not to continue the cooperation with us once the current term expires, the popularity of our platform may decline and the number of our paying users or the amount of revenues we generate from each paying user may decrease, which could materially and adversely affect our operations, financial condition and results of operations.

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In addition to the most popular broadcasters on our platform, we must continue to attract and retain talented broadcasters in order to maintain and increase the amount of content on our platform and ensure the sustainable growth of our live streaming business. We must identify and acquire potential talented broadcasters and provide them with sufficient resources. We cooperate with talent agencies to recruit, manage, train and support our broadcasters, as well as conduct activities to promote new broadcasters. However, there can be no assurance that we can continue to maintain the same level of attractiveness to our broadcasters.

Broadcasters on our platform, including those who are subject to exclusivity provisions, may leave us for other platforms which may offer better services and terms than we do, or stop broadcasting for personal reasons. In addition, if talented and popular broadcasters cease to contribute content to our platform, or their live streams fail to attract users, we may experience a decline in user traffic and user engagement, which may have material and adverse impact on our results of operations, financial conditions and results of operation.

Increases in the costs of content on our platform, such as higher revenue sharing ratio with broadcasters through talent agencies, may have an adverse effect on our business, financial condition and results of operations.

Our portfolio apps needs popular and attractive content to provide our users with engaging and satisfying viewing experiences, and the generation and sharing of such content is dependent on our ability to attract and retain our live broadcasters and talent agencies. We have a revenue sharing arrangement with our broadcasters through their talent agencies under which we share with them a portion of the revenues from the sales of virtual items on our platform. The absolute amounts and revenue percentages that we pay talent agencies may increase if our competitor platforms offer higher revenue sharing ratios with an intent to attract the most popular broadcasters on our platform. If we are not able to continue to retain our broadcasters and high quality content cannot be generated on our platform at costs that are commercially viable, our business, financial condition and results of operations would be adversely impacted. Furthermore, as our business and user base further expands, we may have to devote more resources in encouraging our broadcasters to produce more diverse content that meets the varied interests of our user base, which would increase the costs of content on our platform. There can be no assurance that these investments of resources will generate the returns we expect. If we are unable to generate sufficient revenues that outpace our increased content costs, our business, operating margins, financial condition and results of operations may be materially and adversely affected.

Our revenue growth is significantly dependent on paying users and revenue per paying user. If we fail to grow or maintain our paying users and increase revenue per paying user, our business operation and financial results may be materially and adversely affected.

Our revenues and results of operation depends on our ability to monetize our user base, to convert more users to paying users and to increase the spending of our paying users. Whether we can increase paying users and average revenue per paying user in a given period, or ARPPU, depends on many factors, and many of them are out of our control. For example, our users may be unwilling to pay for our products and services, we may fail to develop new products and services that are attractive enough to our existing paying users for them to pay, our paying users may have less disposable income as they need to meet financial obligations elsewhere, they may decide to no longer follow a particular broadcaster that they had supported financially, and overall worsening economic conditions can lower disposable income for all existing paying users, causing them to spend less on our platform. We expect that our business will continue to be significantly dependent on revenue collected from paying users in the near future. Any decline in the number of paying users or ARPPU may materially and adversely affect our results of operations.

We generate a portion of our revenues from advertising. If we fail to attract more advertisers to our platform or if advertisers are less willing to advertise with us, our revenues may be adversely affected.

Although we currently primarily rely on revenues generated from live streaming services, we also generate a portion of our revenues from advertising. In 2019, 2020 and 2021, we generated RMB35.4 million, RMB45.5 million and RMB53.9 million (US$8.5 million) of revenues from the sales of advertising, respectively, representing 4.7%, 4.4% and 5.0% of our total revenues for the same period. Our revenues from advertising partly depend on the continued development of the online advertising industry in China and abroad and advertisers’ willingness to allocate budgets to online advertising or advertising at all due to macroeconomic conditions and, more importantly, their willingness to allocate budgets to our platform that serves primarily the LGBTQ community. In addition, companies that decide to advertise or promote online may utilize more established methods or channels, such as more established internet portals or search engines, over advertising on our platform, due to their concern about user perception or otherwise. If the online advertising market does not continue to grow, or if we are unable to capture and retain a sufficient share of that market, our ability to increase our current level of advertising revenues and our profitability and prospects may be materially and adversely affected.

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Furthermore, our core and long-term priority of optimizing user experience and satisfaction may limit our platform’s ability to generate revenues from advertising. For example, in order to provide our users with an uninterrupted user experience, we have limited the amount of advertising placement and inventory and designed functions to allow users to skip or shut down advertisements more conveniently. Our philosophy of putting our users first may not be in line with the interest of our advertisers, and may not result in the long-term benefits that we expect, in which case the success of our business and results of operations could be harmed.

Any non-compliance found on the advertisements shown on our online platform and online store may subject us to penalties and other administrative actions.

We are responsible for and are obligated to monitor the advertising content shown on our platform and online store to ensure that such content is true and accurate and in full compliance with applicable laws and regulations. In addition, for certain types of advertisements such as advertisements relating to pharmaceuticals and medical devices, review by relevant governmental authorities is required before such advertisements can be posted, and we are obligated to confirm that such review has been performed and approval has been obtained.

While we have made significant efforts to ensure that the advertisements shown on our platform are in full compliance with applicable PRC laws and regulations, there can be no assurance that all the content contained in such advertisements or offers is true and accurate as required by the advertising laws and regulations, especially given the uncertainty in the interpretation of these PRC laws and regulations. For example, we enter into agreements with third parties in relation to the distribution of pharmaceutical products of such third parties through our online store. If such arrangement is deemed as conducting advertising operations, we will be required to submit application to the applicable governmental authority for approval before displaying the pharmaceutical products on our online store. If we fail to do so, we may be ordered to cease dissemination of the advertisements, our advertising income on such products will be confiscated, and we will be subject to a fine of three to five times the advertising income. In addition, advertisements of prescription drugs are not allowed to be posted on the internet and social media. If the distribution of third-party prescription drugs on our online store are deemed as conducting advertising operations, our advertising income on such products will be confiscated, and we will be subject to a fine between RMB200,000 and RMB1,000,000, and in serious cases, we may be ordered by the relevant PRC governmental authorities to close the online store and terminate the business of online pharmacy, which may have a material adverse effect on our business, financial condition, results of operations and prospects.

We are subject to risks inherent in marketing, distributing and selling pharmaceutical and other health and wellness products.

In connection with the health-related services offered on He Health, we are exposed to risks inherent in marketing, distributing and selling pharmaceutical and other health and wellness products in China.

The regulations of the internet health-related service are relatively new and evolving, and their interpretation and enforcement involve significant uncertainty. The pharmaceutical retail and wholesale industry in China is subject to extensive government regulation and supervision as well as monitoring by various government authorities. Certain other laws, rules and regulations may affect the pricing, demand and distribution of pharmaceutical products, such as those relating to procurement, prescription and dispensing of drugs by hospitals and other medical institutions, retail pharmacy, government funding for private healthcare and medical services, and the inclusion of products in the drugs catalogs for national basic medical insurance, on-the-job injury insurance and maternity insurance promulgated by the Ministry of Human Resources and Social Security, or the MOHRSS. In addition, the pharmaceutical manufacturing, pharmaceutical distribution, pharmaceutical retail, healthcare services and medical device industries in China are each subject to extensive and changing government regulations and supervision. Any unfavorable regulatory changes in these industries may also increase our compliance burden and materially and adversely affect our business, profitability and prospects. However, as of the date of this annual report, none of the regulations or implementation rules regulating online drug sales have yet been promulgated and implemented, which may further introduce and impose certain conditions and restrictions to the online sale of drugs.

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Due to the uncertainties in the regulatory environment of the industries in which we operate, there can be no assurance that we have obtained or applied for all the approvals, permits and licenses required for conducting our business and all activities in China, or that we would be able to maintain our existing approvals, permits and licenses or obtain any new approvals, permits and licenses if required by any future laws or regulations. We provide our users with the access to a wide variety of OTC and prescription drugs and nutritional supplements related to men’s health through our self-owned pharmacy operated by Shandong Youping Pharmacy Chain Co., Ltd., Chongqing Changyuan Pharmaceutical Co., Ltd. and Shandong He Internet Hospital Co., Ltd. We may be subject to administrative penalties if we fail to comply fully with the legal formalities, and/or claims or customer complaints if any of our customers experience side effect or complications, any products sold through our platform are deemed or proven to be unsafe, ineffective or defective, or are found to contain illicit substances, we may also be subject to customer allegations, such as providing inadequate warnings or insufficient or misleading disclosures of side effects.

Any claims made against us could be costly to defend against, result in substantial damage awards against us and divert the attention of our management from our operations, which could have a material adverse effect on our business, financial condition, results of operations and reputation.

Our business may be materially and adversely affected by unfavorable perception of, or negative developments and news regarding, the family planning services we provided in the past and/or the ART industry as a whole.

We stopped from accepting new orders for providing family planning services in March 2021. However, we cannot assure you that our historical orders and operations of the family planning services will not subject us to the risks described herein. We are aware that ART technology in general has been viewed negatively or opposed to by certain feminist groups. Certain ART services that are in demand among members of the LGBTQ community, including surrogacy, use of a gestational carrier, directed gamete donation and collection, and embryo donation and collection are currently prohibited in China. Any negative perception of ART or actual or potential actions by relevant governmental authorities or other parties against ART service providers may subject us for our past provision of family planning services to potential penalties and other legal liabilities, render potential customers reluctant to seek, or cause negative perception towards our company as a whole, thereby having an adverse effect on our brand, reputation and the other products and services provided by us.

From time to time, there has been negative news and publicity about the assisted reproductive industry, assisted reproductive medical facilities and/or medical professionals practicing in this industry. Any further negative news and publicity about the ART industry could amplify existing concerns and misperceptions about ART, and thus may have an adverse effect on our brand, reputation, and results of operations.

Uncertainties in laws and regulations applicable to the ART industry may materially and adversely affect our business.

We stopped from accepting new orders for providing family planning services in March 2021. However, we cannot assure you that our historical orders and operations of the family planning services will not subject us to the risks described herein.

PRC laws provide that ART should only be carried out in approved and registered medical institutions in China. No entity or individual in the PRC should carry out ART or related intermediary services in the PRC without the approval of competent public health authority. Furthermore, any form of advertisement on unapproved ART services is prohibited in the PRC. From time to time, the governmental authorities in the PRC initiate campaigns against unapproved ART services and entities acting as intermediaries or providing advertising for such services, by strengthening the supervision of the publication of relevant information and advertisements on social media, and on investigating intermediaries for illegal ART activities.

As part of our past provision of family planning services, our subsidiary in China, Bluebaby (Beijing) Medical Management & Consulting Ltd., or Bluebaby Beijing, provided consulting and administrative services related to ART such as translation, concierge and logistics. However, due to the lack of a clear and consistent official distinction between the consulting services and intermediary or advertising services in the PRC, there is no assurance that the family planning service provided in the past may not be deemed by the relevant PRC governmental authorities as intermediary or advertising service. The revenues generated from the family planning services represent approximately 1.2%, 0.9% and 0.2% of our total revenues in 2019, 2020 and 2021, respectively.

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If the relevant PRC governmental authorities, including a PRC court, choose to scrutinize our family planning services prior to March 2021 and deem Bluebaby Beijing as an intermediary or providing advertising for unapproved ART services, the validity and enforceability of service agreements entered into between Bluebaby Beijing and its customers may be challenged and will be considered in light of the Civil Code of the PRC, or the Civil Code by taking several factors into consideration, such as ethical, legal and social impact. If the relevant PRC governmental authorities determine that we are providing intermediary services or advertising on unapproved ART services in the PRC, we may be subject to fines, confiscation of illegal gains, discontinuation or restriction of our operations in China, shutting down of all or a portion of our network or servers, takedown of our mobile application from the app store, revocation of business license of the applicable operating entity, operation limits, banning of the gateway to the ART consulting services, and other regulatory or enforcement actions, which may have a material and adverse effect on our business and results of operations. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business is subject to complex and evolving laws and regulations in various countries and regions where we have business. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.”

Our past commercial dealings with ART service providers outside of China may also subject us to risks associated with compliance with local laws and regulations. For example, when we introduced customers to ART service providers outside of China, such as reproductive clinics and ancillary agencies, we received commissions from the ART service providers as referral fees. Local laws of certain jurisdictions where some of these ART service providers operate prohibit commission payments of this nature. Where prohibited by local laws, we ceased entering into new agreements containing commission payment arrangements since January 2020 to ensure compliance. However, we cannot assure you that we will not be subject to penalties or sanctions imposed by applicable law enforcement bodies, if they choose to scrutinize our commission arrangements prior to January 2020 in these jurisdictions despite collectively immaterial contribution of the payments to our revenue. If we become subject to such penalties and sanctions, our operations in these local jurisdictions may be materially disrupted.

Our business depends on the strength and perception of our brands within our addressable user community.

We operate our business under the main brand “BlueCity.” Our mobile app Blued has received wide recognition among the LGBTQ population in China and certain other geographic areas where we operate, such as India, Korea, Thailand and Vietnam. Starting as a website focused on public wellbeing and HIV prevention, BlueCity has transformed into a community providing a full suite of services empowering LGBTQ persons in all aspects of their daily lives. Over the years, our users have developed a unique culture that distinguishes us from players in the market. Our users come to and stay with our platform owing to their sense of belonging. We therefore believe that maintaining and promoting a healthy and respectful community culture is critical to retaining and expanding our user base. Our business and financial performance are highly dependent on the strength and market perception of our brand. A well-recognized brand is crucial to increasing our user base and, in turn, facilitating our efforts to monetize our products and services and enhancing our attractiveness to users, customers and business partners. From time to time, we conduct various marketing activities both online and offline to enhance our brand and to guide public perception of our brand and services. We may need to substantially increase our marketing expenditures in order to create and maintain brand awareness and brand loyalty, to influence public perception, to retain existing and to attract new users, customers and business partners as well as to promote our products and services. However, there can be no assurance that these activities will be successful or that we will be able to achieve the brand promotion effect we expect.

Since we operate in highly competitive industries, brand maintenance and enhancement directly affect our ability to maintain our market position. We must continuously exercise strict quality control of our platform to ensure that our brand image is not tarnished by substandard products or services. We must also promote and distinguish our platform from those of our competitors. If for any reason we are unable to maintain and enhance our brand recognition, or if we incur excessive expenses in this effort, our business, results of operations and prospect may be materially and adversely affected.

In addition, people may not fully comprehend the value of our platform, and there may be a misperception that our platform is used solely as a tool to start spontaneous relationships with strangers. Convincing potential new users, customers and business partners of the value of our services and our welcoming community culture is critical to increasing the number of our users, customers and business partners and to the success of our business.

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If events occur that damage our reputation and brand, our ability to expand our user base and business partners may be impaired, and our business and results of operations may be materially and adversely affected.

Since our inception, we and our community have had to fend against social bias and public sentiment, and we are under continuous media scrutiny and governmental supervision. Unfavorable publicity regarding us, our service offerings, our business practices, or our users, business partners, shareholders or competitors and other industry players, even if factually incorrect or based on isolated incidents, could seriously harm our reputation and brand. Such negative publicity could also adversely affect the size, demographics, engagement and loyalty of our user base and result in decreased revenue or slower user growth rate, which could seriously harm our business. There can be no assurance that we will be able to address negative publicity about us, our management and/or our products or services to the satisfaction of our investors, users, customers and business partners. In the past there had been negative publicity about our company and the misuse of our services, which adversely affected our brand, public image and reputation, and there can be no assurance that there will not be similar negative publicity in the future. Such negative publicity, especially when it is directly addressed against us, may also require us to engage in defensive media campaigns. This may cause us to increase our marketing expenses and divert our management’s attention and may adversely impact our business and results of operations.

Our brand image, business and results of operations may be adversely impacted by user misconduct and misuse of our mobile apps including Blued and Finka.

Our portfolio apps, Blued and Finka, allow users to freely contact and communicate with other users and enable users and broadcasters to interact and engage in various other online activities. In China, we have required all users to complete real-name registration procedures pursuant to the notice jointly issued by National Office of Anti-Pornography and Illegal Publication and other five authorities in August 2018. See also “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Real-Name Registration System.” In countries other than China, our users are not required to complete real-name registration or verify their emails when registering and we are unable to verify the sources of the information posted by our users. In addition, since we have limited control over real-time and offline behavior of our broadcasters and users, our mobile apps may still be misused by users or broadcasters.

We have implemented control procedures on our mobile apps, Blued and Finka, to detect and block illegal or inappropriate content and illegal or fraudulent activities conducted through the misuse of our platform, including inappropriate user profiles, messages and live streams. We may be required by relevant governmental authorities to report certain misbehaviors for further investigation if such misbehaviors are subject to judicial or police investigation. In addition, safety alerts will automatically pop up after a user sends a first message to another user, alerting the recipient to be wary of fraudulent activities. We have also announced the rules of conduct for our broadcasters which are made available on the top of our live streaming page as a banner. Despite all these efforts, we may not be able to identify every incident of inappropriate stream and content, or prevent all such contents from being further disseminated. As a majority of the video and audio communications on our platform are conducted in real time, we cannot filter the content generated by our streamers and users on air before they are streamed on our platform. Therefore, it is possible that broadcasters and users may engage in illegal, obscene or incendiary conversations or activities, including distribution of inappropriate content or content that may be deemed unlawful under applicable laws and regulations on our platform. If any content on our platform is deemed illegal, obscene or incendiary, or if appropriate licenses and third-party consents have not been obtained, claims may be brought against us for torts, defamation, libel, negligence, copyright, patent or trademark infringement, other unlawful activities or other theories and claims based on the nature and content of the information delivered on or otherwise accessed through our platform. In response to allegations of illegal or inappropriate activities conducted through our platform, relevant governmental authorities may intervene and hold us liable for non-compliance with applicable laws and regulations concerning the dissemination of information on the internet and subject us to administrative penalties or other sanctions, such as requiring us to restrict or discontinue some of the features and services provided on our platform. In addition, there were cases where our users suffered or alleged to have suffered physical, financial or emotional harm following contact initiated on our platform, although we have not been subjected to civil lawsuits or other liabilities initiated by the affected users, there can be no assurance that if similar cases occur in the future, we would not face civil lawsuits or other liabilities initiated by the affected user. Our business and public perception of our brand may be materially and adversely affected. Defending any such actions could be costly and require significant time and attention of our management and other resources, which would materially and adversely affect our business.

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Although our terms of use strictly prohibit minors from registering and using our mobile apps, Blued and Finka, some underage users created profiles by misrepresenting their age. For example, in early 2019, there were news reports of minors in China using Blued by registering with false age, and that such minors were exposed to explicit content or alleged to have contracted HIV following contact initiated on Blued. Upon learning of these reports, we promptly and voluntarily halted new user registration in Blued for one week to review the allegation and launched a comprehensive content audit of our mobile app. We then announced the measures we have taken and will take to address the issue and reaffirmed our commitment to protecting minors. New user registration was resumed thereafter. These efforts may not be sufficient to prevent minors from using our mobile apps or our other products and services. If similar events occur, our users may lose trust in us and our reputation may be seriously harmed, and we may be subject to heightened regulatory scrutiny domestically or in overseas jurisdictions, thereby having a material and adverse effect on our business, financial condition and prospects.

If the content contained within videos, audios and other content formats on our platforms is deemed to violate any PRC laws or regulations, our business, financial condition and results of operations may be materially and adversely affected.

The PRC government and regulatory authorities have adopted regulations scrutinizing videos, audio and other content on the internet. Under these regulations, internet content providers are prohibited from posting or displaying internet content that, among other things, violates PRC laws and regulations, impairs the national dignity of China or the public interest, or is obscene, superstitious, fraudulent, violent or defamatory. Internet content providers are also prohibited from displaying content that may be deemed by relevant government authorities as “socially destabilizing” or leaking “state secrets” of China. Failure to comply with these requirements may result in revocation of licenses to provide internet content or other licenses, closure of the concerned websites and reputational harm. The website operator may also be held liable for such censored information displayed on or linked to their website. In January 2019, the China Netcasting Services Association, or the CNSA, issued the Regulations on Administration of Network Short Video Platforms, pursuant to which all content of a short video, including but not limited to its title, description, bullet-chats and comments, may be required to be reviewed in advance before the content is broadcasted. Furthermore, the number of content reviewers a platform is required to host should in principle be more than one one-thousandth of the number of short videos newly broadcasted on the platform per day. In January 2019, CNSA issued the Censoring Criteria for Network Short Video Content, as amended in 2021, which set forth certain details of content prohibited to be broadcasted, such as violence, pornography, gambling, terrorism, and other illegal or immoral content. The enactment of these regulations may significantly increase our compliance costs in recruiting additional content reviewers and training them to identify content violations timely and accurately. In November 2019, the CAC, the MCT, and the NRTA, jointly issued the Administrative Provisions on Online Audio-Visual Information Services, effective from January 1, 2020, which provide that online audio-visual information service providers are the principals responsible for managing the security of information content, and should, among other things, establish and improve their internal policies in relation to user registration, scrutiny of information publication, and information security management. Any failure to comply with these regulations may subject us to liability. In November 2020, the NRTA further promulgated Notice 78, which requests the live streaming platforms for online shows and e-commerce to strengthen positive value guidance and to prevent the spread of the trends of wealth flaunting, money worshiping and vulgarity. See also “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Online Transmission of Audio-Visual Programs.”

In particular, failure to identify and prevent illegal or inappropriate content from being uploaded on our platform may subject us to liability. To the extent that PRC regulatory authorities find any content on our platform objectionable, they may require us to limit or eliminate the dissemination of such content on our platform in the form of take-down orders, or cause our app to be removed from app stores.

In addition, PRC laws and regulations are subject to interpretation by relevant authorities, and it may not be possible to determine in all cases the types of content that could result in our liability as a platform operator. We also may face liability for copyright or trademark infringement, fraud and other claims based on the nature and content of the materials that are delivered, shared or otherwise accessed through or displayed on our platform. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We have been and may be subject to intellectual property infringement claims or other allegations by third parties, which may materially and adversely affect our business, financial condition and prospects.”

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Our business, financial condition and results of operations may be materially and adversely affected if we are unable to compete effectively.

We face competition from other platforms that provide products and services to the LGBTQ community, both domestically and internationally. In addition, our users face a vast array of choices in almost every aspect of our business and costs for users to switch between products are low, and users have a propensity to try new approaches whether to connect with people, enjoy live streams of broadcasters or consult other service providers for healthcare related matters. As a result, new products, entrants and business models are likely to continue to emerge. It is possible that a new product could gain rapid scale at the expense of existing brands through harnessing a new technology, creating more interesting content or other means. Many of our current and potential competitors have greater resources and broader global recognition and enjoy better competitive positions in certain geographical areas or user demographics that we currently serve or may serve in the future. These advantages could enable these competitors to offer products and services that are more appealing to users than our products and services or to respond more quickly and/or cost-effectively than us to new or changing opportunities. Similarly, existing players in an adjacent or downstream industries may choose to leverage their existing infrastructure and expand their services and compete with us to serve the LGBTQ community. If these players succeed in doing so, our business could be encroached upon by their entrance and adversely affected.

If we fail to compete effectively with our current or future competitors that may emerge, our overall user base and level of user engagement may decrease. We may be required to devote additional resources to further increase our brand recognition and promote our products and services, and such additional capital expenditure may adversely affect our profitability. Furthermore, if we are involved in disputes with any of our competitors that result in negative publicity to us, such disputes, regardless of their veracity or outcome, may harm our reputation or brand image and in turn lead to reduced number of users and advertisers. Any legal proceedings or measures we take in response to such disputes may be expensive, time-consuming and disruptive to our operations and divert our management’s attention.

We face risks associated with the misconduct of our employees, business partners and their employees and other related personnel.

We rely on our employees to maintain and operate our business and have implemented an internal code of conduct to guide the actions of our employees. However, we do not have control over the actions of our employees, and any misbehavior of our employees could materially and adversely affect our reputation and business. For example, if our employees download pirated software to their work computers or perform other unauthorized actions on our IT system, we may be exposed to security breach. Despite the security measures we have implemented, our systems and procedures and those of our third-party providers, may be vulnerable to security breaches, act of vandalism, software viruses, misplaced or lost data, programming or human errors or other similar events caused by our employees, our business partners and their employees and other related personnel, which may disrupt our delivery of services or expose the identities and confidential information of our users and others. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed, we may lose current and potential users and may be exposed to legal and financial risks, including legal claims, regulatory fines and penalties, which in turn could adversely affect our business, reputation and results of operations.

With respect to employees, we could also in the future face a wide variety of claims, including discrimination (for example, based on gender, age, race or religious affiliation), sexual harassment, privacy, labor and employment claims. Often these cases raise complex factual and legal issues, and the result of any such claims are inherently unpredictable. Claims against us, whether meritorious or not, could require significant amounts of management time and corporate resources to defend, could result in significant media coverage and negative publicity, and could be harmful to our reputation and our brand. If any of these claims were to be determined adversely to us, or if we were to enter settlement arrangements, we could be exposed to monetary damages or be forced to change the way in which we operate our business, which could have an adverse effect on our business, financial condition and results of operations.

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We also rely on our business partners, including assisted reproductive medical facilities and third-party logistics and delivery companies to directly interact with and serve our users and customers, and their performance is directly associated with our brand. However, we do not directly supervise them in providing services to users and customers. Although we have implemented measures to select business partners with strong reputation and track record, we may not be able to successfully monitor, maintain and improve the quality of their services. In the event of any unsatisfactory performance by our business partners and/or their employees, we or our users may experience disruptions in content or services and our reputation may be materially and adversely affected. For example, we pay the compensation of broadcasters through talent agencies. If any talent agency fails to make payment to the broadcasters, they may lose trust in us and stop live streaming on our platform, they may also disclose such information during live streaming. As a result, our reputation may be materially and adversely affected, we may fail to retain and expand our users, and our business, financial condition and results of operations may be materially and adversely affected.

We organize and train volunteers for HIV prevention initiatives and conduct research studies jointly with third-party institutions. Although we have measures in place to regulate the activities of these volunteers or research institutions to prevent the unauthorized disclosure of private information, we do not directly supervise the volunteers or third-party institutions in how they use the private information. In the event of abusive use or unlawful disclosure of private information involved in this process, our reputation and brand may be seriously harmed, which may in turn materially and adversely affect our business, financial condition and results of operations.

Our results of operations are subject to fluctuations due to seasonality.

We experience seasonality in certain aspects of our business, reflecting seasonal fluctuations in internet usage. As a result, comparing our results of operations on a period-to-period basis may not be meaningful. For example, the number of active users tend to be higher during popular western or Chinese festivals such as Valentine’s Day, Christmas and the Chinese Valentine’s Day, whereas lower during long national holidays. Advertising revenues tend to be higher in June and November, which correlates with marketing campaigns and promotional activities conducted by top e-commerce platforms.

Overall, the historical seasonality of our business has been relatively mild due to our rapid growth but seasonality may increase in the future. Due to our limited operating history, the seasonal trends that we have experienced in the past may not apply to, or be indicative of, our future results of operations. Once our business development has reached a more matured stage, our financial results may reflect seasonal effects owing to the factors mentioned above.

We are dependent on app stores to disseminate our mobile apps.

We offer our social networking service through our mobile apps, including Blued and Finka. Our mobile apps are offered via smartphone and tablet apps stores operated by third parties, such as Apple App Store and Google Play Store, which could suspend or terminate users’ access to our mobile apps, increase access costs or change the terms of access in a way that makes our apps less desirable or harder to access. As a result, our ability to expand our user base may be hindered if potential users experience difficulties in or are barred from accessing our mobile app.

While each of our mobile apps, including Blued and Finka, is free to download from third-party app stores, we provide value-added services comprising a wide variety of additional social features and functions that users pay to use mainly in the form of subscription-based membership services and pay-per-use enhancement functions. We determine the prices at which these memberships services are sold and, in exchange for facilitating the purchase of these membership services through our mobile app to users who download our mobile app from these stores, and we pay Apple, as applicable, a certain share of the revenue we receive from these transactions. As the distribution of our mobile application through app stores increases, and given the strict requirements to use the in-app payments systems tied into Apple’s, and to a lesser degree, Google’s distribution services, we may need to offset any further increase in fees charged by app stores by decreasing traditional marketing expenditures as a percentage of revenue, increasing user volume or monetization per user, or by engaging in other efforts to increase revenue or decrease costs generally, otherwise our business, financial condition and results of operations could be adversely affected.

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

Our mobile apps, including Blued and Finka, must remain interoperable with popular mobile operating systems, such as iOS and Android, and related hardware. We have no control over these operating systems or hardware, and any changes to these systems or hardware that degrade the functionality of our products and services, or give preferential treatment to competitive products, could seriously harm usage of our mobile app. We plan to continue to introduce new products regularly and have experienced that it takes time to optimize such products to function with these operating systems and hardware, impacting the popularity of such products, and we expect this trend to continue.

To deliver high quality products and services, it is crucial that our products and services work well with a range of mobile technologies, systems, networks, regulations and standards that we do not control. In particular, any future changes to the iOS or Android operating systems may impact the accessibility, speed, functionality and other performance aspects of our products and services, which issues are likely to occur in the future from time to time. In addition, the adoption of any laws or regulations that adversely affect the growth, popularity or use of the internet, including laws governing internet neutrality, could decrease the demand for our products and increase our cost of doing business.

We may fail to successfully cultivate relationships with key industry participants or develop products and services that operate effectively with these technologies, systems, networks, regulations or standards. If it becomes more difficult for our users to access and use our app on their mobile devices, if our users choose not to access or use our app on their mobile devices, or if our users choose to use mobile products that do not offer access to our app, our user growth, retention, and engagement could be seriously harmed.

If the software used by our platform and internal systems contains undetected programming errors or vulnerabilities, our business could be adversely affected.

Our mobile platform and internal systems rely on software, including software developed or maintained internally and/or by third parties. In addition, our mobile platform and internal systems depend on the ability of such software to store, retrieve, process and manage immense amounts of data. The software on which we rely in the past has contained, and may now or in the future contain, undetected programming errors, bugs, or vulnerabilities. Some errors may only be discovered after the code has been released for external or internal use. Errors, vulnerabilities, or other design defects within the software on which we rely may result in a negative experience for users using our mobile platform, delay introductions of new features or enhancements, result in errors or compromise our ability to protect the data of our users and/or our intellectual property or lead to reductions in our ability to provide some or all of our services. In addition, any errors, bugs, vulnerabilities, or defects discovered in the software on which we rely, and any associated degradations or interruptions of service, could result in harm to our reputation and loss of users, which could adversely affect our business, financial condition and operation results.

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

COVID-19 may continue to have a severe and prolonged negative impact on the Chinese and the global economy, including potential reductions in advertising and marketing customers’ budgets, which may affect our advertising revenues and financial performance generally. Whether this will lead to a prolonged economic downturn is still uncertain. Even before the outbreak of COVID-19, the Chinese and global macroeconomic environment faced numerous challenges. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies which had been adopted by the central banks and financial authorities of some of the world’s leading economies, including the United States and China. The conflict in Ukraine and the imposition of broad economic sanctions on Russia could raise energy prices and disrupt global markets. Unrest, terrorist threats and the potential for war in the Middle East and elsewhere may increase market volatility across the globe. There have also been concerns about the relationship between China and other countries, including neighboring Asian countries, which may potentially have negative economic effects. In particular, there is significant uncertainty about the future relationship between the United States and China with respect to trade policies, treaties, government regulations and tariffs. The tensions between China, the U.S. and other countries have intensified especially since the outbreak of COVID-19. Economic conditions in China are sensitive to global economic conditions, as well as changes in domestic economic and political policies and the expected or perceived overall economic growth rate in China. Any severe or prolonged slowdown in the global or Chinese economies may materially and adversely affect our business, results of operations and financial condition.

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Our failure to protect our intellectual property rights may undermine our competitive position, and third-party infringements of our intellectual property rights may adversely affect our business.

We believe that our copyrights, trademarks and other intellectual property are essential to our success. See also “Item 5. Operating and Financial Review and Prospects—C. Research and Development, Patents and Licenses, Etc.” We have devoted considerable time and energy to the development and improvement of our mobile app and our system infrastructure.

We rely on a combination of copyright and trademarks laws, trade secrets protection and other contractual restrictions for the protection of the intellectual property used in our business. For example, we have generally registered and continue to apply to register and renew, or secure by contract where appropriate, trademarks and service marks as they are developed. Effective trademark protection may not be available or may not be sought in every country in which our products are made available, and contractual disputes may affect the use of marks governed by private contract. Although our contracts with users and business partners typically prohibit the unauthorized use of our brands, images, characters and other intellectual property rights, there can be no assurance that they will always comply with these terms. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Although we enter into confidentiality agreements with our employees which also include intellectual property ownership provisions, these confidentiality agreements could be breached, we may not have adequate remedies for any breach, and our proprietary technology, know-how or other intellectual property could otherwise become known to third parties. In addition, third parties may independently discover trade secrets and proprietary information, limiting our ability to assert any trade secret rights against such parties.

While we actively take steps to protect our proprietary rights, such steps may not be adequate to prevent the infringement or misappropriation of our intellectual property. In addition, there can be no assurance that any of our trademark applications will ultimately proceed to registration or will result in registration with adequate scope for our business. Some of our pending applications or registrations may be successfully challenged or invalidated by others. If our trademark applications are not successful, we may have to use different marks for affected products or services, or seek to enter into arrangements with any third parties who may have prior registrations, applications or rights, which might not be available on commercially reasonable terms, if at all.

Implementation of intellectual property laws in China has historically been lacking, primarily because of ambiguities in the laws and difficulties in enforcement. Accordingly, intellectual property right protection in China may not be as effective as in other jurisdictions that have a more developed legal framework regulating intellectual property rights. Policing unauthorized use of our proprietary technology, trademarks and other intellectual property is difficult and expensive, and litigation may be necessary in the future to enforce our intellectual property rights. Future litigation could result in substantial costs and diversion of our resources, and could disrupt our business, as well as materially adversely affect our financial condition and results of operations.

We have been and may be subject to intellectual property infringement claims or other allegations by third parties, which may materially and adversely affect our business, financial condition and prospects.

We have been and may in the future be subject to intellectual property infringement claims or other allegations by third party owners or right holders of technology patents, copyrights, trademarks, trade secrets and website content for services we provide or for information or content displayed on, retrieved from or linked to, recorded, stored or made accessible on our platform, or otherwise distributed to our users, including in connection with the music, movies and videos played, recorded, stored or made accessible on our platform during live-streaming or advertisement display, which may materially and adversely affect our business, financial condition and prospects.

Under our agreements with talent agencies, we obtain the intellectual property arising from live-streaming on our platform. We have implemented internal control measures to ensure that the design of our platform and the content that is streamed on it does not infringe on valid intellectual property, such as patents and copyrights held by third parties. We also license certain intellectual properties from third parties to implement certain functions available on our platform.

However, companies in the internet-related industries are frequently involved in litigation based on allegations of infringement of intellectual property rights, unfair competition, invasion of privacy, defamation and other violations of other parties’ rights. The validity, enforceability and scope of protection of intellectual property rights in internet-related industries, particularly in China, are uncertain and still evolving. As we face increasing competition and as litigation becomes a more common method for resolving commercial disputes in China, we face a higher risk of being the subject of intellectual property infringement claims or other legal proceedings.

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We allow users and broadcasters to upload text, pictures, audio, video and other content to our platform and users to download, share, link to and otherwise access other content on our platform. Under relevant PRC laws and regulations, online service providers, which provide storage space for users to upload works or links to other services or content, could be held liable for copyright infringement under various circumstances, including situations where the online service provider knows or should reasonably have known that the relevant content uploaded or linked to on its platform infringes upon the copyright of others and the online service provider failed to take necessary actions to prevent such infringement. We have procedures implemented to reduce the likelihood that content might be used without proper licenses or third-party consents. However, these procedures may not be effective in preventing the unauthorized posting or distribution of copyrighted content and we may be considered failing to take necessary actions against such infringement. Therefore, we may face liability for copyright or trademark infringement, defamation, unfair competition, libel, negligence, and other claims, or our portfolio apps may be disabled or taken down from app stores, based on the nature and content of the materials that are delivered, shared or otherwise accessed through our platform. For example, in December 2020, Blued app was temporarily taken down from Apple App Store due to the alleged infringements by our users.

Defending claims is costly and can impose a significant burden on our management and employees, and there can be no assurance that favorable final outcomes will be obtained in all cases. Such claims, even if they do not result in liability, may harm our reputation. Any resulting liability or expenses, or changes required to our platform to reduce the risk of future liability, may have a material adverse effect on our business, financial condition and prospects.

Some of our products and services contain open source software, which may pose particular risk to our proprietary software, products and services in a manner that negatively affect our business.

We use open source software in some of our products and services and will continue to use open source software in the future. There is a risk that open source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. Additionally, we may face claims from third parties claiming ownership of, or demanding release of, the open source software or derivative works that we developed using such software. These claims could result in litigation and could require us to make our software source code freely available, purchase a costly license or cease offering the implicated products or services unless and until we can re-engineer them to avoid infringement. This re-engineering process could require significant additional technology and development resources, and we may not be able to complete it successfully.

Furthermore, because any software source code we contribute to open source projects is publicly available, our ability to protect our intellectual property rights with respect to such software source code may be limited or lost entirely. As a result, we may be unable to prevent our competitors or others from using such software source code contributed by us.

Our business depends substantially on the continuing efforts of our executive officers and other key employees. If we lose their services, our business operations and growth prospects may be materially and adversely affected.

Our future success depends heavily on the continuing services of our executive officers and other key employees. In particular, we rely on the expertise, experience and vision of our founder and chief executive officer, Mr. Baoli Ma, as well as other members of our senior management team. If one or more of our executive officers or key employees were unable or unwilling to continue their services with us, we might not be able to replace them easily, in a timely manner, or at all. Competition for qualified talent is intense, there can be no assurance that we will be able to attract or retain qualified employees. As a result, our business may be materially and adversely affected, our financial condition and results of operations may be severely affected, and we may incur additional expenses to recruit, train and retain key personnel.

Moreover, if any of our executive officers or other key employees joins a competitor or forms a competing company, we may lose know-how, trade secrets, business partners, user base and market share. Each of our executive officers and key employees has entered into an employment agreement and a non-compete agreement. However, the non-competition agreements may be deemed invalid or unenforceable under PRC laws. If any dispute arises between our executive officers or key employees and us, there can be no assurance that we would be able to enforce these non-compete agreements in China, where these executive officers and key employees reside.

We are subject to risks relating to third-party online payment platforms.

Currently, we settle a significant portion of our products and services to our users through third-party online payment systems. In all these online payment transactions, secured transmission of confidential information such as paying users’ credit card numbers and personal information over public networks is essential to maintaining users’ trust and confidence on our platform.

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We do not have control over the security measures of our third-party online payment vendors. Any security breaches of the online payment systems that we use could expose us to litigation and possible liability for failing to secure confidential customer information and could, among other things, damage our reputation and the perceived security of all of the online payment systems that we use. If a well-publicized internet or mobile network security breach were to occur, users may become reluctant to purchase our products and services even if the publicized breach did not involve payment systems or methods used by us. In addition, there may be billing software errors that would damage customer confidence in these online payment systems. If any of the above were to occur and damage our reputation or the perceived security of the online payment systems we use, we may lose paying users and users may be discouraged from purchasing our products and services, which may have a material adverse effect on our business.

In addition, there are currently only a limited number of reputable third-party online payment systems in China and certain other countries where we operate. If any of these major payment systems decides to cease to provide services to us, or significantly increase the percentage they charge us for using their payment systems for our products and services, our results of operations may be materially and adversely affected.

Present or future strategic alliances or acquisitions may fail and our business, reputation and results of operations may be materially and adversely affected.

We may enter into strategic alliances, including joint ventures or minority equity investments, with various third parties to further our business purpose from time to time. These alliances could subject us to a number of risks, including risks associated with sharing proprietary information, non-performance by the third party and increased expenses in establishing new strategic alliances, any of which may materially and adversely affect our business. We may have limited ability to monitor or control the actions of these third parties and, to the extent any of these strategic third parties suffers negative publicity or harm to their reputation from events relating to their business, we may also suffer negative publicity or harm to our reputation by virtue of our association with any such third party.

In addition, if appropriate opportunities arise, we may acquire additional assets, products, technologies or businesses that are complementary to our existing business. Future acquisitions and the subsequent integration of new assets and businesses into our own would require significant attention from our management and could result in a diversion of resources from our existing business, which in turn could have an adverse effect on our business operations. Acquisitions may not achieve our goals and could be viewed negatively by users, advertisers, partners or investors. Acquisitions could result in the use of substantial amounts of cash, potentially dilutive issuances of equity securities, the occurrence of significant goodwill impairment charges, amortization expenses for other intangible assets and exposure to potential unknown liabilities of the acquired business. Moreover, the costs of identifying and consummating acquisitions may be significant. In addition to possible shareholders’ approval, we may also have to obtain approvals and licenses from relevant governmental authorities for the acquisitions and to comply with any applicable PRC laws and regulations, which could result in increased delay and costs. For example, in August 2020, we completed the acquisition of LESDO, a leading location-based social networking service provider targeting the lesbian community in China. We subsequently terminated the operation of LESDO in October 2021. In December 2020, we completed the acquisition of Finka, a leading gay social networking app in China targeting younger generations. While we believe our acquisitions serve to broaden our product offerings and extend our coverage of sub-groups of the LGBTQ population, we cannot guarantee that these transactions will achieve the strategic value that we have anticipated or assure that these transactions will not negatively impact our results of operations.

We may not have sufficient insurance to cover our business risks, so that any uninsured occurrence of business disruption may result in substantial costs to us and the diversion of our resources, which could have an adverse effect on our results of operations and financial condition.

We have obtained insurance to cover certain potential risks and liabilities, such as property all risks insurance to cover physical loss of or damage to the insured property and digital business, data protection insurance to cover losses due to privacy beach, confidentiality breach, cyber extortion threat, business interruption event, unavailability of our computer system, cyberattack or wrongful act, and D&O insurance to reduce our indemnification obligations towards our directors and officers for certain preset types of claims and liabilities asserted against them in relation to their exercise of duties for our company. However, we may not be able to acquire any insurance for certain types of risks such as business liability to cover our operations and our coverage may not be adequate to compensate for all losses that may occur, particularly with respect to loss of business or operations. Any business disruption, litigation, regulatory action, outbreak of epidemic disease or natural disaster could also expose us to substantial costs and diversion of resources. There can be no assurance that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policies on a timely basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected.

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If we fail to implement and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our results of operations or prevent fraud or fail to meet our reporting obligations, and investor confidence and the market price of the ADSs may be materially and adversely affected.

In the course of preparing our consolidated financial statements as of and for the year ended December 31, 2021 and in the course of auditing our consolidated financial statements as of and for the year ended December 31, 2021, we and our independent registered public accounting firm identified one material weakness in our internal control over financial reporting as of December 31, 2021, in accordance with the standards established by the Public Company Accounting Oversight Board of the United States (PCAOB).

As defined in the standards established by the PCAOB, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified related to our lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and related disclosures in accordance with U.S. GAAP and financial reporting requirements set forth by the SEC. The material weakness, if not timely remedied, may have led to significant misstatements in our consolidated financial statements in the future.

Following the identification of the material weakness and other control deficiencies, we have taken measures and plan to continue to take measures to remedy these control deficiencies. See “Item 15. Controls and Procedures—Management's Annual Report on Internal Control Over Financial Reporting.” However, the implementation of these measures may not fully address these deficiencies in our internal control over financial reporting, and we cannot conclude that they have been fully remedied. Our failure to correct these control deficiencies or our failure to discover and address any other control deficiencies could result in inaccuracies in our financial statements and impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. Moreover, ineffective internal control over financial reporting could significantly hinder our ability to prevent fraud.

We are now a public company in the United States subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we include a report of management on our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2021. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, as we are now a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems. We may be unable to timely complete our evaluation testing and any required remediation.

During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our consolidated financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of the ADSs. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

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We have been named as a defendant in two putative shareholder class action lawsuits that could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.

We are defending against the putative shareholder class action lawsuits described in “Item 8. Financial Information—A. Consolidated Statements and Other Financial Information—Legal Proceedings” including any appeals of such lawsuits, should our initial defense be successful. We are currently unable to estimate the possible loss or possible range of loss, if any, associated with the resolution of these lawsuits. In the event that our initial defense of these lawsuits is unsuccessful, there can be no assurance that we will prevail in any appeal. Any adverse outcome of these cases, including any plaintiff’s appeal, could have a material adverse effect on our business, financial condition, results of operation, cash flows and reputation. In addition, there can be no assurance that our insurance carriers will cover all or part of the defense costs, or any liabilities that may arise from these matters. The litigation process may utilize a significant portion of our cash resources and divert management’s attention from the day-to-day operations of our company, all of which could harm our business. We are also subject to claims for indemnification related to these matters, and we cannot predict the impact that indemnification claims may have on our business or financial results.

We have granted and expect to continue to grant share-based awards in the future under our share incentive plan, which may result in increased share-based compensation expenses.

We adopted the 2015 stock incentive plan (the “2015 Plan”) in 2015, a share incentive plan (the “2020 Plan”) in 2020, and 2021 share Incentive Plan (the “2021 Plan”) in 2021 for purposes of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. We account for compensation costs for all share options using a fair-value based method and recognize expenses in our consolidated statements of comprehensive loss in accordance with U.S. GAAP.

Under the 2015 Plan, we are authorized to grant options to purchase ordinary shares of our company and restricted share units to receive ordinary shares. Under the 2020 Plan and the 2021 Plan, we are authorized to grant options and other types of awards. The maximum number of ordinary shares which may be issued pursuant to all awards under the 2015 Plan is 1,551,724. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2020 Plan is 758,783. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2021 Plan shall initially be 298,780, plus an annual increase on the first day of each fiscal year of the company during the term of the 2021 Plan commencing with the fiscal year beginning January 1, 2022, by (i) an amount equal to 1.5% of the total number of shares issued and outstanding on the last day of the immediately preceding fiscal year, or (ii) such lesser number of shares as may be determined by our board of directors. As of February 28, 2022, awards to purchase a total of 1,227,375 ordinary shares under the 2015 Plan, 747,417 ordinary shares under the 2020 Plan, and 266,704 ordinary shares under the 2021 Plan have been granted and are outstanding. We did not record share-based compensation expenses for the year ended December 31, 2019. We recorded share-based compensation of RMB186.9 million and RMB15.9 million (US$2.5 million) for 2020 and 2021, respectively.

We believe the granting of share incentive awards is of significant importance to our ability to attract and retain employees, and we will continue to grant share incentive awards to employees in the future. As a result, our expenses associated with share-based compensation may increase, which may have an adverse effect on our results of operations.

We may be the subject of allegations, harassing or other detrimental conduct by third parties, which could harm our reputation and cause us to lose market share, users and customers.

We have been subject to allegations by third parties or purported former employees, negative internet postings and other adverse public exposure on our business, operations and staff compensation. We may also become the target of harassment or other detrimental conduct by third parties or disgruntled former or current employees. Such conduct may include complaints, anonymous or otherwise, to regulatory agencies, media or other organizations. We may be subject to government or regulatory investigations or other proceedings as a result of such third-party conduct and may be required to spend significant time and incur substantial costs to address such third-party conduct, and there is no assurance that we will be able to conclusively refute each of the allegations within a reasonable period of time, or at all. Additionally, allegations, directly or indirectly against us, may be posted on the internet, including social media platforms by anyone, whether or not related to us, on an anonymous basis. Any negative publicity on us or our management can be quickly and widely disseminated. Information posted may be inaccurate and adverse to us, and it may harm our reputation, business or prospects. The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be negatively affected as a result of the public dissemination of negative and potentially false information about our business and operations, which in turn may cause us to lose market share, users or customers.

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Computer and mobile malware, viruses, hacking and phishing attacks, spamming and improper or illegal use of our platform may affect user experience, which could reduce our ability to attract users and advertisers and materially and adversely affect our business, financial condition and results of operations.

Computer and mobile malware, viruses, hacking and phishing attacks have become more prevalent in our industries, have occurred on our platform in the past, and may occur again in the future. Although it is difficult to determine what, if any, direct harm may result from an interruption or attack, any failure to maintain performance, reliability, security and availability of our products and technical infrastructure to the satisfaction of our users may seriously harm our reputation and our ability to retain existing users and attract new users.

In addition, spammers may use our platform to send targeted and untargeted spam messages to users, which may affect user experience. In spamming activities, spammers typically create multiple user accounts for the purpose of sending spam messages. Although we attempt to identify and delete accounts created for spamming purposes, we may not be able to effectively eliminate all spam messages from our platform in a timely fashion. Our actions to combat spam may also require diversion of significant time and focus of our engineering team from improving our products. As a result, our users may use our products less or stop using them altogether, and result in continuing operational costs to us.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws, and noncompliance with such laws can subject us to administrative, civil and criminal fines and penalties, collateral consequences, remedial measures and legal expenses, all of which could adversely affect our business, results of operations, financial condition and reputation.

We are subject to anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations in various jurisdictions in which we conduct activities, including the U.S. Foreign Corrupt Practices Act, or FCPA, and other anti-corruption laws and regulations. Those laws generally prohibit us and our officers, directors, employees and business partners acting on our behalf, including agents, from corruptly offering, promising, authorizing or providing anything of value to a “foreign official” for the purposes of influencing official decisions or obtaining or retaining business or otherwise obtaining favorable treatment. The FCPA also requires companies to make and keep books, records and accounts that accurately reflect transactions and dispositions of assets and to maintain a system of adequate internal accounting controls. A violation of these laws or regulations could adversely affect our business, results of operations, financial condition and reputation.

We have adopted and implemented policies and procedures designed to ensure compliance by us and our directors, officers, employees, representatives, consultants, agents and business partners with applicable anti-corruption, anti-bribery, anti-money laundering, financial and economic sanctions and similar laws and regulations. However, our policies and procedures may not be sufficient and our directors, officers, employees, representatives, consultants, agents, business partners, and users could engage in improper conduct for which we may be held responsible.

Non-compliance with anti-corruption, anti-bribery, anti-money laundering or financial and economic sanctions laws could subject us to whistleblower complaints, adverse media coverage, investigations, and severe administrative, civil and criminal sanctions, collateral consequences, remedial measures and legal expenses, all of which could materially and adversely affect our business, results of operations, financial condition and reputation. In addition, changes in economic sanctions laws in the future could adversely impact our business and investments in our shares.

If we cannot maintain our corporate culture as we grow, we could lose the innovation, collaboration and focus that contribute to our business.

We believe that a critical component of our success is our corporate culture, we are comprised of a group of passionate team players, dedicated to bring value to the LGBTQ community. Powered by technological innovation and global expansion, we endeavor to become a platform where the LGBTQ community can find a sense of belonging and enjoy the high-quality products and services we provide. Any failure to preserve our culture could undermine our reputation in the marketplace and negatively impact our ability to retain existing customers and attract new customers, which would in turn jeopardize our future success.

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We may need additional capital, and we may be unable to obtain such capital in a timely manner or on acceptable terms, or at all.

To pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances, including to improve our brand awareness, develop new services or further improve existing services, expand into new geographic areas and acquire complementary businesses and technologies, we may require additional capital from time to time. However, additional funds may not be available when we need them on reasonable terms, or at all. Our ability to obtain additional capital is subject to a variety of uncertainties, including:

● our market position and competitiveness in the LGBTQ-focused social, entertainment and health industries;

● our future profitability, overall financial condition, results of operations and cash flows;

● general market conditions for capital raising activities by online social networking and live streaming platforms and other internet companies in China; and

● economic, political and other conditions in China and internationally.

If we are unable to obtain additional capital in a timely manner or on acceptable terms, or at all, our ability to continue to pursue our business objectives and respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, results of operations, financial condition and prospects could be materially and adversely affected. In addition, our future capital needs and other business reasons could require us to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity or equity-linked securities could dilute our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations or our ability to pay dividends to our shareholders.

Foreign currency exchange rate fluctuations could adversely affect our results of operations.

We operate in various international markets, primarily in various jurisdictions within Asia. We translate international revenues into RMB-denominated results of operations. As a result, we expect foreign currency exchange rate fluctuations will affect the period-over-period comparison of our results of operations as the results of our subsidiaries outside China are translated into RMB, our reporting currency. See “Item 11. Quantitative and Qualitative Disclosures About Market Risk—Foreign Exchange Risk.”

Historically, we have not hedged any foreign currency exposures. The continued growth and expansion of our international operations into new countries increases our exposure to foreign exchange rate fluctuations. Significant foreign exchange rate fluctuations, in the case of one currency or collectively with other currencies, could adversely affect our future results of operations.

The PCAOB is currently unable to inspect our auditor in relation to their audit work performed for our financial statements and the inability of the PCAOB to conduct inspections over our auditor deprives our investors with the benefits of such inspections.

Our auditor, the independent registered public accounting firm that issues the audit report included elsewhere in this annual report, as an auditor of companies that are traded publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or the PCAOB, is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess its compliance with the applicable professional standards. Since our auditor is located in China, a jurisdiction where the PCAOB has been unable to conduct inspections without the approval of the Chinese authorities, our auditor is not currently inspected by the PCAOB. As a result, we and investors in the ADSs are deprived of the benefits of such PCAOB inspections. The inability of the PCAOB to conduct inspections of auditors in China makes it more difficult to evaluate the effectiveness of our independent registered public accounting firm’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to the PCAOB inspections, which could cause investors and potential investors in the ADSs to lose confidence in our audit procedures and reported financial information and the quality of our financial statements.

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The ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or in 2023 if proposed changes to the law are enacted. The delisting of the ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.

The Holding Foreign Companies Accountable Act, or the HFCAA, was signed into law on December 18, 2020. The HFCAA states if the SEC determines that we have filed audit reports issued by a registered public accounting firm that has not been subject to inspection for the PCAOB for three consecutive years beginning in 2021, the SEC shall prohibit our shares or ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. On December 16, 2021, the PCAOB issued a report to notify the SEC of its determination that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. The PCAOB identified our auditor as one of the registered public accounting firms that the PCAOB is unable to inspect or investigate completely.

Whether the PCAOB will be able to conduct inspections of our auditor before the issuance of our financial statements on Form 20-F for the year ending December 31, 2023 which is due by April 30, 2024, or at all, is subject to substantial uncertainty and depends on a number of factors out of our, and our auditor’s, control. If our shares and ADSs are prohibited from trading in the United States, there is no certainty that we will be able to list on a non-U.S. exchange or that a market for our shares will develop outside of the United States. Such a prohibition would substantially impair your ability to sell or purchase the ADSs when you wish to do so, and the risk and uncertainty associated with delisting would have a negative impact on the price of the ADSs. Also, such a prohibition would significantly affect our ability to raise capital on terms acceptable to us, or at all, which would have a material adverse impact on our business, financial condition, and prospects.

On June 22, 2021, the U.S. Senate passed a bill which would reduce the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA from three years to two. On February 4, 2022, the U.S. House of Representatives passed a bill which contained, among other things, an identical provision. If this provision is enacted into law and the number of consecutive non-inspection years required for triggering the prohibitions under the HFCAA is reduced from three years to two, then our shares and the ADSs could be prohibited from trading in the United States in 2023.

Heightened tensions in international relations, particularly between the United States and China, may adversely impact our business, financial condition, and results of operations.

Recently there have been heightened tensions in international relations, particularly between the United States and China, but also as a result of the war in Ukraine and sanctions on Russia. These tensions have affected both diplomatic and economic ties between the two countries. Heightened tensions could reduce levels of trade, investments, technological exchanges, and other economic activities between the two major economies. The existing tensions and any further deterioration in the relationship between the United States and China may have a negative impact on the general, economic, political, and social conditions in both countries and, given our reliance on the Chinese market, adversely impact our business, financial condition, and results of operations.

Any financial or economic crisis, or perceived threat of such a crisis may materially and adversely affect our business, financial condition and results of operations.

The global financial markets experienced significant disruptions in 2008 and the United States, European and other economies went into recession. The recovery from the lows of 2008 and 2009 was uneven and the global financial markets are facing new challenges, including the escalation of the European sovereign debt crisis since 2011, the hostilities in the Ukraine, the end of quantitative easing by the U.S. Federal Reserve and the economic slowdown in the Eurozone in 2014. It is unclear whether these challenges will be contained and what effects they each may have. There is considerable uncertainty over the long-term effects of the expansionary monetary and fiscal policies that have been adopted by the central banks and financial authorities of some of the world’s leading economies, including China’s. Recently there have been signs that the rate of China’s and global economic growth is declining. Any prolonged slowdown in global economic development might lead to tighter credit markets, increased market volatility, sudden drops in business and dramatic changes in business.

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Cayman Islands economic substance requirements may have an effect on our business and operations.

Pursuant to the International Tax Cooperation (Economic Substance) Act (Revised) of the Cayman Islands, or the ES Act, that came into force on January 1, 2019, a “relevant entity” is required to satisfy the economic substance test set out in the ES Act. A “relevant entity” includes an exempted company incorporated in the Cayman Islands as is our company. Based on the current interpretation of the ES Act, we believe that our company is a pure equity holding company since it only holds equity participations in other entities and only earns dividends and capital gains. Accordingly, for so long as our company is a “pure equity holding company,” it is only subject to the minimum substance requirements, which require us to (1) comply with all applicable filing requirements under the Companies Act, Cap. 22 (Act 3 of 1961, as consolidated and revised) of the Cayman Islands; and (2) have adequate human resources and adequate premises in the Cayman Islands for holding and managing equity participations in other entities. However, there can be no assurance that we will not be subject to more requirements under the ES Act. Uncertainties over the interpretation and implementation of the ES Act may have an adverse impact on our business and operations.

Risks Related to Our Corporate Structure

If the PRC government finds that the arrangements that establish the structure for operating some of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

Foreign ownership of certain parts of our businesses, including value-added telecommunications services, is subject to restrictions under current PRC laws and regulations. For example, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (excluding e-commerce, domestic multi-party communication, store-and-forward, and call center), and foreign investors are prohibited from engaging in the internet audio-video program service and internet culture operation (except for music) in accordance with Special Management Measures for the Market Entry of Foreign Investment (Negative List) (2021 Version), or the 2021 Negative List.

We are a Cayman Islands company and our WFOE is considered foreign-invested enterprises. Accordingly, our WFOE is not eligible to operate value-added telecommunication business, internet video, online advertising services and other businesses which foreign-owned companies are prohibited or restricted from conducting in China. As a result, we conduct such business activities through the VIE and its subsidiaries. The VIE holds an ICP License for internet information service (excluding news, publication, education, medical and healthcare, drug and medical instruments, electronic publication services), and an internet culture operation license for operating music products and shows. Each of Mr. Baoli Ma, our founder, chairman and chief executive officer, and Mr. Changyou Ma, a family member of our founder, holds 99.15% and 0.85% equity interests in the VIE, respectively. Our WFOE has entered into a series of contractual arrangements with the VIE and its shareholders, which enables us to:

● exercise effective control over the VIE;

● receive substantially all of the economic benefits of the VIE; and

● have an exclusive option to purchase all or part of the equity interests in the VIE when and to the extent permitted by PRC law.

As a result of these contractual arrangements, we have control over and are the primary beneficiary of the VIE and hence consolidate its financial results and its subsidiaries into our consolidated financial statements under U.S. GAAP. For a detailed discussion of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.”

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In the opinion of King & Wood Mallesons, our PRC legal counsel, (i) the ownership structures of our WFOE and the VIE in China are not in violation of PRC laws and regulations currently in effect; and (ii) the contractual arrangements between our WFOE, the VIE and its shareholders and the spouse consent letters governed by PRC law are legal, valid, binding and enforceable against each party thereto in accordance with their terms and applicable PRC laws and regulations currently in effect. However, our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules; accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to variable interest entity structures will be adopted or if adopted, what they would provide. If we or the VIE are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including:

● revoking the business licenses and/or operating licenses of such entities;

● discontinuing or placing restrictions or onerous conditions on our operations;

● imposing fines, confiscating the income from our WFOE or the VIE, or imposing other requirements with which we or the VIE may not be able to comply;

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

● shutting down our servers or blocking our app/websites;

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

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

● restricting or prohibiting our use of the proceeds of the initial public offering to finance our business and operations in China.

The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business. In addition, it is unclear what impact the PRC government actions would have on us and on our ability to consolidate the financial results of the VIE in our consolidated financial statements, if the PRC governmental authorities were to find our legal structure and contractual arrangements to be in violation of PRC laws and regulations. If the imposition of any of these government actions causes us to lose our right to direct the activities of the VIE or our right to receive substantially all the economic benefits and residual returns from the VIE and we are not able to restructure our ownership structure and operations in a satisfactory manner, we would no longer be able to consolidate the financial results of the VIE in our consolidated financial statements. Either of these results, or any other significant penalties that might be imposed on us in this event, would have a material adverse effect on our financial condition and results of operations.

Furthermore, it is uncertain whether any new PRC laws, rules or regulations relating to contractual arrangements will be adopted or if adopted, what they would provide. The National People’s Congress promulgated the Foreign Investment Law on March, 15, 2019, which came into effect on January 1, 2020. The Foreign Investment Law does not touch upon the relevant concepts and regulatory regimes that were historically suggested for the regulation of VIE structures, and thus this regulatory topic remains unclear under the Foreign Investment Law. Since the Foreign Investment Law is new, there are substantial uncertainties exist with respect to its implementation and interpretation and it is also possible that variable interest entities will be deemed as foreign invested enterprises and be subject to restrictions in the future. Such restrictions may cause interruptions to our operations, products and services and may incur additional compliance cost, which may in turn materially and adversely affect our business, financial condition and results of operations.

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Any of these events could cause significant disruption to our business operations and severely damage our reputation, which would in turn materially and adversely affect our business, financial condition and results of operations. If occurrences of any of these events results in our inability to direct the activities of our consolidated affiliated entities in China that most significantly impact their economic performance, and/or our failure to receive the economic benefits from our consolidated affiliated entities, we may not be able to consolidate the entity in our consolidated financial statements in accordance with U.S. GAAP.

Although we believe we, our WFOE and the VIE comply with current PRC laws and regulations, we cannot assure you that the PRC government would agree that our contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. The PRC government has broad discretion in determining rectifiable or punitive measures for non-compliance with or violations of PRC laws and regulations. If the PRC government determines that we or the VIE does not comply with applicable law, it could revoke the VIE’s business and operating licenses, require the VIE to discontinue or restrict the VIE’s operations, restrict the VIE’s right to collect revenues, block the VIE’s websites, require the VIE to restructure our operations, impose additional conditions or requirements with which the VIE may not be able to comply, impose restrictions on the VIE’s business operations or on their customers, or take other regulatory or enforcement actions against the VIE that could be harmful to their business. Any of these or similar occurrences could significantly disrupt our or the VIE’s business operations or restrict the VIE from conducting a substantial portion of their business operations, which could materially and adversely affect the VIE’s business, financial condition and results of operations. If any of these occurrences results in our inability to direct the activities of any of the VIE that most significantly impact its economic performance, and/or our failure to receive the economic benefits from any of the VIE, we may not be able to consolidate these entities in our consolidated financial statements in accordance with U.S. GAAP.

Uncertainties exist with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.

On March 15, 2019, the National People’s Congress approved the Foreign Investment Law and the State Council approved the Regulation on Implementing the Foreign Investment Law (the “Implementation Regulations”) on December 12, 2019, effective from January 1, 2020, which replaced the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The Supreme People’s Court of China issued a judicial interpretation on the Foreign Investment Law on December 27, 2019, effective from January 1, 2020, to ensure fair and efficient implementation of the Foreign Investment Law. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Investment” for further details. The Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments.

However, since it is relatively new, uncertainties still exist in relation to its interpretation. For instance, under the Foreign Investment Law, “foreign investment” refers to the investment activities directly or indirectly conducted by foreign individuals, enterprises or other entities in China. Though it does not explicitly classify contractual arrangements as a form of foreign investment, there is no assurance that foreign investment via contractual arrangement would not be interpreted as a type of indirect foreign investment activities under the definition in the future. In addition, the definition contains a catch-all provision which includes investments made by foreign investors through means stipulated in laws or administrative regulations or other methods prescribed by the State Council. Therefore, it still leaves leeway for future laws, administrative regulations or provisions promulgated by the Stale Council to provide for contractual arrangements as a form of foreign investment. In any of these cases, it will be uncertain whether our contractual arrangements will be deemed to be in violation of the market access requirements for foreign investment under the PRC laws and regulations. Furthermore, if future laws, administrative regulations or provisions prescribed by the State Council mandate further actions to be taken by companies with respect to existing contractual arrangements, we may face substantial uncertainties as to whether we can complete such actions in a timely manner, or at all. Failure to take timely and appropriate measures to cope with any of these or similar regulatory compliance challenges could materially and adversely affect our current corporate structure, corporate governance and business operations.

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We rely on contractual arrangements with the VIE and its shareholders for a portion of our business operations, which may not be as effective as direct ownership in providing operational control.

The VIE contributed a portion of our consolidated total revenues for the years ended December 31, 2019, 2020 and 2021, respectively. We have relied and expect to continue to rely on contractual arrangements with the VIE and its shareholders to conduct our business. For a description of these contractual arrangements, see “Item 4. Information on the Company—C. Organizational Structure.” These contractual arrangements may not be as effective as direct ownership in providing us with control over the VIE. For example, the VIE and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations in an acceptable manner or taking other actions that are detrimental to our interests.

There are very few precedents as to whether contractual arrangements would be judged to form effective control over the relevant consolidated affiliated entities through the contractual arrangements, or how contractual arrangements in the context of a consolidated affiliated entity should be interpreted or enforced by the PRC courts. Should legal actions become necessary, we cannot guarantee that the court will rule in favor of the enforceability of the consolidated affiliated entity contractual arrangements. In the event we are unable to enforce these contractual arrangements, or if we suffer significant delay or other obstacles in the process of enforcing these contractual arrangements, we may not be able to exert effective control over the VIE, and our ability to conduct our business may be materially adversely affected. Therefore, these contractual arrangements may not be as effective in providing us with control over the VIE as direct ownership. If we had direct ownership of the VIE, we would be able to exercise our rights as a shareholder to effect changes in the board of directors of the VIE, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, we rely on the performance by the VIE and its shareholders of their obligations under the contracts to exercise control over the VIE. The shareholders of the VIE may not act in the best interests of our company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate our business through the contractual arrangements with the VIE. If any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC law and courts and therefore will be subject to uncertainties in the PRC legal system. See “—Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.” Therefore, our contractual arrangements with the VIE may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.

Any failure by the VIE or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.

If the VIE or its shareholders fail to perform their respective obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which may be unsuccessful. For example, if the shareholders of the VIE were to refuse to transfer their equity interest in the VIE to us or our designee when we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, we may have to take legal actions to compel them to perform their contractual obligations.

All of the arrangements under our contractual arrangements are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in China is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. See “Risks Related to Doing Business in China—Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to you and us.” Meanwhile, there are very few precedents and little formal guidance as to how contractual arrangements in the context of a VIE should be interpreted or enforced under PRC law, and as a result it may be difficult to predict how an arbitration panel would view such contractual arrangements. Additionally, under PRC law, rulings by arbitrators are final, parties cannot appeal the arbitration results in courts, and if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay.

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The VIE holds our ICP License for internet information service (excluding news, publication, education, medical and healthcare, drug and medical instruments, electronic publication services), an internet culture operation license for operating music products and shows, a radio and television programs production and management license for animations, feature films, TV variety shows (excluding political news and similar features and columns). In the event we are unable to enforce our contractual arrangements, we may not be able to exert effective control over the VIE, and our ability to conduct these businesses may be negatively affected.

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

The shareholders of the VIE may have potential conflicts of interest with us. For example, Mr. Baoli Ma is one of the shareholders of the VIE. Mr. Baoli Ma is also our founder, chairman and chief executive officer. Any shareholder of the VIE may breach, or cause the VIE to breach, or refuse to renew, the existing contractual arrangements we have with any of them and the VIE, which would have a material and adverse effect on our ability to effectively control the VIE and receive substantially all the economic benefits from them. For example, the shareholders may be able to cause our arrangements with the VIE to be performed in a manner adverse to us by, among other things, failing to remit payments due under the contractual arrangements to us on a timely basis. There can be no assurance that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.

Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and our company, except that we could exercise our purchase option under the exclusive option agreements with these shareholders to request them to transfer all of their equity interests in the VIE to a PRC entity or individual designated by us, to the extent permitted by PRC law. For individuals who are also our directors and officers, we rely on them to abide by the laws of the Cayman Islands, which provide that directors and officers owe a fiduciary duty to the company that requires them to act in good faith and in what they believe to be the best interests of the company and not to use their position for personal gains. The shareholders of the VIE have executed shareholders’ voting rights proxy agreement to appoint our WFOE or a person designated by our WFOE to vote on their behalf and exercise voting rights as shareholders of the VIE. If we cannot resolve any conflict of interest or dispute between us and the shareholders of the VIE, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.

The shareholders of the VIE may be involved in personal disputes with third parties or other incidents that may have an adverse effect on their respective equity interests in the relevant VIE and the validity or enforceability of our contractual arrangements with the relevant entity and its shareholders. For example, in the event that any of the shareholders of the VIE divorces his spouse, the spouse may claim that the equity interest of the relevant VIE held by such shareholder is part of their community property and should be divided between such shareholder and his or her spouse. If such claim is supported by the court, the relevant equity interest may be obtained by the shareholder’s spouse or another third party who is not subject to obligations under our contractual arrangements, which could result in a loss of the effective control over the relevant VIE by us. Similarly, if any of the equity interests of the VIE is inherited by a third party with whom the current contractual arrangements are not binding, we could lose our control over the relevant VIE or have to maintain such control by incurring unpredictable costs, which could cause significant disruption to our business and operations and harm our financial condition and results of operations.

Contractual arrangements in relation to the VIE may be subject to scrutiny by the PRC tax authorities and they may determine that we or the VIE owe additional taxes, which could negatively affected our financial condition and the value of your investment.

Under applicable PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities determine that the VIE contractual arrangements were not entered into on an arm’s-length basis in such a way as to result in an impermissible reduction in taxes under applicable PRC laws, rules and regulations, and adjust the income of the VIE in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction of expense deductions recorded by the VIE for PRC tax purposes, which could in turn increase its tax liabilities. In addition, the PRC tax authorities may impose punitive interest on the VIE for the adjusted but unpaid taxes at the rate of 5% over the basic RMB lending rate published by the People’s Bank of China for a period according to the applicable regulations. Our financial position could be materially and adversely affected if the VIE’s tax liabilities increase or if it is required to pay punitive interest.

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We may lose the ability to use and enjoy assets held by the VIE that are material to the operation of certain portion of our business if the VIE goes bankrupt or become subject to a dissolution or liquidation proceeding.

As part of our contractual arrangements with the VIE, the VIE and its subsidiaries hold certain assets that are material to the operation of certain portion of our business. If the VIE goes bankrupt and all or part of its assets become subject to liens or rights of third-party creditors, we may be unable to continue some or all of our business activities, which could materially and adversely affect our business, financial condition and results of operations. Under the contractual arrangements, neither the VIE nor the shareholders of the VIE may not, in any manner, sell, transfer, mortgage or dispose of their assets or legal or beneficial interests in the business without our prior consent. If the VIE undergoes a voluntary or involuntary liquidation proceeding, independent third-party creditors may claim rights to some or all of these assets, thereby hindering our ability to operate our business, which could materially and adversely affect our business, financial condition and results of operations.

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

In China, a company chop or seal serves as the legal representation of the company towards third parties even when unaccompanied by a signature. Each legally registered company in China is required to maintain a company chop, which must be registered with the local Public Security Bureau. In addition to this mandatory company chop, companies may have several other chops which can be used for specific purposes. The chops of our WFOE and the VIE are generally held securely by personnel designated or approved by us in accordance with our internal control procedures. To the extent those chops are not kept safely, are stolen or are used by unauthorized persons or for unauthorized purposes, the corporate governance of these entities could be severely and adversely compromised and those corporate entities may be bound to abide by the terms of any documents so chopped, even if they were chopped by an individual who lacked the requisite power and authority to do so. In addition, if the chops are misused by unauthorized persons, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations.

Risks Related to Doing Business in China

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business, financial condition and results of operations.

A substantial majority of our revenues are sourced from China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the government. In addition, the Chinese government continues to play a significant role in regulating industry development by imposing industrial policies.

The Chinese government also exercises significant control over China’s economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies.

While the Chinese economy has experienced significant growth in recent decades, growth has been uneven, both geographically and among various sectors of the economy. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures may benefit the overall Chinese economy, but some may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments, monetary policy or changes in tax regulations. The growth rate of the Chinese economy has gradually slowed since 2010, and the impact of COVID-19 on the Chinese economy in 2020 is likely to be severe. Any prolonged slowdown in the Chinese economy may reduce the demand for our products and services and materially and adversely affect our business and results of operations.

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Uncertainties in the interpretation and enforcement of Chinese laws and regulations could limit the legal protections available to you and us.

We conduct our business primarily through our WFOE and the VIE and its subsidiaries in China. Our operations in China are governed by PRC laws and regulations. Our WFOE is subject to laws and regulations applicable to foreign investment in China. The PRC legal system is a civil law system based on written statutes. Unlike the common law system, prior court decisions under the civil law system may be cited for reference but have limited precedential value. In addition, any new or changes in PRC laws and regulations related to foreign investment in China could affect the business environment and our ability to operate our business in China.

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. Any administrative and court proceedings in China may be protracted, resulting in substantial costs and diversion of resources and management attention. Since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory provisions and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. These uncertainties may impede our ability to enforce the contracts we have entered into and could materially and adversely affect our business and results of operations.

Furthermore, the PRC legal system is based in part on government policies and internal rules, some of which are not published on a timely basis or at all and may have retroactive effect. As a result, we may not be aware of our violation of any of these policies and rules until sometime after the violation. Such unpredictability towards our contractual, property and procedural rights could adversely affect our business and impede our ability to continue our operations.

Any failure or perceived failure by us to comply with the Anti-Monopoly Guidelines for the Internet Platform Economy Sector and other PRC anti-monopoly laws and regulations may result in governmental investigations or enforcement actions, litigation or claims against us and could have an adverse effect on our business, financial condition and results of operations.

On February 7, 2021, the State Council Anti-Monopoly Committee issued the Anti-Monopoly Guidelines for the Internet Platform Economy Sector, or Anti-monopoly Guide, that aims at specifying some of the circumstances under which an activity of internet platforms may be identified as monopolistic act as well as setting out merger controlling filing procedures involving variable interest entities. Due to the uncertainties associated with the evolving legislative activities and varied local implementation practices of anti-monopoly and competition laws and regulations in the PRC, it may be costly to adjust some of our business practice in order to comply with these laws, regulations, rules, guidelines and implementations.

The PRC anti-monopoly enforcement agencies have strengthened enforcement under the PRC Anti-Monopoly Law in recent years, which may subject us to penalties and fines for transactions closed in the past. Under the PRC Anti-Monopoly Law, companies conducting certain investments and acquisitions relating to businesses in China must file with the anti-monopoly enforcement agency, in advance of any transaction where the parties’ revenues exceed certain thresholds and the buyer would obtain control of, or decisive influence over, the other party. It is unclear whether transactions involving companies with a VIE structure are subject to these requirements, namely the filing of notification of concentration of undertaking. However, the governmental authorities have recently strengthened the enforcement of notification of concentration of undertaking filing requirement by companies with a VIE structure. In December 2020, the SAMR penalized three internet companies each with a VIE structure in the transactions for failure to make the filing of notification of concentration of undertaking. Since then, the SAMR has been reviewing historical cases of concentrations of undertaking of certain major internet companies with a VIE structure, and may impose penalties for past failures to making filings. Any failure or perceived failure to comply with the anti-monopoly laws and regulations, as well as the related government policies and guidance relating to investments in or by us or associated inquiries, investigations and other governmental actions may divert significant management time and attention and our financial resources, bring negative publicity, subject us to liabilities or administrative penalties, and/or materially and adversely affect our financial conditions, operations and business prospects.

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We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.

Our business is subject to supervision and regulation by various governmental authorities in China, and such governmental authorities include the CAC, the MOFCOM, the MIIT, the SAMR, the National Health Commission, or the NHC, the MCT, the NRTA, and the corresponding local regulatory authorities. Such governmental authorities promulgate and enforce laws and regulations that cover a variety of business activities that relate to our operations, such as provision of internet information, sales of and internet advertisement, providing live streaming and short videos broadcasting services, online sale of pharmaceutical products, among other things. These regulations in general regulate the entry into, the permitted scope of, as well as approvals, licenses and permits for, the relevant business activities.

We have not obtained certain approvals, licenses and permits that may be required for some aspects of our business operations. For example, our mobile apps offer short videos created by ourselves and our broadcasters. According to the PRC Administrative Provisions on Internet Audio-Visual Program Services, a provider of online audio-visual service is required to obtain a license for online transmission of audio-visual programs, or Audio-Visual License. We have not obtained the Audio-Visual License for providing internet audio-visual program services and content through our platform in China and we may not be eligible for the Audio-Visual License, because the current PRC laws and regulations require an applicant to be a wholly state-owned or state-controlled entity. Although we are looking for suitable licensed targets or partners to work with, identifying, negotiating and maintaining relationships with such licensed entities require significant time and resources. Though we have obtained a pharmaceutical operation license from the local counterpart of the SAMR in February 2020 through acquisition of license-holding targets for conducting pharmaceutical retail business, historically we did not hold the pharmaceutical operation license; we shall obtain a practicing license of medical institutions from the NHC if our health related services are deemed medical diagnosis and treatment services. We have established our own internet hospital, Dezhou He Health Internet Hospital (“He Health Internet Hospital”), which has obtained a medical institution practicing license and completed the registration of internet diagnosis and treatment activities with the NHC in April 2021. We acquired Finka in 2020, which allows users to communicate in real-time on the apps. Finka holds the ICP License for internet information service, which however does not cover real-time information interaction. We are making efforts to obtain all licenses and permits that are necessary to our various business activities, however, there is no assurance that we can timely obtain all such licenses and permits or that we will not be subject to penalty for operating without such licenses and permits.

Our mobile platform, Blued, is operated by the VIE, which holds an ICP license and a Network Culture Operation License and offers value-added telecommunication services through Blued, including features to show users profile at the top of the “nearby user list” and push users’ selected posts to the “now trending” section to bring them more viewership and fans, while our WFOE collected payment from such users for such services and recognized live streaming revenue and membership revenue prior to May 20, 2020. Since May 20, 2020, the VIE has started to collect payments and provided live streaming and membership services. Accordingly, we expect the revenue of the VIE will significantly increase. Due to the uncertainty regarding the interpretation of relevant concepts of value-added telecommunication services and cyber performance operation services, it is not clear whether our WFOE as a party receiving payments for such services rather than the actual business operator will also be deemed to be a service provider and be required to obtain an ICP license or a Network Culture Operation License. Although we consider that our WFOE was providing technical support rather than offering telecommunication services, and that our WFOE did not offer network culture products, there is no assurance that the governmental authorities, future legislations, interpretations and enforcement of law will reach the same conclusion.

We generate a substantial portion of our revenues from the live streaming services. On June 4, 2009, Ministry of Culture, the predecessor of the MCT, and the MOFCOM jointly issued Notice on the Strengthening of the Administration of Online Game Virtual Currency, or the Virtual Currency Notice, which defines what virtual currency is and requires that entities obtain the approval from the Ministry of Culture prior to issuing virtual currency and engaging in transactions using virtual currency in connection with online games. Although we do not think the Virtual Currency Notice applies to the operation of our live streaming business, given the wide discretion of the governmental authorities and uncertainties in the regulatory environment, there is no assurance that the governmental authorities will not in the future interpret the Virtual Currency Notice in a different way and subject our operation of live streaming business to the scope of the Virtual Currency Notice or issue new rules to regulate the virtual currency in the live streaming industry. In that case, our business may be materially and adversely affected.

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We pay broadcasters through their talent agencies and the fees are determined based on a percentage of revenue from virtual gift sales that is attributed to the broadcasters’ live streams. Although we consider the nature of our relation with the talent agencies and the broadcasters as that between procurer and suppliers of services and that the users are purchasing the virtual gifts on our platform using virtual currencies, there is no assurance that the governmental authorities will view it in the same way. If the PRC governmental authorities consider that we are receiving the payment on behalf of the broadcasters or their talent agencies for their performance, we may be deemed as third-party payment service providers and be required to either obtain a license to conduct third-party payment business or to work with licensed payment service providers.

If the PRC governmental authorities consider that we are operating without proper approvals, licenses or permits, or new laws and regulations are promulgated that require us to obtain additional approvals or licenses or impose additional restrictions on the operation of any part of our business, the PRC governmental authorities have the power, among other things, to order timely rectification, impose fines, confiscate our income, revoke our business licenses, and require us to discontinue our relevant business or impose restrictions on the affected portion of our business. Any of these actions by the PRC government may have a material adverse effect on our business, results of operations and financial condition.

The approval of, or filing with the CSRC or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, and, if required, we cannot predict whether or for how long we will be able to obtain such approval or complete such filing.

Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC persons or entities to obtain the approval of the CSRC prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. The interpretation and application of the regulations remain unclear, and our offshore offerings may ultimately require approval of the CSRC. If the CSRC approval is required, it is uncertain whether we can or how long it will take us to obtain the approval and, even if we obtain such CSRC approval, the approval could be rescinded. Any failure to obtain or delay in obtaining the CSRC approval for any of our offshore offerings, or a rescission of such approval if obtained, would subject us to sanctions imposed by the CSRC or other PRC regulatory authorities, which could include fines and penalties on our operations in China, restrictions or limitations on our ability to pay dividends outside of China, and other forms of sanctions that may materially and adversely affect our business, financial condition, and results of operations.

The PRC government authorities has recently indicated an intent to exert more oversight and control over securities offerings and other capital markets activities that are or have been conducted overseas and foreign investment in China-based companies like us. On July 6, 2021, the relevant PRC government authorities issued the Securities Activities Opinions. These opinions emphasized the need to strengthen the administration over illegal securities activities and the supervision on overseas listings by China-based companies and proposed to take effective measures, such as promoting the construction of relevant regulatory systems to deal with the risks and incidents faced by China-based overseas-listed companies. As a follow-up, on December 24, 2021, the CSRC issued a draft of the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic Companies, and a draft of Administration Measures for the Filing of Overseas Securities Offering and Listing by Domestic Companies for public comments. These draft measures propose to establish a new filing-based regime to regulate overseas offerings and listings by domestic companies. Specifically, an overseas offering and listing by a PRC company, whether directly or indirectly, an initial or follow-on offering, must be filed with the CSRC. The issuer or its affiliated PRC entity, as the case may be, shall file with the CSRC for its initial public offering, follow-on offering and other equivalent offing activities. The examination and determination of an indirect offering and listing will be conducted on a substance-over-form basis, and an offering and listing shall be deemed as a PRC company’s indirect overseas offering and listing if the issuer meets the following conditions: (i) any of the operating income, gross profit, total assets, or net assets of the PRC enterprise in the most recent fiscal year was more than 50% of the relevant line item in the issuer’s audited consolidated financial statement for that year; and (ii) senior management personnel responsible for business operations and management are mostly PRC citizens or are ordinarily resident in the PRC, and the principal place of business is in the PRC or carried out in the PRC. It is unclear based on these draft measures whether either or both of the above criteria need to be satisfied. Particularly, the issuer shall submit the filing with respect to its initial public offering and listing within three business days after its initial filing of the listing application, and submit the filing with respect to its follow-on offering within three business days after the completion of the follow-on offering. Failure to comply with the filing requirements may result in fines to the relevant PRC companies, suspension of their businesses, revocation of their business licenses and operation permits and fines on the controlling shareholder and other responsible persons. These draft measures also set forth certain regulatory red lines for overseas offerings and listings by PRC enterprises.

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There are substantial uncertainties as to whether these draft measures to regulate direct or indirect overseas offering and listing would be further amended, revised or updated, their enactment timetable and final content. As the CSRC may formulate and publish guidelines for filings in the future, these draft measures do not provide for detailed requirements of the substance and form of the filing documents. In a Q&A released on CSRC’s official website on December 24, 2021, the respondent CSRC official indicated that the proposed new filing requirement will start with new issuers and listed companies seeking follow-on financing and other financing activities. As for the filings for other listed companies, the regulator will grant adequate transition period and apply separate arrangements. The Q&A also pointed out that, if compliant with relevant PRC laws and regulations, companies with compliant VIE structure may seek overseas listing after completion of the CSRC filings. Nevertheless, the Q&A did not specify what would qualify as a “compliant VIE structure” and what relevant PRC laws and regulations are required to be complied with. The draft Provisions on Strengthening the Confidentiality and Archives Administration of Overseas Securities Issuance and Listing by Domestic Enterprises does not provide for a clear scope of government work secrets or the documents and materials that, if divulged, will jeopardize national security or public interest, and the PRC government authorities may have wide discretion in the interpretation and enforcement of the applicable laws. Given the substantial uncertainties surrounding the latest CSRC filing requirements at this stage, we cannot assure you that, if ever required, we would be able to complete the filings and fully comply with the relevant new rules on a timely basis, if at all.

On December 27, 2021, the NDRC and the MOFCOM jointly issued the 2021 Negative List, which became effective on January 1, 2022. Pursuant to the Special Administrative Measures, if a PRC company engaging in the prohibited business stipulated in the 2021 Negative List seeks an overseas offering and listing, it shall obtain the approval from the competent governmental authorities. Besides, according the further explanation of the NDRC, the foreign investors of the direct overseas offering and listing company shall not be involved in the company’s operation and management, and their shareholding percentages shall be subject, mutatis mutandis, to the relevant regulations on the domestic securities investments by foreign investors. As the 2021 Negative List is relatively new, there remain substantial uncertainties as to the interpretation and implementation of these new requirements, and it is unclear as to whether and to what extent listed companies like us will be subject to these new requirements. If we are required to comply with these requirements and fail to do so on a timely basis, if at all, our business operation, financial conditions and business prospect may be adversely and materially affected.

In addition, we cannot assure you that any new rules or regulations promulgated in the future will not impose additional requirements on us. If it is determined in the future that approval and filing from the CSRC or other regulatory authorities or other procedures, including the cybersecurity review under the laws, regulations and provisions described above, are required for our future offshore offerings, it is uncertain whether we can or how long it will take us to obtain such approval or complete such filing procedures and any such approval or filing could be rescinded or rejected. Any failure to obtain or delay in obtaining such approval or completing such filing procedures for our offshore offerings, or a rescission of any such approval or filing if obtained by us, would subject us to sanctions by the CSRC or other PRC regulatory authorities for failure to seek CSRC approval or filing or other government authorization for our offshore offerings. These regulatory authorities may impose fines and penalties on our operations in China, limit our ability to pay dividends outside of China, limit our operating privileges in China, delay or restrict the repatriation of the proceeds from our offshore offerings into China or take other actions that could materially and adversely affect our business, financial condition, results of operations, and prospects, as well as the trading price of our listed securities. The CSRC or other PRC regulatory authorities also may take actions requiring us, or making it advisable for us, to halt our offshore offerings before settlement and delivery of the shares offered. Consequently, if investors engage in market trading or other activities in anticipation of and prior to settlement and delivery, they do so at the risk that settlement and delivery may not occur. In addition, if the CSRC or other regulatory authorities later promulgate new rules or explanations requiring that we obtain their approvals or accomplish the required filing or other regulatory procedures for our prior offshore offerings, we may be unable to obtain a waiver of such approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties or negative publicity regarding such approval requirement could materially and adversely affect our business, prospects, financial condition, reputation, and the trading price of our listed securities.

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

We conduct our business primarily in China. Our operations in China are governed by PRC laws and regulations. The PRC government has significant oversight and discretion over the conduct of our business, and may intervene or influence our operations as the government deems appropriate to advance regulatory and societal goals and policy positions. The PRC government has recently published new policies that significantly affected certain industries and we cannot rule out the possibility that it will in the future release regulations or policies that directly or indirectly affect our industry or require us to seek additional permission to continue our operations, which could result in a material adverse change in our operation and/or the value of the ADSs. Therefore, investors of our company and our business face potential uncertainty from actions taken by the PRC government affecting our business.

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Currently there is no law or regulation specifically governing virtual asset property rights and therefore it is not clear what liabilities, if any, live streaming platforms may have for virtual assets.

While participating on our platform, our users acquire, purchase and accumulate some virtual assets, such as gifts or certain status. Such virtual assets can be important to users and have monetary value and, in some cases, are sold for actual money. In practice, virtual assets can be lost for various reasons, often through unauthorized use of the user account of one user by other users and occasionally through data loss caused by delay of network service, network crash or hacking activities. Under the Civil Code effective in January 2021, ownership of data and virtual assets are civil rights protected by laws. However, there is currently no further PRC law or regulation specifically governing virtual asset property rights. As a result, there is uncertainty as to who the legal owner of virtual assets is, whether and how the ownership of virtual assets is protected by law, and whether an operator of live streaming platform such as us would have any liability, whether in contract, tort or otherwise, to users or other interested parties, for loss of such virtual assets. Based on recent PRC court judgments, the courts have typically held online platform operators liable for losses of virtual assets by platform users, and ordered online platform operators to return the lost virtual items to users or pay damages and losses. In case of a loss of virtual assets, we may be sued by our users and held liable for damages, which may negatively affect our reputation and business, financial condition and results of operations.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing actions in China against us or our management named in the annual report based on foreign laws.

We are a company incorporated under the laws of the Cayman Islands, we generate a substantial majority of our revenues from China and substantially all of our assets are located in China. In addition, all of our senior executive officers reside within China for a significant portion of the time and all are PRC nationals. As a result, it may be difficult for you to effect service of process upon us or those persons inside the mainland of China. It may also be difficult for you to enforce in U.S. courts judgments obtained in U.S. courts based on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors as none of them currently resides in the U.S. or has substantial assets located in the U.S. In addition, there is uncertainty as to whether the courts of the Cayman Islands or the PRC would recognize or enforce judgments of U.S. courts against us or such persons predicated upon the civil liability provisions of the securities laws of the United States or any state.

The recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on principles of reciprocity between jurisdictions. China does not have any treaties or other forms of reciprocal arrangement with the United States that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, the PRC courts will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC laws or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the U.S.

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It may be difficult for overseas regulators to conduct investigation or collect evidence within China.

There are significant legal and other obstacles in China to providing information needed for regulatory investigations or litigation initiated by regulators outside China. Although the authorities in China may establish a regulatory cooperation mechanism with the securities regulatory authorities of another country or region to implement cross-border supervision and administration, such cooperation with the securities regulatory authorities in the Unities States involves uncertainty. The PRC government authorities have strengthened the supervision of cross-border information provision recently. For example, according to Article 177 of the PRC Securities Law, or Article 177, which became effective in March 2020, no overseas securities regulator is allowed to directly conduct investigation, evidence collection and other activities within the territory of the PRC. Furthermore, pursuant to the draft of Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) issued by the CSRC on April 2, 2022, if any overseas securities regulators and competent overseas authorities requests to investigate, including to collect evidence for investigation purpose, or inspects a domestic company that has been listed or offered securities in an overseas market or securities companies and securities service providers that undertake securities business for such domestic companies, such investigation and inspection shall be conducted under a cross-border regulatory cooperation mechanism, and the CSRC and competent authorities will provide necessary assistance pursuant to bilateral and multilateral cooperation mechanisms. For more information, see “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to M&A and Overseas Listing.” While detailed interpretation of or implementation rules under Article 177 have yet to be promulgated and the draft of Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) have not been formally adopted, the inability for an overseas securities regulator to directly conduct investigation or evidence collection activities within China may further increase difficulties faced by you in protecting your interests.

We may rely on dividends and other distributions on equity paid by our WFOE to fund any cash and financing requirements we may have, and any limitation on the ability of our WFOE to make payments to us could have a material and adverse effect on our ability to conduct our business.

We are a Cayman Islands holding company and we rely principally on dividends and other distributions on equity from our WFOE for our cash requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders for services of any debt we may incur. If any of our WFOE, the VIE and its subsidiaries incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. Under PRC laws and regulations, our WFOE may pay dividends only out of its respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to a staff welfare and bonus fund. These reserve fund and staff welfare and bonus fund cannot be distributed to us as dividends.

Our WFOE, the VIE and its subsidiaries generate primarily all of their revenue in RMB, which is not freely convertible into other currencies. As result, any restriction on currency exchange may limit the ability of our WFOE to use their RMB revenues to pay dividends to us.

The PRC government may continue to strengthen its capital controls, and more restrictions and substantial vetting process may be put forward by the State Administration of Foreign Exchange, or the SAFE, for cross-border transactions falling under both the current account and the capital account. Any limitation on the ability of our WFOE to pay dividends or make other kinds of payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business.

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There are significant uncertainties under the PRC Enterprise Income Tax Law relating to the withholding tax liabilities of our WFOE, and dividends payable by our WFOE to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.

Under the PRC Enterprise Income Tax Law and its implementation rules, the profits of a foreign-invested enterprise generated through operations, which are distributed to its immediate holding company outside of China, will be subject to a withholding tax rate of 10%. Pursuant to a special arrangement between Hong Kong and China, such rate may be reduced to 5% if a Hong Kong resident enterprise owns more than 25% of the equity interest in the PRC company. Our WFOE is wholly owned by BlueCity Holdings Hong Kong Limited, our Hong Kong subsidiary. Accordingly, BlueCity Holdings Hong Kong Limited may qualify for a 5% tax rate in respect of distributions from our WFOE. Under the Notice of the State Administration of Taxation on Issues regarding the Administration of the Dividend Provision in Tax Treaties promulgated in 2009, the taxpayer needs to satisfy certain conditions to enjoy the benefits under a tax treaty. These conditions include: (i)the taxpayer must be the beneficial owner of the relevant dividends, and (ii)the corporate shareholder to receive dividends from our WFOE must have met the direct ownership thresholds during the 12 consecutive months preceding the receipt of the dividends. Further, the State Administration of Taxation, or the SAT, promulgated the Notice on How to Understand and Recognize the “Beneficial Owner” in Tax Treaties in 2009, which limits the “beneficial owner” to individuals, enterprises or other organizations normally engaged in substantive operations, and sets forth certain detailed factors in determining “beneficial owner” status.

Entitlement to a lower tax rate on dividends according to tax treaties or arrangements between the PRC central government and governments of other countries or regions is subject to the Administrative Measures for Non-Resident Taxpayers to Enjoy Treatments under Tax Treaties, which provides that non-resident enterprises are not required to obtain pre-approval from the relevant tax authority in order to enjoy the reduced withholding tax. Instead, non-resident enterprises and their withholding agents may, by self-assessment and on confirmation that the prescribed criteria to enjoy the tax treaty benefits are met, directly apply the reduced withholding tax rate, and file necessary forms and supporting documents when performing tax filings, which will be subject to post-tax filing examinations by the relevant tax authorities. As a result, there can be no assurance that we will be entitled to any preferential withholding tax rate under tax treaties for dividends received from our WFOE.

There are uncertainties with respect to value-added tax rates relating to the tax liabilities of our WFOE.

The PRC Ministry of Finance, or the MOF, the SAT and the General Administration of Customs promulgated the Announcement on Policies to Deepen Value-Added Tax Reform on March 20, 2019, which provides that the current value-added tax rate of 16% in manufacturing and other industries will be reduced to 13%, the current value-added tax rate of 10% in transportation and other industries will be reduced to 9%, and the value-added tax rate in value-added telecommunication service and other industries will remain at 6% from April, 2019. We are subject to value-added tax at a rate of 13% on our sale of medications and screening kits from April, 2019, less any deductible value-added tax we have already paid or borne. It is uncertain whether the value-added tax rate will be raised in the future, which could have a material adverse effect on our financial condition and results of operations. If we fail to comply with these regulations, we may be subject to sanctions including corrective orders, imposition of fines and confiscation of illegal gains.

PRC regulation of loans to and direct investment in PRC entities by offshore holding companies and governmental control of currency conversion may delay or prevent us from using the proceeds of the initial public offering to make loans or additional capital contributions to our WFOE, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

We are an offshore holding company conducting our operations in China through our WFOE, the VIE and its subsidiaries. We may make loans to our WFOE, the VIE and its subsidiaries subject to the approval, registration, and filing with governmental authorities and limitation of amount, or we may make additional capital contributions to our wholly foreign-owned subsidiaries in China. Any loans to our wholly foreign-owned subsidiaries in China, which are treated as foreign-invested enterprises under PRC law, are subject to foreign exchange loan registrations. In addition, a foreign invested enterprise shall use its capital pursuant to the principle of authenticity and self-use within its business scope. The capital of a foreign invested enterprise shall not be used for the following purposes: (i) directly or indirectly used for payment beyond the business scope of the enterprises or the payment prohibited by relevant laws and regulations; (ii) directly or indirectly used for investment in securities or investments other than banks’ principal-secured products unless otherwise provided by relevant laws and regulations; (iii) the granting of loans to non-affiliated enterprises, except where it is expressly permitted in the business license; and (iv) paying the expenses related to the construction and purchase of real estate that is not for self-use (except for the foreign-invested real estate enterprises).

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In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, there can be no assurance that we will be able to complete the necessary government registrations or obtain the necessary government approvals or filings on a timely basis, if at all, with respect to future loans by us to our WFOE or the VIE or with respect to future capital contributions by us to our WFOE. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from the initial public offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Implementation of the labor laws and regulations in China may adversely affect our business and results of operations.

Pursuant to the Labor Contract Law that took effect in January 2008, its implementation rules that took effect in September 2008 and its amendment that took effect in July 2013, employers are subject to stricter requirements in terms of signing labor contracts, minimum wages, paying remuneration, determining the term of employees’ probation and unilaterally terminating labor contracts. Due to lack of detailed interpretative rules and uniform implementation practices and broad discretion of the local competent authorities, it is uncertain as to how the labor contract law and its implementation rules will affect our current employment policies and practices. Our employment policies and practices may violate the labor contract law or its implementation rules, and we may thus be subject to related penalties, fines or legal fees. Compliance with the labor contract law and its implementation rules may increase our operating expenses, in particular our personnel expenses. In the event that we decide to terminate some of our employees or otherwise change our employment or labor practices, the labor contract law and its implementation rules may also limit our ability to effect those changes in a desirable or cost-effective manner, which could adversely affect our business and results of operations.

We expect our labor costs to increase due to the implementation of these laws and regulations. As the interpretation and implementation of these laws and regulations are still evolving, there can be no assurance that our employment practices will at all times be deemed in full compliance with labor-related laws and regulations in China, which may subject us to labor disputes or government investigations. If we are deemed to have violated relevant labor laws and regulations, we could be required to provide additional compensation to our employees and our business, financial condition and results of operations could be materially and adversely affected.

Further, labor disputes, work stoppages or slowdowns at our company or any of our third-party service providers could significantly disrupt our daily operation or our expansion plans and have a material adverse effect on our business.

Our business may be negatively affected by the potential obligations to make additional social insurance and housing fund contributions.

We are required by PRC labor laws and regulations to pay various statutory employee benefits, including pensions insurance, medical insurance, work-related injury insurance, unemployment insurance, maternity insurance and housing fund, to designated government agencies for the benefit of our employees and associates. The relevant government agencies may examine whether an employer has made adequate payments of the requisite statutory employee benefits, and employers who fail to make adequate payments may be subject to late payment fees, fines and/or other penalties. If the relevant PRC authorities determine that we shall make supplemental social insurance and housing fund contributions or that we are subject to fines and legal sanctions in relation to our failure to make social insurance and housing fund contributions in full for our employees, our business, financial condition and results of operations may be adversely affected.

We may be subject to fines for failing to register and file lease agreements with the relevant governmental authorities in China.

According to the Administrative Measures for Commodity Housing Tenancy promulgated by the Ministry of Housing and Urban-Rural Development, all leases are to be registered and filed with the relevant real estate administration bureaus in China. As of the date of the annual report, certain leases relating to our offices in China had not been registered and filed with the relevant land and real estate administration bureaus in China. Our PRC legal advisers have advised us that failure to complete the registration and filing of lease agreements will not affect the validity of such leases or impede our use of the relevant properties but could result in the imposition of fines up to RMB10,000 for each leased property that is unregistered if we fail to rectify the noncompliance within the time frame prescribed by the relevant authorities.

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Fluctuation in exchange rates could have a material and adverse effect on our results of operations and the value of your investment.

The conversion of Renminbi into foreign currencies, including U.S. dollars, is based on rates set by the People’s Bank of China. The Renminbi has fluctuated against the U.S. dollar, at times significantly and unpredictably. The value of Renminbi against the U.S. dollar and other currencies is affected by changes in China’s political and economic conditions and by China’s foreign exchange policies, among other things. We cannot assure you that Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. It is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future.

A substantial majority of our revenues and costs is denominated in RMB. Any significant depreciation of the RMB may materially adversely affect the value of, and any dividends payable on, the ADSs in U.S. dollars. For example, when we convert our U.S. dollars denominated funds into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would have an adverse effect on the Renminbi amount we would receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making payments for dividends on our ordinary shares or the ADSs or for other business purposes, appreciation of the U.S. dollar against the Renminbi would have a negative effect on the U.S. dollar amount available to us. In addition, appreciation or depreciation in the value of the Renminbi relative to U.S. dollars would affect our financial results reported in U.S. dollar terms regardless of any underlying change in our business or results of operations.

Very limited hedging options are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedges may be limited and we may not be able to adequately hedge our exposure or at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency. As a result, fluctuations in exchange rates may have a material adverse effect on your investment.

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We receive a substantial majority of our revenues in Renminbi. Under our current corporate structure, our Cayman Islands holding company primarily relies on dividend payments from our WFOE to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval of SAFE by complying with certain procedural requirements. Specifically, under the existing exchange restrictions, without prior approval of SAFE, cash generated from the operations of our WFOE in China may be used to pay dividends to our company. However, approval from or registration with appropriate governmental authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. As a result, we need to obtain SAFE approval to use cash generated from the operations of our WFOE and the VIE to pay off their respective debt in a currency other than Renminbi owed to entities outside of China, or to make other capital expenditure payments outside of China in a currency other than Renminbi.

In light of the flood of capital outflows of China, the PRC government may from time to time impose more restrictive foreign exchange policies and step up scrutiny of major outbound capital movement. More restrictions and substantial vetting process may be required by SAFE or other governmental authorities to regulate cross-border transactions falling under the capital account. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of the ADSs.

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China’s M&A Rules and certain other PRC regulations establish complex procedures for certain acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

Among other things, the M&A Rules adopted by six PRC regulatory agencies in 2006 and amended in 2009, established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time-consuming and complex. Such regulation requires, among other things, that MOFCOM be notified in advance of any change-of-control transaction in which a foreign investor acquires control of a PRC domestic enterprise and involves any of the following circumstances: (i) any important industry is concerned, (ii) such transaction involves factors that impact or may impact national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. The Anti-Monopoly Law promulgated by the Standing Committee of the National People's Congress which became effective in 2008 requires that transactions which are deemed concentrations and involve parties with specified turnover thresholds must be cleared by MOFCOM before they can be completed. In addition, PRC national security review rules that became effective in September 2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. On December 14, 2020, the SAMR announced three cases of administrative penalties for the failures of acquirers to make proper concentration declarations to authorities about their past acquisitions. This is also the first time that the SAMR imposed administrative penalties for illegal concentration declarations on entities structured in a VIE arrangement.

We have made strategic acquisitions, and we may in the future grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from MOFCOM or its local counterparts may delay or inhibit our ability to complete such transactions. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, MOFCOM or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in China, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited.

PRC regulations relating to offshore investment activities by PRC residents may limit our WFOE’s ability to change its registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC laws.

In July 2014, SAFE promulgated the Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37. SAFE Circular 37 requires PRC residents (including PRC individuals and PRC corporate entities as well as foreign individuals that are deemed as PRC residents for foreign exchange administration purpose) to register with SAFE or its local branches in connection with their direct or indirect offshore investment activities. SAFE Circular 37 further requires amendment to the SAFE registrations in the event of any changes with respect to the basic information of the offshore special purpose vehicle, such as change of a PRC individual shareholder, name and operation term, or any significant changes with respect to the offshore special purpose vehicle, such as increase or decrease of capital contribution, share transfer or exchange, or mergers or divisions. SAFE Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future.

If our shareholders who are PRC residents fail to make the required registration or to update the previously filed registration, our WFOE may be prohibited from distributing their profits or the proceeds from any capital reduction, share transfer or liquidation to us, and we may also be prohibited from making additional capital contributions into our WFOE.

In February 2015, SAFE promulgated a Notice on Further Simplifying and Improving Foreign Exchange Administration Policy on Direct Investment, or SAFE Notice 13, effective in June 2015. Under SAFE Notice 13, applications for foreign exchange registration of inbound foreign direct investments and outbound overseas direct investments, including those required under SAFE Circular 37, will be filed with qualified banks instead of SAFE. The qualified banks will directly examine the applications and accept registrations under the supervision of SAFE.

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We may not be informed of the identities of all the PRC residents holding direct or indirect interest in our company, and we cannot provide any assurance that these PRC residents will comply with our request to make or obtain any applicable registrations or continuously comply with all requirements under SAFE Circular No. 37 or other related rules. The failure or inability of the relevant shareholders to comply with the registration procedures set forth in these regulations may subject us to fines and legal sanctions, such as restrictions on our cross- border investment activities, on the ability of our wholly foreign-owned subsidiaries in China to distribute dividends and the proceeds from any reduction in capital, share transfer or liquidation to us. Moreover, failure to comply with the various foreign exchange registration requirements described above could result in liability under PRC law for circumventing applicable foreign exchange restrictions. As a result, our business operations and our ability to distribute profits to you could be materially and adversely affected.

Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

In February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, replacing earlier rules promulgated in 2007. Pursuant to these rules, PRC citizens and non-PRC citizens who reside in China for a continuous period of not less than one year who participate in any stock incentive plan of an overseas publicly listed company, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be the PRC subsidiaries of such overseas-listed company, and complete certain other procedures. In addition, an overseas-entrusted institution must be retained to handle matters in connection with the exercise or sale of stock options and the purchase or sale of shares and interests. We and our executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted options are subject to these regulations when our company becomes an overseas-listed company. Failure to complete SAFE registrations may subject them to fines of up to RMB300,000 for entities and up to RMB50,000 for individuals, and legal sanctions and may also limit our ability to contribute additional capital into our WFOE and limit our WFOE’s ability to distribute dividends to us. We also face regulatory uncertainties that could restrict our ability to adopt additional incentive plans for our directors, executive officers and employees under PRC law. See “Item 4. Information on the Company— B. Business Overview—Regulation—Regulations Relating to Foreign Exchange—Regulations on Stock Incentive Plans.”

In addition, the SAT has issued certain circulars concerning employee share options and restricted shares. Under these circulars, our employees working in China who exercise share options or are granted restricted shares will be subject to PRC individual income tax. Our WFOE has obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options. If our employees fail to pay or we fail to withhold their income taxes according to relevant laws and regulations, we may face sanctions imposed by the tax authorities or other PRC governmental authorities. See “Item 4. Information on the Company— B. Business Overview—Regulation—Regulations Relating to Foreign Exchange—Regulations on Stock Incentive Plans.”

If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or the ADS holders.

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with “de facto management body” within the PRC is considered a “resident enterprise” and will be subject to the enterprise income tax on its global income at the rate of 25%. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise. In 2009, the SAT issued a circular, known as SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises.

According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China and will be subject to PRC enterprise income tax on its global income only if all of the following conditions are met: (i) the primary location of the day-to-day operational management is in the PRC; (ii) decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii) the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv)at least 50% of voting board members or senior executives habitually reside in the PRC.

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We believe that we are not a PRC resident enterprise for PRC tax purposes. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” If the PRC tax authorities determine that we are a PRC resident enterprise for enterprise income tax purposes, we could be subject to PRC tax at a rate of 25% on our worldwide income, which could materially reduce our net income, and we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of the ADSs. In addition, non-resident enterprise shareholders (including the ADS holders) may be subject to PRC tax at a rate of 10% on gains realized on the sale or other disposition of ADSs or Class A ordinary shares, if such income is treated as sourced from within the PRC. Furthermore, if we are deemed a PRC resident enterprise, dividends payable to our non-PRC individual shareholders (including the ADS holders) and any gain realized on the transfer of ADSs or Class A ordinary shares by such shareholders may be subject to PRC tax at a rate of 20% (which, in the case of dividends, may be withheld at source by us), if such income or gains are deemed to be from PRC sources. Any PRC tax imposed on dividends or gains may be subject to reduction if a reduced rate is available under an applicable tax treaty. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any PRC tax may reduce the returns on your investment in the ADSs or Class A ordinary shares.

We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by the SAT in 2009 with retroactive effect from January 1, 2008, where a non-resident enterprise transfers the equity interests of a PRC resident enterprise indirectly by disposition of the equity interests of an overseas holding company, or an Indirect Transfer, and such overseas holding company is located in a tax jurisdiction that: (i)has an effective tax rate less than 12.5% or (ii)does not tax foreign income of its residents, the non-resident enterprise, being the transferor, shall report to the competent tax authority of the PRC resident enterprise this Indirect Transfer.

In February 2015, the SAT issued a Public Notice Regarding Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-Tax Resident Enterprises, or SAT Circular 7. SAT Circular 7 supersedes the rules with respect to the Indirect Transfer under SAT Circular 698, but does not touch upon the other provisions of SAT Circular 698, which remain in force. SAT Circular 7 has introduced a new tax regime that is significantly different from the previous one under SAT Circular 698. SAT Circular 7 extends its tax jurisdiction to not only Indirect Transfers set forth under SAT Circular 698 but also transactions involving transfer of immovable property in China and assets held under the establishment, and placement in China, of a foreign company through the offshore transfer of a foreign intermediate holding company. In addition, SAT Circular 7 provides clearer criteria than SAT Circular 698 for assessment of reasonable commercial purposes and has introduced safe harbors for internal group restructurings and the purchase and sale of equity through a public securities market. SAT Circular 7 also brings challenges to both foreign transferor and transferee (or other person who is obligated to pay for the transfer) of taxable assets. Where a non-resident enterprise transfers taxable assets indirectly by disposing of the equity interests of an overseas holding company, which is an Indirect Transfer, the non-resident enterprise as either transferor or transferee, or the PRC entity that directly owns the taxable assets, may report such Indirect Transfer to the relevant tax authority. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. Both the transferor and the transferee may be subject to penalties under PRC tax laws if the transferee fails to withhold the taxes and the transferor fails to pay the taxes.

In October 2017, the SAT issued an Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or SAT Circular 37. Effective in December 2017, SAT Circular 37, among others, repealed the Circular 698 and amended certain provisions in SAT Circular 7. According to SAT Circular 37, where the non-resident enterprise fails to declare the tax payable pursuant to Article 39 of the Enterprise Income Tax, the tax authority may order it to pay the tax due within required time limits, and the non-resident enterprise shall declare and pay the tax payable within such time limits specified by the tax authority. However, if the non-resident enterprise voluntarily declares and pays the tax payable before the tax authority orders it to do so within required time limits, it shall be deemed that such enterprise has paid the tax in time.

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We face uncertainties as to the reporting and other implications of certain past and future transactions where PRC taxable assets are involved, such as offshore restructuring, sale of the shares in our offshore subsidiaries and investments. Our company may be subject to filing obligations or taxed if our company is transferor in such transactions, and may be subject to withholding obligations if our company is transferee in such transactions, under SAT Circular 7 and SAT Circular 37. For transfer of shares in our company by investors who are non-PRC resident enterprises, our PRC subsidiary may be requested to assist in the filing under SAT circulars. As a result, we may be required to expend valuable resources to comply with SAT circulars or to request the relevant transferors from whom we purchase taxable assets to comply with these circulars, or to establish that our company should not be taxed under these circulars, which may have a material adverse effect on our financial condition and results of operations.

Risks Related to The ADSs

The market price for the ADSs has been and may continue to be volatile.

The trading price of the ADSs has ranged from US$1.25 to US$20.46 per ADS in 2021. The trading price of the ADSs is likely to remain volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, including the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. In addition to market and industry factors, the price and trading volume for the ADSs may be highly volatile for factors specific to our own operations, including the following:

● variations in our revenues, earnings, cash flow and data related to our user base or user engagement;

● announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors;

● announcements of new product and service offerings, solutions and expansions by us or our competitors;

● announcements of new laws and regulations or interpretations of existing laws and regulations that affect our business;

● changes in financial estimates by securities analysts;

● detrimental adverse publicity about us, our products and services or our industries;

● additions or departures of key personnel;

● release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities;

● actual or potential litigation or regulatory investigations; and

● the proposed acquisition of all of our outstanding shares, including the Class A ordinary shares represented by the ADSs, not already beneficially owned by Mr. Baoli Ma and Metaclass Management ELP in a proposed going private transaction.

Any of these factors may result in large and sudden changes in the volume and price at which the ADSs will trade.

In the past, shareholders of public companies have often brought securities class action suits against those companies following periods of instability in the market price of their securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations and require us to incur significant expenses to defend the suit, which could harm our results of operations. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

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There can be no assurance that any definitive offer will be made with respect to the going private transaction proposed by Mr. Baoli Ma and Metaclass Management ELP, that any definitive agreement will be executed or that this or any other similar transaction will be approved or consummated. Potential uncertainty involving the proposed going private transaction may adversely affect our business and the market price of the ADSs.

On January 2, 2022, our board of directors received a preliminary non-binding proposal letter (the “Original Proposal”) from Mr. Baoli Ma and Spriver Tech Limited, to acquire all of our outstanding ordinary shares, including the Class A ordinary shares represented by the ADSs, that are not already beneficially owned by them for a proposed purchase price of US$3.70 per ordinary share or US$1.85 per ADS in cash through a going private transaction.

On April 18, 2022, our board of directors received a revised preliminary non-binding proposal letter (the “Proposal Letter”) from Mr. Baoli Ma and Metaclass Management ELP, an affiliate of Spriver Tech Limited (“Sponsor,” and together with Mr. Baoli Ma, the “Buyer Group”) with respect to the proposed going private transaction (the “Proposed Transaction”). The Buyer Group was formed in furtherance of the Proposed Transaction initially set forth in the Original Proposal, and the Proposal Letter updates the Original Proposal to (i) inform our board of directors that Metaclass Management ELP, an affiliate of Spriver Tech Limited, is replacing Spriver Tech Limited as Sponsor and (ii) reduce the proposed purchase price from US$3.70 per Ordinary Share or US$1.85 per ADS in cash to US$3.20 per Ordinary Share or US$1.60 per ADS in cash. The other key terms of the Proposal Letter remain the same as those set forth in the Original Proposal. As of April 18, 2022, Mr. Baoli Ma beneficially owns an aggregate of 5,114,840 Class B ordinary shares and 792,537 Class A ordinary shares, which represent 67.3% of our total voting power.

Our board of directors has formed a special committee consisting of three independent directors, Wenjie (Jenny) Wu, Shengwen (Roy) Rong, and Guojie Shi, to evaluate and consider the Proposal Transaction. The special committee retained Duff & Phelps as its financial advisor and Skadden, Arps, Slate, Meagher & Flom as its U.S. legal counsel. There can be no assurance that any definitive offer will be made, that any definitive agreement will be executed relating to the going private transaction, or that the going private transaction or any other similar transaction will be approved or consummated.

The Proposed Transaction, whether or not pursued or consummated, presents a risk of diverting management focus, employee attention and resources from other strategic opportunities and from operational matters. In addition, if we sign any definitive agreement with the Buyer Group, we may be subject to various restrictions under those agreements on the conduct of our business prior to the completion of the transaction, which may delay or prevent us from undertaking business opportunities that may arise pending completion of the transaction. Also, any development of the transaction, such as entering into or termination of any definitive agreement, may increase volatility of the trading price of the ADSs.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, the market price for the ADSs and trading volume could decline.

The trading market for the ADSs will be influenced by research or reports that industry or securities analysts publish about our business. If one or more analysts who cover us downgrade the ADSs, the market price for the ADSs would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the market price or trading volume for the ADSs to decline.

The sale or availability for sale of substantial amounts of the ADSs could adversely affect their market price.

Sales of substantial amounts of the ADSs in the public market, or the perception that these sales could occur, could adversely affect the market price of the ADSs and could materially impair our ability to raise capital through equity offerings in the future. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of the ADSs.

Because we do not expect to pay dividends in the foreseeable future, you must rely on price appreciation of the ADSs for return on your investment.

We currently intend to retain most, if not all, of our available funds and any future earnings to fund the development and growth of our business. As a result, we do not expect to pay any cash dividends in the foreseeable future. Therefore, you should not rely on an investment in the ADSs as a source for any future dividend income.

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Our board of directors has complete discretion as to whether to distribute dividends. Even if our board of directors decides to declare and pay dividends, the timing, amount and form of future dividends, if any, will depend on, among other things, our future results of operations and cash flow, our capital requirements and surplus, the amount of distributions, if any, received by us from our subsidiary, our financial condition, contractual restrictions and other factors deemed relevant by our board of directors. Accordingly, the return on your investment in the ADSs will likely depend entirely upon any future price appreciation of the ADSs. There is no guarantee that the ADSs will appreciate in value or even maintain the price at which you purchased the ADSs. You may not realize a return on your investment in the ADSs and you may even lose your entire investment in the ADSs.

Our dual-class voting structure will limit your ability to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and the ADSs may view as beneficial.

We have a dual-class ordinary share structure. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of Class A ordinary shares will be entitled to one vote per share, while holders of Class B ordinary shares will be entitled to five votes per share. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any transfer of Class B ordinary shares by a holder thereof to any person or entity that is not an affiliate of such holder, such Class B ordinary shares shall be automatically and immediately converted into the equal number of Class A ordinary shares.

As of April 18, 2022, Mr. Baoli Ma beneficially owns an aggregate of 5,114,840 Class B ordinary shares and 792,537 Class A ordinary shares, which represent 67.3% of our total voting power. Therefore, Mr. Baoli Ma has decisive influence over matters requiring shareholders’ approval, including election of directors and significant corporate transactions, such as a merger or sale of our company or our assets. This concentrated control will limit your ability to influence corporate matters and could discourage others from pursuing any potential merger, takeover or other change of control transactions that holders of our Class A ordinary shares and the ADSs may view as beneficial.

The dual-class structure of our ordinary shares may adversely affect the trading market for the ADSs.

S&P Dow Jones and FTSE Russell have previously announced changes to their eligibility criteria for inclusion of shares of public companies on certain indices, including the S&P 500, to exclude companies with multiple classes of shares and companies whose public shareholders hold no more than 5% of total voting power from being added to such indices. In addition, several shareholder advisory firms have announced their opposition to the use of multiple class structures. As a result, the dual class structure of our ordinary shares may prevent the inclusion of the ADSs representing our Class A ordinary shares in such indices and may cause shareholder advisory firms to publish negative commentary about our corporate governance practices or otherwise seek to cause us to change our capital structure. Any such exclusion from indices could result in a less active trading market for the ADSs representing our Class A ordinary shares. Any actions or publications by shareholder advisory firms critical of our corporate governance practices or capital structure could also adversely affect the value of the ADSs.

You must rely on the judgment of our management as to the use of the net proceeds from the initial public offering, and such use may not produce income or increase the ADS price.

Our management will have considerable discretion in the application of the net proceeds received by us. You will not have the opportunity, as part of your investment decision, to assess whether proceeds are being used appropriately. The net proceeds may be used for corporate purposes that do not improve our efforts to achieve or maintain profitability or increase the ADS price. The net proceeds from the initial public offering may be placed in investments that do not produce income or that lose value.

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There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in the ADSs or Class A ordinary shares to significant adverse United States income tax consequences.

We will be classified as a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year if either (a) 75% or more of our gross income for such year consists of certain types of “passive” income or (b) 50% or more of the value of our assets (generally determined on the basis of a quarterly average) during such year produce or are held for the production of passive income. Although the law in this regard is unclear, we intend to treat the VIE (including its subsidiaries) as being owned by us for United States federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their results of operations in our consolidated financial statements. Assuming that we are the owner of the VIE (including its subsidiaries) for United States federal income tax purposes, and based upon our current and expected income and assets, including goodwill and other unbooked intangibles not reflected on our balance sheet, we do not believe that we were a PFIC for the taxable year ended December 31, 2021 and do not presently expect to be a PFIC for the current taxable year or the foreseeable future.

While we do not expect to become a PFIC, because the value of our assets for purposes of the asset test may be determined by reference to the market price of the ADSs, fluctuations in the market price of the ADSs may cause us to become a PFIC for the current or subsequent taxable years. In particular, recent declines in the market price of the ADSs significantly increased our risk of becoming a PFIC. The market price of the ADSs may continue to fluctuate considerably and, consequently, we cannot assure you of our PFIC status for any taxable year. The determination of whether we will be or become a PFIC will also depend, in part, on the composition of our income and assets. In addition, the composition of our income and assets will also be affected by how, and how quickly, we use our liquid assets. If we determine not to deploy significant amounts of cash for active purposes or if it were determined that we do not own the stock of the VIE for United States federal income tax purposes, our risk of being a PFIC may substantially increase. Because PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year.

If we are a PFIC in any taxable year, a U.S. Holder (as defined in “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations”) may incur significantly increased United States income tax on gain recognized on the sale or other disposition of the ADSs or Class A ordinary shares and on the receipt of distributions on the ADSs or Class A ordinary shares to the extent such gain or distribution is treated as an “excess distribution” under the United States federal income tax rules, and such U.S. Holder may be subject to burdensome reporting requirements. Further, if we are a PFIC for any year during which a U.S. Holder holds the ADSs or Class A ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds the ADSs or Class A ordinary shares. For more information, see “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Considerations” and “Item 10. Additional Information—E. Taxation—United States Federal Income Tax Considerations—Passive Foreign Investment Company Rules.”

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The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of the underlying Class A ordinary shares which are represented by the ADSs.

As a holder of the ADSs, you will only be able to exercise the voting rights with respect to the underlying Class A ordinary shares representing the ADSs in accordance with the provisions of the deposit agreement. Under the deposit agreement, you must vote by giving voting instructions to the depositary. Upon receipt of your voting instructions, the depositary will vote the underlying Class A ordinary shares representing the ADSs in accordance with these instructions. You will not be able to directly exercise your right to vote with respect to the underlying Class A ordinary shares representing the ADSs unless you withdraw the shares and become the registered holder of such shares prior to the record date for the general meeting. When a general meeting is convened, you may not receive sufficient advance notice enable you to withdraw the Class A ordinary shares underlying the ADSs and become the registered holder of such shares prior to the record date of the general meeting to allow you to vote with respect to any specific matter. In addition, under our currently effective memorandum and articles of association, for the purposes of determining those shareholders who are entitled to attend and vote at any general meeting, our directors may close our register of members or fix in advance a record date for such meeting, and such closure of our register of members or the setting of such a record date may prevent you from withdrawing the Class A ordinary shares underlying the ADSs and becoming the registered holder of such shares prior to the record date, so that you would not be able to attend the general meeting or to vote directly. Where any matter is to be put to a vote at a general meeting, the depositary will use its best endeavors to notify you of the upcoming vote and to deliver our voting materials to you. There can be no assurance that you will receive the voting materials in time to ensure that you can instruct the depositary to vote your Class A ordinary shares. In addition, the depositary and its agents are not responsible for failing to carry out voting instructions or for their manner of carrying out your voting instructions. This means that you may not be able to exercise your right to vote and you may have no legal remedy if the Class A ordinary shares underlying the ADSs are not voted as you requested.

Except in limited circumstances, the depositary for the ADSs will give us a discretionary proxy to vote the Class A ordinary shares underlying the ADSs if you do not vote at shareholders’ meetings, which could adversely affect your interests.

Under the deposit agreement for the ADSs, if you do not timely and properly give voting instructions to the depository as to how to vote the Class A ordinary shares underlying the ADSs, the depositary will give us or our nominee a discretionary proxy to vote the Class A ordinary shares underlying the ADSs at shareholders’ meetings unless:

● we have instructed the depositary that we do not wish a discretionary proxy to be given;

● we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting;

● a matter to be voted on at the meeting would have a material adverse impact on shareholders; or

● the voting at the meeting is to be made on a show of hands.

The effect of this discretionary proxy is that if you do not timely and properly give voting instructions to the depository as to how to vote the Class A ordinary shares underlying the ADSs at shareholders’ meetings, you cannot prevent such Class A ordinary shares underlying the ADSs from being voted, except under the circumstances described above. This may make it more difficult for shareholders to influence the management of our company. Holders of our Class A ordinary shares are not subject to this discretionary proxy.

Your rights to pursue claims against the depositary as a holder of ADSs are limited by the terms of the deposit agreement.

Under the deposit agreement, any action or proceeding against or involving the depositary, arising out of or based upon the deposit agreement or the transactions contemplated thereby or by virtue of owning the ADSs may only be instituted in a state or federal court in New York, New York, and you, as a holder of the ADSs, will have irrevocably waived any objection which you may have to the laying of venue of any such proceeding, and irrevocably submitted to the exclusive jurisdiction of such courts in any such action or proceeding. The depositary may, in its sole discretion, require that any dispute or difference arising from the relationship created by the deposit agreement be referred to and finally settled by an arbitration conducted under the terms described in the deposit agreement, although the arbitration provisions do not preclude you from pursuing claims under the Securities Act or the Exchange Act in state or federal courts. See “Item 12. Description of Securities Other than Equity Securities—D. American Depositary Shares” for more information.

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ADSs holders may not be entitled to a jury trial with respect to claims arising under the deposit agreement, which could result in less favorable outcomes to the plaintiff(s) in any such action.

The deposit agreement governing the ADSs representing our Class A ordinary shares provides that, subject to the depositary’s right to require a claim to be submitted to arbitration, the federal or state courts in the City of New York have exclusive jurisdiction to hear and determine claims arising under the deposit agreement and in that regard, to the fullest extent permitted by law, ADS holders waive the right to a jury trial of any claim they may have against us or the depositary arising out of or relating to our ordinary shares, the ADSs or the deposit agreement, including any claim under the U.S. federal securities laws.

If we or the depositary opposed a jury trial demand based on the waiver, the court would determine whether the waiver was enforceable based on the facts and circumstances of that case in accordance with the applicable state and federal law. To our knowledge, the enforceability of a contractual pre-dispute jury trial waiver in connection with claims arising under the federal securities laws has not been finally adjudicated by the United States Supreme Court. However, we believe that a contractual pre-dispute jury trial waiver provision is generally enforceable, including under the laws of the State of New York, which govern the deposit agreement. In determining whether to enforce a contractual pre-dispute jury trial waiver provision, courts will generally consider whether a party knowingly, intelligently and voluntarily waived the right to a jury trial. We believe that this is the case with respect to the deposit agreement and the ADSs. It is advisable that you consult legal counsel regarding the jury waiver provision before investing in the ADSs.

If you or any other holders or beneficial owners of ADSs bring a claim against us or the depositary in connection with matters arising under the deposit agreement or the ADSs, including claims under federal securities laws, you or such other holder or beneficial owner may not be entitled to a jury trial with respect to such claims, which may have the effect of limiting and discouraging lawsuits against us and/or the depositary. If a lawsuit is brought against us and/or the depositary under the deposit agreement, it may be heard only by a judge or justice of the applicable trial court, which would be conducted according to different civil procedures and may result in different outcomes than a trial by jury would have had, including results that could be less favorable to the plaintiff(s) in any such action.

Nevertheless, if this jury trial waiver provision is not enforced, to the extent a court action proceeds, it would proceed under the terms of the deposit agreement with a jury trial. No condition, stipulation or provision of the deposit agreement or ADSs shall relieve us or the depositary from our respective obligations to comply with the Securities Act and Exchange Act.

You may experience dilution of your holdings due to inability to participate in rights offerings.

We may from time to time distribute rights to our shareholders, including rights to acquire our securities. However, we cannot make such rights available to you in the United States unless we register both the rights and the securities to which the rights relate under the Securities Act or an exemption from the registration requirements is available. Under the deposit agreement, the depositary will not make rights available to you unless both the rights and the underlying securities to be distributed to ADS holders are either registered under the Securities Act or exempt from registration under the Securities Act. We are under no obligation to file a registration statement with respect to any such rights or securities or to endeavor to cause such a registration statement to be declared effective and we may not be able to establish a necessary exemption from registration under the Securities Act. Accordingly, you may be unable to participate in our rights offerings in the future and may experience dilution in your holdings.

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You may not receive dividends or other distributions on our Class A ordinary shares and you may not receive any value for them, if it is illegal or impractical to make them available to you.

The depositary of the ADSs has agreed to pay to you the cash dividends or other distributions it or the custodian receives on Class A ordinary shares or other deposited securities underlying the ADSs, after deducting its fees and expenses. You will receive these distributions in proportion to the number of Class A ordinary shares your ADSs represent. However, the depositary is not responsible if it decides that it is unlawful or impractical to make a distribution available to any holders of ADSs. For example, it would be unlawful to make a distribution to a holder of ADSs if it consists of securities that require registration under the Securities Act but that are not properly registered or distributed under an applicable exemption from registration. The depositary may also determine that it is not feasible to distribute certain property through the mail. Additionally, the value of certain distributions may be less than the cost of mailing them. In these cases, the depositary may determine not to distribute such property. We have no obligation to register under U.S. securities laws any ADSs, Class A ordinary shares, rights or other securities received through such distributions. We also have no obligation to take any other action to permit the distribution of ADSs, Class A ordinary shares, rights or anything else to holders of ADSs. This means that you may not receive distributions we make on our Class A ordinary shares or any value for them if it is illegal or impractical for us to make them available to you. These restrictions may cause a material decline in the value of the ADSs.

You may be subject to limitations on transfer of your ADSs.

Your ADSs are transferable on the books of the depositary. However, the depositary may close its books at any time or from time to time when it deems expedient in connection with the performance of its duties. The depositary may close its books from time to time for a number of reasons, including in connection with corporate events such as a rights offering, during which time the depositary needs to maintain an exact number of ADS holders on its books for a specified period. The depositary may also close its books in emergencies, and on weekends and public holidays. The depositary may refuse to deliver, transfer or register transfers of the ADSs generally when our share register or the books of the depositary are closed, or at any time if we or the depositary thinks that it is advisable to do so because of any requirement of law or of any government or governmental body, or under any provision of the deposit agreement, or for any other reason in accordance with the terms of the deposit agreement. As a result, you may be unable to transfer your ADSs when you wish to.

Our memorandum and articles of association contain anti-takeover provisions that could have a material adverse effect on the rights of holders of our Class A ordinary shares and ADSs.

Our seventh amended and restated memorandum and articles of association contain provisions that could limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions. These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. In addition, our board of directors has the authority, without further action by our shareholders, to issue preferred shares in one or more series and to fix their designations, powers, preferences, privileges, and relative participating, optional or special rights and the qualifications, limitations or restrictions, including dividend rights, conversion rights, voting rights, terms of redemption and liquidation preferences, any or all of which may be greater than the rights associated with our Class A ordinary shares, in the form of ADS or otherwise. Preferred shares could be issued quickly with terms calculated to delay or prevent a change in control of our company or make removal of management more difficult. If our board of directors decides to issue preferred shares, the price of the ADSs may fall and the voting and other rights of the holders of our Class A ordinary shares and ADSs may be materially and adversely affected.

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You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under Cayman Islands law.

We are an exempted company incorporated under the laws of the Cayman Islands. Our corporate affairs are governed by our currently effective memorandum and articles of association, the Companies Act (As Revised) of the Cayman Islands, or the Companies Act, and the common law of the Cayman Islands. The rights of shareholders to take action against our directors, actions by our minority shareholders and the fiduciary duties of our directors owed to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the Cayman Islands. The rights of our shareholders and the fiduciary duties of our directors owed to us under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the Cayman Islands. In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

The notice of registered office is a matter of public record. A list of the names of the current directors and alternate directors (if applicable) are made available by the Registrar of Companies in the Cayman Islands for inspection by any person on payment of a fee. The register of mortgages is open to inspection by creditors and members. Shareholders of Cayman Islands exempted companies like us have no general rights under Cayman Islands law to inspect corporate records (other than the currently effective memorandum and articles of association and any special resolutions passed by such companies) or to obtain copies of lists of shareholders of these companies. Our directors have discretion under our currently effective memorandum and articles of association to determine whether or not, and under what conditions, our corporate records may be inspected by our shareholders, but are not obliged to make them available to our shareholders. This may make it more difficult for you to obtain the information needed to establish any facts necessary for a shareholder motion or to solicit proxies from other shareholders in connection with a proxy contest.

As a result of all of the above, our public shareholders may have more difficulty in protecting their interests in the face of actions taken by our management, members of our board of directors or our controlling shareholders than they would as public shareholders of a company incorporated in the United States. See “Item 10.B. Additional Information—B. Memorandum and Articles of Association—Differences in Corporate Law.”

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 for so long as we are an emerging growth company until the fifth anniversary from the date of our initial listing. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

In addition, pursuant to the JOBS Act, we have elected to take advantage of the extended transition period for complying with new or revised accounting standards until those standards would otherwise apply to private companies. As a result, our operating results and financial statements may not be comparable to the operating results and financial statements of other companies who have adopted the new or revised accounting standards. If we cease to be an emerging growth company, we will no longer be able to take advantage of these exemptions or the extended transition period for complying with new or revised accounting standards.

We cannot predict if investors will find the ADSs less attractive or our company less comparable to certain other public companies because we will rely on these exemptions and election. If some investors find the ADSs less attractive as a result, there may be a less active trading market for the ADSs and the ADS price may be more volatile.

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We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to United States domestic public companies.

Because we are a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including: (i) the rules under the Exchange Act requiring the filing of quarterly reports on Form 10-Q or current reports on Form 8-K with the SEC; (ii) the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; (iii) the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and (iv) the selective disclosure rules by issuers of material nonpublic information under Regulation FD.

We are required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis through press releases, distributed pursuant to the rules and regulations of Nasdaq. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely compared to that required to be filed with the SEC by U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer.

As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.

As an exempted company incorporated in the Cayman Islands company that is listed on the Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. We currently follow our home country practice that does not require us to (i) hold an annual meeting of shareholders no later than one year after the end of its fiscal year, (ii) seek shareholder approval for establishing share incentive plans, and (iii) have an audit committee consisting of two members. As a result, our investors may not be provided with the benefits of certain corporate governance requirements of Nasdaq.

We are a “controlled company” within the meaning of the Nasdaq Stock Market Rules and, as a result, may rely on exemptions from certain corporate governance requirements that provide protection to shareholders of other companies.

We are a “controlled company” as defined under the Nasdaq Stock Market Rules because Mr. Baoli Ma, our founder, chairman and chief executive officer, owns more than 50% of our total voting power. For so long as we remain a controlled company under that definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules, including an exemption from the rule that a majority of our board of directors must be independent directors. As a result, you may not have the same protection afforded to shareholders of companies that are subject to these corporate governance requirements.

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We expect to incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”

We are a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. These additional costs may negatively affect our financial results. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and Nasdaq, impose various requirements on the corporate governance practices of public companies. We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. We expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a public company, we have increased the number of independent directors and adopted policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

ITEM 4. INFORMATION ON THE COMPANY

A. History and Development of the Company

In September 2011, Beijing BlueCity Culture and Media Co., Ltd., the VIE, a PRC domestic company, was established. We launched our mobile app Blued in 2012.

In December 2013, BlueCity Holdings Limited was established in the Cayman Islands as our offshore holding company to facilitate financing and offshore listing. In March 2014, BlueCity Holdings Limited established a wholly-owned subsidiary in Hong Kong, BlueCity Holdings Hong Kong Limited.

In 2014, BlueCity Holdings Hong Kong Limited established, Beijing BlueCity Information & Technology Co., Ltd., our WFOE, and we gained control over the VIE through our WFOE by entering into a series of contractual arrangements with the VIE and its shareholders. In June 2018, in order to reflect the change of shareholding of the VIE, we effected some restructuring of the equity ownership in the VIE, and a new series of contractual arrangements, whose terms are substantially the same with the previous contractual arrangements, were subsequently entered into by and among our WFOE, the VIE and the VIE’s shareholders. See “—C. Organizational Structure—Contractual Arrangements with the VIE and Its Shareholders” and “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure.” As a result of our direct ownership in our WFOE and the VIE contractual arrangements, we are regarded as the primary beneficiary of the VIE. We treat the VIE as our consolidated affiliated entity under U.S. GAAP, and have consolidated the financial results of the VIE in our consolidated financial statements in accordance with U.S. GAAP.

On July 8, 2020, the ADSs commenced trading on the Nasdaq Global Market under the ticker symbol “BLCT.” We raised approximately US$78.2 million in net proceeds from the issuance of new shares from our initial public offering after deducting underwriting commissions and the offering expenses payable by us.

In August 2020, we completed the acquisition of LESDO, a leading location-based social networking service provider targeting the lesbian community in China. We subsequently terminated the operation of LESDO in October 2021.

In December 2020, we completed the acquisition of Finka, a leading gay social networking app in China targeting younger generations, for an aggregate consideration equivalent to RMB237 million in cash.

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In April 2021, we established our own internet hospital, He Health Internet Hospital, which has obtained a medical institution practicing license and completed the registration of internet diagnosis and treatment activities with the NHC. He Health Internet Hospital now offers HIV-related diagnosis and treatment services, as well as consultation services related to comprehensive men’s health issues.

In November 2021, we established our own consumer health brand, Mr. Heer, dedicated to male personal care and sexual health products. Currently, Mr. Heer products include condoms, lubricant, and wet wipes.

On January 2, 2022, our board of directors received the Original Proposal from Mr. Baoli Ma and Spriver Tech Limited to acquire all of our outstanding ordinary shares, including the Class A ordinary shares represented by the ADSs, that are not already beneficially owned by them for a proposed purchase price of US$3.70 per ordinary share or US$1.85 per ADS in cash through a going private transaction.

On April 18, 2022, our board of directors received the Proposal Letter from Mr. Baoli Ma and Metaclass Management ELP, an affiliate of Spriver Tech Limited, with respect to the Proposed Transaction. The Buyer Group was formed in furtherance of the Proposed Transaction initially set forth in the Original Proposal, and the Proposal Letter updates the Original Proposal to (i) inform our board of directors that Metaclass Management ELP, an affiliate of Spriver Tech Limited, is replacing Spriver Tech Limited as Sponsor and (ii) reduce the proposed purchase price from US$3.70 per Ordinary Share or US$1.85 per ADS in cash to US$3.20 per Ordinary Share or US$1.60 per ADS in cash. The other key terms of the Proposal Letter remain the same as those set forth in the Original Proposal.

Our board of directors has formed a special committee consisting of three independent directors, Wenjie (Jenny) Wu, Shengwen (Roy) Rong, and Guojie Shi, to evaluate and consider the going private transaction. For risks and uncertainties relating to the Proposed Transaction, please see “Item 3. Key Information—D. Risk Factors—Risks Related to The ADSs—There can be no assurance that any definitive offer will be made with respect to the going private transaction proposed by Mr. Baoli Ma and Metaclass Management ELP, that any definitive agreement will be executed or that this or any other similar transaction will be approved or consummated. Potential uncertainty involving the proposed going private transaction may adversely affect our business and the market price of the ADSs.”

Corporate Information

Our principal executive office is Block 2 Tower B Room 028, No 22 Pingguo Shequ, Bai Zi Wan Road, Chaoyang District, Beijing, China. Our telephone number at this address is +86 10 5876-9855. Our registered office in the Cayman Islands is Conyers Trust Company (Cayman) Limited, Cricket Square, Hutchins Drive, P.O. 2681, Grand Cayman KY1-1111, Cayman Islands. Our agent for service of process in the United States is Cogency Global Inc., located at 122 East 42nd Street, 18th Floor, New York, NY 10168.

SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC on www.sec.gov. You can also find information on our website http://ir.blue-city.com. The information contained in our website is not a part of this annual report.

B.Business Overview

We have a large and active user base that primarily consists of LGBTQ persons in China and other countries and regions including India, South Korea, Thailand and Vietnam. Through our apps, Blued and Finka, we provide a full suite of services that fosters connections and enhances the wellbeing of the LGBTQ community.

Currently, the Blued app enables users to conveniently and safely connect with each other, express themselves and access professional health-related services. Finka, a leading gay social networking app that we acquired in December 2020, satisfies these needs from a younger generation in China.

Leveraging our experience in China, we have successfully expanded into a number of overseas markets and established a strong global presence. Average MAUs of our apps reached 7.2 million in the fourth quarter of 2021. Our users span approximately 170 countries and regions as of December 31, 2021.

Despite our global footprint, approximately 6.6%, 10.0% and 11.9% of our total revenues for 2019, 2020 and 2021, respectively, were contributed by users outside China. We are still in the early stage of generating revenue from our users outside China and are continuing to introduce diversified service offerings to cater to their different needs.

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We generate revenues through various services we provide for LGBTQ community. Our total revenues increased by 35.9% to RMB1,031.3 million in 2020 from RMB758.9 million in 2019, and by 4.4% to RMB1,076.6 million (US$168.9 million) in 2021 from RMB1,031.3 million in 2020. Our net loss increased by 319.1% to RMB221.9 million in 2020 from RMB52.9 million in 2019, and by 39.6% to RMB309.6 million (US$48.6 million) in 2021 from RMB221.9 million in 2020.

Our Business

Our Community

We operate a leading global LGBTQ platform that is deeply rooted in the LGBTQ community, which is primarily based in China but also includes users from other countries and regions. Currently, our apps include Blued and Finka. Blued is primarily used by homosexual men, while all of its services are available to the LGBTQ population in general. Finka is a networking app that primarily targets younger generations of the gay community and is mainly focused on developing relationships between users.

We mainly grow our user base organically and foster a healthy and uplifting community culture to allow the LGBTQ population to know themselves, be themselves, and celebrate their lives. In 2021, Blued had an average next month retention rate of 69.0%.

Blued mobile app

As a central hub of BlueCity’s services and platforms, the Blued mobile app allows our users to connect with each other through our social networking services, express themselves through our live streaming services, access professional health related services through He Health at their fingertips. Through Blued, Danlan Public Interest also conducts a variety of public interest activities for our community, including online HIV test booking and HIV prevention education.

We currently operate Blued via a domestic version and an international version, which were launched in 2012 and 2015, respectively. The two versions are substantially similar in terms of the social networking and live streaming functions, while we adopted different approaches to user interface design to cater to domestic and international users’ preferences. The international version can be used in a broad range of languages to accommodate our globalized user base. As we are in the early stage of developing our health-related services, currently they are accessible only on the domestic version of Blued and some third-party platforms in China.

The main services and features of the Blued app are described below.

Social Networking Services

Location-Based Social Networking

We offer a variety of location-based features that cater to the diverse social needs of our users and enable them to conveniently connect with each other and expand relationships from online to offline. Users can contact each other via messaging or other communication tools on our platform, and follow other users’ accounts in order to receive real-time notifications on their status updates. In December 2021, we launched “Flash” feature to our Blued mobile app in South Korea and Vietnam and that allows users to invite others to join online or offline events.

Content-Based Social Networking

Leveraging our strong data analytics capabilities and AI-driven technologies, our content-based social features allow users to discover content that is interesting and relevant to them and build connections with other users in our robust global community. The “Recommendation” channel of Blued presents a selected feed of high-quality posts made by users of the general community that is updated on a real-time basis. The “Following” channel allows users to follow the posts made by the content creators that they follow.

We offer more contents through sub-channels. Under “Community” feature, users can join groups covering diverse topics and better engage with community members that share the common interests. Other features available on our platform, such as Super Topic and short video channel, help users to generate relevant content and make meaningful interactions with others within the communities.

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We customize our content offerings based on user behavior in different operating regions and the needs of the local communities. For example, we launched “Quick Chat” feature on the international version of Blued that allows users to join live video speed dating. This feature pairs users in seconds based on the languages that they speak and their locations. In November 2020, we introduced a major update to our Blued mobile app in Latin America with optional photo verification and a simpler user interface.

Private Messaging

Our social networking services are supported by instant messaging function, which enables users to communicate with each other using various forms of messages including text, our self-designed emojis “gaymojis,” voice recordings, pictures and video messages, virtual gifts, as well as real-time communication through audio and video chat functions.

Live Streaming Services

Our application enables viewers to enjoy a wide variety of content and interactive activities including talent shows, matchmaking shows, game shows, storytelling shows, comedy shows and casual chats between broadcasters and viewers, facilitating dynamic and engaging interactions among members of our community. In addition to solo-broadcaster live streaming sessions, we also enable our broadcasters to collaborate with each other to conduct one-on-one battle and multi-broadcaster sessions. Leveraging our artificial intelligent algorithm, we are able to efficiently recommend to viewers live streaming content and broadcasters that they might find interesting.

We offer a wide range of interesting and interactive features such as customized filters, virtual gifts, and special visual effects. Viewers of live streams may interact with broadcasters by posting bullet feeds that can be seen by other viewers or by sending virtual gifts purchased with our platform’s virtual currencies. We enable viewers to discover live streaming channels by different categories and view channels of the broadcasters they have followed. Users may apply to become a broadcaster through our required verification processes directly on the mobile app.

We have implemented stringent measures to protect user identity and privacy. In August 2021, we launched a feature on the international version of Blued to prohibit screenshots and screen recording during live streaming and video calls. The iOS version would produce a blank page after a screenshot is attempted, and the Android version does not allow a screenshot from being taken altogether.

Health-related Services

Through the He Health platform, we provide a wide variety of health-related services primarily including (1) HIV-related services and (2) comprehensive men’s health services. Our users can access He Health from Blued, our official website, Wechat official account and online official store.

HIV-related services

We provide easy access to timely and professional HIV screening, pre-exposure prophylaxis (“PrEP”) and post-exposure prophylaxis (“PEP”) solutions. We enable our users to select and order from a comprehensive array of advanced self-test kits and PrEP and PEP medications to be delivered directly to their doorstep, or to be picked up at a pharmacy in our partner network covering over 200 major cities in China. We also offer express delivery of PEP medication with expected delivery time of two hours during business hours, which is now available in nearly 70 major cities in China. We have a customer service team dedicated to providing basic guidance for our users on the use of the medications and kits. For users in need of medical advice regarding their PrEP and PEP plans, we provide online referrals to HIV specialists from recommended hospitals in China who provide follow-up and one-on-one consultation services.

Our He Health Internet Hospital has obtained a medical institution practicing license and completed the registration of internet diagnosis and treatment activities in April 2021. In July 2021, He Health Internet Hospital started to offer online consultation services, working with doctors from China’s leading hospitals. Since then, He Health Internet Hospital has been expanding the scope of its health services, which now covers, among others, treatment and prescription, guidance on health issues such as erectile dysfunction, premature ejaculation, and HIV testing and prevention, and the provision of HIV screening, PrEP and PEP services.

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In addition, as an important initiative of our Danlan Public Interest, we enable our users to search for HIV testing locations in China and make appointments directly via Blued. In cooperation with our community partners throughout China, we have amassed a network of over 7,200 testing locations and established 259 express testing centers as of December 2021. We also educate and engage our users by running a forum through He Health, on which we regularly post feature articles and organize “Q&A” threads related to HIV prevention.

Besides, in 2021, we began inviting organizations to register on Blued’s international version to provide critical HIV-related services. Users can directly contact these organizations to receive services including counseling, book appointments for HIV testing, access to PrEP and PEP and home kit deliveries.

Comprehensive Men’s Health Services

Helping our users enjoy a healthier life is a top priority of our platform. Through our self-owned pharmacy operated by Shandong Youping Pharmacy Chain Co., Ltd. and through our cooperation with relevant reputable vendors, He Health provides access to a wide variety of OTC drugs and nutritional supplements related to men’s health. Our users can submit purchase requests, upload relevant medical information and place orders through He Health to efficiently obtain the drugs or supplements they need. We also provide online referrals to users to specialists from top hospitals in China to provide one-on-one consultation services on various men’s health issues. Furthermore, our He Health Internet Hospital provides our users with consultation services related to comprehensive men’s health issues. In addition, we provide a selected collection of skincare, lifestyle and sexual wellness products on He Health through our own health brand, Mr. Heer as well as cooperation with reputable vendors.

Finka mobile app

In December 2020, we completed the acquisition of Finka, a leading gay social networking app in China that primarily targets younger generations. Built upon the signature “Swipe” function, Finka helps young users establish social contact, record and share their daily lives through rich product features, including matching, private message, posting moments and live streaming. Finka complements our Blued app, both in its functionality focused on dating and swipe, and in the demographics of its users.

Our Monetization Model

We generate revenue primarily through (1) live streaming services, (2) membership services, (3) advertising services, (4) merchandise sales and (5) other services.

Live Streaming Services

We derive a substantial portion of our revenues from live streaming, primarily through sale of virtual gifts that viewers purchase for the broadcasters. We officially launched our live streaming services in Blued app in 2016. Finka also provides live streaming services to our community members.

Virtual Gifts

On our apps, we offer a wide variety of innovative virtual gift items to our users, including decorations and other consumable special effects, which they can give to broadcasters to show their appreciation, thereby converting them to paying users. Users are able to purchase virtual gifts on our platform using virtual currencies, beans on Blued, and diamonds on Finka, which in turn can be purchased via embedded payment systems. These virtual currencies are non-refundable and may not be converted back to cash or be transferred between users. The RMB equivalent pricing of virtual gifts range approximately from less than RMB1 to RMB8,500. We continuously offer new virtual items related to trendy events and pop culture trends to incentivize purchases and increase sales.

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Broadcasters Engagement

We have a large pool of robust, talented and loyal broadcasters on our apps, and share a certain percentage of revenue generated from virtual gift sales with talent agencies that represent these broadcasters. Talent agencies recruit, train and manage broadcasters on our platform. We are committed to supporting the development of our broadcasters and attracting new broadcasters to ensure a sustainable supply of high-quality streaming content on our platform. For broadcasters who join us without a talent agency, we refer them to a third-party talent agency for better management and development. We require talent agencies and their broadcasters to comply with our platform’s polices. We promote our broadcaster’s profile and increase their popularity in a number of ways, such as designating eye-catching “agency-signed broadcaster” or, for certain highly popular agency-signed broadcasters, “official broadcaster” labels to their profile and recommending their channels on the homepage and during special online events. We also continuously encourage our users to become a broadcaster by holding various promotional campaigns to encourage our users to express themselves and showcase their talent.

Membership Services

To satisfy our users’ social networking needs and improve their user experience, we provide membership services comprising a wide variety of additional social features and functions that users pay to use mainly in the forms of (1) subscription-based membership services and (2) pay-per-use enhancement functions.

We launched our membership services in June 2018 on the domestic version of Blued. Blued started to implement a comparable membership service system on the international version in November 2019 with certain offerings differentiated for the international markets. Currently, Finka also provides membership service.

Subscription-based Membership Services

On Blued, we provide enhanced and additional services to users who subscribe to our membership program by paying membership fees. The subscription-based membership service is currently divided into two tiers, VIP and Blued X.

For example, VIP services on the domestic version include displaying a membership logo on their profile, ability to hide distance and last log-in time from other users, personalized homepage, advanced filters, personalized chat window background, higher limits on the maximum number of blacklisted users, and other special features unavailable to non-members. Additional services unlocked for our Blued X on the domestic version include the ability to hide log-in status, blocking in-app advertisements, following and visiting other users without giving them notice and so on.

On Finka, we provide enhanced and additional services to users who subscribe to our membership program by paying membership fees. Additional services unlocked for members include access to near-by users, advanced filters, exploration to find friends in different locations, privacy alteration, multiple profile photos, special virtual effect when entering into live streaming channels and other special features unavailable to non-members.

Pay-Per-Use Services

On Blued, we also empower our users to better promote themselves and improve their profile through advanced enhancement functions on a pay-per-service basis, currently including “Promote” and “Spotlight” which are available on the domestic version, and “Boost”, “Quick Chat” and “1v1 Video Call” on the international version.

For example, “Promote” service on the domestic version promotes a single post that the paying user created by widely pushing the post to other users and thus increasing the likelihood of other users viewing the post for several hours. The paying user can either rely on our intelligent matchmaking algorithm to recommend the post to other users that he might be interested in attracting, or directly target a specific user type by applying a number of filters. After purchasing “Spotlight” service, our platform recommends the paying user to the nearby users for a short period of time, significantly increasing the likelihood of other users visiting or messaging the paying user.

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Advertising Services

We offer a variety of advertising services via Blued and Finka, primarily including (1) display advertising placement on the full screen that appears before the application is loaded, banners on the location-based social homepage, and banners on recent visitors page and (2) native advertising placement on the location-based social homepage and recent visitors page. Our advertisers consist of a variety of brands attracted by our platform and user base, including major e-commerce platforms, fast moving consumer goods, cosmetic and beauty products and health products providers in China.

Merchandise sales

Through He Health, we generated revenue from merchandise sales of HIV-related screening kits, medications and drugs, as well as sales of OTC drugs and nutritional supplements related to men’s health. He Health, launched in March 2019, is currently available only in China.

Others

Others mainly consist of the provisions of family planning service (we stopped from accepting relevant new orders starting from March 2021), consulting service to healthcare and medical institutions and marketplace service.

Content Monitoring and Prevention of Minor Usage

We are committed to complying with relevant laws and regulations on online content. We have invested significant resources in developing advanced content monitoring technologies, policies and procedures. We have a dedicated team, which consists of approximately 25% of our employees, to review and handle content on our platform for compliance with applicable laws and regulations.

We maintain content management and review procedures to monitor short-form videos, online chatting rooms, user profiles and news feed, and other content on our platform to promptly identify content that may be deemed inappropriate, in violation of laws, regulations and government policies or infringing upon third-party rights. We have an automated AI-enabled screening mechanism that serves as the first layer of defense in our content review system. This system, incorporating AI technologies provided by third-party service providers, automatically flags and screens out content that involves inappropriate or illegal audio, video, comments or texts. Once the content is processed by the automated screening mechanism, our system then extracts the selected suspicious content and sends to our manual content monitoring team, our second layer of defense, for further review. The content is subject to manual re-assessment, our third layer of defense.

Due to the real time nature of live streaming, we deploy concurrent manual and machine monitoring regarding image content to comply with applicable laws and regulations. Our AI-enabled screening mechanism constantly analyzes the live video feed and flags doubtful content to our content monitoring team for further handling. In addition, we rolled out a report button for all users watching the live streaming so that the content monitoring team may re-examine the one-minute video clip around the point when report button is pressed. When any inappropriate or illegal content is identified, we promptly remove the content. Further actions may also be taken to hold relevant users accountable.

We strictly limit people under the lawful age to use our platform, which is expressly and repeatedly stated in our user terms and conditions, new-user registration page, welcoming screen, home page banner, and chatting interface. Each newly registered user in China is subject to a manual review process as a measure to prevent minor usage. We also generally require broadcasters to submit their bank information, and valid identifications before initiating any live streaming activities. We actively encourage users to report minor users. Once a user is determined to be under age, the relevant account will be identified and blocked by our platform.

Data Security and Cyber Security Compliance

We are committed to protecting information of all users on our platform. We collect personal information and data only with users’ prior consent. We encrypt confidential personal information we gather from our platform. We strictly control and manage the use of data within our various teams and retain access record. To further ensure data security and avoid data leakage, we have established internal protocols under which we grant classified access to confidential personal data to limited employees with strictly defined and layered access authority through internal application programming interface (API).

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We have a security team of engineers and technicians dedicated to protecting the security of our platform and complying with applicable cyber security laws and regulations in the regions where we operate. Our back-end security system is capable of handling malicious attacks to safeguard the security of our platform and to protect the privacy of our users. We back up our user and certain other critical forms of data on a daily basis in separate and various secured data back-up systems operated by cloud providers to minimize the risk of data lost. Among our portfolio apps, only Blued’s infrastructure and cloud-based data security system has passed ISO 27001 and GB 17859-1999 Level 3 standards. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business generates and processes a large amount of data, and we are required to comply with PRC and other applicable laws relating to privacy and cybersecurity. The improper use or disclosure of data could have a material and adverse effect on our business and prospects.”

Our Technology

We have a team of over 240 experienced technology professionals who are based in China as of December 31, 2021. Our major technology and development teams include those focusing on mobile, front end, big data, artificial intelligence, quality control and infrastructure. Among our technology and development personnel, above 78% hold undergraduate degrees or above, and above 10% hold graduate degrees.

Big Data

We build big data analysis framework on our platform to improve operating efficiencies and user satisfaction. The data we collect include user behavior, profiles, channels, subscription history, and live streaming statistics and key words in posts. The collected data are processed to remove identifying information, transformed, and stored on our big data clusters. We leverage big data analytics and artificial intelligence technologies to enhance the accuracy of user behavior predictions and user profiling and optimize our operation, targeted content and user experience. Internal operational teams may also gain insights with visual representation from sampled data to track their performances.

The seamless collaboration between our technology and operational teams, together with our big data analytics capability have resulted in improved operational efficiency for our company. Our data engineers are involved in all critical operational areas, such as content recommendation, live streaming monitoring, and ads algorithms. They have thorough understanding of the computational needs from different operational teams, and are therefore capable of providing technological support to address diversified needs in operating our platform.

Artificial Intelligence

We believe we are in a unique position to capitalize on the use of artificial intelligence technologies, including computer vision, machine learning, and natural language processing, to provide personalized user experience on our platform. Notable artificial intelligence features include:

User Matching and Content Recommendation

We utilize artificial intelligence and machine learning technologies to empower our ranking and recommendation system to increase the exposure of certain live streaming contents. We also plan to deploy a more personalized ranking system to provide more precise social matching services based on user profiles and preferences.

Real-time Monitoring

We have incorporated various artificial intelligence technologies from third-party service providers, including image and video recognition, natural language processing, voice recognition, and text filters. Combining artificial intelligence with manual verification, we constantly monitor user-generated contents, such as live streaming, chatting room interaction and discussion.

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Infrastructure

We have developed a secure, efficient and cost-effective cloud-based core system to operate our business. Cloud-based technology allows us to process large amount of complex data in-house, which significantly reduces cost and improves operation efficiency. We currently rely on Tencent Cloud for our computing, storage, bandwidth and other services both in and outside of China. Data related to users in and outside of China are strictly stored on servers in and outside of China, respectively. This ensures the instant expansion and robustness of our services at peak times. We currently support simultaneous hosting of hundreds and thousands of live streaming and simultaneous streaming services for millions of users. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business depends on our ability to maintain and scale our technology infrastructure. Any service disruption in our service could damage our reputation, result in a potential loss of users and decrease in user engagement, and seriously harm our business.”

Marketing and Brand Promotion

Our brand values are diversity, healthiness and positivity. We believe that our high-quality products and services lead to strong word-of-mouth referrals, which drives customer awareness of our brand. Our market position benefits significantly from our large and robust user base and our strong brand recognition. Leveraging our in-depth understanding of our users, we adopt a variety of online and offline marketing and promotional activities, including advertising placements through major social networks and search engines, promotional campaigns on app stores, key opinion leader marketing, sponsorship of LGBTQ events, local user groups gatherings and entertainment and user feedback sessions. In addition, our long-standing dedication to public interest initiatives related to the health and recognition of the LGBTQ community is also conducive to building and promoting our brand. To assist with our overseas marketing and promotional activities, we also engage marketing service providers with in-depth local knowledge in a number of countries and regions outside of China.

Customer Service

Providing superior customer service is our top priority. We have established customer service centers based in China. Our users may submit inquiries, feedback or complaints about the use of our products and services by sending messages via online chat or emails at any time. Upon receipt of complaints or inquiries, our customer service team will promptly conduct investigations and provide users with explanations and solutions accordingly.

For our health-related services, we have a customer service team dedicated to providing guidance to our users on various issues, including use of the products, explanation of test results, and referral to HIV or men’s health specialists.

We have not received any complaints from our users that resulted in a material adverse impact on our business.

Corporate Social Responsibility

We are committed to undertaking our corporate social responsibility in the regions where we have our user communities, and continually supporting and empowering the LGBTQ community through our own public interest initiatives and in partnership with other public interest organizations.

We have been ranked at No. 12 among 50 Chinese Internet companies for its performance in corporate social responsibility (CSR) in 2019 according to a report issued in April 2020 by China CSR Research Center, an affiliate of Southern Weekly, one of the country’s most influential media outlets. Launched in 2003, the annual report is one of the most influential CSR performance indices in China.

In December 2021, we released our 2020 Environmental, Social and Governance (ESG) Report, which highlight our initiatives to drive progress towards a more diverse and inclusive space for our employees, users globally and wider society.

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Danlan Public Interest

Leveraging our deep understanding of and broad connections with the LGBTQ community accumulated throughout the years since Danlan.org, we continuously conduct a wide variety of public interest initiatives related to the LGBTQ community primarily through Danlan Public Interest, BlueCity’s public interest arm. Empowered by our platform’s technologies and data traffic, we introduced the concept of “Internet + HIV prevention” to integrate online and offline HIV prevention efforts in China. We promoted our “Internet + HIV prevention” practices and experience at the International AIDS Conference in 2016 and 2020. We are also committed to continuously promoting diversity and LGBTQ awareness around the world by organizing and participating in a wide variety of social events. Examples of Danlan Public Interest’s initiatives include the following:

HIV Express Testing. We empower our users to search for HIV testing locations in China and make appointments directly via Blued. In cooperation with our community partners throughout China, we have amassed a network containing over 7,200 testing locations and established 259 express testing centers covering most major cities throughout China as of December 31, 2021. Our first testing center was established in Beijing in 2012. From 2017 to 2019, we facilitated over 23,000 free offline HIV tests in Beijing alone. In 2021, we facilitated through the Blued app over 5,000 online appointments for HIV testing in Beijing.

HIV Education. We committed a portion of Blued platform resources to HIV prevention education. We recommend and promote HIV prevention education materials through our advertising spots, messaging system and He Health’s educational forum. We also cooperate with HIV specialists to produce educational programs distributed in the forms of short video posts and live streaming sessions organized by our Blued official account.

HIV Research. We are a natural partner for HIV research. Leveraging our platform’s technological advantages and our large LGBTQ user base, we are able to empower researchers in various aspects of HIV research, including size estimation of LGBTQ population, recruitment of research subjects, assessment of risks and intervention strategies and large-scale survey for feedback on prevention measures. We have worked with a wide range of governmental, academia and corporate partners, including Gilead Sciences, Inc. and GlaxoSmithKline (China) Investment Co., Ltd., to conduct HIV-related research and studies. From 2019 to 2021, we have participated in 31 studies and co-published 15 research papers on renowned academic journals.

HIV Prevention Volunteers. Effective HIV prevention also needs dedicated community efforts offline. We have organized and trained approximately 404 volunteers who have worked on HIV testing and prevention initiatives since 2012, with an aggregate of over 63,456 dedicated volunteer hours. We have implemented a standardized program to regularly interview, recruit and train our volunteers and test and evaluate their HIV-related knowledge and service quality.

Funding for HIV Prevention. We also work with prominent community partners to provide funding to HIV programs from time to time. For example, in August 2019, in cooperation with Chinese Foundation for Prevention of STD and HIV we established and provided the initial funding for “Danlan Public Interest Fund.” Through the fund, we intend to further gather support from other community partners and HIV-related organizations to strengthen support for HIV prevention efforts among youth. In November 2020, we pledged to donated RMB1 million to further carry out HIV-prevention education and control in the lead-up to World AIDS Day.

Other Social Responsibility and Sustainability Initiatives

We are committed to serving our community by continuously improving our social responsibility and sustainability performance. In addition to the HIV-related initiatives currently implemented by Danlan Public Interest, we are committed to operating as a strong corporate citizen across many other areas of our business. Among other things, we review and disclose our corporate social responsibility performance on an annual basis. In reference to the United Nations’ Sustainable Development Goals, we have identified certain key areas for a corporation like us to focus on, including operational compliance, user data and privacy protection, community care, product innovation, user experience and customer service, employee health and safety and employee diversity and equality. Examples of some of the activities include the following:

Diversity and LGBTQ Inclusion. We are a firm believer in equality and diversity, and in promoting an open and inclusive corporate culture within our company. We also constantly participate in a wide range of activities to promote diversity and LGBTQ inclusion. We routinely organize seminars and gatherings to conduct dialogues with LGBTQ members on their life issues and help provide guidance to them.

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We also organize LGBTQ social events in cooperation with NGOs, media, and corporate partners with the aim of using our influence to foster a more LGBTQ friendly environment. For example, in 2015, we sponsored a group wedding ceremony of seven Chinese same-sex couples officiated in the U.S., in cooperation with our corporate and NGO partners. In late June 2020, in the fight against the ongoing COVID-19 pandemic, Blued held #StayProud: A Virtual Pride Experience, its first-ever online pride event to encourage the LGBTQ community to stay strong and proud during these challenging times, with profits of the show donated to the Los Angeles LGBT Center.

We also partnered with not-for-profit organizations in markets including Brazil, China, South Korea, India, Japan, the Philippines, and Vietnam to donate certain medical supplies and conduct COVID-19 related training and education. For example, in July 2020, Blued invited representatives from Casa 1, an LGBT NGO in São Paulo, to share sexual and mental health advice in live streaming events for the region’s users. In late 2020, in partnership with Impulse, a global nonprofit HIV/wellness organization for gay men, Blued promoted HIV prevention and deliver free testing toolkits at offline launch events in Mexico City in conjunction with the launching of its new interface in Latin America, and joined Impulse in supporting the World AIDS Day on December 1. In January 2021, our CEO was listed on the “OUTstanding 100 LGBT+ Executives List” from INvolve, a global network and consultancy championing diversity and inclusion in business.

Operational Compliance. We continuously optimize our ability to effectively manage and control our internal systems and processes. We have established various channels to gather external information from our stakeholders, such as our users, suppliers and partners, as well as standardized procedures for internal communications and feedback between each level of our operations. We have also established comprehensive internal policies and procedures to monitor, report and prevent fraudulent and corruptive conduct to improve our operational compliance and promote an ethical and transparent culture.

Talent Development. Talent development is fundamental to our sustainable growth. Our new employee training features a “Rainbow Boat” program, through which we provide comprehensive training tailored to new employees’ personal goals to help them effectively and holistically align themselves with our corporate culture. We also provide various interactive training programs to develop our employees’ professional skills and capabilities, including “Knowledge and Innovation Sharing Sessions” in which we teach them innovative skills and ideas to help them better develop our businesses as well as their own career.

Employee Health. We are committed to improving employees’ physical and mental health. We provide a healthy workplace that offers resources to actively support a healthy lifestyle, such as office gym, ergonomic office supplies and baby care rooms. We also provide our employees access to health check programs and regularly organize recreational activities.

Fight against the COVID-19. In addition to organizing the #StayProud event to support the LGBTQ community in the ongoing COVID-19 crisis, we partnered with not-for-profit organizations in countries such as Brazil, China, South Korea, India, Japan, the Philippines, and Vietnam to donate much-needed medical supplies or conduct COVID-19-related training and education.

Competition

We currently compete in various intensely competitive industries, primarily including the global online LGBTQ social and entertainment industry, and PRC online health services industry.

We anticipate that these industries will continue to evolve and experience rapid technological change, evolving industry trends, shifting customer demands, and frequent innovation. We will endeavor to continually innovate to remain competitive.

Intellectual Property

We regard our proprietary domain names, copyrights, trademarks, patents and other intellectual property as critical to our operations. We rely on a combination of patents, copyrights, trademarks and trade secret laws to protect our intellectual property. As of December 31, 2021, we had more than 870 registered trademarks in China and globally including the logo of our Blued application and Finka application; 1 patent in China; more than 35 software copyrights in China; and more than 260 domain names.

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We rigorously control access to our proprietary technology and information and maintain internal channels for report of intellectual property rights infringements. There can be no assurance that our efforts will be successful. Even if our efforts are successful, we may incur significant costs in defending our rights. From time to time, third parties may initiate litigation against us alleging infringement of their proprietary rights or claiming they have not infringed our intellectual property rights. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We have been and may be subject to intellectual property infringement claims or other allegations by third parties, which may materially and adversely affect our business, financial condition and prospects.”

Insurance

We maintain various insurance policies to safeguard against risks and unexpected events. We have purchased property insurance, digital business and data protection insurance, business interruption insurance and directors and officers liability insurance. We provide social security insurance for our employees as required by PRC law. We do not have product liability insurance or key-man life insurance.

Regulation

This section sets forth a summary of the most significant rules and regulations that affect our business activities in China or the rights of our shareholders to receive dividends and other distributions from us.

Regulations Relating to Foreign Investment

Guidance Catalogue of Industries for Foreign Investment

Investment activities in the PRC by foreign investors are principally governed by the Guidance Catalogue of Industries for Foreign Investment, which was promulgated and is amended from time to time by MOFCOM and NDRC. On June 28, 2017, MOFCOM and NDRC promulgated a revision of the Guidance Catalogue of Industries for Foreign Investment (2017 Revision), or the Catalogue, effective on July 28, 2017. Industries listed in the Catalogue are divided into three categories: encouraged, restricted and prohibited. On June 28, 2018, NDRC and MOFCOM promulgated the Special Administrative Measures (Negative List) for Foreign Investment Access (2018 Version), or the 2018 Negative List, effective on July 28, 2018. The Negative List and the Industry Guidelines on Encouraged Foreign Investment (2019 Version), or the 2019 Encouraged Catalogue, were both promulgated by the NDRC and MOFCOM on June 30, 2019 and became effective on July 30, 2019. The 2020 Negative List promulgated by the NDRC and MOFCOM on June 23, 2020 and became effective on July 23, 2020, and the Industry Guidelines on Encouraged Foreign Investment (2020 Version), or the 2020 Encouraged Catalogue, promulgated on December 27, 2020 and became effective on January 27, 2021. The 2021 Negative List promulgated by the NDRC and MOFCOM on December 27, 2021 and became effective on January 1, 2022. The 2018 Negative List was repealed simultaneously by the 2019 Negative List, the 2020 Negative List and then by the 2021 Negative List, and the “Industry Guidelines on Encouraged Foreign Investment” in the Catalogue was repealed simultaneously by the 2019 Encouraged Catalogue and then by 2020 Encouraged Catalogue. Therefore, the 2021 Negative List enumerates restricted industries and prohibited industries in relation to the foreign investment, the 2020 Encouraged Catalogue enumerates encouraged industries in relation to the foreign investment. Industries neither listed in the 2021 Negative List nor listed in the 2020 Encouraged Catalogue are generally deemed to be in the “permitted” category. Establishment of wholly foreign-owned enterprises is generally allowed in encouraged and permitted industries. Some restricted industries are limited to equity or contractual joint ventures, while in some cases Chinese partners are required to hold the majority interests in such joint ventures. In addition, foreign investment in restricted category projects is subject to government approvals. Foreign investors are not allowed to invest in industries in the prohibited category. Industries not listed in the 2021 Negative List are generally open to foreign investment unless specifically restricted by other PRC regulations. Foreign investment in value-added telecommunications services (except for e-commerce, domestic multi-party communication, store-and-forward, and call center) and Internet audio-video program service and Internet culture operation (except for music) fall within the 2021 Negative List.

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On October, 2016, MOFCOM issued the Interim Measures for Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises, or FIE Record-filing Interim Measures, most recently amended on June 29, 2018 and took effect on June 30, 2018. Pursuant to FIE Record-filing Interim Measures, the establishment and change of foreign-invested enterprises are subject to record-filing procedures, provided that such establishment or change does not involve special entry administration measures. If the establishment or change of foreign-invested enterprises matters involve the special entry administration measures, the approval of the MOFCOM or its local counterparts is still required. On December 30, 2019, MOFCOM and SAMR jointly promulgated the Measures for Information Reporting on Foreign Investment, or the Measures for Information Reporting, which became effective in January 2020. The FIE Record-filing Interim Measures was repealed simultaneously by the Measures for Information Reporting. Pursuant to the Measures for Information Reporting, where a foreign investor carries out investment activities in China directly or indirectly, the foreign investor or the foreign-invested enterprise shall submit the investment information to competent commerce departments. The establishments and changes of foreign-invested enterprises are subject to information reporting procedures through Enterprise Registration System and National Enterprise Credit Information Publicity System.

Pursuant to the Provisions on Administration of Foreign-Invested Telecommunications Enterprises promulgated by the State Council of the People’s Republic of China, or the State Council on December 11, 2001 and most recently amended in April 2022 and effective from May 1, 2022, or the FITE Regulations, the ultimate foreign equity ownership in a value-added telecommunications services provider may not exceed 50%.

The Ministry of Information Industry, or the MII (which is the predecessor of MIIT) issued the Circular on Strengthening the Administration of Foreign Investment in and Operation of Value-added Telecommunications Business, or the MIIT Circular, on July 13, 2006. The MIIT Circular reiterates the regulations on foreign investment in telecommunications businesses, which requires foreign investors to set up foreign invested enterprises and obtain telecommunications business operating licenses to conduct any value-added telecommunications business in China. Under the MIIT Circular, a domestic company that holds telecommunications business operating licenses is prohibited from leasing, transferring or selling the license to foreign investors in any form, and from providing any assistance, including providing resources, sites or facilities, to foreign investors that conduct value-added telecommunications business illegally in China.

To comply with PRC laws and regulations, we rely on contractual arrangements with the VIE to operate our value-added telecommunications business, Internet audio-video program service and Internet culture operation in China.

Foreign Investment Law

On March 15, 2019, the Standing Committee of the National People’s Congress promulgated the Foreign Investment Law, which came into effect on January, 2020 and replaced the trio of old rules regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law, together with their implementation rules and ancillary regulations. The existing foreign-invested enterprises established prior to the effective of the Foreign Investment Law may keep their corporate forms within five years. The implementing rules of the Foreign Investment Law will be stipulated separately by State Council. Pursuant to the Foreign Investment Law, “foreign investors” means natural person, enterprise, or other organization of a foreign country, “Foreign Invested Enterprises”, or “FIEs”, means any enterprise established under PRC law that is wholly or partially invested by foreign investors and “foreign investment” means any foreign investor’s direct or indirect investment in the mainland of China, including: (i) establishing FIEs in the mainland of China either individually or jointly with other investors; (ii) obtaining stock shares, stock equity, property shares, other similar interests in Chinese domestic enterprises; (iii) investing in new projects in the mainland of China either individually or jointly with other investors; and (iv) making investment through other means provided by laws, administrative regulations, or State Council provisions.

On December 26, 2019, the State Council promulgated the Implementation Rules to the Foreign Investment Law, which became effective on January 1, 2020. The Implementation Rules to the Foreign Investment Law further clarifies that the state encourages and promotes foreign investment, protects the lawful rights and interests of foreign investors, regulates foreign investment administration, continues to optimize foreign investment environment, and advances a higher-level opening. Competent investment department and commerce department of the State Council shall be responsible for proposing the Negative List for the State Council’s approval. The Negative List will be promulgated by the State Council or its investment department and commerce department, and will be amended in accordance with the social development and the wide-ranging opening up.

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The Foreign Investment Law stipulates that China implements the management system of pre-establishment national treatment plus a negative list to foreign investment and the government generally will not expropriate foreign investment, except under special circumstances, in which case it will provide fair and reasonable compensation to foreign investors. Foreign investors are barred from investing in prohibited industries on the negative list and must comply with the specified requirements when investing in restricted industries on that list. When a license is required to enter a certain industry, the foreign investor must apply for one, and the government must treat the application the same as one by a domestic enterprise, except where laws or regulations provide otherwise. In addition, foreign investors or FIEs are required to file information reports and foreign investment shall be subject to the national security review.

Regulations Relating to Telecommunications Services

On September 25, 2000, the State Council issued the Regulations on Telecommunications of China, or the Telecommunications Regulations, as recently amended in February 2016, to regulate telecommunications activities in China. The Telecommunications Regulations set out basic guidelines on different types of telecommunications business activities in China. According to the Catalog of Telecommunications Business (2015 Amendment) implemented in March 2016 (as amended on June, 2019), Internet information services constitute a type of value-added telecommunications service. The Telecommunications Regulations require operators of value-added telecommunications services to obtain value-added telecommunications business operation licenses from MIIT, or its provincial branches prior to the commencement of such services.

The FITE Regulations regulate foreign direct investment in telecommunications companies in China. The FITE Regulations stipulate that foreign investors are generally prohibited from holding more than 50% of equity interest in a foreign-invested enterprise that provides value-added telecommunications services, including, among others, provisions of Internet content.

The MIIT Circular, which provides that (a)foreign investors can only operate a telecommunications business in China through telecommunications enterprises with a valid telecommunications business operation license; (b)domestic license holders may not rent, transfer or sell telecommunications business operation licenses to foreign investors in any form or provide any foreign investors with resources, venues or facilities to promote unlicensed operations of telecommunications businesses in China; (c)value-added telecommunications service providers or their shareholders must directly own the domain names and registered trademarks that are used in their daily operations; (d)each value-added telecommunications service provider must have necessary facilities for its approved business operations and maintain such facilities in the geographic regions specified in its license; and (e)all value-added telecommunications service providers should improve their network and information security, establish a relevant information safety system and set up emergency plans to ensure network and information safety.

Regulations Relating to Internet Information Services

The Administrative Measures on Internet Information Services, or the ICP Measures issued by the State Council on September 25, 2000 and amended in January 2011, regulates provisions of Internet information services in the PRC. According to the ICP Measures, Internet information services refer to provisions of information through the Internet to online subscribers, including commercial and non-commercial services. Pursuant to the ICP Measures, commercial Internet information service providers shall obtain ICP Licenses from relevant PRC local authorities before engaging in commercial Internet information services in China. In addition, according to relevant PRC laws, administrative regulations or rules, providers of Internet information services in respect of news, publishing, education, medical treatment, health, pharmaceuticals or medical apparatuses shall obtain consent of the relevant PRC competent authority before applying for an operating permit or carrying out record-filing procedures.

Additionally, the ICP Measures and other relevant measures also prohibit publication of any content that propagates, among others, obscenity, pornography, gambling and violence, incite the commission of crimes or infringe upon the lawful rights and interests of third parties. If an Internet information services provider detects that information transmitted on its system falls under the specified prohibition, such provider must immediately terminate the transmission and delete the information and report it to the governmental authorities. Any provider’s violation of these prohibitions, in serious cases, will lead to revocation of its ICP License and shutdown of its Internet systems.

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Regulations Relating to Real-Name Registration System

Pursuant to the Regulations for the Administration of Online Live-Streaming Services, or Internet Live-Streaming Services Provisions, promulgated by the CAC, on November, 2016, which came into effect in December 2016, live streaming service providers should verify the identity of users on a live streaming platform with their information such as through their mobile phone number. Also, according to the Administrative Measures for Business Activities of Online Performances issued by Ministry of Culture on December, 2016 and in effect as of January, 2017, live streaming service providers should require streamers on a live streaming platform to make real-name registration.

On August 1, 2018, the National Office of Anti-Pornography and Illegal Publication, the MIIT, the MPS, the MCT, the NRTA, and the CAC jointly promulgated the Notice on Strengthening the Administration of Online Live Streaming Service, or the Online Living Streaming Service Notice. Effective on the same day, the Online Living Streaming Service Notice provides that online live streaming services providers shall implement the user real name system as required, strengthen the administration of broadcasters, establish a broadcaster blacklist system, and improve the system for monitoring and examining the content of live streaming services and the measures for dealing with illegal and harmful content.

Regulations Relating to Mobile Internet Applications Information Services

In addition to the Telecommunications Regulations and other regulations above, mobile applications, or the APPs and the Internet application store, or the APP store, are specially regulated by the Regulations for the Administration of Mobile Internet Applications Information Services, or the APP Provisions, which were promulgated by the CAC, on June 28, 2016 and became effective in August 2016.

Pursuant to the APP Provisions, the APP information service providers shall satisfy relevant qualifications required by laws and regulations, strictly carry out the information security management responsibilities and fulfill their obligations in various aspects relating to the real-name system, protection of users’ information and the examination and management of information content.

Regulations Relating to Online Transmission of Audio-Visual Programs

On April 13, 2005, the State Council promulgated the Certain Decisions on the Entry of the Private Capital into the Cultural Industry, according to which private capital was prohibited from engaging in the business of online transmission of audio-visual programs. In July 2005, five PRC governmental authorities, including the Ministry of Culture, or the MOC (which is the predecessor of the Ministry of Culture and Tourism, or the MCT), the State Administration of Radio Film and Television, or the SARFT (which is currently as the NRTA), the General Administration of Press and Publication, or the GAPP, the NDRC and the MOFCOM, jointly adopted the Several Opinions on Canvassing Foreign Investment into the Cultural Sector. On December 20, 2007, the SARFT and the MII jointly promulgated the Administrative Provisions on Internet Audio-Visual Program Services, or the Audio-Visual Provisions, which took effect on January 31, 2008 and were subsequently amended on August 28, 2015. Under these provisions, foreign investors are prohibited from engaging in the business of distributing audio-visual programs through Internet.

On May 21, 2008, SARFT issued a Notice on Relevant Issues Concerning Application and Approval of License for the Online Transmission of Audio-Visual Programs, as amended on August 28, 2015, which further sets out detailed provisions concerning the application and approval process regarding the Audio-Visual License. The notice also stipulates that Internet audio-visual program services providers engaging in such services prior to the promulgation of the Audio-Visual Provisions are able to apply for the license so long as their violation of the laws and regulations is minor in scope and can be rectified in a timely manner and they have no records of violation during the three months prior to the promulgation of the Audio-Visual Provisions. Further, on March 30, 2009, SARFT promulgated the Notice on Strengthening the Administration of the Content of Internet Audio-Visual Programs, which reiterates the pre-approval requirements for the audio- visual programs transmitted through the Internet, including through mobile networks, where applicable, and prohibits certain types of Internet audio-visual programs containing violence, pornography, gambling, terrorism, superstition or other similarly prohibited elements.

On March 17, 2010, the SARFT issued the Internet Audio-Visual Program Services Categories (Provisional), or the Provisional Categories, as amended on March 10, 2017, which classified Internet audio-visual program services into four categories.

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In March 2018, the State Administration of Press, Publication, Radio, Film and Television, or the SAPPRFT (which is the predecessor of NRTA), issued the Notice on Further Regulating the Transmission Order of Internet Audio-Visual Programs, which requires that, among others, audio-visual platforms shall: (i)not produce or transmit programs intended to parody or denigrate classic works, (ii)not re-edit, re-dub, re-caption or otherwise ridicule classic works, radio and television programs, or original Internet audio-visual programs without authorization, (iii)not transmit re-edited programs, which unfairly distort the original content, (iv)strictly monitor the adapted content uploaded by platform users and not provide transmission channels for illicit content, (v)immediately take down unauthorized content upon receipt of complaints from copyright owners, radio and television stations, or film and television production institutions, (vi)strengthen the administration of movie trailers and prevent improper broadcasting of movie clips and trailers prior to authorized release, and (vii)strengthen the administration of sponsorship and endorsement for Internet audio-visual programs. Pursuant to this notice, the provincial branches of the NRTA shall have the authority to supervise radio and television stations and websites that offer audio-visual programs within its jurisdiction and require them to further improve their content management systems and implement relevant management requirements.

In January 2019, the CNSA issued the Regulations on Administration of Network Short Video Platforms, which requires network platforms to obtain the License for Online Transmission of Audio-visual Programs and relevant qualifications to provide short video services, and to strictly operate within the scope of such license. The network short video platform is required to establish a chief-editor content management and responsibility system, and all contents of a short video, including but not limited to its title, description, bullet-chats and comments shall be reviewed in advance before the content is broadcasted. Furthermore, the content reviewer is expected to have high political awareness and professionality. These content reviewers shall be trained by the provincial or higher level radio and television management departments, and the number of content reviewers shall be sufficient considering the number of short videos uploaded and broadcasted on the platform. Furthermore, the number of content reviewers a platform is required to host should in principle be more than one one-thousandth of the number of short videos newly broadcasted on the platform per day.

In January 2019, the CNSA issued the Censoring Criteria for Network Short Video Content, as amended in 2021, which set forth certain details of content prohibited to be broadcasted, such as violence, pornography, gambling, terrorism, superstitious and other illegal or immoral content.

In March 2019, the NRTA promulgated the Provisions on the Administration of Programs for Minors, which requires the internet audio-visual program service providers to establish special channels to stream programs for minors at conspicuous places in a conspicuous manner. Internet audio-visual program services providers shall censor programs for minors prior to the broadcasting according to relevant provisions; and for the live-streaming programs, the internet audio-visual program services providers should take necessary technical measures such as delayed live-streaming or substitutions with alternative programs to ensure that the live-streaming will not contain any content prohibited by this Regulation, such as violence and terrorism. Internet audio-visual program services providers shall assign special personnel with minors protection working experience or education background to take in charge of the pre-broadcasting censorship. These service providers are also required to establish evaluation committees to review the programs for minors periodically, and to submit a written report annually about the protection of minors to the NRTA local branch. If a network user uploads programs containing the image and information of a minor without the consent of the minor’s statutory guardian(s), then the statutory guardian(s) of the minor are entitled to notify the internet audio-visual program services provider to take necessary measures such as deleting, blocking and disconnecting the link, and the internet audio-visual program services provider should take relevant measures timely upon the receipt of the notice and after the confirmation of the identity.

On November 18, 2019, the CAC, the MCT and the NRTA, jointly issued the Administrative Provisions on Online Audio-Visual Information Services, effective on January 1, 2020, which provides that online audio-visual information service providers are the principals responsible for information content security management, and should, among other things, establish and improve their internal policies in relation to user registration, scrutiny of information publication, and information safety management. Organizations and individuals are prohibited from using online audio-visual information services and related information technology to carry out illegal activities and infringe legal rights and interests of others. The Provisions further set out requirements for utilization of new applications driven by new technology (such as deep learning and virtual reality) to produce, publish and disseminate audio-visual information, for example, audio-visual information service providers are required to conduct safety evaluation, identify and label fraudulent audio-visual information, and to defeat rumors, false news and content violating user agreements.

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Regulations Relating to Live Streaming Service

The Notice concerning Strengthening the Administration of the Streaming Service of Online Audio-Visual Programs, or the Notice of Streaming Service promulgated by SAPPRFT in September 2016 emphasizes that, unless a specific license is granted, the audio-visual programs service provider is forbidden from engaging in live streaming on major political, military, economic, social, cultural and sports events. An Internet live-streaming service provider shall (i) equip personnel to review the content of the live-stream; (ii) establish the technical methods and work mechanisms in order to replace the unlawful content by using the backup program; and (iii) record the live streaming program and keep the records for at least 60 days to fulfill the inspections requirements from the competent administrative authorities.

According to the Internet Live-Streaming Services Provisions, an Internet live streaming service provider shall (a) establish a live streaming content review platform; (b) conduct authentication registration of Internet live-streaming issuers based on their identity certificates, business licenses and organization code certificates; and (c)enter into a service agreement with Internet live-streaming services user to specify both parties’ rights and obligations.

According to the Online Living Streaming Service Notice, online live streaming service providers shall fulfill the website ICP filing formalities with the competent government authorities. Online live streaming services providers involved in the operation of telecommunications services and Internet-based news information, online performances, live streaming of internet audio-visual programs and other services shall apply to the relevant departments respectively for obtaining licenses for the operation of telecommunications services, Internet-based news information services, network cultural operations, and dissemination of audio-visual programs through information networks and shall complete record-filing formalities with the local public security authorities in accordance with the relevant regulations within 30 days of their live streaming services being launched. Online live streaming services providers shall carry out their business in strict accordance with the licensed scope, and shall not use live streaming services to produce, copy, release, or disseminate information and content prohibited by laws and regulations.

According to Notice 78 promulgated by the NRTA on November 12, 2020, live streaming platforms for online shows are requested to strengthen positive value guidance and enable those tasteful, meaningful, interesting and warm live-broadcasting programs to have good traffic, and to prevent the spread of the trends of wealth flaunting, money worshiping and vulgarity. In addition, the number of content reviewers of a platform is required to be no less than 1:50 of the number of live streaming rooms. Live streaming platforms for online shows need to manage the broadcasters and “virtual gifting” users based on the real-name registration system, and users who have not registered with real names or who are minors are prohibited from virtual gifting. The live streaming platforms are required to implement real-name registration system by real-name verification, face recognition, manual review and other measures to prevent minors from virtual gifting. The platform shall limit the maximum amount of virtual gifting each user may give per time, day and month. Live streaming platforms for e-commerce shall not illegally produce and broadcast, beyond their business scope of e-commerce, any commentary programs unrelated to sales of goods. Notice 3 jointly promulgated by the NRTA and six other authorities reiterates certain requirements for live streaming platforms stipulated under Notice 78, which requires live streaming platforms to, including but not limited to, file with local cyberspace administration office in a timely manner and cancel its filing immediately after it ceases to provide live streaming services, set certain limits on user spending on virtual gifting and restrictions on minors on virtual gifting as required and strengthen the protections of minors. On August 30, 2021, the MCT promulgated the Measures for the Administration of Online Performance Brokerage Agencies, or the Online Performance Brokerage Agencies Measures, which took effect on the same date, pursuant to which, online performance brokerage agencies are not allowed to provide online performance brokerage services to minors under the age of 16, and when providing such services to minors over the age of 16, online performance brokerage agencies must verify their identity information and obtain written consent from their guardians.

On March 25, 2022, the CAC, the STA and the SAMR jointly issued the Notice on Further Standardizing the Profit-Making Behavior of Live Streaming to Promote the Healthy Development of the Industry, which required live streaming platforms to authenticate the identity of each live streaming publisher and report various information of those publishers that have profit-making behaviours to local provincial-level network department and tax authorities semi-annually. Information required to be reported include personal identity, live streaming account, online nicknames, bank account to receive compensation, income type and profit level. Furthermore, live streaming platforms are required to (i) strictly implement classification management system over live streaming accounts, (ii) take appropriate measures against law-breaking accounts, including to issue warnings and notices, request to rectify, limit the account functions, suspend or terminate accounts, and prohibit re-registration, and (iii) properly keep relevant record.

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Regulations Relating to Online Cultural Activities

The MOC promulgated the Provisional Measures on Administration of Internet Culture on February 17, 2011, which took effect in April 2011 and was recently amended on December 15, 2017, and the Notice on Issues Relating to Implementing the Newly Revised Provisional Measures on Administration of Internet Culture promulgated by the MOC on March 18, 2011, which apply to entities that engage in activities related to “online cultural products”. “Online cultural products” are classified as cultural products developed, published and disseminated through the Internet which mainly include: (i)online cultural products particularly developed for publishing through the Internet, such as, among other things, online music and video files, network games and online animation features and cartoons (including flash animation); and (ii)online cultural products converted from audio and visual products, games, performing arts, artworks and animation features and cartoons, and published on the Internet. Pursuant to this legislation, entities are required to obtain the Network Culture Operation License from the applicable provincial level counterpart of the MCT if they intend to commercially engage in any of the following types of activities:

● production, duplication, import, release or broadcasting of online cultural products;

● publishing of online cultural products on the Internet or transmission thereof to computers, fixed-line or mobile phones, radios, television sets or game consoles for the purpose of browsing, reading, reviewing, using or downloading such products by online users; or

● exhibitions or contests related to online cultural products.

On August 12, 2013, the MOC issued the Administrative Measures for Content Self-Review by Internet Culture Business Entities, which requires Internet culture business entities to review the content of products and services to be provided prior to providing such content and services to the public. The content management system of an Internet culture business entity is required to specify the responsibilities, standards and processes for content review as well as accountability measures, and is required be filed with the provincial level counterpart of the MCT.

In May 2019, the General Office of MCT promulgated the Notice on Adjustments on the Scope of Approval in relation to the Network Culture Operation License and Further Regulating the Approval Work, or the Notice on Adjustment of the Network Culture Operation License, according to which any activities in relation to chatting, e-commerce, education, training, sports, traveling, etc. shall not be deemed as a network performance which has been adjusted as a specific item in the business scope under Notice on Adjustment of the Network Culture Operation License.

Regulations Relating to Virtual Currency

On January 25, 2007, the MPS, the MOC, the MII and the GAPP jointly issued a circular regarding online gambling which has implications on the issuance and use of virtual currency. To curtail online games that involve gambling while addressing concerns that virtual currency might be used for money laundering or illicit trade, the circular (a)prohibits online game operators from charging commissions in the form of virtual currency in connection with the winning or losing of games; (b)requires online game operators to impose limits on use of virtual currency in guessing and betting games; (c)bans the conversion of virtual currency into real currency or property; and (d)prohibits services that enable game players to transfer virtual currency to other players. To comply with the relevant section of the circular that bans the conversion of virtual currency into real currency or property, in relation to online music and entertainment, our virtual currency currently can only be used by viewers to exchange for virtual items to be used to show support for performers or gain access to privileges and special features in the channels which are services in nature instead of “real currency or property.” Once the virtual currency is exchanged by viewers for virtual items or the relevant privileged services, the conversion transaction is completed and we immediately cancel the virtual item in our internal system.

In February 2007, fourteen PRC regulatory authorities jointly issued a circular to further strengthen the oversight of Internet cafes and online games. In accordance with the circular, the People’s Bank of China, or the PBOC, has the authority to regulate virtual currency, including: (a)setting limits on the aggregate amount of virtual currency that can be issued by online game operators and the amount of virtual currency that can be purchased by an individual; (b)stipulating that virtual currency issued by online game operators can only be used for purchasing virtual products and services within the online games and not for purchasing tangible or physical products; (c)requiring that the price for redemption of virtual currency shall not exceed the respective original purchase price; and (d)banning the trading of virtual currency.

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In June 2009, the MOC and the MOFCOM jointly issued the Notice to Strengthen the Administration of Online Game Virtual Currency, or the Virtual Currency Notice. The Virtual Currency Notice requires businesses that (a)issue online game virtual currency (in the form of prepaid cards and/or pre-payment or prepaid card points), or (b)offer online game virtual currency transaction services to apply for approval from the MCT through its provincial branches within three months after the issuance of the notice. The Virtual Currency Notice requires businesses that issue virtual currency for online games are prohibited from offering services that can trade virtual currency. Any company that fails to file the necessary application will be subject to sanctions, including but not limited to, mandatory corrective actions and fines.

Under the Virtual Currency Notice, online games virtual currency trading service provider refers to the business that provides platform services related to virtual trading in online games among game users. The Virtual Currency Notice further requires an online game virtual currency transaction service provider to comply with relevant e-commerce regulations issued by the MOFCOM. According to the Guiding Opinions on Online Trading (Interim) issued by the MOFCOM on March, 2007, online platform services are trading services provided to online buyers and sellers through a computer information system operated by the service provider.

The Virtual Currency Notice regulates, among others, the amount of virtual currency a business can issue, the retention period of user records, the function of virtual currency and the return of unused virtual currency upon the termination of online services. Online game operators are prohibited from distributing virtual items or virtual currencies to players through random selection methods such as lottery or betting when the player directly pays cash or virtual currency. Game operators are prohibited from issuing virtual currency to game players in any way other than legal tender purchases. Any business that provides online game virtual currency transaction services is required to adopt technical measures to prohibit the illegal transactions. For game operators do not support online game virtual currency transaction service, technical measures shall be adopted to restrict the transfer of online game virtual currency among accounts of different game players.

Currently, the PRC government has not promulgated any specific rules, laws or regulations to directly regulate virtual currency, except for the above-mentioned online game virtual currency. Although we do not think the Virtual Currency Notice applies to the operation of our live streaming business, given the wide discretion of the governmental authorities and uncertainties in the regulatory environment, there is no assurance that the governmental authorities will not in the future interpret the Virtual Currency Notice in a different way and subject our operation of live streaming business to its scope of regulation.

Regulations Relating to Internet Information Security and Privacy Protection

Internet information in China is regulated from a national security standpoint. The National People’s Congress, or the NPC, has enacted the Decisions on Preserving Internet Security on December 28, 2000 and amended on August 27, 2009, which subject violators to potential criminal punishment in China for any attempt to: (i) gain improper entry into a computer or system of strategic importance; (ii) disseminate politically disruptive information; (iii) leak state secrets; (iv) spread false commercial information; or (v) infringe intellectual property rights. The MPS has promulgated measures that prohibit use of the internet in ways which, among other things, result in a leak of state secrets or a spread of socially destabilizing content. If an internet information service provider violates these measures, the MPS and its local branches may revoke its operating license and shut down its websites. In December 2012, the Standing Committee of the National People’s Congress promulgated the Decision on Strengthening Network Information Protection, or the Network Information Protection Decision, to enhance the legal protection of information security and privacy on the internet. The Network Information Protection Decision also requires internet operators to take measures to ensure confidentiality of information of users.

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In recent years, PRC governmental authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized disclosure. Under the Several Provisions on Regulating the Market Order of Internet Information Services, issued by the MIIT on December 29, 2011 and effective on March 15, 2012, an internet information service provider may not collect any user personal information or provide any such information to third parties without the consent of the user. An internet information service provider must expressly inform the users of the method, content and purpose of the collection and processing of such user personal information and may only collect such information necessary for the provision of its services. An internet information service provider is also required to properly maintain the user’s personal information, and in case of any leak or likely leak of the user’s personal information, the internet information service provider must take immediate remedial measures and, in severe circumstances, immediately report to the telecommunications authority. Moreover, pursuant to the Ninth Amendment to the Criminal Law issued by the Standing Committee of the National People’s Congress on August 29, 2015 which became effective on November 1, 2015, any internet service provider that fails to fulfill the obligations related to internet information security administration as required by applicable laws and refuses to rectify upon orders, shall be subject to criminal penalty for the result of (i) any dissemination of illegal information in large scale; (ii) any severe effect due to the leakage of the client’s information; (iii) any serious loss of criminal evidence; or (iv) other severe situation. Any individual or entity that (i) sells or provides personal information to others in a way violating the applicable law, or (ii) steals or illegally obtains any personal information, shall be subject to criminal penalty in severe situation. It further provides that any ICP provider that fails to fulfill the obligations related to internet information security administration as required by applicable laws and refuses to rectify upon orders will be subject to criminal liability. In addition, the Interpretations of the Supreme People’s Court and the Supreme People’s Procuratorate of the PRC on Several Issues Concerning the Application of Law in Handling Criminal Cases of Infringing Personal Information, issued on May 8, 2017 and effective on June 1, 2017, clarified certain standards for the conviction and sentencing of the criminals in relation to personal information infringement. Further, the NPC promulgated a new National Security Law, effective on July 1, 2015, to replace the former National Security Law and covers various types of national security including technology security and information security.

In addition, the Standing Committee of the National People’s Congress promulgated the Cyber Security Law of the People’s Republic of China, or the Cyber Security Law, effective in June 2017, to protect cyberspace security and order. Pursuant to the Cyber Security Law, any individual or organization using the network must comply with the constitution and the applicable laws, follow the public order and respect social moralities, and must not endanger cyber security, or engage in activities by making use of the network that endanger the national security, honor and interests, or infringe on the fame, privacy, intellectual property and other legitimate rights and interests of others. The Cyber Security Law sets forth various security protection obligations for network operators, which are defined as “owners and administrators of networks and network service providers”, including, among others, complying with a series of requirements of tiered cyber protection systems, verifying users’ real identity, localizing the personal information and important data gathered and produced by key information infrastructure operators during operations within the PRC, and providing assistance and support to governmental authorities where necessary for protecting national security and investigating crimes. Furthermore, MIIT’s Rules on Protection of Personal Information of Telecommunications and Internet Users promulgated on July 16, 2013, effective on September, 2013, contain detailed requirements on the use and collection of personal information as well as security measures required to be taken by telecommunications business operators and internet information service providers.

Pursuant to the Announcement of Conducting Special Activities Against Illegal Collection and Use of Personal Information by APPs, which was jointly released by the CAC, MIIT, MPS and SAMR on January 23, 2019 and became effective on the same date, to further implement and strengthen the Cyber Security Law, (i) the app operators shall strictly fulfill their obligations under the Cyber Security Law and shall be responsible for the personal information collected by them as well as implement effective measures to strengthen the protection of personal information, (ii) competent government authorities shall strengthen its regulations and punishments on illegal collection and use of personal information in accordance with the Cyber Security Law and the Law on the Protection of Consumer Rights and Interests, and (iii) the MPS will initiate targeted activities against illegal collection and use of personal information online. On November 28, 2019, the CAC, MIIT, MPS and SAMR jointly issued the Notice on Identification of the Illegal Collection and Use of Personal Information by APPs, effective on the same date, to provide detailed methods on identifying illegal collection and use of personal information by APPs. Provisions on the Necessary Personal Information Scope for Common Types of Mobile Internet Applications, which was jointly released by the CAC, MIIT, MPS and SAMR on March 12, 2021 and will become effective on May 1, 2021, specified the scope of necessary personal information for different types of mobile apps, and provided that the mobile apps must not refuse to provide their basic functions to users who disagree to provide information that are out of the scope of necessary personal information. On April 26, 2021, the MIIT issued the Interim Administrative Provisions on Personal Information Protection in Internet Mobile Applications (Draft for Comment), which set forth two principles of collection and utilization of personal information, namely “explicit consent” and “minimum necessity.” In addition, the Anti-monopoly Guide, also prohibits us from collection of user information without users’ consents.

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To further regulate data processing activities, safeguard data security, promote data development and utilization, protect the lawful rights and interests of individuals and organizations, and maintain national sovereignty, security, and development interests, on June 10, 2021, Standing Committee of the National People’s Congress promulgated the PRC Data Security Law, or the Data Security Law, which took effect on September 1, 2021. The Data Security Law requires data processing, which includes the collection, storage, use, processing, transmission, provision, publication of data, to be conducted in a legitimate and proper manner. The Data Security Law provides for data security and privacy obligations on entities and individuals carrying out data activities. The Data Security Law also introduces a data classification and hierarchical protection system based on the importance of data in economic and social development, and the degree of harm it may cause to national security, public interests, or legitimate rights and interests of individuals or organizations if such data are tampered with, destroyed, leaked, illegally acquired or illegally used. The appropriate level of protection measures is required to be taken for each category of data. For example, a processor of important data is required to designate the personnel and the management body responsible for data security, carry out regular risk assessments of its data processing activities and file the risk assessment reports with the competent authorities. State core data, i.e. data having a bearing on national security, the lifelines of national economy, people’s key livelihood and major public interests, shall be subject to stricter management system. Moreover, the Data Security Law provides a national security review procedure for those data activities which affect or may affect national security and imposes export restrictions on certain data and information. In addition, the Data Security Law also provides that any organization or individual within the territory of the PRC shall not provide any foreign judicial body and law enforcement body with any data without the approval of the competent PRC governmental authorities.

On July 6, 2021, the relevant PRC government authorities issued the Securities Activities Opinions, which, among others, provided for improving relevant laws and regulations on data security, cross-border data transmission, and confidential information management. It provided that efforts will be made to revise the regulations on strengthening the confidentiality and file management relating to the offering and listing of securities overseas, to implement the responsibility on information security of overseas listed companies, and to strengthen the standardized management of cross-border information provision mechanisms and procedures.

On December 28, 2021, the CAC, the NDRC, the MIIT, the MPS, the Ministry of State Security, the MOF, the MOFCOM, the PBOC, the SAMR, the NRTA, the CSRC, the State Secrecy Administration and the State Cryptography Administration jointly promulgated the Cybersecurity Review Measures, which took effect on February 15, 2022. Cybersecurity Review Measures provides that critical information infrastructure operators that intend to purchase internet products and services and data processing operators engaging in data processing activities, which affect or may affect national security, shall apply to the Cybersecurity Review Office for cybersecurity reviews. Furthermore, operators who possess personal information of over a million users shall apply to the Cybersecurity Review Office for cybersecurity reviews before listing in a foreign country. In addition to the abovementioned circumstances under which the relevant operators are mandatorily imposed with the obligation to apply for cybersecurity reviews, Cybersecurity Review Measures also provides that if the members of the cybersecurity review working mechanism consider that any network products and services and data processing activities affects or may affect national security, the Cybersecurity Review Office shall report to the CAC for approval and initiate a cybersecurity review even if the relevant operator may not have an obligation to report for a cybersecurity review under such circumstance. Cybersecurity Review Measures also elaborated the factors to be considered when assessing the national security risks of the relevant activities, including among others, risks of core data, important data or a large amount of personal information being stolen, leaked, destroyed, and illegally used or exited the country and risks of critical information infrastructure, core data, important data or a large amount of personal information data being affected, controlled and maliciously used by foreign governments after a foreign listing.

On November 14, 2021, the CAC released the Regulations of Internet Data Security Management (Draft for Comments), which provided that data processors refer to individuals or organizations that autonomously determine the purpose and the manner of processing data. In accordance with this draft, data processors shall apply for a cybersecurity review for the following activities: (i) merger, reorganization or division of internet platform operators that have acquired a large number of data resources related to national security, economic development or public interests to the extent that affects or may affect national security; (ii) listing abroad of data processors which process over one million users’ personal information; (iii) listing in Hong Kong which affects or may affect national security; or (iv) other data processing activities that affect or may affect national security. In addition, data processors that are listed overseas shall carry out an annual data security assessment. Cybersecurity Review Measures and Regulations of Internet Data Security Management (Draft for Comments) both remain unclear on whether the relevant requirements will be applicable to companies that have been listed in the United States and Hong Kong. We cannot predict the impact of the regulation or the draft, if any, at this stage, and we will closely monitor and assess any development in the rule-making process. If the enacted versions mandate clearance of cybersecurity review and other specific actions to be completed by China-based companies listed on a U.S. stock exchange and Hong Kong exchange, we will face uncertainties as to whether such clearance can be timely obtained, or at all. In addition, if a final version of the Regulations of Internet Data Security Management (Draft for Comments) is adopted, we may be subject to review when conducting data processing activities and annual data security assessment and may face challenges in addressing its requirements and make necessary changes to our internal policies and practices in data processing.

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On July 12, 2021, the MIIT and two other authorities jointly issued the Provisions on the Administration of Security Vulnerabilities of Network Products, which state that, no organization or individual may abuse the security vulnerabilities of network products to engage in activities that endanger network security, or to illegally collect, sell, or publish the information on such security vulnerabilities. Anyone who is aware of the aforesaid offences shall not provide technical support, advertising, payment settlement and other assistance to the relevant offenders. According to the Provisions on the Administration of Security Vulnerabilities of Network Products, network product providers, network operators, and platforms collecting network product security vulnerabilities shall establish and improve channels for receiving network product security vulnerability information and keep such channels available, and retain network product security vulnerability information reception logs for at least six months. Furthermore, the provision of undisclosed vulnerabilities to overseas organizations or individuals other than to the product providers is not allowed.

On July 30, 2021, the State Council promulgated the Regulations on Protection of Critical Information Infrastructure, which became effective on September 1, 2021 and defined “critical information infrastructure” as the important network facilities or information systems of key industries or fields, such as public communication and information service, energy, transportation, water conservation, finance, public services, e-government affairs and national defence science, and important network facilities or information systems which may endanger national security, people’s livelihood and public interest once there occur damage, malfunctioning or data leakage to them. Regulations on Protection of Critical Information Infrastructure provided that no individual or organization may carry out any illegal activity of intruding into, interfering with, or sabotaging any critical information infrastructures, or endanger the security of any critical information infrastructures. Regulations on Protection of Critical Information Infrastructure also mandate that each critical information infrastructure operator shall establish a cybersecurity protection system and accountability system, and the principal person in-charge of a critical information infrastructure operator shall take full responsibility for the security protection of the critical information infrastructures operated by it. In addition, relevant administration departments of each important industry and sector, or the Protection Departments, shall be responsible for formulating the rule of critical information infrastructure determination applicable to their respective industry or sector, and determine the critical information infrastructure operators in their industry or sector. The result of the determination of critical information infrastructure operator shall be informed to the relevant operator by the Protection Departments, and notified to the public security department of the State Council as well.

On October 29, 2021, the CAC issued the Measures for Security Assessment of Cross-border Data Transfer (Draft for Comment), or the Draft Security Assessment Measures. According to these measures, in addition to the self-risk assessment requirement for provision of any data outside China, a data processor shall apply to the competent cyberspace department for data security assessment and clearance of outbound data transfer in any of the following events: (i) outbound transfer of personal information and important data collected and generated by an operator of critical information infrastructure; (ii) outbound transfer of important data; (iii) outbound transfer of personal data by a data processor which has processed more than one million users’ personal data; (iv) outbound transfer of more than one hundred thousand users’ personal information or more than ten thousand users’ sensitive personal information cumulatively; and (v) such other circumstances where ex-ante security assessment and evaluation of cross-border data transfer is required by the CAC. However, as the Draft Security Assessment Measures was released for public comments only, there still exist substantial uncertainties with respect to its enactment timetable and final provisions.

Pursuant to the Civil Code, the personal information of a natural person shall be protected by the law. Any organization or individual shall legally obtain such personal information of others when necessary and ensure the safety of such information, and shall not illegally collect, use, process or transmit personal information of others, or illegally purchase or sell, provide or make public personal information of others.

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On August 20, 2021, the Standing Committee of the National People’s Congress promulgated the Personal Information Protection Law which took effect on November 1, 2021. According to the Personal Information Protection Law, personal information refers to information related to identified or identifiable natural persons which is recorded by electronic or other means (excluding the anonymized information). The Personal Information Protection Law requires, among others, that (i) the processing of personal information should have a clear and reasonable purpose which should be directly related to the processing purpose and should be conducted in a method that has the minimum impact on personal rights and interests, and (ii) the collection of personal information should be limited to the minimum scope as necessary to achieve the processing purpose and avoid the excessive collection of personal information. The Personal Information Protection Law also specified the rules for handling “sensitive personal information,” which means personal information that, once leaked or illegally used, may easily cause harm to the dignity of natural persons or grave harm to personal or property security, including information on biometric characteristics, financial accounts, individual location tracking. In addition, the Personal Information Protection Law requests a personal information processor that provides for basic internet platform services, has large amount of users, or has complicated business activities, to formulate an independent institution mainly comprising of outside members to supervise personal information processing activities, termination of provision of services for product or service providers on the platform whose personal information processing activities are in material violation of laws and regulations, and to issue personal information protection social responsibilities reports regularly. Personal information processors shall adopt necessary measures to safeguard the security of the personal information they handle, and the offending entities could be ordered to correct, or to suspend or terminate the provision of services, and face confiscation of illegal income, fines or other penalties. We have taken measures to ensure compliance of personal information collection and protection, and these measures can also meet the requirements of the Personal Information Protection Law in all material aspects.

On December 31, 2021, the CAC issued the Administrative Provisions on Algorithm Recommendation of Internet Information Services, with effect from March 1, 2022, which requires algorithm recommendation service providers to establish and improve management system and technical measures for, among others, data security and personal information protection.

Regulations Relating to Internet Advertising Business

In July 2016, the State Administration for Industry and Commerce, or the SAIC (which is the predecessor of the SAMR) issued the Interim Measures for the Administration of Internet Advertising, or the Internet Advertising Interim Measures to regulate internet advertising activities, which became effective on September 1, 2016, defining internet advertising as any commercial advertising that directly or indirectly promotes goods or services through websites, webpages, internet applications and other internet media in the forms of words, picture, audio, video or others, including promotion through emails, texts, images, video with embedded links and paid-for search results. According to the Internet Advertising Interim Measures, no advertisement of any medical treatment, medicines, food for special medical purpose, medical apparatuses, pesticides, veterinary medicines, dietary supplement or other special commodities or services subject to examination by an advertising examination authority as stipulated by laws and regulations may be published unless the advertisement has passed such examination. On December 13, 2019, the SAMR issued the Interim Measures for the Administration of Medicines, Medical Apparatuses and Food for Special Medical Purpose, effective on March 1, 2020, clarifying certain issues in the examination of medicines, medical apparatuses and food for special medical purpose. In addition, no entity or individual may publish any advertisement of over-the-counter (OTC) medicines or tobacco on the internet. An internet advertisement must be identifiable and clearly identified as an “advertisement” to the consumers. Paid search advertisements are required to be clearly distinguished from natural search results. In addition, the following internet advertising activities are prohibited: providing or using any applications or hardware to intercept, filter, cover, fast forward or otherwise restrict any authorized advertisement of other persons; using network pathways, network equipment or applications to disrupt the normal data transmission of advertisements, alter or block authorized advertisements of other persons or load advertisements without authorization; or using fraudulent statistical data, transmission effect or matrices relating to online marketing performance to induce incorrect quotations, seek undue interests or harm the interests of others. Pursuant to the Advertisement Law of the PRC, which was promulgated by the Standing Committee of the National People’s Congress on October 27, 1994 and last amended on April 29, 2021, internet advertisement publishers are required to verify relevant supporting documents and check the content of the advertisement and are prohibited from publishing any advertisement with unverified content or without all the necessary qualifications. Internet information service providers that are not involved in internet advertising business activities but simply provide information services are required to block any attempt to publish an illegal advisement that they are aware of or should reasonably be aware of through their information services. The administration for industry and commerce shall order the offender to stop publishing advertisement, order the advertiser to eliminate impact within the corresponding scope, and impose a fine ranging from three to five times the amount of the advertising fee if publish advertisements without examination. The administration for industry and commerce shall order the offender to stop publishing advertisement, impose a fine ranging from RMB200,000 to RMB1 million, and in serious cases may also cancel the business license, if publish advertisement of OTC medicines. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

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Regulations Relating to Payment Services

On June 14, 2010, the PBOC issued the Administrative Measures for the Payment Services of Non-Financial Institutions, or the Payment Services Measures, effective on September 1, 2010. Under the Payment Services Measures, a non-financial institution must obtain a payment business license, or Payment License, to provide payment services and qualifies as a paying institution. With the Payment License, a non-financial institution may serve as an intermediary between payees and payers and provide some or all of the following services: online payment, issuance and acceptance of prepaid card, bank card acceptance, and other payment services as specified by PBOC. Without PBOC’s approval, no non-financial institution or individual may engage in payment business whether explicitly or in a disguised form.

In November 2017, PBOC published a notice, or the PBOC Notice, on the investigation and administration of illegal offering of settlement services by financial institutions and third-party payment service providers to unlicensed entities. The PBOC Notice intended to prevent unlicensed entities from using licensed payment service providers as a conduit for conducting the unlicensed payment settlement services, so as to safeguard the fund security and information security.

Regulations Relating to Pharmaceutical Operation and Service

Pharmaceutical Operation

In September 1984, the Standing Committee of the National People’s Congress issued the Drug Administration Law of the People’s Republic of China, or the Drug Administration Law, which was amended in 2001, 2013, 2015 and 2019 respectively to regulate all entities or individuals engaging in research, manufacture, operation, use, supervision and management of drugs within the PRC. According to the Drug Administration Law, no pharmaceutical operation, including pharmaceutical whole-sale and pharmaceutical retail business, is permitted without obtaining the Pharmaceutical Operation License. The Implementation Rules for the Drug Administration Law, was promulgated by the State Council on August 4, 2002 and was recently amended on March 2, 2019, which emphasized the detailed implementation rules of drugs administration. The CFDA promulgated the Measures for the Administration of Pharmaceutical Operation License on February 4, 2004 as amended on November 17, 2017, which stipulate the procedures for applying the Pharmaceutical Operation License and the requirements and qualifications for pharmaceutical wholesalers or pharmaceutical retailers with respect to their management system, personnel, facilities and etc. The valid term of the Pharmaceutical Operation License is five years and shall be renewed six months prior to its expiration date.

According to the Measures on Prescription Drugs and OTC Drugs Classification Management and the Interim Provisions on the Circulation of Prescription and OTC Drugs (Trial), which were both promulgated by the State Drug Administration, which was restructured and integrated into the CFDA, in 1999 and became effective in January 2000, drugs are divided into prescription drugs and over-the-counter drugs, or OTC drugs. For prescription drugs, the dispensing, purchase and use can only be based on the prescription issued by the certified medical practitioner or certified medical assistant practitioner. In addition, the prescription drugs can only be advertised and promoted in professional medical magazines. OTC drugs, on the other hand, are further divided into Class A and Class B and they both can be purchased and used without a prescription and promoted in public upon approval by the relevant governmental authorities. The pharmaceutical wholesale enterprises distributing prescription drugs and/or OTC drugs, as well as pharmaceutical retail enterprises selling prescription drugs and/or Class A OTC drugs are required to obtain the Pharmaceutical Operation License.

Medical Devices Operation

According to the Regulations on the Supervision and Administration of Medical Devices, which was promulgated by the State Council in January 2000 and most recently amended in 2021, and the Supervision and Management Measures on Medical Devices Operation, which was promulgated by the CFDA in July 2014 and most recently amended in 2022 which will become effective on May 1, 2022, business operations of medical devices are regulated based on the degree of risks involving the medical devices, which are divided into three categories. Operation of Class I medical devices does not require a license or record-filing, while operations of Class II medical devices and Class III medical devices are subject to record-filing and licensing requirements, respectively. An entity engaging in the operation of medical devices shall meet certain requirements with respect to its management system, personnel, facilities etc., and shall apply for approval to operate Class III medical devices and make record-filing with relevant governmental authority to operate Class II medical devices. The valid term of medical devices operation permit is five years.

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Pursuant to the Supervision and Management Measures on Medical Devices Operation, an alteration to items borne on a License for Business Operations of Medical Devices includes alteration to licensed items and alteration to registered items. An alternation of business model, business scope is an alternation to licensed items, to which, an enterprise shall apply to the administration that issued the License for Business Operations of Medical Devices and submit altered documents. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China —We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

Regulations Relating to Online Operation of Drugs and Medical Devices

Internet Drug Information Service

The Administrative Measures on Internet Drug Information Service, or Internet Drug Measures, was promulgated by the CFDA on July 8, 2004 and amended on November 17, 2017, pursuant to which the internet drug information services is to provide drug (including medical device) information services to online users, which is divided into commercial internet drug information services and non-commercial internet drug information services. The website operator that provides drugs (including medical devices) information services must obtain an Internet Drug Information Service Qualification Certificate from the competent counterpart of the CFDA. The valid term for an Internet Drug Information Service Qualification Certificate is five years and may be renewed at least six months prior to its expiration date upon a re-examination by the relevant governmental authorities.

Furthermore, as requested by Internet Drug Measures, the information relating to drugs shall be accurate and scientific in nature, and its provision shall comply with the relevant laws and regulations. No product information of stupefacient, psychotropic drugs, medicinal toxic drugs, radio, pharmaceutical, detoxification drugs and pharmaceutics made by medical institutes shall be distributed on the website. In addition, advertisements relating to drugs (including medical devices) shall be approved by the CFDA or its competent counterparts.

Internet Medical Services

According to the Opinion Concerning the Promotion of the Development of Internet Plus Medical and Health, promulgated and implemented on April 25, 2018 by the General Office of the State Council, third-party organizations such as the internet medical health service platform shall ensure that the qualifications of their medical service staffs are in compliance with the relevant regulation provisions and bear the responsibilities for the services provided. The internet medical health service platform shall also be strictly in accordance with the relevant regulation provisions regarding information security and confidentiality obligations for health and medical data, and establish or improve its privacy information protection system.

According to the Notice of Publishing of the Measures on the Administration of the Internet Diagnosis and Treatment (For Trial Implementation) and Other Two Documents, which was promulgated and implemented on July 17, 2018 by the National Health Commission and State Administration of Traditional Chinese Medicine, Internet diagnosis and treatment refers to the use of doctors registered in the institution using the Internet and other information technology to carry out re-diagnosis of some common diseases and chronic diseases and “Internet Plus” family doctor contract services, provided that physicians have obtained the patient’s medical records and relevant common diseases or chronic diseases have been diagnosed at the physical medical institution. Internet diagnosis and treatment activity shall be provided by medical institution that has obtained the Medical Institution Practicing License and the medical institution shall apply for registration of Internet diagnosis and treatment activity. Medical institutions carrying out Internet diagnosis and treatment activities should be consistent with their diagnosis and treatment subjects. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

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Internet Drug Transaction Services

The Interim Provisions on the Examination and Approval of Internet Drug Transaction Services, or Interim Provisions of Internet Drug Transaction, were promulgated by the CFDA on September 29, 2005 and became effective on December 1, 2005, and regulate transaction of drugs (including medical devices and packing materials and containers that are in direct contact with drugs) over internet, including the provision of transaction services among pharmaceutical manufacturers, pharmaceutical operation enterprises and medial institutes, the services provided by pharmaceutical manufacturers and pharmaceutical wholesale enterprises to other third parties via their own websites and services provided by pharmaceutical retail chain enterprises to individual consumers. According to Interim Provisions of Internet Drug Transaction, enterprises engaging in providing drug transaction services over the internet must obtain an Internet Drug Transaction Qualification Certificate. Such certificates have a term of five years and have three types: A certificate, B certificate and C certificate. They are only issued to three kinds of enterprises: (i)enterprises that provide drug transaction services to pharmaceutical manufacturers, pharmaceutical operation enterprises and medical institutions, but do not participate in pharmaceutical manufacture and operation and do not own, have no property relationship or other economic interest with the administrative organizations, medical institutions or pharmaceutical manufacture and operation enterprises; (ii)pharmaceutical manufacturers and pharmaceutical wholesale enterprises that deal with other third-party enterprises via their own websites; (iii)the pharmaceutical retail chain enterprises that provide OTC drug transaction services for individual consumers via the internet.

However, according to the Decision on the Cancellation of the Third Batch of Items Subject to Administrative Permission by Local Governments Designated by the Central Government, promulgated by the State Council on January 12, 2017, except for third-party platforms, all approvals of internet drug transaction service enterprises implemented by counterparts of CFDA at the provincial level are cancelled. In April 2017, the General Office of the CFDA promulgated a notice on implementing the above mentioned decision, pursuant to which pharmaceutical manufacture enterprises and pharmaceutical wholesale enterprises may carry out internet drug (including medical device) transactions with other enterprises through their own websites, but shall not provide internet drug (including medical device) transaction services to individual consumers. In addition, pharmaceutical retail chain enterprises may provide internet drug (including medical device) transaction services to individual consumers, but they shall not exceed the business scope permitted by license and filings and display information of prescription drugs on related transaction webpages, or sell prescription drugs or the OTC drugs under special administrative requirements; as indicated in such decision, the CFDA will promulgate subsequently the relevant rules on supervision of internet drug (including medical device) transaction.

Furthermore, according to the Decision on the Cancellation of Various Items Subject to Administrative Permission promulgated by the State Council on September 22, 2017, the enterprises engaging in internet drug transaction service as a third-party platform shall no longer be subject to the examination and approval of the CFDA before carrying out such business. In November 2017 the General Office of the CFDA promulgated a Notice on Strengthening the Administration and Supervision of Internet Drug and Medical Devices Transaction, which specify the approval to conduct internet drug transaction service as the third-party platform is cancelled, but enterprises carrying out internet drug (including medical) transaction services shall establish a comprehensive supervision system in general and also request local counterparts of CFDA to implement day-to-day supervision and examination with respect to qualification access examination, products inspection, storage of transaction data and legal liabilities etc.

Online Sales of Drugs and Medical Device

On February 9, 2018, the CFDA released the draft Administrative Measures for Supervision and Regulation of Online Drug Sales for comments, or the 2018 Draft Administrative Measures for Supervision and Regulation of Online Drug Sales. The 2018 Draft Administrative Measures for Supervision and Regulation of Online Drug Sales stipulates that sellers and online platforms engaging in this business shall obtain relevant certificates and have sufficient medical staff and operating systems to guarantee the safety and quality of the drugs. Furthermore, these entities shall make record-filing with the counterparts of CFDA at provisional level. In particular, the transaction webpages for sale of prescription drugs to individuals are not allowed to display prescription drugs information via the internet. On November 12, 2020, according to the Drug Administration Law revised in 2019, the NMPA, has made certain modifications, revisions and/or amendments to the 2018 Draft Administrative Measures for the Supervision and Administration of Online Drug Sales and further published the 2020 Draft Administrative Measures for the Supervision and Administration of Online Drug Sales for public comments, which provides that pharmaceutical retailing enterprises qualified to sell prescription drugs online can display prescription drug information to the public while other pharmaceutical retailing enterprises are not allowed to display prescription drug sales information via the Internet. Qualified pharmaceutical retailing enterprises shall disclose safety warnings including “prescription drugs should only be purchased and used with prescriptions and guidance of licensed pharmacists” when displaying information of prescription drugs. As of the date of this annual report, the 2020 Draft Administrative Measures for the Supervision and Administration of Online Drug Sales has not come into effect and there are substantial uncertainties with respect to its enactment timetable and final provisions.

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On August 26, 2019, the Standing Committee of the National People’s Congress promulgated the Administrative Law of the Pharmaceutical, or the Pharmaceutical Law, which became effective on December 1, 2019. The Pharmaceutical Law does not include prescription drugs as an item that are prohibited to be sold online definitely. Further, detailed administrative measures shall be promulgated by corresponding governmental authorities in relation to a company engaging in sales of pharmaceutical online. However, as of the date of this annual report, no further administrative measure has been promulgated.

On December 20, 2017, the CFDA promulgated the Administration and Supervision Measures of Online Sales of Medical Devices, or the Online Medical Devices Sales Measures, which became effective on March 1, 2018. According to the Online Medical Devices Sales Measures, enterprises engaged in online sales of medical devices must be medical device manufacture and operation enterprises with medical devices production licenses or operation licenses or being filed for record in accordance with laws, unless such licenses or record-filing is not required by laws and regulations, and the third-party platform for provision of online medical devices transaction services shall obtain an Internet Drug Information Services Qualification License. Either enterprises for online sales of medical devices or enterprises for provision of medical devices online transaction services shall take technical measures to ensure the data and materials of medical devices online sales are authentic, completed and retrospective, for example the records of sale information of medical devices shall be kept for two years after the valid period of the medical devices, and for no less than five years in case of no valid period, or be kept permanently in case of implanted medical devices.

Regulations Relating to Human Assisted Reproductive Technology

The Ministry of Health promulgated the Management Measures on Human Assisted Reproductive Technology on February 20, 2001 and it became effective on August 1, 2001. It stipulates that human assisted reproductive procedures should only be carried out in approved and registered medical institutions. No entity or individual should carry out human assisted reproductive procedures without the approval of competent health authority. Furthermore, medical institutions must obtain human assisted reproductive technology licenses, which are subject to regular examinations by the governmental approval authority. In the event the medical institution fails to pass the examination, the human assisted reproductive technology licenses would be revoked.

On April 3, 2015, twelve departments promulgated the Work Plan for Combating Surrogacy, or the Work Plan. According to the Work Plan, a national leading group will be established to combat surrogacy activities, any intermediaries that carry out surrogacy activities and any networks, television broadcasts, newspapers and magazines, etc. for the promotion and service of surrogacy activities shall be cleaned up. On June 8, 2017, twelve departments promulgated Work Plan for Investigating and Handling Illegal and Irregular Use of Human Assisted Reproductive Technology, according to which relevant departments shall strengthen supervision on the advertisement in relation to human assisted reproductive technology and any websites with illegal information and advertisement with respect to human assisted reproductive technology shall be cleaned-up.

Regulations Relating to Intellectual Property in the PRC

Copyright

Pursuant to the Copyright Law of the PRC, as amended in 2020, which will take into effect on June 1, 2021, copyrights include personal rights such as the right of publication and that of attribution as well as property rights such as the right of production and that of distribution. Reproducing, distributing, performing, projecting, broadcasting or compiling a work or communicating the same to the public via an information network without permission from the owner of the copyright therein, unless otherwise provided in the Copyright Law of the PRC, shall constitute infringements of copyrights. The infringer shall, according to the circumstances of the case, undertake to cease the infringement, take remedial action, and offer an apology, pay damages, etc.

Trademark

Pursuant to the Trademark Law of the PRC, as most recently amended in 2019, the right to exclusive use of a registered trademark shall be limited to trademarks which have been approved for registration and to goods for which the use of such trademark has been approved. The period of validity of a registered trademark shall be ten years, counted from the day the registration is approved. According to this law, using a trademark that is identical to or similar to a registered trademark in connection with the same or similar goods without the authorization of the owner of the registered trademark constitutes an infringement of the exclusive right to use a registered trademark. The infringer shall, in accordance with the regulations, undertake to cease the infringement, take remedial action, and pay damages, etc.

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Patent

Pursuant to the Patent Law of the PRC, as amended in 2020, which will take into effect on June 1, 2021, after the grant of the patent right for an invention or utility model, except where otherwise provided for in the Patent Law, no entity or individual may, without the authorization of the patent owner, exploit the patent, that is, make, use, offer to sell, sell or import the patented product, or use the patented process, or use, offer to sell, sell or import any product which is a direct result of the use of the patented process, for production or business purposes. After a patent right is granted for a design, no entity or individual shall, without the permission of the patent owner, exploit the patent, that is, for production or business purposes, manufacture, offer to sell, sell, or import any product containing the patented design. Once the infringement of patent is confirmed, the infringer shall, in accordance with the regulations, undertake to cease the infringement, take remedial action, and pay damages, etc.

Domain Name

Pursuant to the Measures for the Administration of Internet Domain Names of China promulgated in November 2004 and effective in December 2004, or the 2004 Domain Names Measures, and the Measures for the Administration of Internet Domain names promulgated in August 2017 and effective in November 2017 to replace the 2004 Domain Names Measures, “domain name” shall refer to the character mark of hierarchical structure, which identifies and locates a computer on the internet and corresponds to the internet protocol (IP) address of that computer. The principle of “first come, first serve” is followed for the domain name registration service. After completing the domain name registration, the applicant becomes the holder of the domain name registered by him/it. Any organization or individual may file an application for settlement with the domain names dispute resolution institution or file a lawsuit in the people’s court in accordance with the law, if such organization or individual consider its/his legal rights and interests to be infringed by domain names registered or used by others.

Regulations Relating to Internet Infringement

Pursuant to the Civil Code and the Regulations on Protection of Information Network Transmission Right, which was promulgated by the State Council on May 18, 2006, effective on July 1, 2006 and was last amended on January 30, 2013, an Internet user or an Internet service provider that infringes upon the civil rights or interests of others through using the Internet assumes tort liability. If an Internet user infringes upon the civil rights or interests of another through using the Internet, the person being infringed upon has the right to notify and request the Internet service provider whose Internet services are facilitating the infringement to take necessary measures including the deletion, blocking or disconnection of an Internet link. If, after being notified, the Internet service provider fails to take necessary measures in a timely manner to end the infringement, it will be jointly and severally liable for any additional harm caused by its failure to act.

Regulations Relating to Labor Protection in the PRC

According to the Labor Law of the PRC, or the Labor Law, which was promulgated by the Standing Committee of the National People’s Congress in July 1994, effective on January 1, 1995, and most recently amended in December 2018, an employer shall develop and improve its rules and regulations to safeguard the rights of its workers. An employer shall develop and improve its labor safety and health system, stringently implement national protocols and standards on labor safety and health, conduct labor safety and health education for workers, guard against labor accidents and reduce occupational hazards.

The Labor Contract Law of the PRC, which was promulgated by the Standing Committee of the National People’s Congress on June 29, 2007, effective on January 1, 2008, and most recently amended in December 2012, and the Implementation Regulations on Labor Contract Law, promulgated and became effective on September 18, 2008, regulate both parties to a labor contract, namely the employer and the employee, and contain specific provisions involving the terms of the labor contract. It is stipulated by the Labor Contract Law and the Implementation Regulations on Labor Contract Law that a labor contract must be made in writing. An employer and an employee may enter into a fixed-term labor contract, an un-fixed term labor contract, or a labor contract that concludes upon the completion of certain work assignments, after reaching agreement upon due negotiations. An employer may legally terminate a labor contract and dismiss its employees after reaching agreement upon due negotiations with the employee or by fulfilling the statutory conditions. Labor contracts concluded prior to the enactment of the Labor Contract Law and subsisting within the validity period thereof shall continue to be honored. With respect to a circumstance where a labor relationship has already been established but no formal contract has been made, a written labor contract shall be entered into within one month from the date of the establishment of the labor relationship.

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According to the Interim Regulations on the Collection and Payment of Social Insurance Premiums, the Regulations on Workplace Injury Insurance, the Regulations on Unemployment Insurance and the Trial Measures on Employee Maternity Insurance of Enterprises, enterprises in the PRC shall provide benefit plans for their employees, which include basic pension insurance, unemployment insurance, maternity insurance, workplace injury insurance and basic medical insurance. An enterprise must provide social insurance by processing social insurance registration with local social insurance agencies, and shall pay or withhold relevant social insurance premiums for or on behalf of employees. The Law on Social Insurance of the PRC, which was promulgated in October 2010, effective in July 2011, and most recently amended in December 2018, has consolidated pertinent provisions for basic pension insurance, unemployment insurance, maternity insurance, workplace injury insurance and basic medical insurance, and has elaborated in detail the legal obligations and liabilities of employers who do not comply with relevant laws and regulations on social insurance.

According to the Interim Measures for Participation in the Social Insurance System by Foreigners Working within the Territory of China, promulgated by the MOHRSS in September 2011, and effective in October 2011, employers who employ foreigners shall participate in the basic pension insurance, unemployment insurance, basic medical insurance, occupational injury insurance, and maternity leave insurance in accordance with the relevant law, with the social insurance premiums to be contributed respectively by the employers and foreigner employees as required. In accordance with such Interim Measures, the social insurance administrative agencies shall exercise their right to supervise and examine the legal compliance of foreign employees and employers, and the employers who do not pay social insurance premiums in conformity with the laws shall be subject to the administrative provisions provided in the Social Insurance Law and other relevant regulations and rules.

According to the Regulations on the Administration of Housing Provident Fund, which was promulgated in and effective in April 1999, and was most recently amended in March 2019, housing provident fund contributions by an individual employee and housing provident fund contributions by his or her employer shall belong to the individual employee.

The employer shall timely pay up and deposit housing provident fund contributions in full amount and late or insufficient payments shall be prohibited. The employer shall process housing provident fund payment and deposit registrations with the housing provident fund administration center. With respect to companies who violate the above regulations and fail to process housing provident fund payment and deposit registrations or open housing provident fund accounts for their employees, such companies shall be ordered by the housing provident fund administration center to complete such procedures within a designated period. Those who fail to process their registrations within the designated period shall be subject to a fine ranging from RMB10,000 to RMB50,000. When companies violate these regulations and fail to pay up housing provident fund contributions in full amount as due, the housing provident fund administration center shall order such companies to pay up within a designated period, and may further apply to the People’s Court for mandatory enforcement against those who still fail to comply after the expiry of such period. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

Regulations Relating to Tax in the PRC

Income Tax

The PRC Enterprise Income Tax Law was promulgated in March 2007 and was most recently amended in December 2018. The PRC Enterprise Income Tax Law applies a uniform 25% enterprise income tax rate to both foreign-invested enterprises and domestic enterprises, except where tax incentives are granted to special industries and projects. Under the PRC Enterprise Income Tax Law, an enterprise established outside of China with a “de facto management body” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation regulations to the PRC Enterprise Income Tax Law, a “de facto management body” is defined as the body that exercises full and substantial control and overall management over the business, productions, personnel, accounts and properties of an enterprise.

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In January 2009, the SAT promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, or the Non-resident Enterprises Measures, pursuant to which entities that have the direct obligation to make certain payments to a nonresident enterprise shall be the relevant tax withholders for such non-resident enterprise. Further, the Non-resident Enterprises Measures provide that, in case of an equity transfer between two non-resident enterprises occurring outside of China, which is indirectly related to the transfer of equity interests of a PRC resident enterprise, the non-resident enterprise which receives the equity transfer payment shall, by itself or engage an agent to, file a tax declaration with the PRC tax authority located at the place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred shall assist the tax authorities to collect taxes from the relevant non-resident enterprise. In April 2009, the MOF, and the SAT jointly issued the Notice on Issues Concerning Process of Enterprise Income Tax in Enterprise Restructuring Business, or Circular 59. In December 2009, the SAT issued the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or Circular 698. Both Circular 59 and Circular 698 became effective retroactively as of January 2008. In March 2011, the SAT issued the Notice on Several Issues Regarding the Income Tax of Non-PRC Resident Enterprises, or SAT Circular 24, effective in April 2011. By promulgating and implementing these circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise.

In January 2014, the Notice on Issues Relating to Handling Enterprise Income Tax in Promoting Enterprise Restructuring promulgated by MOF and the SAT took effect and partly superseded provisions in Circular 59. In February 2015, the SAT issued the Notice on Certain Corporate Income Tax Matters on Indirect Transfer of Properties by Non-PRC Resident Enterprises, or SAT Circular 7, to supersede existing provisions in relation to the indirect transfer as set forth in Circular 698, while the other provisions of Circular 698 remain in force. SAT Circular 7 introduces a new tax regime that is significantly different from that under Circular 698. SAT Circular 7 extends its tax jurisdiction to capture not only indirect transfers as set forth under Circular 698 but also transactions involving transfer of immovable property in China and assets held under the establishment, and placement in China, of a foreign company through the offshore transfer of a foreign intermediate holding company. SAT Circular 7 also addresses transfer of the equity interest in a foreign intermediate holding company broadly. In addition, SAT Circular 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and introduces safe harbor scenarios applicable to internal group restructurings and the purchase and sale of equity through a public securities market. However, it also brings challenges to both the foreign transferor and transferee of the indirect transfer as they have to determine whether the transaction should be subject to PRC tax and to file or withhold the PRC tax accordingly. In October 2017, the SAT issued the Announcement on Issues Relating to Withholding at Source of Income Tax of Non-resident Enterprises, or SAT Circular 37. SAT Circular 37, effective in December 2017, superseded the Non-resident Enterprises Measures and SAT Circular 698 as a whole and partially amended some provisions in SAT Circular 24 and SAT Circular 7. SAT Circular 37 purports to clarify certain issues in the implementation of the above regime, by providing, among others, the definition of equity transfer income and tax basis, the foreign exchange rate to be used in the calculation of withholding amount, and the date of occurrence of the withholding obligation. Specifically, SAT Circular 37 provides that where the transfer income subject to withholding at source is derived by a non-PRC resident enterprise in instalments, the instalments may first be treated as recovery of costs of previous investments. Upon recovery of all costs, the tax amount to be withheld must then be computed and withheld.

Value-Added Tax

According to the Temporary Regulations on Value-added Tax, amended in November 2017, and the Detailed Implementing Rules of the Temporary Regulations on Value- added Tax, amended in October 2011, all taxpayers selling goods, providing processing, repair or replacement services or importing goods within the PRC shall pay value- added tax. The tax rate of 17% shall be levied on general taxpayers selling or importing various goods; the tax rate of 17% shall be levied on the taxpayers providing processing, repairing or replacement service; the applicable rate for the export of goods by taxpayers shall be nil, unless otherwise stipulated.

Furthermore, according to the Trial Scheme for the Conversion of Business Tax to Value-added Tax, promulgated by the MOF and the SAT in November 2011, the State Council began to launch taxation reforms in a gradual manner in January 2012, whereby the collection of value-added tax in lieu of business tax items was implemented on a trial basis in regions showing significant radiating effects in economic development and providing outstanding reform examples, beginning with production service industries such as transportation and certain modern service industries.

In accordance with a SAT circular that took effect in May 2016, upon approval of the State Council, the pilot program of the collection of value-added tax in lieu of business tax shall be promoted nationwide in a comprehensive manner starting from May 2016, and all taxpayers of business tax engaged in the construction industry, the real estate industry, the financial industry and the life science industry shall be included in the scope of the pilot program with regard to payment of value-added tax instead of business tax.

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In April 2018, MOF and the SAT jointly promulgated the Circular of the Ministry of Finance and the State Administration of Taxation on Adjustment of Value-Added Tax Rates, or Circular 32, according to which (i)for VAT taxable sales acts or importation of goods originally subject to value-added tax rates of 17% and 11% respectively, such tax rates shall be adjusted to 16% and 10%, respectively; (ii)for purchase of agricultural products originally subject to deduction rate of 11%, such deduction rate shall be adjusted to 10%; (iii) for purchase of agricultural products for the purpose of production and sales or consigned processing of goods subject to tax rate of 16%, such tax shall be calculated at the deduction rate of 12%; (iv) for exported goods originally subject to tax rate of 17% and export tax refund rate of 17%, the export tax refund rate shall be adjusted to 16%; and (v)for exported goods and cross-border taxable acts originally subject to tax rate of 11% and export tax refund rate of 11%, the export tax refund rate shall be adjusted to 10%. Circular 32 became effective on May 1, 2018 and shall supersede existing provisions which are inconsistent with Circular 32.

In March 2019, MOF, the SAT and General Administration of Customs jointly promulgated the Announcement on Policies for Deepening the VAT Reform, or Circular 39, according to which (i)for VAT taxable sales acts or importation of goods originally subject to value-added tax rates of 16% and 10% respectively, such tax rates shall be adjusted to 13% and 9%, respectively; (ii)for purchase of agricultural products originally subject to deduction rate of 10%, such deduction rate shall be adjusted to 9%; (iii) for purchase of agricultural products for the purpose of production and sales or consigned processing of goods subject to tax rate of 13%, such tax shall be calculated at the deduction rate of 10%; (iv) for exported goods originally subject to tax rate of 16% and export tax refund rate of 16%, the export tax refund rate shall be adjusted to 13%; and (v)for exported goods and cross-border taxable acts originally subject to tax rate of 10% and export tax refund rate of 10%, the export tax refund rate shall be adjusted to 9%. Circular 39 became effective on April 1, 2019 and shall supersede existing provisions which are inconsistent with Circular 39.

Regulations Relating to Dividend Distributions

The principal regulations governing distribution of dividends of wholly foreign-owned enterprise, or WFOE, include the Company Law, the Foreign Investment Law and the Implementation Regulations. Under these regulations, foreign investment enterprises in China may pay dividends only out of their accumulated profits, if any, as determined in accordance with PRC accounting standards and regulations. In addition, a foreign investment enterprises in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until its cumulative total reserve funds reaches 50% of its registered capital. These reserve funds, however, may not be distributed as cash dividends. The proportional ratio for withdrawal of rewards and welfare funds for employees shall be determined at the discretion of the WFOE. Profits of a WFOE shall not be distributed before the losses thereof before the previous accounting years have been made up. Any undistributed profit for the previous accounting years may be distributed together with the distributable profit for the current accounting year.

Regulations Relating to Foreign Exchange

Regulations Relating to Foreign Exchange Registration of Overseas Investment by PRC Residents

Circular on Relevant Issues Concerning Foreign Exchange Control on Domestic Residents’ Offshore Investment and Financing and Roundtrip Investment Through Special Purpose Vehicles, or Circular 37, issued by SAFE in and effective in July 2014, regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing and conduct round trip investment in China. Under Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate domestic or offshore assets or interests, while “round trip investment” refers to the direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. Circular 37 requires that, before making contribution into an SPV, PRC residents or entities are required to complete foreign exchange registration with SAFE or its local branch. Circular 37 further provides that option or share- based incentive tool holders of a non-listed SPV can exercise the options or share incentive tools to become a shareholder of such non-listed SPV, subject to registration with SAFE or its local branch.

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PRC residents or entities who have contributed legitimate domestic or offshore interests or assets to SPVs but have yet to obtain SAFE registration before the implementation of the Circular 37 shall register their ownership interests or control in such SPVs with SAFE or its local branch. An amendment to the registration is required if there is a material change in the registered SPV, such as any change of basic information (including change of such PRC resident’s name and operation term), increases or decreases in investment amounts, transfers or exchanges of shares, or mergers or divisions. Failure to comply with the registration procedures set forth in Circular 37, or making misrepresentation or failure to disclose controllers of foreign-invested enterprise that is established through round-trip investment, may result in restrictions on the foreign exchange activities of the relevant foreign-invested enterprises, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations. In February 2015, SAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Circular 13, became effective on June 1, 2015. This SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing. Circular 37 is applicable to our shareholders who are PRC residents and may be applicable to any offshore acquisitions that we make in the future. All of our shareholders who, to our knowledge, are subject to the above SAFE regulations have completed the necessary registrations with the local SAFE branch or qualified banks as required by SAFE Circular 37.

According to the SAFE Circular 13, those who fails to comply with the requirements set forth in the preceding paragraph, the foreign exchange control authorities shall conduct business control over them in the capital account information system, and banks shall not carry out foreign exchange businesses under the capital account for them. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We may be adversely affected by the complexity, uncertainties and changes in PRC laws and regulation, and any lack of requisite approvals, licenses or permits applicable to our business may have a material adverse effect on our business, financial conditions and results of operations.”

On March 30, 2015, SAFE promulgated the Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or Circular 19, effective on June 1, 2015. According to Circular 19, the foreign exchange capital of foreign-invested enterprises shall be subject to the Discretional Foreign Exchange Settlement. The Discretional Foreign Exchange Settlement refers to the foreign exchange capital in the capital account of a foreign-invested enterprise for which the rights and interests of monetary contribution has been confirmed by the local foreign exchange bureau (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based on the actual operational needs of the foreign-invested enterprise. The proportion of Discretional Foreign Exchange Settlement of the foreign exchange capital of a foreign-invested enterprise is temporarily determined to be 100%. The Renminbi converted from the foreign exchange capital will be kept in a designated account and if a foreign-invested enterprise needs to make further payment from such account, it still needs to provide supporting documents and go through the review process with the banks.

SAFE issued the Circular on Reforming and Regulating Policies on the Control over Foreign Exchange Settlement of Capital Accounts, or Circular 16, in June 2016, which became effective simultaneously, which among other things, amends certain provisions of the Circular 19. Pursuant to Circular 16, enterprises registered in the PRC may also convert their foreign debts from foreign currency to Renminbi on a discretionary basis. Circular 16 provides an integrated standard for conversion of foreign exchange under capital account items (including but not limited to foreign currency capital and foreign debts) on a discretionary basis which applies to all enterprises registered in the PRC. Circular 16 reiterates the principle that Renminbi converted from foreign currency-denominated capital of a company may not be directly or indirectly used for purposes beyond its business scope or prohibited by PRC laws or regulations, while such converted Renminbi shall not be provided as loans to its non-affiliated entities. As Circular 16 is newly issued, and SAFE has not provided detailed guidelines with respect to its interpretation or implementations, it is uncertain how these rules will be interpreted and implemented.

In January 2017, SAFE promulgated the Circular on Further Improving Reform of Foreign Exchange Administration and Optimizing Genuineness and Compliance Verification, or Circular 3, which took effect on the same day. Circular 3 sets out various measures to tighten genuineness and compliance verification of cross-border transactions and cross-border capital flow, which include without limitation requiring banks to verify board resolutions, tax filing form, and audited financial statements before wiring foreign invested enterprises’ foreign exchange distribution above US$50,000, and strengthening genuineness and compliance verification of foreign direct investments. Our WFOE’s distributions to its offshore parents are required to comply with the requirements as described above.

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Regulations on Stock Incentive Plans

Pursuant to the Notice on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plan of Overseas Publicly Listed Company, or Circular 7, issued by SAFE in February 2012, employees, directors, supervisors and other senior management participating in any stock incentive plan of an overseas publicly listed company who are PRC citizens or who are non-PRC citizens residing in China for a continuous period of not less than one year, subject to a few exceptions, are required to register with SAFE through a domestic qualified agent, which could be a PRC subsidiary of such overseas listed company, and complete certain other procedures. We and our directors, executive officers and other employees who are PRC citizens or who reside in the PRC for a continuous period of not less than one year and who have been granted options are subject to these regulations as our company is an overseas-listed company. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Any failure to comply with PRC regulations regarding the registration requirements for employee stock incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.”

In addition, the SAT has issued certain circulars concerning employee share options or restricted shares. Under these circulars, the employees working in the PRC who exercise share options or are granted restricted shares will be subject to PRC individual income tax. The PRC subsidiaries of such overseas listed company have obligations to file documents related to employee share options or restricted shares with relevant tax authorities and to withhold individual income taxes of those employees who exercise their share options. If the employees fail to pay or the PRC subsidiaries fail to withhold their income taxes according to relevant laws and regulations, the PRC subsidiaries may face sanctions imposed by the tax authorities or other PRC governmental authorities.

Regulations Relating to M&A and Overseas Listing

Under the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rule, were jointly adopted by six PRC regulatory authorities, including CSRC, in August 2006, and effective in September 2006, and most recently amended in June 2009, a foreign investor is required to obtain necessary approvals when (i)a foreign investor acquires equity in a domestic non-foreign invested enterprise thereby converting it into a foreign-invested enterprise, or subscribes for new equity in a domestic enterprise via an increase of registered capital thereby converting it into a foreign-invested enterprise; or (ii)a foreign investor establishes a foreign- invested enterprise which purchases and operates the assets of a domestic enterprise, or which purchases the assets of a domestic enterprise and injects those assets to establish a foreign-invested enterprise. According to the M&A Rule, where a domestic company or enterprise, or a domestic natural person, through an overseas company established or controlled by it/him, acquires a domestic company which is related to or connected with it/him, approval from MOFCOM is required. In addition, on December 19, 2020, the NDRC and the MOFCOM promulgated the Measures for Security Review of Foreign Investment, or the Foreign Investment Security Review Measures, which took effect on January 18, 2021. Under the Foreign Investment Security Review Measures, investment in certain key areas which results in acquiring the actual control of the assets is required to obtain approval from designated governmental authorities in advance.

Our PRC legal counsel, King & Wood Mallesons, has advised us that, based on its understanding of the current PRC laws and regulations, we will not be required to submit an application to the CSRC for the approval of the listing and trading of the ADSs on the Nasdaq Global Market. However, our PRC legal counsel has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering, and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules.

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On December 24, 2021, the CSRC issued the Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic companies (Draft for Comments), and the Draft Listing Administration Provisions for the Filing of Overseas Securities Offering and Listing by Domestic companies (Draft for Comments). Pursuant to these drafts, PRC domestic companies which are classified as indirect overseas offering with the following criteria will be required to complete filing procedure with and report to the CSRC: (i) any of the revenue, net profit, total assets or net assets of the domestic companies accounted for more than 50% of the respective audited revenue, net profit, total assets or net assets of the issuer within the latest fiscal year; (ii) a majority of the officers responsible for management of the issuer are PRC citizens or have their usual place of residence located in mainland China, the issuer’s main place of operation is within mainland China. It is unclear whether either or both of the above criteria need to be satisfied. The main purpose of these regulations is to establish a new filing-based regime to regulate overseas offerings and listings by domestic companies. Where an issuer makes an application for initial public offering to competent overseas regulators, the issuer must submit to the CSRC filing documents within three working days after such application is submitted, and the subsequent securities offering and listing of an issuer in other overseas markets after it has offered and listed securities in an overseas market shall be filed pursuant to provisions. The CSRC also requires the domestic companies to submit regulatory opinions, assessment opinions or approvals issued by relevant authorities as filing materials. Overseas offerings and listings that are prohibited by specific laws and regulations, constitute threat to or endanger national security, involve material ownership disputes on shareholding, main assets, core technology or other aspects, the PRC domestic companies, their controlling shareholders or actual controllers involving in certain criminal offence, material non-compliance or investigation, or directors, supervisors and senior management of the issuer involving in certain criminal offence, administrative penalties or investigation, among other circumstances, are explicitly forbidden. The Provisions of the State Council on the Administration of Overseas Securities Offering and Listing by Domestic companies (Draft for Comments), and the Draft Listing Administration Provisions for the Filing of Overseas Securities Offering and Listing by Domestic companies (Draft for Comments) also require subsequent report to the CSRC on material events, such as material change in principal business and change of control. However, these regulations are unclear on whether companies that have been already listed overseas need to complete the CSRC filing.

On April 2, 2022, the CSRC issued the draft of Provisions on Strengthening Confidentiality and Archives Administration of Overseas Securities Offering and Listing by Domestic Companies (Draft for Comments) for public comments. A domestic company that plans to, either directly or through its overseas listed entity, publicly disclose or provide to relevant entities or individuals including securities companies, securities service providers, and overseas regulators, documents and materials that contain state secrets or government work secrets, shall first obtain approval from competent authorities according to law, and file with the secrecy administrative department at the same level. Archives, including working papers, that have been produced in the Chinese mainland by securities companies and securities service providers for overseas securities offering and listing by domestic companies shall be retained in the Chinese mainland, and, without prior approval by competent authorities, must not be brought, mailed or otherwise transferred to outside the Chinese mainland, or transmitted to any institutions or individuals outside the Chinese mainland through any methods including via the use of information technologies. Overseas securities regulators and competent overseas authorities may request to investigate, including to collect evidence for investigation purpose, or inspect a domestic company that has been listed or offered securities in an overseas market or securities companies and securities service providers that undertake securities business for such domestic companies. Such investigation and inspection shall be conducted under a cross-border regulatory cooperation mechanism, and the CSRC and competent authorities of the Chinese government will provide necessary assistance pursuant to bilateral and multilateral cooperation mechanisms. Before cooperating with the investigation and inspection by, or providing documents and materials to overseas securities regulators or other competent overseas authorities, such domestic companies, securities companies and securities service providers shall report to the CSRC or other competent authorities. As of the date of this document, this draft has not been formally adopted and the final version and effective date of such measures are subject to change with substantial uncertainty.

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C.Organizational Structure

The following diagram illustrates our corporate structure, including our principal subsidiaries and consolidated affiliated entities, as of the date of this annual report:

Note:

(1) Mr. Baoli Ma, our founder, chairman and chief executive officer, and Mr. Changyou Ma, a family member of Mr. Baoli Ma, hold 99.15% and 0.85% equity interests in the VIE, respectively.

Contractual Arrangements with the VIE and Its Shareholders

The following is a summary of the currently effective contractual arrangements relating to our WFOE and the VIE.

Arrangements that provide us with effective control over the VIE

Powers of Attorney. Pursuant to the Powers of Attorney, dated June 26, 2018, between Mr. Baoli Ma and Mr. Changyou Ma, the shareholders of the VIE collectively executed powers of attorney to irrevocably authorize our WFOE to act as their attorney-in-fact to exercise all of their rights as shareholders of the VIE, including but not limited to, the right to attend shareholders meetings, to vote, to dispose equity interests under their names, and to recommend and appoint directors, chief managers and other senior management of the VIE as authorized representatives of the shareholders. The powers of attorney will remain permanently effective as long as Mr. Baoli Ma and Mr. Changyou Ma remain as shareholders of the VIE, unless otherwise terminated by our WFOE.

Equity Interest Pledge Agreement. Pursuant to the equity interest pledge agreement, dated June 26, 2018, among our WFOE and the shareholders of the VIE, the shareholders of the VIE have collectively pledged 100% equity interests in the VIE to our WFOE to guarantee the performance by the VIE of its obligations under the Exclusive Consulting and Services Agreement. In the event of a breach by the VIE of contractual obligations under these contractual arrangements, our WFOE, as pledgee, will have the right to dispose of the pledged equity interests in the VIE and will have priority in receiving the proceeds from such disposal. The shareholders of the VIE also covenant that, without the prior written consent of our WFOE, they will not dispose of, create or allow any encumbrance on the pledged equity interests. The equity interest pledge agreement will remain effective until (i) the termination of the Exclusive Consulting and Services Agreement with all service fees under the Exclusive Consulting and Services Agreement have been paid and no further obligation shall be undertaken by BlueCity Culture Media; or (ii) the equity interests of BlueCity Culture Media have been transferred to BlueCity Information Technology or any third party designated by it.

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Spouse Consent Letters. Pursuant to the spouse consent letter, dated June 26, 2018, the spouse of Mr. Changyou Ma, confirmed that she can perform the obligations under the contractual arrangements. The spouse of Mr. Changyou Ma agreed that the equity interest in the VIE held by Mr. Changyou Ma and registered in the name of Mr. Changyou Ma will be disposed of pursuant to the exclusive consulting and service agreement, exclusive option agreement, equity interest pledge agreement and the powers of attorney. In addition, in the event that the spouse of Mr. Changyou Ma obtains any equity interest in the VIE for any reason, she agreed to be bound by the contractual arrangements.

Agreements that allow us to receive economic benefits from the VIE

Exclusive Consulting and Services Agreement. Pursuant to the exclusive consulting and services agreement, dated June 26, 2018, between our WFOE and the VIE, the WFOE has the exclusive right to provide consulting and services required by the VIE’s business. Without our WFOE’s prior written consent, the VIE may not accept the consulting and services provided by any third party, including its shareholders, during the term of the agreement. The VIE agrees to pay our WFOE quarterly service fees at an amount confirmed by WFOE and all of its subsidiaries, which amount and percentage may be adjusted by, which should be paid within 10 business days upon receipt of invoice from our WFOE. Our WFOE has the exclusive ownership of all the intellectual property rights created under the Exclusive Consulting and Services Agreement, and both parties will further negotiate on the license of such intellectual properties. The exclusive consulting and services agreement will remain effective, unless otherwise terminated by our WFOE.

Agreements that provide us with the option to purchase the equity interests in the VIE

Exclusive Option Agreement. Pursuant to the exclusive option agreement, dated June 26, 2018, among our WFOE and shareholders of the VIE, the shareholders of the VIE have irrevocably granted our WFOE an exclusive option to purchase all or part of their equity interests in the VIE and/or the assets in the VIE. Our WFOE may exercise such options at the lowest price as permitted by PRC laws and regulations, which price may be adjusted based on the valuation of the equity interests of the assets, if required by PRC laws and regulations. The equity holders should remit to our company any amount that is paid by our company or its designated person(s) in connection with the purchased equity interest. The VIE and the shareholders of covenant that, without our WFOE’s prior written consent, they will not, among other things, (i) transfer or otherwise dispose of, or create any pledge or encumbrance on their equity interests in the VIE, (ii) change the VIE’s registered capital, or increase or decrease the VIE’s current equity interests owners, (iii) dispose or make the VIE’s management to dispose any assets of the VIE, other than in the ordinary course of business, or (iv) amend the VIE’s articles of association. The exclusive options agreement will remain effective until shareholders of the VIE have transferred all of their equity interests and/or assets in the VIE to our WFOE or any third party so designated, unless otherwise terminated by our WFOE immediately in its sole discretion with written notice.

In the opinion of King & Wood Mallesons, our PRC legal counsel:

● the ownership structures of the VIE in China and our WFOE are not in violation of applicable PRC laws and regulations currently in effect; and

● the contractual arrangements between our WFOE, the VIE and its shareholders and the spouse consent letters governed by PRC law are legal, valid, binding and enforceable against each party thereto in accordance with their terms and applicable PRC laws and regulations currently in effect.

However, our PRC legal counsel has also advised us that there are substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules. Accordingly, the PRC regulatory authorities may take a view that is contrary to the opinion of our PRC legal counsel. It is uncertain whether any new PRC laws or regulations relating to VIE structures will be adopted or if adopted, what they would provide. If we or the VIE are found to be in violation of any existing or future PRC laws or regulations, or fail to obtain or maintain any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures. See “Item 3. Key Information—D. Risk Factors—Risks Relating to Our Corporate Structure—If the PRC government finds that the arrangements that establish the structure for operating some of our operations in China do not comply with PRC regulations relating to the relevant industries, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—Uncertainties exist

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with respect to the interpretation and implementation of the newly enacted PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.”

D.Property, Plant and Equipment

As of December 31, 2021, we leased an aggregate gross floor area of properties totaling approximately 7,711 square meters, including approximately 4,789 square meters in Beijing, China for our principal office in China and approximately 2,887 square meters in other regions of China, and approximately 35 square meters outside of China.

We believe that our existing facilities are generally adequate in meeting our current needs, but we may seek additional space as needed to accommodate future growth.

ITEM 4A. UNRESOLVED STAFF COMMENTS

Not applicable.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this annual report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Item 3. Key Information—D. Risk Factors” and elsewhere in this annual report. See “Forward-Looking Statements”

A.Operating Results

Key Factors Affecting Our Results of Operations

User growth and engagement

We generate revenue primarily through (i) live streaming services, (ii) membership services, (iii) advertising services, (iv) merchandise sales and (v) others. Our revenues are driven by and highly dependent on the growth in our active user base, which includes our users on both domestic and international versions of our mobile app and users of our various products and services. We have experienced rapid user growth since our inception. Strategies that we pursue to achieve active user growth may affect our costs and expenses and results of operations.

Average MAUs of BlueCity’s portfolio apps decreased from 7.6 million in the three month ended December 2020 to 7.2 million in the three month ended December 2021. The following table sets forth our average MAUs and DAUs of BlueCity’s portfolio apps for each of the quarters indicated:

	For the Three Months Ended
	March 31,	June 30,	September  30,	December  31,	March 31,	June 30,	September  30,	December  31,
	2020	2020	2020	2020	2021	2021	2021	2021
	(in millions)
Average MAUs	6.0	6.4	6.3	7.6	8.3	8.3	7.5	7.2
Average DAUs	2.5	2.8	2.9	3.3	3.5	3.7	3.6	3.5

Changes in user engagement could affect our revenues and financial results. Our average next-month retention rate of Blued increased from 66.3% in 2020 to 69.0% in 2021, mainly because we adjusted overseas strategies in the second half of 2021. In 2020, Blued had an average daily time spent per active user of over 50 minutes compared to 60 minutes in 2019 and average daily sessions per active user of over 21 times compared to 16 times in 2019, according to the Frost & Sullivan Report commissioned by us. Active user engagement powered by diverse functionalities and rich content enables us to secure an abundant supply of user profiles and behavioral data, which is essential for our advertising services and our ability to improve our service features, including our membership subscription packages.

Monetization of our user base

Our revenues and results of operations depend on our ability to monetize our user base, to convert more users to paying users and to increase the spending of our paying users. Paying users on our platform include users who make payments for various products and services offered on our platform, including payments for virtual currency which can be used to purchase and send virtual gifts in live streaming, purchase membership services, payment for health-related services and family planning services (we stopped from accepting relevant new orders starting from March 2021). Currently, revenues generated from live streaming is the largest component of our revenues, and we expect revenues generated from our membership services and health-related services will grow at a faster pace.

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Our paying users for live streaming services increased from 409 thousand in 2020 to 441 thousand in 2021, primarily due to the contribution of the live streaming services in the overseas market. Our ARPPU for live streaming services decreased from approximately RMB2,123 in 2020 to RMB1,860 in 2021, primarily due to the unfavorable headwind in the talent show live streaming industry in China. We launched our membership services in June 2018, and our paying users for membership services increased from approximately 780 thousand in 2020 to 1,194 thousand in 2021, benefited from the continued enhancement of various features of our membership services in both domestic and overseas markets, improved user experiences as well as gradually increased paying ratios. Our ARPPU for membership services increased from RMB91 in 2020 to RMB108 in 2021, primarily due to the contribution from pay-per-use services as well as more diversified membership services. We launched subscription-based membership services for the international version of Blued in the fourth quarter of 2019. We are committed to continually developing innovative membership services tailored to the needs of our users.

We will continue to diversify our product and service offerings and expand our monetization channels without compromising user experience. We seek to strengthen our capability to generate revenue from live streaming by optimizing matching of broadcasters and viewers and adopting additional creative ways of virtual gifting. We also plan to curate more premium content and attract more high-quality influencers to our platform, in order to increase viewers’ willingness to pay. Furthermore, we plan to test our offerings in selected global markets with localized functionalities and features. We are also testing new features and geography for our membership services. Our revenue growth will be affected by our ability to effectively execute our monetization strategies and expand our paying user base.

Our brand recognition and market leadership

BlueCity is a spiritual home for LGBTQ people, encouraging them to be themselves, feel good about themselves and embrace the community. Average MAUs of BlueCity’s apps was 7.2 million in the three months ended 2021. The prominent market leadership and brand recognition of BlueCity’s apps is key to our ability to maintain and enhance relationships with our users, broadcasters, advertisers, and other business partners, and increase our revenues. In addition, the reputation and attractiveness of our platform among the LGBTQ community also serves as a highly efficient marketing channel for our products and services.

Our ability to further improve cost efficiency

Our results of operations depend on our ability to manage our costs and expenses. Our cost of revenues consists primarily of revenue-sharing costs, staff costs and processing fees and service charges payable to third-party business partners. It is critical for us to manage our costs and expenses effectively and improve operational efficiency. We will also invest in the growth of our platform by incurring selling and marketing expenses as we promote more diversified services for the LGBTQ community.

Investment in technology and talent

Our technology is critical for us to retain and attract users and business partners. We must continue to innovate to keep pace with the growth of our industry. Our current technology and development efforts are primarily focused on enhancing our artificial intelligence technology and big data analytics capabilities, which we believe are crucial for us to scale our products and services and improve user experience. For example, leveraging both big data analytics and artificial intelligence technologies, we were able to enhance the accuracy of content monitoring and user profiling, and optimize our operation, targeted content and user experience. To keep up with the pace of our global expansion, we must recruit, retain and motivate talented employees both in managerial and operational levels who are equipped with relevant industry insights and experience, while controlling our personnel-related expenses.

Successful implementation of globalization strategies

We have successfully replicated our business model in China to other markets. We are rapidly expanding into new markets, and have Blued users spanning over 170 countries and regions as of December 31, 2021. Despite our global footprint, approximately 6.6%, 10.0% and 11.9% of our total revenues for 2019, 2020 and 2021, respectively, were contributed by users outside China. We are still in the early stage of generating revenue from our users outside China and are continuing to introduce diversified service offerings to cater to their different needs. We believe that our expansion and penetration into selected global markets will diversify our revenue streams across geographic regions.

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Impact of COVID-19 on Our Operations and Financial Performance

The COVID-19 pandemic has had, and, together with any subsequent outbreaks driven by new or existing variants of COVID-19, may continue to have, a significant impact on our operations and financial results. The potential downturn brought by and the duration of the COVID-19 pandemic may be difficult to assess or predict where actual effects will depend on many factors beyond our control. The extent to which the COVID-19 pandemic impacts our long-term results remains uncertain, and we are closely monitoring its impact on us. There still have been outbreaks of COVID-19 cases from time to time, including the recent outbreaks driven by COVID-19 Delta and Omicron variants, in multiple cities in China.

In 2022, the COVID-19 pandemic may, among other things, (i) leads to cancellation and postponement of various offline promotional events and community activities, which may an adverse impact on the implementation of our marketing and business expansion initiatives, (ii) increase the volatility of the activity levels of users of our social networking services as users were discouraged from engaging in offline social networking activities due to lock-downs or travel bans, (iii) reduce or curtail our customers’ advertising expenditures and overall demand for our services, especially customers in industries that are negatively impacted by COVID-19, (iv) disrupt our supply chain, delay our ability to timely fulfill our orders and lead to higher fulfillment expenses, and (v) request us to put forth initiatives in response to COVID-19 and many other efforts to leverage our technology, products and services to help contain the pandemic, all of which could have a material adverse effect on our business, financial condition and results of operations.

There are still significant uncertainties of COVID-19’s future impact, and the extent of the impact will depend on a number of factors, including the duration and severity of COVID-19, possibility of new waves in China, the development and progress of distribution of COVID-19 vaccine and other medical treatment, the potential change in user behavior, especially on internet usage due to the prolonged impact of COVID-19, the actions taken by government authorities, particularly to contain the outbreak, almost all of which are beyond our control. Hence, the extent of the business disruption and the related impact on our financial results and outlook cannot be reasonably estimated at this time. See also “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We face risks related to natural disasters, health epidemics and other outbreaks, such as the COVID-19 pandemic, which could significantly disrupt our operations.”

As of December 31, 2021, our cash and cash equivalents and term deposits were RMB349.8 million (US$54.9 million). Our principal sources of liquidity have been cash generated by historical equity financing activities and the proceeds from our initial public offering. We believe this level of liquidity is sufficient to successfully navigate an extended period of uncertainty.

Key Components of Results of Operations

Revenues

The following table sets forth the components of our revenues by amounts and percentages of our total revenues for the years presented:

	For the Years Ended December 31,
	2019		2020		2021
	RMB	%	RMB	%	RMB	US$	%
	(in thousands, except for percentages)
Revenues
Live streaming services	671,411	88.5	868,946	84.3	820,826	128,806	76.2
Membership services	36,738	4.8	71,227	6.9	128,809	20,213	12.0
Advertising services	35,384	4.7	45,453	4.4	53,881	8,455	5.0
Others	15,355	2.0	17,023	1.6	8,866	1,391	0.8
Total service revenues	758,888	100.0	1,002,649	97.2	1,012,382	158,865	94.0
Merchandise sales	—	—	28,674	2.8	64,209	10,076	6.0
Total revenues	758,888	100.0	1,031,323	100.0	1,076,591	168,941	100.0

Live streaming services. We generate revenues from our live streaming services through sales of virtual gift items which users can send to broadcasters to show support. The virtual gift items sold comprise of decorations and other consumable special effects. Under the arrangements with talent agencies that manage broadcasters, we share with these talent agencies a portion of the revenues derived from the sales of virtual gift items.

108

Membership services. We generate revenues from membership services by sales of (i)subscription-based membership services, and (ii)pay-per-use services. Our members are entitled to additional functionalities and privileges on our mobile app.

Advertising services. We generate revenues from advertising services through display advertising arrangements on Blued. Advertising arrangements allow advertisers to place advertisements on particular areas on the Blued application, in particular formats and over particular periods.

Merchandise sales. We generate revenues from merchandise sales of the HIV-related screening kits, medications and drugs, as well as sales of OTC drugs and nutritional supplements related to men’s health, through He Health. He Health, launched in March 2019, is currently available only in China.

Others. Our other service revenues primarily consist of family planning services and others. We generated revenues from family planning services by providing comprehensive consulting and administrative services to our customers such as ongoing facilitation of physical checks, remote conference with global experts, visa application support, and logistics arrangement for overseas trips. In March 2021, we stopped from accepting new orders in the provision of our family planning services.

Cost and expenses

Cost of revenues

The following table sets forth the components of our cost of revenues by amounts and percentages of our total revenues for the years presented:

	For the Years Ended December 31,
	2019		2020		2021
	RMB	%	RMB	%	RMB	US$	%
	(in thousands, except for percentages)
Cost of revenues
Revenue-sharing costs	468,306	61.7	570,256	55.3	541,195	84,925	50.3
Commission costs	45,511	6.0	68,584	6.7	71,915	11,285	6.7
Staff costs	17,445	2.3	24,129	2.3	39,390	6,181	3.6
Others	14,949	2.0	57,401	5.5	75,565	11,858	7.0
Total cost of revenues	546,211	72.0	720,370	69.8	728,065	114,249	67.6

Revenue-sharing costs consist of broadcasters fees paid to talent agencies in accordance with our revenue-sharing arrangements. Commission costs primarily consist of processing fees paid to mobile app stores and third-party payment platforms service charges. Staff costs consist of salaries and benefits for our employees involved in the operation of our app, website and live streaming. Other costs consist of merchandise costs, depreciation and amortization cost, rental cost, advertising cost and other costs related to our business operation.

Operating expenses

The following table sets forth the components of our operating expenses by amounts and percentages of our total revenues for the years presented:

	For the Years Ended December 31,
	2019		2020		2021
	RMB	%	RMB	%	RMB	US$	%
	(in thousands, except for percentages)
Operating expenses
Selling and marketing expenses	119,437	15.7	187,282	18.2	220,464	34,596	20.5
Technology and development expenses	129,652	17.1	149,256	14.5	219,741	34,482	20.4
General and administrative expenses	24,439	3.2	209,086	20.3	109,099	17,120	10.1
Total operating expenses	273,528	36.0	545,624	53.0	549,304	86,198	51.0

109

Selling and marketing expenses. Selling and marketing expenses consist primarily of (i) advertising and market promotion expenses, (ii) staff cost for our selling and marketing personnel, (iii) share-based compensation expenses, and (iv) overhead charges and other costs related to selling and marketing functions.

Technology and development expenses. Technology and development expenses consist primarily of staff cost for technology and development personnel, technology infrastructure costs and share-based compensation expenses. Technology infrastructure costs include servers and other equipment depreciation, bandwidth and cloud infrastructure costs, utilities and other expenses necessary to support our business.

General and administrative expenses. General and administrative expenses consist primarily of staff cost for general and administrative personnel, professional fees, rental and depreciation related to general and administrative functions, share-based compensation expenses, and other corporate expenses.

Impairment of intangible assets and goodwill

Our impairment loss of intangible assets and goodwill was impairment loss recognized whenever events or changes in circumstances indicate that the carrying amount of the intangible assets or goodwill may be below its fair value.

Taxation

Cayman Islands

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to our company levied by the Government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the United Kingdom in 2010 but otherwise is not party to any double tax treaties.

Further, no stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands.

Hong Kong

Our subsidiary incorporated in Hong Kong, BlueCity Holdings Hong Kong Limited, is subject to 16.5% Hong Kong profit tax on its taxable income generated from operations in Hong Kong. Under the Hong Kong tax laws, we are exempted from the Hong Kong income tax on our foreign-derived income. In addition, payments of dividends from our Hong Kong subsidiary to us are not subject to any Hong Kong withholding tax.

PRC

Generally, the VIE and its subsidiaries are subject to enterprise income tax on their taxable income in China at a statutory rate of 25%. The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. According to the PRC tax laws, entities that qualify as “high-and-new technology enterprises eligible for key support from the State” (“HNTE”) are entitled to a preferential income tax rate of 15%. In 2020, our WFOE renewed the approval from the tax authority that it qualified as an HNTE. The certificate entitled our WFOE to the preferential income tax rate of 15% effective retroactively from January 1, 2020 to December 31, 2022.

110

Dividends paid by our WFOE in China to our intermediary holding company in Hong Kong will be subject to a withholding tax rate of 10%, unless the relevant Hong Kong entity satisfies all the requirements under the Arrangement between China and the Hong Kong Special Administrative Region on the Avoidance of Double Taxation and Prevention of Fiscal Evasion with respect to Taxes on Income and Capital and receives approval from the relevant tax authority. If our Hong Kong subsidiary satisfies all the requirements under the tax arrangement and receives approval from the relevant tax authority, then the dividends paid to the Hong Kong subsidiary would be subject to withholding tax at the standard rate of 5%. Effective from November 1, 2015, the above mentioned approval requirement has been abolished, but a Hong Kong entity is still required to file an application package with the relevant tax authority, and settle the overdue taxes if the preferential 5% tax rate is denied based on the subsequent review of the application package by the relevant tax authority. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Corporate Structure—There are significant uncertainties under the PRC Enterprise Income Tax Law relating to the withholding tax liabilities of our WFOE, and dividends payable by our WFOE to our offshore subsidiaries may not qualify to enjoy certain treaty benefits.”

If our holding company in the Cayman Islands or any of our subsidiaries outside of China were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—If we are classified as a PRC resident enterprise for PRC income tax purposes, such classification could result in unfavorable tax consequences to us and our non-PRC shareholders or the ADS holders.”

Results of Operations

The following table sets forth a summary of our consolidated results of operations for the years presented, both in absolute amount and as a percentage of our revenues for the years presented. This information should be read together with our consolidated financial statements and related notes included elsewhere in this annual report. The results of operations in any period are not necessarily indicative of our future trends.

	For the Years Ended December 31,
	2019		2020		2021
	RMB	%	RMB	%	RMB	US$	%
	(in thousands, except for percentages)
Revenues:
Live streaming services	671,411	88.5	868,946	84.3	820,826	128,806	76.2
Membership services	36,738	4.8	71,227	6.9	128,809	20,213	12.0
Advertising services	35,384	4.7	45,453	4.4	53,881	8,455	5.0
Others	15,355	2.0	17,023	1.6	8,866	1,391	0.8
Total service revenues	758,888	100.0	1,002,649	97.2	1,012,382	158,865	94.0
Merchandise sales	—	—	28,674	2.8	64,209	10,076	6.0
Total revenues	758,888	100.0	1,031,323	100.0	1,076,591	168,941	100.0
Cost and expenses:
Cost of revenues(1)	(546,211)	(72.0)	(720,370)	(69.8)	(728,065)	(114,249)	(67.6)
Selling and marketing expenses(1)	(119,437)	(15.7)	(187,282)	(18.2)	(220,464)	(34,596)	(20.5)
Technology and development expenses(1)	(129,652)	(17.1)	(149,256)	(14.5)	(219,741)	(34,482)	(20.4)
General and administrative expenses(1)	(24,439)	(3.2)	(209,086)	(20.3)	(109,099)	(17,120)	(10.1)
Impairment of intangible assets and goodwill	—	—	—	—	(109,864)	(17,240)	(10.2)
Total cost and expenses	(819,739)	(108.0)	(1,265,994)	(122.8)	(1,387,233)	(217,687)	(128.8)
Operating loss	(60,851)	(8.0)	(234,671)	(22.8)	(310,642)	(48,746)	(28.8)
Changes in fair value of financial instruments	(9,024)	(1.2)	(5)	—	—	—	—
Gain (loss) on disposal of an investment security	—	—	4,863	0.5	(50)	(8)	—
Gain on extinguishment of a convertible debt	8,986	1.2	—	—	—	—	—
Interest income	8,890	1.2	6,518	0.6	1,890	297	0.2
Loss before income taxes	(51,999)	(6.8)	(223,295)	(21.7)	(308,802)	(48,457)	(28.6)
Income tax (expense) benefit	(931)	(0.1)	1,442	0.1	(821)	(129)	(0.1)
Net loss	(52,930)	(6.9)	(221,853)	(21.6)	(309,623)	(48,586)	(28.7)

Note:

111

(1) Since the exercisability was dependent upon the completion of our initial public offering, no compensation expense relating to the options was recorded for the years ended December 31, 2019. Upon the completion of IPO, we immediately recognized share-based compensation expenses of RMB139.4 million of options vested cumulatively. For the year ended December 31, 2021, we recognized RMB15.9 million share-based compensation expenses. See notes to our consolidated financial statements included elsewhere in this annual report.

Year ended December 31, 2021 compared to year ended December 31, 2020

Revenues

Our revenues increased by 4.4% from RMB1.03 billion in 2020 to RMB1.08 billion (US$168.9 million) in 2021.

Live streaming services. Our revenues from live streaming services decreased by 5.5% from RMB868.9 million in 2020 to RMB820.8 million (US$128.8 million) in 2021, mainly attributable to the decrease in the average spending per paying user for live streaming services as a result of the headwinds in the talent show live streaming industry in China. Our paying users for live streaming services increased from 409 thousand in 2020 to 441 thousand in 2021, primarily due to the contribution of the live streaming services in the overseas market. Our ARPPU for live streaming services decreased from approximately RMB2,123 in 2020 to RMB1,860 in 2021 primarily due to the unfavorable headwind in the talent show live streaming industry in China.

Membership services. Our revenues from membership services increased by 80.8% from RMB71.2 million in 2020 to RMB128.8 million (US$20.2 million) in 2021, mainly attributable to the increase in the number of paying users benefited from diverse membership service offerings on our apps. Our paying users for membership services increased from approximately 780 thousand in 2020 to 1,194 thousand in 2021, benefited from the continued enhancement of various features of our membership services in both domestic and overseas markets, improved user experiences as well as gradually increasing paying ratios. Our ARPPU for membership services increased from approximately RMB91 in 2020 to RMB108 in 2021, primarily due to the contribution from pay-per-use services as well as more diversified membership services.

Advertising services. Our revenues from advertising services increased by 18.5% from RMB45.5 million in 2020 to RMB53.9 million (US$8.5 million) in 2021, as a results of the Company’s enhanced efforts to attract more advertisers with diverse advertising and marketing solutions as well as improved advertising efficiency.

Merchandise sales. Our revenues from merchandise sales increased by 123.9% from RMB28.7 million in 2020 to RMB64.2 million (US$10.1 million) in 2021, contributed from the continued expansion of the sales of “He Health” merchandise.

Others. Our revenues from other services decreased by 47.9% from RMB17.0 million in 2020 to RMB8.9 million (US$1.3 million) in 2021 mainly due to the decreased revenue from family planning services as we stopped from accepting relevant new orders starting from March 2021.

Cost of revenues

Our cost of revenues increased by 1.1% from RMB720.4 million in 2020 to RMB728.1 million (US$114.2 million) in 2021. Revenue-sharing costs decreased by 5.1% from RMB570.3 million in 2020 to RMB541.2 million (US$84.9 million) in 2021, in line with the decreased revenue from live streaming services. Commission costs and processing fees paid to mobile application stores increased by 4.9% from RMB68.6 million in 2020 to RMB71.9 million (US$11.3 million) in 2021, primarily due to the increase of our business and transaction volume on our platform. Staff costs increased by 63.3% from RMB24.1 million in 2020 to RMB39.4 million (US$6.2 million) in 2021, primarily due to an increase in headcount as a result of the growth of our business.

Selling and marketing expenses

Our selling and marketing expenses increased by 17.7% from RMB187.3 million in 2020 to RMB220.5 million (US$34.6 million) in 2021, primarily attributable to (i) an increase of RMB25.9 million (US$4.1 million) in staff cost for selling and marketing personnel, and (ii) an increase of RMB13.5 million (US$2.1 million) in advertising and promotion expenses mainly due the continued advertising activities in domestic market, the increase was partially offset by the decrease of RMB9.2 million (US$1.5 million) in share-based compensation expenses.

112

Technology and development expenses

Our technology and development expenses increased by 47.2% from RMB149.3 million in 2020 to RMB219.7 million (US$34.5 million) in 2021, primarily due to (i) an increase of RMB48.4 million (US$7.6 million) in staff cost for technology and development personnel primarily driven by an increase in the headcount of our technology and development staff, and (ii) an increase of RMB30.9 million (US$4.8 million) in content, server and bandwidth cost associated with research and development activities. This was partially offset by a decrease of RMB11.5 million (US$1.8 million) in share-based compensation expenses.

General and administrative expenses

Our general and administrative expenses decreased by 47.8% from RMB209.1 million in 2020 to RMB109.1 million (US$17.1 million) in 2021, primarily due to a decrease of RMB140.7 million (US$22.1 million) in share-based compensation expenses. This was partially offset by an increase of RMB22.9 million (US$3.6 million) in staff cost.

Impairment of intangible assets and goodwill

Impairment of intangible assets and goodwill were RMB109.9 million (US$17.2 million) in 2021, including impairment of intangible assets of RMB 2.9 million (US$0.5 million) and impairment of goodwill of RMB 107.0 million (US$16.8 million).

Operating loss

As a result of the foregoing, we incurred operating loss of and RMB310.6 million (US$48.7 million) in 2021, compared to operating loss of RMB234.7 million in 2020.

Changes in fair value of financial instruments

We incurred from changes in fair value of financial instruments of RMB5.2 thousand gain and nil in 2020 and 2021, respectively.

Gain (loss) on disposal of an investment security

We incurred gain on disposal of an investment security of RMB 4.9 million and loss on disposal of another investment security of RMB50 thousand (US$ 8 thousand) in 2020 and 2021, respectively.

Interest income

Interest income primarily represents interest earned on our cash and cash equivalents and term deposits. We had interest income of RMB6.5 million and RMB1.9 million (US$0.3 million) in 2020 and 2021, respectively.

Income tax (expense) benefit

We recorded RMB1.4 million income tax benefit and RMB0.8 million (US$0.1 million) income tax expenses in 2020 and 2021, respectively.

Net loss

As a result of the foregoing, we incurred net loss of RMB309.6 million (US$48.6 million) in 2021, compared to net loss of RMB221.9 million in 2020.

113

Year ended December 31, 2020 compared to year ended December 31, 2019

Revenues

Our revenues increased by 35.9% from RMB758.9 million in 2019 to RMB1.03 billion in 2020.

Live streaming services. Our revenues from live streaming services increased by 29.4% from RMB671.4 million in 2019 to RMB868.9 million in 2020, mainly attributable to continued growth of our live streaming services in China and globally, as well as the increase in our paying users for live streaming services. Our paying users for live streaming services increased from 326 thousand in 2019 to 409 thousand in 2020, primarily due to the increased user activity and willingness to pay mainly as a result of improved interactive features and promotion events. Our ARPPU for live streaming services increased from approximately RMB2,059 in 2019 to RMB2,123 in 2020 primarily due to our continuous efforts to enhance our live streaming services.

Membership services. Our revenues from membership services increased by 93.9% from RMB36.7 million in 2019 to RMB71.2 million in 2020, mainly attributable to the rapid development of our membership services offerings in both subscription and pay-per-use services. Our paying users for membership services increased from approximately 457 thousand in 2019 to 780 thousand in 2020, benefited the continued enhancing enhancement of various features of our membership services in both domestic and overseas markets. Our ARPPU for membership services increased from approximately RMB80 in 2019 to RMB91 in 2020, primarily due to the contribution from pay-per-use services.

Advertising services. Our revenues from advertising services increased by 28.5% from RMB35.4 million in 2019 to RMB45.5 million in 2020, as we continued to steadily grow our advertising service.

Merchandise sales. We recorded revenues generated from merchandise sales of RMB28.7 million in 2020, contributed from the sales of “He Health” merchandise.

Others. Our revenues from other services increased by 10.9% from RMB15.4 million in 2019 to RMB17.0 million in 2020 mainly due to the increased public interest services.

Cost of revenues

Our cost of revenues increased by 31.9% from RMB546.2 million in 2019 to RMB720.4 million in 2020. Revenue-sharing costs increased by 21.8% from RMB468.3 million in 2019 to RMB570.3 million in 2020, primarily due to the continued growth of our live streaming services. Commission costs and processing fees paid to mobile application stores increased by 50.7% from RMB45.5 million in 2019 to RMB68.6 million in 2020, primarily due to the consistent increase of our business and transaction volume on our platform. Staff costs increased by 38.3% from RMB17.4 million in 2019 to RMB24.1 million in 2020, primarily due to an increase in headcount as a result of the growth of our business.

Selling and marketing expenses

Our selling and marketing expenses increased by 56.8% from RMB119.4 million in 2019 to RMB187.3 million in 2020, primarily attributable to (i) an increase of RMB31.1 million in advertising and promotion expenses mainly due to the continued expansion of our business globally, (ii) an increase of RMB16.6 million in staff cost for selling and marketing personnel, primarily as a result of an increase in the headcount of our selling and marketing staff, and (iii) an increase of RMB16.9 million in share-based compensation expenses.

Technology and development expenses

Our technology and development expenses increased by 15.1% from RMB129.7 million in 2019 to RMB149.3 million in 2020, primarily due to (i) an increase of RMB16.7 million in share-based compensation expenses, (ii) an increase of RMB9.4 million in staff cost for technology and development personnel primarily driven by an increase in the headcount of our technology and development staff. This was partially offset by a decrease of RMB9.0 million in content, server and bandwidth cost as a result of our improved procurement efficiency.

114

General and administrative expenses

Our general and administrative expenses increased by 755.5% from RMB24.4 million in 2019 to RMB209.1 million in 2020, primarily due to (i) an increase of RMB141.5 million in share-based compensation expenses, (ii) an increase of RMB37.3 million in professional service fees, and (iii) an increase of RMB7.8 million in staff cost.

Operating loss

As a result of the foregoing, we incurred operating loss of RMB234.7 million in 2020, compared to operating loss of RMB60.8 million in 2019.

Changes in fair value of financial instruments

We incurred from changes in fair value of financial instruments of RMB9.0 million loss and RMB5.2 thousand gain in 2019 and 2020, respectively.

Gain on disposal of an investment security

We incurred gain on disposal of an investment security of nil and RMB4.9 million in 2019 and 2020, respectively.

Gain on extinguishment of a convertible debt

We incurred gain on extinguishment of a convertible debt of RMB9.0 million and nil in 2019 and 2020, respectively.

Interest income

Interest income primarily represents interest earned on our cash and cash equivalents and term deposits. We had interest income of RMB8.9 million and RMB6.5 million in 2019 and 2020, respectively.

Income tax (expense) benefit

We recorded RMB0.9 million income tax expense and RMB1.4 million income tax benefit in 2019 and 2020, respectively.

Net loss

As a result of the foregoing, we incurred net loss of RMB221.9 million in 2020, compared to net loss of RMB52.9 million in 2019.

B.Liquidity and Capital Resources

The following table sets forth a summary of our cash flows for the years presented:

	For the Years Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB	US$
	(in thousands)
Selected Consolidated Cash Flow Data
Net cash used in operating activities	(31,642)	(40,302)	(210,902)	(33,095)
Net cash provided by (used in) investing activities	285,594	(288,738)	130,352	20,455
Net cash (used in) (provided by) financing activities	(22,252)	503,480	64	10
Effect of foreign currency exchange rate changes on cash and cash equivalents	2,527	(32,221)	(9,222)	(1,447)
Net increase (decrease) in cash and cash equivalents	234,227	142,219	(89,708)	(14,077)
Cash and cash equivalents at beginning of the year	63,047	297,274	439,493	68,966
Cash and cash equivalents at end of the year	297,274	439,493	349,785	54,889

115

To date, we have financed our operating and investing activities through cash generated by historical equity financing activities and the proceeds from our initial public offering. As of December 31, 2019, 2020 and 2021, respectively, our cash and cash equivalents and term deposits were RMB380.3 million, RMB611.8 million and RMB349.8 million (US$54.9 million). Our cash and cash equivalents primarily consist of cash on hand, cash at banks and term deposits, which have original maturities of three months or less and are readily convertible to known amounts of cash. Our term deposits have original maturities of more than 3 months but less than one year.

In July 2020, we completed our IPO of 5,300,000 ADSs and we raised a total of US$84.8 million in gross proceeds from the IPO, before deducting underwriting commissions and the offering expenses payable by us.

We believe that our current cash and cash equivalents and term deposits will be sufficient to meet our anticipated working capital requirements and capital expenditures for the next 12 months. However, we may decide to enhance our liquidity position or increase our cash reserve for future investments through additional funding.

As of December 31, 2021, 84.2% of our cash and cash equivalents were held in China, and 10.2% were denominated in Renminbi. Although we consolidate the results of the VIE and its subsidiaries, we only have access to the assets or earnings of the VIE and its subsidiaries through our contractual arrangements with the VIE and its shareholders. See “Item 4. Information on the Company—C. Organizational Structure—Contractual Arrangements with the VIE and Its Shareholders.”

A substantial amount of our future revenues are likely to be in Renminbi. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior SAFE approval as long as certain routine procedural requirements are fulfilled. Therefore, our WFOE is allowed to pay dividends in foreign currencies to us without prior SAFE approval by following certain routine procedural requirements. However, approval from or registration with competent government authorities is required where the Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may at its discretion restrict access to foreign currencies for current account transactions in the future.

Operating activities

Net cash used in operating activities in 2021 was RMB210.9 million (US$33.1 million), as compared to net loss of RMB309.6 million (US$48.6 million) in the same period. The difference was primarily due to (i) an increase of RMB 41.5 million (US$6.5 million) in prepayments and other current assets due from the increased receivable from third party payment platforms and advance to suppliers, (ii) a decrease of RMB7.3 million (US$1.1 million) in accrued expenses and other current liabilities, (iii) an increase of RMB8.5 million (US$1.3 million) in accounts payables mainly attributable to an increase in revenue-sharing payable to live broadcasters, and (iv) an increase of RMB8.0 million (US$1.3 million) in accounts receivable, mainly including cash due from advertising customers. The principal non-cash items affecting the difference between our net loss and our net cash provided by operating activities in 2021 were RMB109.9 million (US$17.2 million) in impairment of intangible assets and goodwill, RMB15.9 (US$2.5 million) in share-based compensation expenses, and RMB14.9 million (US$2.3 million) in depreciation and amortization.

Net cash used in operating activities in 2020 was RMB40.3 million (US$6.2 million), as compared to net loss of RMB221.9 million in the same period. The difference was primarily due to (i) an increase of RMB6.9 million in inventories due from merchandise sales, (ii) an increase of RMB6.1 million in prepayments and other current assets due from the increased receivable from third party payment platforms, (iii) an decrease of RMB2.8 million in deferred revenue, mainly including cash received from paying users related to live streaming services and membership services, and (iv) an increase of RMB2.7 million in accounts receivable, mainly including cash due from advertising customers, partially offset by an increase of RMB9.2 million in accrued expenses and other current liabilities. The principal non-cash items affecting the difference between our net loss and our net cash provided by operating activities in 2020 were RMB186.9 million in share-based compensation expenses, RMB5.6 million in depreciation and amortization, and gains of RMB4.9 million in changes in gain on disposal of an investment security.

116

Investing activities

Net cash provided by investing activities in 2021 was RMB130.4 million (US$20.5 million), primarily due to proceeds from maturity of term deposits of RMB170.9 million (US$26.8 million), partially offset by (i) payment for business acquisition of RMB24.5 million (US$3.8 million), net of cash acquired, (ii) cash decrease for disposal of subsidiaries of RMB5.0 million (US$0.8 million), (iii) purchase of property and equipment of RMB7.0 million (US$1.1 million), and (iv) payment for assets acquisition of RMB2.6 million (US$0.4 million).

Net cash used in investing activities in 2020 was RMB288.7 million, primarily due to (i) purchase of term deposits of RMB841.2 million, (ii) payment for business acquisition of RMB203.1 million, net of cash acquired, (iii) purchase of property and equipment of RMB7.5 million and (iv) payment for assets acquisition of RMB3.3 million for a license of online pharmacy retail, partially offset by proceeds from maturity of term deposits of RMB741.1 million and proceeds from disposal of financial instrument of RMB25.0 million.

Financing activities

Net cash provided by financing activities in 2021 was RMB64.0 thousand (US$10.0 thousand), primarily attributable to proceeds from exercising of share options.

Net cash provided by financing activities in 2020 was RMB503.5 million (US$77.2 million), primarily attributable to net proceeds from our initial public offering.

Material cash requirements

Our material cash requirements as of December 31, 2021 and any subsequent interim period primarily include our capital expenditures and operating lease obligations.

Our capital expenditures are primarily incurred for acquiring licenses, purchases of office and electronic equipment, as well as leasehold improvements. Our capital expenditures were RMB5.9 million in 2019, RMB10.7 million in 2020 and RMB9.6 million (US$1.5 million) in 2021.

Our operating lease obligations consist of the obligations under the lease agreements covering our offices facilities. The following table sets forth our contractual obligations for operating lease as of December 31, 2021:

	Payment Due
		Less than			More than
	Total	1 year	1-3 years	3-5 years	5 years
	(RMB in thousands)
Operating lease obligations	17,644	13,316	4,205	123	—

We intend to fund our existing and future material cash requirements with our existing cash balance and other financing alternatives. We will continue to make cash commitments, including capital expenditures, to support the growth of our business.

We have not entered into any off-balance sheet 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 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. We do not have retained or contingent interests in assets transferred. We have not entered into contractual arrangements that support the credit, liquidity or market risk for transferred assets. We do not have obligations that arise or could arise from variable interests held in an unconsolidated entity, or obligations related to derivative instruments that are both indexed to and classified in our own equity, or not reflected in the statement of financial position.

Other than as shown above, we did not have any significant capital and other commitments, long-term obligations or guarantees as of December 31, 2021.

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Holding Company Structure

BlueCity Holdings Limited is a holding company with no material operations of its own. We conduct our business primarily through our WFOE, the VIE and its subsidiaries in China. As a result, BlueCity Holdings Limited’s ability to pay dividends depends upon dividends paid by our WFOE. If our WFOE or any newly formed PRC subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us. In addition, our wholly foreign-owned subsidiaries in China are permitted to pay dividends to us only out of its retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Under PRC law, each of our WFOE, the VIE and its subsidiaries in China is required to set aside at least 10% of its after-tax profits each year, if any, to fund certain statutory reserve funds until such reserve funds reach 50% of their registered capital. In addition, our WFOE in China may allocate a portion of their after-tax profits based on PRC accounting standards to a staff welfare and bonus fund at their discretion, and the VIE may allocate a portion of its after-tax profits based on PRC accounting standards to a surplus fund at their discretion. The statutory reserve funds and the discretionary funds are not distributable as cash dividends. Remittance of dividends by a wholly foreign-owned company out of China is subject to examination by the banks designated by SAFE. Our WFOE has not paid dividends and will not be able to pay dividends until they generate accumulated profits and meet the requirements for statutory reserve funds.

C.Research and Development, Patents and Licenses, Etc.

See “Item 4. Information On the Company—B. Business Overview—Our Technology” and “Item 4. Information On the Company—B. Business Overview—Intellectual Property.”

D.Trend Information

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events since January 1, 2021 to December 31, 2021 that are reasonably likely to have a material adverse effect on our net revenues, income, profitability, liquidity or capital resources, or that caused the disclosed financial information to be not necessarily indicative of future operating results or financial conditions.

E.Critical Accounting Estimates

An accounting policy is considered critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time such estimate is made, and if different accounting estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements.

We prepare our financial statements in conformity with U.S. GAAP, which requires us to make judgments, estimates and assumptions. We continually evaluate these estimates and assumptions based on the most recently available information, our own historical experiences and various other assumptions that we believe to be reasonable under the circumstances. Since the use of estimates is an integral component of the financial reporting process, actual results could differ from our expectations as a result of changes in our estimates. Some of our accounting policies require a higher degree of judgment than others in their application and require us to make significant accounting estimates.

The following descriptions of critical accounting policies, judgments and estimates should be read in conjunction with our consolidated financial statements and accompanying notes and other disclosures included in this annual report. When reviewing our financial statements, you should consider (i) our selection of critical accounting policies, (ii) the judgments and other uncertainties affecting the application of such policies and (iii) the sensitivity of reported results to changes in conditions and assumptions.

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Impairment of goodwill

We only have one reporting unit, which is mobile platform operations.

We conduct an annual impairment test as of December 31 of each year, or more frequently if events or circumstances indicate an impairment may exist. We conduct impairment tests by quantitatively comparing the fair value of the reporting unit to its carrying amount. We estimated the fair value of the reporting unit by using the income approach. The income approach considers a number of factors and requires us to make certain assumptions and estimates. The key assumption used in the income approach included: (a) expected revenue growth rate, and (b) a discount rate that reflects the weighted-average cost of capital adjusted for the relevant risk associated with the reporting unit’s operations and the uncertainty inherent in our internally developed forecasts. We also corroborate the reasonableness of the inputs and outcomes of our discounted cash flow analysis through a market capitalization reconciliation to determine whether the implied control premium is reasonable. The fair value information is sensitive to changes in these key assumptions used to determine fair value and such changes could result in the fair value at the reporting date to be different from the fair value presented.

Recently Issued Accounting Pronouncements

A list of recently issued accounting pronouncements that are relevant to us is included in 2. (ff) to our consolidated financial statements included elsewhere in this annual report.

Safe Harbor

This annual report on Form 20-F contains forward-looking statements. These statements are made under the “safe harbor” provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “is/are likely to,” “potential,” “continue” and similar statements. Among other things, business outlook and quotations from management in this annual report on Form 20-F, as well as BlueCity’s strategic and operational plans, contain forward-looking statements. BlueCity may also make written or oral forward-looking statements in its periodic reports 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. Statements that are not historical facts, including but not limited to statements about BlueCity’s beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement. Further information regarding these risks, uncertainties or factors is included in the Company’s filings with the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is current as of the date of the press release, and the Company does not undertake any obligation to update such information, except as required under applicable law.

ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.Directors and Senior Management

The following table sets forth information regarding our directors and executive officers as of the date of this annual report.

Directors and Executive Officers	Age	Position/Title
Baoli Ma	44	Founder, Chairman of the Board of Directors and Chief Executive Officer
Shengwen (Roy) Rong	53	Independent Director
Wenjie (Jenny) Wu	47	Independent Director
Weiru Chen	51	Independent Director
Guojie Shi	45	Independent Director
Alfred Chung-Chieh Ying	57	Chief Strategy Officer
Junchen Sun	34	Acting Chief Financial Officer
Liang Zhao	39	Chief Risk Officer
Yuanchen (Calvin) Liu	41	Chief Technology Officer

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Mr. Baoli Ma is our founder and chairman and has served as our director and chief executive officer since our inception. Prior to funding our company, Mr. Ma served as deputy director of information research at Qinhuangdao Public Security Bureau from 1997 to 2012. Mr. Ma studied public security in Qinhuangdao People’s Police School from 1992 to 1996, public security management in Chinese People’s Armed Police Force Academy from 2002 to 2003, and received his bachelor of laws degree in public security management from People’s Public Security University of China in 2006. Mr. Ma is currently attending “Lakeside University,” a senior executive training program founded by Jack Ma, founder of Alibaba Group.

Mr. Shengwen (Roy) Rong has served as our independent director since July 2020. Mr. Rong currently serves as an independent director of Qudian Inc. (NYSE: QD), X Financial (NYSE: XYF) and MOGU Inc. (NYSE: MOGU). From February 2017 to September 2018, Mr. Rong served as the senior vice president and chief financial officer at Yixia Technology Co., Ltd, a leading live video broadcast and short-video platform in China. Prior to that, he served as the chief financial officer at Quixey, Inc. from 2015 to 2016, the chief financial officer at UCWeb from 2012 to 2014, and the chief financial officer at Country Style Cooking Restaurant Chain Co., Ltd, an NYSE-listed company, from 2010 to 2012. Mr. Rong received his bachelor’s degree in international finance from Renmin University in 1991, master’s degree in accounting from West Virginia University in 1996, and MBA degree from University of Chicago Booth School of Business in 2000. Mr. Rong is a Certified Public Accountant in the United States.

Ms. Wenjie (Jenny) Wu has served as our independent director since July 2020. Ms. Wu is currently an independent non-executive director of Kingsoft Corporation Limited (3888.HK) and an independent director of Xunlei Limited (Nasdaq: XNET). Ms. Wu served as the chief investment officer of New Hope Group from November 2018 to February 2020. Ms. Wu served as managing partner of Baidu Capital from November 2016 to November 2018. Ms. Wu successively served as deputy CFO, CFO and CSO of Trip.com Group Limited (Nasdaq: TCOM) from December 2011 to November 2016. Ms. Wu was an equity research analyst covering China Internet and Media industries at Morgan Stanley Asia Limited and at Citigroup Global Markets Asia Limited from 2005 to 2011. Prior to that, Ms. Wu worked for China Merchants Holdings (International) Company Limited (Stock Code: 0144), a company listed on the Hong Kong Stock Exchange, for three years. Ms. Wu has a Ph.D. degree in finance from the University of Hong Kong, a master’s degree in finance from the Hong Kong University of Science and Technology, and a master’s degree and a bachelor’s degree in economics from Nan Kai University, China. Ms. Wu has been a Chartered Financial Analyst (CFA) since 2004.

Mr. Weiru Chen has served as our independent director since January 2021. Mr. Chen is an associate professor of strategy at China Europe International Business School (CEIBS). He has served as executive director of the Internet Industry Research Center and chief strategic officer of Alibaba Cainiao Logistic Network between August 2017 and July 2020. Prior to joining CEIBS, he served as an assistant professor of strategy at INSEAD Business School from 2003 to 2011. Mr. Chen’s research is centered on firms’ technological innovation, platform strategy, and digital transformation. Mr. Chen has also served as an independent director of several public companies, including TAL Education Group (NYSE: TAL) since June 2015, Dian Diagnostics Group (SHE: 300244) since August 2017, Country Garden Services Holdings Company Limited (HK: 06098) since February 2018, FangDD Network Group Ltd. (Nasdaq: DUO) since November 2019 and Jack Sewing Machine Co Ltd (SHA: 603337) since 2020. Mr. Chen received a bachelor’s degree from National Taiwan University in Taiwan in 1993, a master’s degree from TamKang University in 1996 and a Ph.D. in Management from Purdue University in 2003.

Mr. Guojie Shi has served as our independent director since November 2021. Mr. Shi has been a teaching assistant for several courses at Hupan University since 2020. Mr. Shi, a founding member of Taobao.com and had served as the head of its marketing and business development department, and worked in the organization department at Taobao.com, Koubei.com, Alibaba Cloud, and Alibaba Group from 2004 to 2013. Prior to that, Mr. Shi served as a marketing manager at A. O. Smith (China) Water Heater Co., Ltd. from 2002 to 2004, a marketing manager at Shanghai Sanming Foodstuff Co., Ltd. from 2000 to 2002, and a brand manager at Ting Hsin International Group Tianjin Tingyi Food Co., Ltd (Shanghai branch) from 1998 to 2002. Mr. Shi received his bachelor’s degree in water conservancy and hydropower engineering from Sichuan University in 1998 and his postgraduate diploma in integrated marketing communications from the University of Hong Kong in 2002.

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Mr. Alfred Chung-Chieh Ying has served as our chief strategy officer since July 2021. Prior to joining us, he served as chief financial officer at Healthever Biotech from 2018 to 2021 and iFresh from 2017 to 2018. Before his tenure at iFresh, Mr. Ying served as the director of investor relations and senior advisor to the board at Safe-Run Machinery (Suzhou) from 2015 to 2016, vice president of investment banking for the consumer industry at China Minsheng Banking Corp from 2012 to 2014, and vice president of equity research at Piper Jaffrey Asia Securities Ltd from 2011 to 2012. He had also previously held positions as vice president of investor relations and M&A at Daphne International Holdings from 2007 to 2011, executive vice president of equity research at Grand Cathay Securities from 2004 to 2007, and served as deputy managing director for APAC high-technology research from 1998 to 2004 and Taiwan regional representative at BNP Paribas Peregrine Securities Ltd from 1998 to 2004. Mr. Ying received his MBA degree from the University of New South Wales in 1995, master’s degree in mechanical engineering from the National Chiao Tung University in 1989, and bachelor’s degree in mechanical engineering from the National Cheng Kung University in 1987.

Mr. Junchen Sun joined us in February 2017 and has served as our acting Chief Financial Officer since May 2021. Prior to joining us, Mr. Sun served as finance controller in MicroMedia Holdings Limited from 2015 to 2017. Mr. Sun worked as a senior associate in PricewaterhouseCoopers Zhong Tian LLP, Tianjin Branch, Tianjin from 2011 to 2015. Mr. Sun received his bachelor’s degree in accounting from Tianjin University of Finance and Economics in 2011 and master’s degree in business administration from Peking University in 2018.

Mr. Liang Zhao joined our company since April 2015 and has served as our chief risk officer since October 2017. Prior to joining us, Mr. Zhao was an entrepreneur and founded a business providing pet related services from 2011 to 2015. Mr. Zhao worked as a manager in Phoenix New Media Ltd. (NYSE: FENG) from 2004 to 2009. Mr. Zhao received his bachelor’s degree in law from China University of Political Science and Law in 2004.

Mr. Yuanchen (Calvin) Liu has served as our chief technology officer since March 2014. Prior to joining us, Mr. Liu served as a research and development manager at Baidu, Inc. (Nasdaq: BIDU), Beijing office from 2007 to 2014. Mr. Liu worked as a software engineer at Sina Corporation (Nasdaq: SINA), Beijing office from 2005 to 2007. Mr. Liu received his bachelor’s degree in information management and information system from Jilin University in 2002, and his master’ degree in management science and engineering from Jilin University, Business School in 2005.

B.Compensation of Directors and Executive Officers

For the fiscal year ended December 31, 2021, we paid an aggregate of RMB19.6 million (US$3.1 million) in cash to our executive officers, and we did not pay any compensation to our non-executive directors. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors. Our WFOE and the VIE are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund. For share incentive grants to our officers and directors, see “—Share Incentive Plans.”

Employment Agreements and Indemnification Agreements

We have entered into employment agreements with each of our executive officers. Under these agreements, each of our executive officers is employed for a specified time period. We may terminate employment for cause, at any time, for certain acts of the executive officer, such as continued failure to satisfactorily perform, willful misconduct or gross negligence in the performance of agreed duties, conviction or entry of a guilty or nolo contendere plea of any felony or any misdemeanor involving moral turpitude, or dishonest act that results in material to our detriment or material of the employment agreement. We may also terminate an executive officer’s employment without cause upon 60-day advance written notice. In such case of termination by us, we will provide severance payments to the executive officer as may be agreed between the executive officer and us. The executive officer may resign at any time with a 60-day advance written notice.

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Each executive officer has agreed to hold, both during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information or trade secrets, any confidential information or trade secrets of our clients or prospective clients, or the confidential or proprietary information of any third party received by us and for which we have confidential obligations. The executive officers have also agreed to disclose in confidence to us all inventions, designs and trade secrets which they conceive, develop or reduce to practice during the executive officer’s employment with us and to assign all right, title and interest in them to us, and assist us in obtaining and enforcing patents, copyrights and other legal rights for these inventions, designs and trade secrets.

In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and typically for one year following the last date of employment. Specifically, each executive officer has agreed not to (i) approach the suppliers, clients, direct or end customers or contacts or other persons or entities introduced to the such executive officer in his/her capacity as our representative for the purpose of doing business of the same or of a similar nature to the business or doing business that will harm our business relationships with the foregoing persons or entities; (ii) assume employment with or provide services to any of our competitors, or engage, whether as principal, partner, licensor or otherwise, any of our competitors, without our express consent; or (iii) seek, directly or indirectly, to solicit the services of, or hire or engage, any person who is known to be employed or engaged by us; or (iv) otherwise interfere with our business or accounts.

We have also entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.

Share Incentive Plans

2015 Stock Incentive Plan

We adopted the 2015 Plan for purposes of granting share-based compensation awards to employees, directors and consultants to incentivize their performance and align their interests with ours. Under the 2015 Plan, the maximum number of shares which may be issued pursuant to all awards is 1,551,724. As of February 28, 2022, options to purchase a total of 1,227,375 ordinary shares have been granted and outstanding under the 2015 Plan.

The following paragraphs summarize the terms of the 2015 Plan.

Type of Awards. The 2015 Plan permits the awards of options or other right or benefit under the 2015 Plan.

Plan Administration. Our board of directors or a committee appointed by the board of directors or any director appointed will administer the 2015 Plan. The plan administrator will determine, among others, the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each grant.

Award Agreement. Awards granted under the 2015 Plan are evidenced by an award agreement that sets forth the terms, conditions and limitations for each award, which may include the term of the award, the provisions applicable in the event that the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.

Eligibility. We may grant awards to our employees, directors and consultants.

Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.

Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the relevant award agreement. Options that are vested and exercisable will terminate if they are not exercised prior to the time as the plan administrator determines at the time of grant. However, the maximum exercisable term is ten years from the date of effectiveness of the 2015 Plan.

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Transfer Restrictions. Awards shall be transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the grantee, and to the extent and in the manner authorized by the plan administrator. The grantee may designate one or more beneficiaries of the grantee’s award in the event of the grantee’s death on a beneficiary designation form provided by the administrator.

Termination and Amendment of the 2015 Plan. Unless terminated earlier, the 2015 Plan has a term of ten years from the date of effectiveness of the 2015 Plan. Our board of directors has the authority to terminate, amend, suspend or modify the 2015 Plan in accordance with our articles of association. However, without the prior written consent of the participant, no such action may adversely affect in any material way any award previously granted pursuant to the 2015 Plan.

2020 Share Incentive Plan

In June 2020, our shareholders and board of directors adopted the 2020 Plan to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of our business. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2020 Plan is 758,783. As of February 28, 2022, awards to purchase 747,417 ordinary shares have been granted and are outstanding under the 2020 Plan.

The following paragraphs describe the principal terms of the 2020 Plan.

Types of Awards. The 2020 Plan permits the awards of options, restricted shares, restricted share units or any other type of awards approved by the plan administrator.

Plan Administration. Our board of directors or a committee of one or more members of the board of directors will administer the 2020 Plan. The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award.

Award Agreement. Awards granted under the 2020 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which may include the term of the award, the provisions applicable in the event that the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.

Eligibility. We may grant awards to our employees, consultants and directors of our company. However, we may grant options that are intended to qualify as incentive share options only to our employees and employees of our subsidiaries.

Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.

Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is ten years from the date of a grant.

Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than in accordance with the exceptions provided in the 2020 Plan, such as transfers by will or the laws of descent and distribution.

Termination and Amendment of the 2020 Plan. Unless terminated earlier, the 2020 Plan has a term of ten years. Our board of directors has the authority to amend or terminate the plan. However, no such action may adversely affect in any material way any awards previously granted unless agreed by the recipient.

2021 Share Incentive Plan

In August 2021, our shareholders and board of directors adopted the 2021 Plan to attract and retain the best available personnel, provide additional incentives to employees, directors and consultants and promote the success of our business. The maximum aggregate number of shares which may be issued pursuant to all awards under the 2021 Plan is 298,780 shares, plus an annual increase on the first day of each fiscal year of the Company during the term of the 2021 Plan commencing with the fiscal year beginning January 1, 2022, by (i) an amount equal to 1.5% of the total number of shares issued and outstanding on the last day of the immediately preceding fiscal year, or (ii) such lesser number of shares as may be determined by our board of directors. As of February 28, 2022, awards to purchase 266,704 ordinary shares have been granted and are outstanding under the 2021 Plan.

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The following paragraphs describe the principal terms of the 2021 Plan.

Types of Awards. The 2021 Plan permits the awards of options, restricted shares, restricted share units or any other type of awards approved by the plan administrator.

Plan Administration. Our board of directors or a committee of one or more members of the board of directors will administer the 2021 Plan. The committee or the full board of directors, as applicable, will determine the participants to receive awards, the type and number of awards to be granted to each participant, and the terms and conditions of each award.

Award Agreement. Awards granted under the 2021 Plan are evidenced by an award agreement that sets forth terms, conditions and limitations for each award, which may include the term of the award, the provisions applicable in the event that the grantee’s employment or service terminates, and our authority to unilaterally or bilaterally amend, modify, suspend, cancel or rescind the award.

Eligibility. We may grant awards to our employees, consultants and directors of our company. However, we may grant options that are intended to qualify as incentive share options only to our employees and employees of our subsidiaries.

Vesting Schedule. In general, the plan administrator determines the vesting schedule, which is specified in the relevant award agreement.

Exercise of Options. The plan administrator determines the exercise price for each award, which is stated in the award agreement. The vested portion of option will expire if not exercised prior to the time as the plan administrator determines at the time of its grant. However, the maximum exercisable term is ten years from the date of a grant.

Transfer Restrictions. Awards may not be transferred in any manner by the recipient other than in accordance with the exceptions provided in the 2021 Plan, such as transfers by will or the laws of descent and distribution.

Termination and Amendment of the 2020 Plan. Unless terminated earlier, the 2021 Plan has a term of ten years. Our board of directors has the authority to amend or terminate the plan. However, no such action may adversely affect in any material way any awards previously granted unless agreed by the recipient.

The following table summarizes, as of February 28, 2022, the awards that we granted to our directors and executive officers and to other individuals as a group under the 2015 Plan, the 2020 Plan and the 2021 Plan in the aggregate:

	Ordinary Shares
	Underlying
	Outstanding	Exercise Price
Name	Options	($/Share)	Grant Date	Expiration Date
Baoli Ma	165,557	0.01	July 1, 2018	March 10, 2025
	*	0.01	August 8, 2017	March 10, 2025
	*	0.01	May 8, 2017	March 10, 2025
	303,513	0.01	June 15, 2020	June 14, 2030
Liang Zhao	*	0.01	August 16, 2016	March 10, 2025
	*	0.01	August 8, 2017	March 10, 2025
	*	0.01	February 8, 2018	March 10, 2025
Yuanchen (Calvin) Liu	*	0.01	August 16, 2016	March 10, 2025
	*	0.01	May 8, 2017	March 10, 2025
	*	0.01	August 8, 2017	March 10, 2025
Junchen Sun	*	0.01	February 13, 2017	March 10, 2025
	*	0.01	July 1, 2018	March 10, 2025
Alfred Chung-Chieh Ying	*	0.01	October 8, 2021	October 8, 2031
Other employees	1,264,865	0.01	April 1, 2015 to October 8, 2021	March 10, 2025 to October 8, 2031
Total	2,090,870	0.01

*Less than 1% of our total ordinary shares outstanding.

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C.Board Practices

Board of Directors

Our board of directors consists of five directors. A director who is in any way, whether directly or indirectly, interested in a contract or transaction or proposed contract or transaction with our company is required to declare the nature of his interest at a meeting of our directors. Subject to the Nasdaq Global Market rules and disqualification by the chairman of the relevant board meeting, a director may vote in respect of any contract or transaction or proposed contract or transaction notwithstanding that he may be interested therein, and if he does so his vote shall be counted and he shall be counted in the quorum at any meeting of our directors at which any such contract or transaction or proposed contract or transaction is considered. Our directors may exercise all the powers of our company to raise or borrow money and to mortgage or charge its undertaking, property and assets (present and future) and uncalled capital or any part thereof, to issue debentures, debenture stock, bonds and other securities, whether outright or as collateral security for any debt, liability or obligation of our company or of any third party.

Committees of the Board of Directors

We have established three committees: an audit committee, a compensation committee and a nominating and corporate governance committee. We have adopted a charter for each of the three committees. Each committee’s members and functions are described below.

Audit Committee. Our audit committee consists of Shengwen (Roy) Rong and Wenjie (Jenny) Wu. Shengwen (Roy) Rong is the chairperson of our audit committee. We have determined that Shengwen (Roy) Rong and Wenjie (Jenny) Wu each satisfies the “independence” requirements of Rule 5605(c)(2) of the Nasdaq Stock Market Rules and meet the independence standards under Rule 10A-3 under the Exchange Act, as amended. We have determined that Shengwen (Roy) Rong and Wenjie (Jenny) Wu each qualifies as an “audit committee financial expert.” The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of our company. The audit committee is responsible for, among other things:

● appointing the independent auditors and pre-approving all auditing and non-auditing services permitted to be performed by the independent auditors;

● reviewing with the independent auditors any audit problems or difficulties and management’s response;

● discussing the annual audited financial statements with management and the independent auditors;

● reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any steps taken to monitor and control major financial risk exposures;

● reviewing and approving all proposed related party transactions;

● meeting separately and periodically with management and the independent auditors; and

● monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance.

Compensation Committee. Our compensation committee consists of Guojie Shi, Baoli Ma, and Weiru Chen. Guojie Shi is the chairperson of our compensation committee. We have determined that Guojie Shi and Weiru Chen each satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The compensation committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which his compensation is deliberated. The compensation committee is responsible for, among other things:

● reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers;

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● reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors;

● reviewing periodically and approving any incentive compensation or equity plans, programs or similar arrangements; and

● selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.

Nominating and Corporate Governance Committee. Our nominating and corporate governance committee consists of Baoli Ma, Weiru Chen and Wenjie (Jenny) Wu. Baoli Ma is the chairperson of our nominating and corporate governance committee. We have determined that Weiru Chen and Wenjie (Jenny) Wu each satisfies the “independence” requirements of Rule 5605(a)(2) of the Nasdaq Stock Market Rules. The nominating and corporate governance committee will assist the board of directors in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee is responsible for, among other things:

● selecting and recommending to the board nominees for election by the shareholders or appointment by the board;

● reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience and diversity;

● making recommendations on the frequency and structure of board meetings and monitoring the functioning of the committees of the board; and

● advising the board periodically with regards to significant developments in the law and practice of corporate governance as well as our compliance with applicable laws and regulations, and making recommendations to the board on all matters of corporate governance and on any remedial action to be taken.

Special Committee. In January 2022, our board of directors formed a special committee consisting of three independent directors, Wenjie (Jenny) Wu, Shengwen (Roy) Rong, and Guojie Shi, to evaluate and consider the Proposed Transaction from the Buyer Group in relation to a proposed going private transaction. Wenjie (Jenny) Wu is the chairperson of the special committee. See “Item 4. Information on the Company—A. History and Development of the Company.”

Duties of Directors

Under Cayman Islands law, our directors owe fiduciary duties to our company, including a duty of loyalty, a duty to act honestly, and a duty to act in what they consider in good faith to be in our best interests. Our directors must also exercise their powers only for a proper purpose. Our directors also have a duty to exercise skills they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than what may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care, and these authorities are likely to be followed in the Cayman Islands. In fulfilling their duty of care to us, our directors must ensure compliance with our currently effective memorandum and articles of association, as amended and restated from time to time, and the class rights vested thereunder in the holders of the shares. Our company has the right to seek damages if a duty owed by our directors is breached. A shareholder may in certain limited circumstances have the right to seek damages in our name if a duty owed by the directors is breached.

Our board of directors has all the powers necessary for managing, and for directing and supervising, our business affairs. The functions and powers of our board of directors include, among others:

● convening shareholders’ annual general meetings and reporting its work to shareholders at such meetings;

● declaring dividends and distributions;

● appointing officers and determining the term of office of the officers;

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● exercising the borrowing powers of our company and mortgaging the property of our company; and

● approving the transfer of shares in our company, including the registration of such shares in our share register.

Terms of Directors and Officers

Our directors may be elected by an ordinary resolution of our shareholders. Alternatively, our board of directors may, by the affirmative vote of a simple majority of the directors present and voting at a board meeting appoint any person as a director to fill a casual vacancy on our board or as an addition to the existing board. Our directors are not automatically subject to a term of office and hold office until such time as they are removed from office by an ordinary resolution of our shareholders. In addition, a director will cease to be a director if he (i) resigns his office by notice delivered to us or tendered at a meeting of our board; (ii) becomes of unsound mind or dies; (iii) without special leave of absence from our board, is absent from meetings of our board for three (3) consecutive times, unless the board resolves that his office not be vacated; (iv) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors; (v) is prohibited by law from being a director; or (vi) ceases to be a director by virtue of any provision of the laws of the Cayman Islands or is removed from office pursuant to any other provision of our articles of association.

Our officers are appointed by and serve at the discretion of the board of directors, and may be removed by our board of directors.

Board Diversity Matrix

Board Diversity Matrix (As of February 28, 2022)
Country of Principal Executive Offices:	People’s Republic of China
Foreign Private Issuer	Yes
Disclosure Prohibited Under Home Country Law	No
Total Number of Directors	5
	Female		Male	Non- Binary	Did Not Disclose Gender
Part I: Gender Identity
Directors		1	4	0	0
Part II: Demographic Background
Underrepresented Individual in Home Country Jurisdiction	1
LGBTQ+	1
Did Not Disclose Demographic Background	—

D.Employees

As of December 31, 2019, 2020 and 2021, we had a total of 491,755 and 801 full-time employees, respectively. As of December 31, 2021, substantially all of our employees were based in China. The following table sets forth the number of our employees as of December 31, 2021 by function:

	As of December 31,
	2021
	Number	%
Functions:
Technology and development	248	31
Content monitoring	201	25
Sales and marketing	136	17
Customer services and operations	152	19
General and administration	64	8
Total	801	100

Our success depends on our ability to attract, retain and motivate qualified employees that share our values. We place great emphasis on our corporate culture to ensure that we maintain consistently high standards everywhere we operate. We believe that we maintain a good working relationship with our employees and we have not experienced any significant labor disputes.

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We enter into standard labor contracts and confidentiality agreements with our employees. We typically enter into non-compete agreements with our senior management and technology and development related employees. Under the non-compete agreements, the non-compete restricted period typically expires six months after the termination of employment and we shall compensate the employee with a certain percentage of his or her pre-departure salary during the restricted period, subject to certain conditions.

As required by regulations in China, we participate in various government statutory employee benefit plans. We are required under PRC law to contribute to employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees up to a maximum amount specified by the local government from time to time.

E.Share Ownership

Except as specifically noted, the following table sets forth information with respect to the beneficial ownership of our ordinary shares on an as-converted basis as of February 28, 2022 by:

● each of our directors and executive officers; and

● each person known to us to own beneficially 5% or more of our ordinary shares.

The calculations in the table below are based on 18,733,476 ordinary shares, consisting of 13,618,636 Class A ordinary shares (excluding 1,185,200 Class A ordinary shares issued and reserved for future issuance upon the exercising or vesting of awards granted under our share incentive plans) and 5,114,840 Class B ordinary shares issued and outstanding as of February 28, 2022.

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days after February 28, 2022, including through the exercise of any option, warrant, or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person.

	Class A	Class B	Total	% of Total		% of Aggregate
	Ordinary Shares	Ordinary Shares	Ordinary Shares	Ordinary Shares		Voting Power†
Directors and Executive Officers**:
Baoli Ma(1)	792,537	5,114,840	5,907,377	31.1	%	67.3	%
Shengwen (Roy) Rong	—	—	—	—		—
Wenjie (Jenny) Wu	—	—	—	—		—
Weiru Chen	—	—	—	—		—
Guojie Shi	—	—	—	—		—
Alfred Chung-Chieh Ying	—	—	—	—		—
Junchen Sun	*	—	*	*		*
Liang Zhao	*	—	*	*		*
Yuanchen (Calvin) Liu	*	—	*	*		*
All Directors and Executive Officers as a Group	945,214.0	5,114,840	6,060,054.0	31.7	%	67.7	%
Principal Shareholders:
BlueCity Media Limited(2)	568,224.5	5,114,840	5,683,064.5	30.3	%	66.7	%
Shunwei Ventures III Limited(3)	938,890	—	938,890	5.0	%	2.4	%
CDH entities***(4)	1,423,186	—	1,423,186	7.6	%	3.6	%
Liberty Hero Limited(5)	1,150,862	—	1,150,862	6.1	%	2.9	%

Notes:

*Less than 1% of our total ordinary shares on an as-converted basis outstanding as of February 28, 2022.

**Except as otherwise indicated below, the business address of our directors and executive officers is Block 2 Tower B Room 028, No 22 Pingguo Shequ, Bai Zi Wan Road, Chaoyang District, Beijing, China. The business address of Weiru Chen is 699 Hongfeng Road, Pudong New Area, Shanghai, China.

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†For each person or group included in this column, percentage of total voting power represents voting power based on both Class A and Class B ordinary shares held by such person or group with respect to all outstanding shares of our Class A and Class B ordinary shares as a single class. Each holder of our Class A ordinary shares is entitled to one vote per share. Each holder of our Class B ordinary shares is entitled to five votes per share. Our Class B ordinary shares are convertible at any time by the holder into Class A ordinary shares on a one-for-one basis, while Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Each of the grantees has granted a powers of attorney to our board of directors or any person designated by our board of directors to exercise the voting rights with respect to the ordinary shares issuable pursuant to the options that have been granted and outstanding to each of them under the 2015 Plans.

***CDH entities include Rainbow Rain Limited and Aviator D, L.P.

(1) Represents (i) 5,114,840 Class B ordinary shares held by BlueCity Media Limited, (ii) 500,000 Class A ordinary shares held by BlueCity Media Limited, (iii) 33,734.5 Class A ordinary shares represented by 67,469 ADSs held by BlueCity Media Limited, and (iv) 258,802.5 ordinary shares issuable upon the exercise of options that are exercisable by Baoli Ma within 60 days after April 19, 2022, based on the Schedule 13D/A filed on April 21, 2022.

On January 2, 2022, our board of directors received the Original Proposal from Mr. Baoli Ma and Spriver Tech Limited, to acquire all of our outstanding ordinary shares, including the Class A ordinary shares represented by the ADSs, that are not already beneficially owned by them, through a going private transaction. On April 18, 2022, our board of directors received the Proposal Letter from Mr. Baoli Ma and Metaclass Management ELP, an affiliate of Spriver Tech Limited, to update the Original Proposal. For a detailed description of the Proposed Transaction, please see “Item 4. Information on the Company—A. History and Development of the Company.” For risks and uncertainties relating to the Proposed Transaction, please see “Item 3. Key Information—D. Risk Factors—Risks Related to The ADSs—There can be no assurance that any definitive offer will be made with respect to the going private transaction proposed by Mr. Baoli Ma and Metaclass Management ELP, that any definitive agreement will be executed or that this or any other similar transaction will be approved or consummated. Potential uncertainty involving the proposed going private transaction may adversely affect our business and the market price of the ADSs.”

On December 30, 2021, BlueCity Media Limited and Mr. Baoli Ma entered into a loan agreement (the “Loan Agreement”) with Mico World Limited (the “Lender”), pursuant to which the Lender has extended a term loan to BlueCity Media Limited in an aggregate amount of US$6,000,000. On January 12, 2022, BlueCity Media Limited and Mr. Baoli Ma entered into a Share Charge in favor of the Lender (the “Share Charge”), pursuant to which, among other things, BlueCity Media Limited charged and assigned 4,316,547 Class B ordinary shares (the “Charged Shares”) held by it in our company, any ADSs resulting therefrom upon conversion of the Charged Shares, and other related assets in favor of the Lender by way of first ranking fixed charge as a continuing security for the obligations of BlueCity Media Limited and Mr. Baoli Ma under the Loan Agreement.

(2) Represents (i) 5,114,840 Class B ordinary shares, (ii) 500,000 Class A ordinary shares, (iii) 33,734.5 Class A ordinary shares represented by 67,469 ADSs, and (iv) 34,490 Class A ordinary shares issuable upon the exercise of options exercisable within 60 days after April 19, 2022, held by BlueCity Media Limited, based on the Schedule 13D/A filed on April 21, 2022. The sole director of BlueCity Media Limited is Mr. Baoli Ma. BlueCity Media Limited is wholly-owned by Shimmery Sapphire Holding Limited. Cantrust (FarEast) Limited holds 100% equity interests in Shimmery Sapphire Holding Limited on behalf of Shimmery Diamond Trust, who is a trust established under the laws of Guernsey and managed by Cantrust (Far East) Limited as the trustee. Mr. Baoli Ma is the settlor of Shimmery Diamond Trust, and Mr. Baoli Ma and his family are the trust’s beneficiaries. Mr. Baoli Ma may provide investment advisory services to the trustee in his capacity as an investment advisor in respect to the assets of Shimmery Diamond Trust, including the shares held by BlueCity Media Limited in our Company. The registered address of BlueCity Media Limited is Sertus Chambers, P.O. Box 905, Quastisky Building, Road Town, Tortola, British Virgin Islands.

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(3) The number of ordinary shares beneficially owned is as of December 31, 2021, as reported in Schedule 13G (Amendment No.1) filed by Shunwei Ventures III Limited, Shunwei China Internet Fund II, L.P., Shunwei Capital Partners II GP, L.P., Shunwei Capital Partners II GP Limited, Silver Unicorn Ventures Limited, and Tuck Lye Koh on February 14, 2022, and represents 938,890 Class A ordinary shares (represented by 1,877,779 ADSs) held by Shunwei Ventures III Limited, a British Virgin Islands company. Shunwei Ventures III Limited is wholly owned by Shunwei China Internet Fund II, L.P. The general partner of Shunwei China Internet Fund II, L.P. is Shunwei Capital Partners II GP, L.P. The general partner of Shunwei Capital Partners II GP, L.P. is Shunwei Capital Partners II GP Limited. Shunwei Capital Partners II GP Limited is controlled by Silver Unicorn Ventures Limited, which is controlled by Mr. Tuck Lye Koh. The registered address of Shunwei Ventures III Limited is Vistra Corporate Services Center, Wickhams Cay II, Road Town, Tortola, VG 1110, British Virgin Islands.

(4) Represents (i) 1,080,901 Class A ordinary shares represented by ADSs held by Rainbow Rain Limited, a British Virgin Islands company, and (ii) 342,285 Class A ordinary shares represented by ADSs held by Aviator D, L.P., a Cayman Islands company, based on the information provided by CDH entities to our company. Rainbow Rain Limited is wholly-owned by Roger Field Fund, L.P., whose general partner is CDH Harvest Holdings Company Limited, based on the information provided by these entities to our company. The general partner of Aviator D, L.P. is CDH China HF Holdings Company Limited. Both CDH Harvest Holdings Company Limited and CDH China HF Holdings Company Limited are controlled by Mr. Shangzhi Wu and Mr. Shuge Jiao. Rainbow Rain Limited and Aviator D, L.P. are collectively referred to as the CDH entities. The registered address of Rainbow Rain Limited is Maples Corporate Services, (BVI) Limited, Kingston Chambers, PO Box 173, Road Town, Tortola, British Virgin Islands. The registered address of Aviator D, L.P. is Maples Corporate Services Limited, PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands.

(5) Represents 1,150,862 Class A ordinary shares represented by ADSs held by Liberty Hero Limited, a British Virgin Islands company, based on the information provided by this entity to our company. Golden Bull Skyline Limited holds all management shares of Liberty Hero Limited, and has the right with respect to the retention or disposal of, and the exercise of any voting and other rights attached to, the shares held by Liberty Hero Limited in our Company. The shareholders of Golden Bull Skyline Limited are Mr. Ziqiang Liu and Ms. Fengjin Jiang. The registered address of Liberty Hero Limited is Wickhams Cay II, Road Town, Tortola, VG1110, British Virgin Islands.

To our knowledge, as of February 28, 2022, 14,535,279 of our ordinary shares were held by one record holder with registered address in the United States, representing approximately 77.6% of our total outstanding shares. The holder is Deutsche Bank Trust Company Americas, the depositary of the ADS program, which held 98.2% Class A ordinary shares on record. The number of beneficial owners of the ADSs in the United States is likely to be much larger than the number of record holders of our ordinary shares in the United States.

ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.Major Shareholders

Please refer to “Item 6. Directors, Senior Management and Employees—E. Share Ownership.”

B.Related Party Transactions

Contractual Arrangements with Our Consolidated Affiliated Entities and Their Respective Shareholders

See “Item 4. Information on the Company—C. Organizational Structure.”

Shareholders Agreement

We entered into our fifth amended and restated shareholders agreement on November 2, 2017 with our shareholders, which consist of holders of ordinary shares and preferred shares. The shareholders agreement provides for certain shareholders’ rights, including information and inspection rights, right of participation, right of first refusal and co-sale rights, and contains provisions governing our board of directors and other corporate governance matters.

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Registration Rights

We have granted certain registration rights to our shareholders. Set forth below is a description of the registration rights granted under the shareholders agreement.

Demand Registration Rights. At any time after the earlier of (i)forty eight (48)months after January 26, 2018 or (ii)any time following the effectiveness of a registration statement filed with the SEC for a qualified initial public offering, holders of at least 30% of the registrable securities (including preferred shares and ordinary shares issued upon conversion of preferred shares) then outstanding have the right to demand that we file a registration statement of all registrable securities that the holders request to be registered and included in such registration by written notice. Other than required by the underwriter(s) in connection with our initial public offering, at least twenty-five percent (25%) of the registrable securities requested by the holders to be included in such underwriting and registration shall be so included. We have the right to defer filing of a registration statement for a period of not more than 90 days after the receipt of the request of the initiating holders if we furnish to the holders requesting registration a certificate signed by our president or chief executive officer stating that in the good faith judgment of our board of directors, it would be materially detrimental to us and our shareholders for such registration statement to be filed at such time. However, we cannot exercise the deferral right more than once in any twelve-month period. We are obligated to effect no more than two demand registrations, other than demand registration to be effected pursuant to registration statement on Form F-3, for which an unlimited number of demand registrations shall be permitted.

Piggyback Registration Rights. If we propose to file a registration statement for a public offering of our securities, we must offer shareholders an opportunity to include in the registration all or any part of the registrable securities held by such holders. If the managing underwriters of any underwritten offering determine in good faith that marketing factors require a limitation of the number of shares to be underwritten, and the number of shares that may be included in the registration and the underwriting shall be allocated (i)first, to us, (ii)second, to each holder requesting inclusion of its registrable securities in such registration statement on a pro rata basis based on the total number of registrable securities then held by each such holder; provided that at least twenty-five percent (25%) of the registrable securities requested by the holders to be included in the underwriting and registration shall be so included and all shares that are not registrable securities shall first be excluded from such registration and underwriting before any registrable securities are so excluded.

Form F-3 Registration Rights. Our shareholders may request us in writing to file an unlimited number of registration statements on Form F-3. We shall effect the registration of the securities on Form F-3 as soon as practicable, except in certain circumstances.

Expenses of Registration. We will bear all registration expenses. Each holder participating in a registration as mentioned above will bear such holder’s proportionate share (based on the total number of shares sold in such registration other than for the account of us) of all selling expenses to other amounts payable to underwriter(s) or brokers, in connection with such offering by the holders.

Termination of Registration Rights. Our shareholders’ registration rights will terminate upon the earlier of (i)after five years of the consummation of a qualified IPO, or (ii)all such registrable securities proposed to be sold by a shareholder may then be sold under Rule 144 promulgated under the Securities Act.

Employment Agreements and Indemnification Agreements

See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Employment Agreements and Indemnification Agreements.”

Share Incentive Plans

See “Item 6. Directors, Senior Management and Employees—B. Compensation of Directors and Executive Officers—Share Incentive Plans.”

Other Related Party Transactions

During the year ended December 31, 2019, we provided interest free loans in the amount of RMB8.0 million to Mr. Baoli Ma. All the loans were repaid by Mr. Baoli Ma during the year ended December 31, 2019.

On April 3, 2020, we made a payment of RMB4,722,814 on behalf of Mr. Baoli Ma. All the amount was repaid by Mr. Baoli Ma on August 19, 2020.

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Participation in the Initial Public Offering

Mr. Baoli Ma subscribed for, through BlueCity Media Limited, and were allocated by the underwriters, an aggregate of 312,500 ADSs, which represents 156,250 Class A ordinary shares, in our initial public offering at the initial public offering price and on the same terms as the other ADSs being offered, for consideration of US$5.0 million (equivalent to RMB35.1 million).

Proposed Going Private Transaction

On January 2, 2022, our board of directors received the Original Proposal from Mr. Baoli Ma and Spriver Tech Limited, to acquire all of our outstanding ordinary shares, including the Class A ordinary shares represented by the ADSs, that are not already beneficially owned by them, through a going private transaction. On April 18, 2022, our board of directors received the Proposal Letter from Mr. Baoli Ma and Metaclass Management ELP, an affiliate of Spriver Tech Limited, to update the Original Proposal. For a detailed description of the Proposed Transaction, please see “Item 4. Information on the Company—A. History and Development of the Company.” For risks and uncertainties relating to the Proposed Transaction, please see “Item 3. Key Information—D. Risk Factors—Risks Related to The ADSs—There can be no assurance that any definitive offer will be made with respect to the going private transaction proposed by Mr. Baoli Ma and Metaclass Management ELP, that any definitive agreement will be executed or that this or any other similar transaction will be approved or consummated. Potential uncertainty involving the proposed going private transaction may adversely affect our business and the market price of the ADSs.”

C.Interests of Experts and Counsel

Not applicable.

ITEM 8. FINANCIAL INFORMATION

A.Consolidated Statements and Other Financial Information

We have appended consolidated financial statements filed as part of this annual report.

Legal Proceedings

On April 30, 2021, a complaint was filed in the New York Supreme Court, County of New York, Commercial Division against our company and our company’s certain executives and directors, alleging violations of the Securities Act of 1933 in relation to our company’s initial public offering (the “IPO”). The case is captioned Michael James Lorenzo v. BlueCity Holdings Limited et al, Index No. 652894/2021. The plaintiff sought to represent all purchasers of our company’s American Depositary Shares in or traceable to the IPO. On October 12, 2021, the court approved a lead plaintiff counsel. On December 13, 2021, the plaintiff filed an amended complaint. On February 11, 2022, our company filed a motion to dismiss. The plaintiff’s opposition, if any, is due by April 12, 2022. On April 13, 2022, the plaintiff filed an opposition to our motion to dismiss. Our reply to plaintiff’s opposition is due by May 27, 2022.

On July 19, 2021, another complaint was filed in the U.S. District Court for the Eastern District of New York against our company and our company’s certain executives and directors, authorized process agent in the U.S. and IPO underwriters, alleging violations of the Securities Act of 1933 in relation to our company’s IPO. The case is captioned Jiang v. BlueCity Holdings Limited et al, 1:21-cv-04044-FB-CLP. The plaintiffs sought to represent all purchasers of our company’s American Depositary Shares in or traceable to the IPO. On December 22, 2021, the court appointed two plaintiffs as co-lead plaintiffs and two firms as co-lead counsel. The lead plaintiffs’ amended complaint is due by April 15, 2022. On April 15, 2022, the lead plaintiffs filed an amended complaint. Our response to the amended complaint is due by June 14, 2022.

The actions remain in their preliminary stages. We are defending against the actions vigorously. For risks and uncertainties relating to the pending cases against us, please see “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—We have been named as a defendant in two putative shareholder class action lawsuits that could have a material adverse impact on our business, financial condition, results of operation, cash flows and reputation.”

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We may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. Litigation or any other legal or administrative proceeding, regardless of the outcome, is likely to result in substantial costs and diversion of our resources, including our management’s time and attention. See “Item 3. Key Information—D. Risk Factors—Risks Related to Our Business and Industry—Our business is subject to complex and evolving laws and regulations in various countries and regions where we have business. Many of these laws and regulations are subject to change and uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.”

Dividend Policy

Our board of directors has complete discretion on whether to distribute dividends, subject to certain requirements of Cayman Islands law, namely that our company may only pay dividends out of profits or share premium, and provided always that in no circumstances may a dividend be paid out of share premium if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business. Even if our board of directors decides to pay dividends on our ordinary shares, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors our board of directors may deem relevant.

We do not expect to pay any cash dividends on our ordinary shares in the foreseeable future after the initial public offering. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

We are a holding company incorporated in the Cayman Islands. We may rely on dividends from our subsidiaries in China for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our WFOE to pay dividends to us. See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Dividend Distributions.”

If we pay any dividends on our ordinary shares, we will pay those dividends which are payable in respect of the ordinary shares underlying the ADSs to the depositary, as the registered holder of such ordinary shares, and the depositary then will pay such amounts to the ADS holders in proportion to the ordinary shares underlying the ADSs held by such ADS holders, subject to the terms of the deposit agreement, including the fees and expenses payable thereunder. See “Item 12. Description of Securities Other than Equity Securities—D. American Depositary Shares.” Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

B.Significant Changes

We have not experienced any significant changes since the date of our audited consolidated financial statements included in this annual report.

ITEM 9. THE OFFER AND LISTING

A.Offering and Listing Details

See “—C. Markets” for our host market and trading symbol. We have a dual-class structure of our ordinary shares, in which Class A ordinary shares and Class B ordinary shares have different voting rights. Class A ordinary shares are entitled to one vote per share and Class B ordinary shares are entitled to five votes per share. See “Item 3. Key Information—D. Risk Factors—Risks Related to The ADSs— The dual-class structure of our ordinary shares may adversely affect the trading market for the ADSs.”

B.Plan of Distribution

Not applicable.

C.Markets

The ADSs, each two representing one Class A ordinary share, have been listed on Nasdaq Stock Market under the symbol “BLCT” since July 8, 2020.

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D.Selling Shareholders

Not applicable.

E.Dilution

Not applicable.

F.Expenses of the Issue

Not applicable.

ITEM 10. ADDITIONAL INFORMATION

A.Share Capital

Not applicable.

B.Memorandum and Articles of Association

The following are summaries of material provisions of the seventh amended and restated memorandum and articles of association and of the Companies Act, insofar as they relate to the material terms of our ordinary shares.

Objects of Our Company. Under our amended and restated memorandum and articles of association, the objects of our company are unrestricted and we have the full power and authority to carry out any object not prohibited by the laws of the Cayman Islands.

Ordinary Shares. Our ordinary shares are divided into Class A ordinary shares and Class B ordinary shares. Holders of our Class A ordinary shares and Class B ordinary shares will have the same rights except for voting and conversion rights. Our ordinary shares are issued in registered form and are issued when registered in our register of members. We may not issue shares to bearer. Our shareholders who are nonresidents of the Cayman Islands may freely hold and vote their shares.

Each Class B ordinary share is convertible into an equal number of Class A ordinary shares upon the occurrence of certain matters as set forth in our amended and restated memorandum and articles of association, including upon any direct or indirect sale, transfer, assignment or disposition of Class B ordinary shares by a holder thereof to any person other than holders of Class B ordinary shares or their affiliates. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances.

Dividends. Our directors may from time to time declare dividends (including interim dividends) and other distributions on our shares in issue and authorize payment of the same out of the funds of our company lawfully available therefor. Our amended and restated memorandum and articles of association provide that dividends may be declared and paid out of the funds of our Company lawfully available therefor. Under the laws of the Cayman Islands, our company may pay a dividend out of either profit or share premium account; provided that in no circumstances may a dividend be paid if this would result in our company being unable to pay its debts as they fall due in the ordinary course of business.

Voting Rights. In respect of all matters subject to a shareholders’ vote, each holder of Class A ordinary shares is entitled to one vote per share and each holder of Class B ordinary shares is entitled to five votes per share. Our Class A ordinary shares and Class B ordinary shares votes together as a single class on all matters submitted to a vote of our shareholders, except as may otherwise be required by law. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of such meeting or any one shareholder holding not less than 10% of the votes attaching to the shares present in person or by proxy.

An ordinary resolution to be passed at a meeting by the shareholders requires the affirmative vote of a simple majority of the votes attaching to the ordinary shares cast at a meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast attaching to the issued and outstanding ordinary shares at a meeting. A special resolution will be required for important matters such as a change of name or making changes to our amended and restated memorandum and articles of association. Our shareholders may, among other things, divide or combine their shares by ordinary resolution.

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General Meetings of Shareholders. As a Cayman Islands exempted company, we are not obliged by the Companies Act to call shareholders’ annual general meetings. Our amended and restated memorandum and articles of association provide that we may (but are not obliged to) in each year hold a general meeting as our annual general meeting in which case we shall specify the meeting as such in the notices calling it, and the annual general meeting shall be held at such time and place as may be determined by our directors.

Shareholders’ general meetings may be convened by (i) a majority of the board, or (ii) the chairman of our board, or (iii) any director, where required to give effect to a requisition received from any one or more shareholders under our articles of association. Advance notice of at least ten clear days is required for the convening of our annual general shareholders’ meeting (if any) and any other general meeting of our shareholders. A quorum required for any general meeting of shareholders consists of, one or more shareholders entitled to vote and present in person or by proxy or (in the case of a shareholder being a corporation) by its duly authorized representative representing not less than one-third of all voting power of our share capital in issue throughout the meeting.

The Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our amended and restated memorandum and articles of association provide that upon the requisition of any one or more of our shareholders holding shares which carry in aggregate not less than one-third of the paid up capital of our company entitled to vote at general meetings, our board will convene an extraordinary general meeting and put the resolutions so requisitioned to a vote at such meeting. However, our amended and restated memorandum and articles of association do not provide our shareholders with any right to put any proposals before annual general meetings or extraordinary general meetings not called by such shareholders.

Conversion. Each Class B ordinary share is convertible into one Class A ordinary share at any time by the holder thereof. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances. Upon any sale of Class B ordinary shares by a holder thereof to any person or entity, such Class B ordinary shares will be automatically and immediately converted into an equal number of Class A ordinary shares.

Transfer of Ordinary Shares. Subject to the restrictions set out below, any of our shareholders may transfer all or any of his or her ordinary shares by an instrument of transfer in the usual or common form or any other form approved by our board of directors.

Our board of directors may, in its absolute discretion, decline to register any transfer of any ordinary share which is not fully paid up or on which we have a lien. Our board of directors may also decline to register any transfer of any ordinary share unless:

● the instrument of transfer is lodged with us, accompanied by the certificate for the ordinary shares to which it relates and such other evidence as our board of directors may reasonably require to show the right of the transferor to make the transfer;

● the instrument of transfer is in respect of only one class of ordinary shares;

● the instrument of transfer is properly stamped, if required;

● in the case of a transfer to joint holders, the number of joint holders to whom the ordinary share is to be transferred does not exceed four; and

● a fee of such maximum sum as the Nasdaq Global Market may determine to be payable or such lesser sum as our directors may from time to time require is paid to us in respect thereof.

If our directors refuse to register a transfer they shall, within three months after the date on which the instrument of transfer was lodged, send to each of the transferor and the transferee notice of such refusal.

The registration of transfers may, on ten calendar days’ notice being given by advertisement in such one or more newspapers, by electronic means or by any other means in accordance with the rules of the Nasdaq Global Market be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine; provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as our board may determine.

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Liquidation. On the winding up of our company, if the assets available for distribution amongst our shareholders shall be more than sufficient to repay the whole of the share capital at the commencement of the winding up, the surplus shall be distributed amongst our shareholders in proportion to the par value of the shares held by them at the commencement of the winding up, subject to a deduction from those shares in respect of which there are monies due, of all monies payable to our company for unpaid calls or otherwise. If our assets available for distribution are insufficient to repay all of the paid-up capital, such the assets will be distributed so that, as nearly as may be, the losses are borne by our shareholders in proportion to the par value of the shares held by them.

Calls on Shares and Forfeiture of Shares. Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their shares in a notice served to such shareholders at least 14 clear days prior to the specified time and place of payment. The shares that have been called upon and remain unpaid are subject to forfeiture.

Redemption, Repurchase and Surrender of Shares. We may issue shares on terms that such shares are subject to redemption, at our option or at the option of the holders of these shares, on such terms and in such manner as may be determined, before the issue of such shares, by our board of directors or by our shareholders by special resolution. Our company may also repurchase any of our shares on such terms and in such manner and upon such terms as have been approved by our board of directors. Under the Companies Act, the redemption or repurchase of any share may be paid out of our Company’s profits or out of the proceeds of a new issue of shares made for the purpose of such redemption or repurchase, or out of capital (including share premium account and capital redemption reserve) if our company can, immediately following such payment, pay its debts as they fall due in the ordinary course of business. In addition, under the Companies Act no such share may be redeemed or repurchased (a)unless it is fully paid up, (b)if such redemption or repurchase would result in there being no shares outstanding or (c)if the company has commenced liquidation. In addition, our company may accept the surrender of any fully paid share for no consideration.

Variations of Rights of Shares. Whenever the capital of our company is divided into different classes all or any of the special rights for the time being attached to the shares or any class of shares may, unless otherwise provided by the terms of issue of the shares of that class, from time to time (whether or not our company is being wound up) be varied, modified or abrogated with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied, modified or abrogated by the creation or issue of further shares ranking pari passu therewith.

Issuance of Additional Shares. Our amended and restated memorandum and articles of association authorizes our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.

Our amended and restated memorandum and articles of association also authorizes our board of directors to establish from time to time one or more series of preference shares and to determine, with respect to any series of preference shares, the terms and rights of that series, including the designations, powers, preferences and relative, participating, optional and other rights, if any, and the qualifications, limitations and restrictions thereof, if any, including, without limitation, the number of shares constituting each such class or series, dividend rights, conversion rights, redemption privileges, voting powers, full or limited or no voting powers, and liquidation preferences, and to increase or decrease the size of any such class or series (but not below the number of shares of any class or series of preferred shares then outstanding).

Our board of directors may issue preference shares without action by our shareholders to the extent authorized but unissued. Issuance of these shares may dilute the voting power of holders of ordinary shares.

Inspection of Books and Records. Holders of our ordinary shares will have no general right under Cayman Islands law to inspect or obtain copies of our list of shareholders or our corporate records. However, we intend to provide our shareholders with annual audited financial statements.

Anti-Takeover Provisions. Some provisions of our amended and restated memorandum and articles of association may discourage, delay or prevent a change of control of our company or management that shareholders may consider favorable, including provisions that authorize our board of directors to issue preference shares in one or more series and to designate the price, rights, preferences, privileges and restrictions of such preference shares without any further vote or action by our shareholders.

However, under Cayman Islands law, our directors may only exercise the rights and powers granted to them under our amended and restated memorandum and articles of association for a proper purpose and for what they believe in good faith to be in the best interests of our company.

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Exempted Company. We are an exempted company with limited liability under the Companies Act. The Companies Act distinguishes between ordinary resident companies and exempted companies. Any company that is registered in the Cayman Islands but conducts business mainly outside of the Cayman Islands may apply to be registered as an exempted company. The requirements for an exempted company are essentially the same as for an ordinary company except that an exempted company:

● does not have to file an annual return of its shareholders with the Registrar of Companies;

● is not required to open its register of members for inspection;

● does not have to hold an annual general meeting;

● may issue negotiable or bearer shares or shares with no par value;

● may obtain an undertaking against the imposition of any future taxation (such undertakings are usually given for 20 years in the first instance);

● may register by way of continuation in another jurisdiction and be deregistered in the Cayman Islands;

● may register as a limited duration company; and

● may register as a segregated portfolio company.

“Limited liability” means that the liability of each shareholder is limited to the amount unpaid by the shareholder on the shares of the company (except in exceptional circumstances, such as involving fraud, the establishment of an agency relationship or an illegal or improper purpose or other circumstances in which a court may be prepared to pierce or lift the corporate veil).

Differences in Corporate Law

The Companies Act is derived, to a large extent, from the older Companies Acts of England but does not follow recent English statutory enactments and accordingly there are significant differences between the Companies Act and the current Companies Act of England. In addition, the Companies Act differs from laws applicable to U.S. corporations and their shareholders. Set forth below is a summary of certain significant differences between the provisions of the Companies Act applicable to us and the laws applicable to companies incorporated in the United States and their shareholders.

Mergers and Similar Arrangements. The Companies Act permits mergers and consolidations between Cayman Islands companies and between Cayman Islands companies and non-Cayman Islands companies. For these purposes, (i) “merger” means the merging of two or more constituent companies and the vesting of their undertaking, property and liabilities in one of such companies as the surviving company, and (ii)a “consolidation” means the combination of two or more constituent companies into a consolidated company and the vesting of the undertaking, property and liabilities of such companies to the consolidated company. In order to effect such a merger or consolidation, the directors of each constituent company must approve a written plan of merger or consolidation, which must then be authorized by (a)a special resolution of the shareholders of each constituent company, and (b)such other authorization, if any, as may be specified in such constituent company’s articles of association. The written plan of merger or consolidation must be filed with the Registrar of Companies of the Cayman Islands together with a declaration as to the solvency of the consolidated or surviving company, a list of the assets and liabilities of each constituent company and an undertaking that a copy of the certificate of merger or consolidation will be given to the members and creditors of each constituent company and that notification of the merger or consolidation will be published in the Cayman Islands Gazette. Court approval is not required for a merger or consolidation which is effected in compliance with these statutory procedures.

A merger between a Cayman parent company and its Cayman subsidiary or subsidiaries does not require authorization by a resolution of shareholders of that Cayman subsidiary if a copy of the plan of merger is given to every member of that Cayman subsidiary to be merged unless that member agrees otherwise. For this purpose a company is a “parent” of a subsidiary if it holds issued shares that together represent at least ninety percent (90%) of the votes at a general meeting of the subsidiary.

The consent of each holder of a fixed or floating security interest over a constituent company is required unless this requirement is waived by a court in the Cayman Islands.

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Save in certain limited circumstances, a shareholder of a Cayman constituent company who dissents from the merger or consolidation is entitled to payment of the fair value of his shares (which, if not agreed between the parties, will be determined by the Cayman Islands court) upon dissenting to the merger or consolidation, provide the dissenting shareholder complies strictly with the procedures set out in the Companies Act. The exercise of dissenter rights will preclude the exercise by the dissenting shareholder of any other rights to which he or she might otherwise be entitled by virtue of holding shares, save for the right to seek relief on the grounds that the merger or consolidation is void or unlawful.

Separate from the statutory provisions relating to mergers and consolidations, the Companies Act also contains statutory provisions that facilitate the reconstruction and amalgamation of companies by way of schemes of arrangement, provided that the arrangement is approved by a majority in number of each class of shareholders and creditors with whom the arrangement is to be made, and who must in addition represent three-fourths in value of each such class of shareholders or creditors, as the case may be, that are present and voting either in person or by proxy at a meeting, or meetings, convened for that purpose. The convening of the meetings and subsequently the arrangement must be sanctioned by the Grand Court of the Cayman Islands. While a dissenting shareholder has the right to express to the court the view that the transaction ought not to be approved, the court can be expected to approve the arrangement if it determines that:

● the statutory provisions as to the required majority vote have been met;

● the shareholders have been fairly represented at the meeting in question and the statutory majority are acting bona fide without coercion of the minority to promote interests adverse to those of the class;

● the arrangement is such that may be reasonably approved by an intelligent and honest man of that class acting in respect of his interest; and

● the arrangement is not one that would more properly be sanctioned under some other provision of the Companies Act.

The Companies Act also contains a statutory power of compulsory acquisition which may facilitate the “squeeze out” of dissentient minority shareholder upon a tender offer. When a tender offer is made and accepted by holders of 90.0% of the shares affected within four months, the offeror may, within a two-month period commencing on the expiration of such four month period, require the holders of the remaining shares to transfer such shares to the offeror on the terms of the offer. An objection can be made to the Grand Court of the Cayman Islands but this is unlikely to succeed in the case of an offer which has been so approved unless there is evidence of fraud, bad faith or collusion.

If an arrangement and reconstruction by way of scheme of arrangement is thus approved and sanctioned, or if a tender offer is made and accepted in accordance with the foregoing statutory procedures, a dissenting shareholder would have no rights comparable to appraisal rights, which would otherwise ordinarily be available to dissenting shareholders of Delaware corporations, providing rights to receive payment in cash for the judicially determined value of the shares.

Shareholders’ Suits. In principle, we will normally be the proper plaintiff to sue for a wrong done to us as a company, and as a general rule a derivative action may not be brought by a minority shareholder. However, based on English authorities, which would in all likelihood be of persuasive authority in the Cayman Islands, the Cayman Islands court can be expected to follow and apply the common law principles (namely the rule in Foss v. Harbottle and the exceptions thereto) so that a non-controlling shareholder may be permitted to commence a class action against or derivative actions in the name of the company to challenge actions where:

● a company acts or proposes to act illegally or ultra vires;

● the act complained of, although not ultra vires, could only be effected duly if authorized by more than a simple majority vote that has not been obtained; and

● those who control the company are perpetrating a “fraud on the minority.”

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Indemnification of Directors and Executive Officers and Limitation of Liability. Cayman Islands law does not limit the extent to which a company’s memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against civil fraud or the consequences of committing a crime. Our amended and restated memorandum and articles of association provide that that we shall indemnify our officers and directors against all actions, proceedings, costs, charges, expenses, losses, damages or liabilities incurred or sustained by such directors or officer, other than by reason of such person’s dishonesty, willful default or fraud, in or about the conduct of our company’s business or affairs (including as a result of any mistake of judgment) or in the execution or discharge of his duties, powers, authorities or discretions, including, without prejudice to the generality of the foregoing, any costs, expenses, losses or liabilities incurred by such director or officer in defending (whether successfully or otherwise) any civil proceedings concerning our company or its affairs in any court whether in the Cayman Islands or elsewhere. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation.

In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with additional indemnification beyond that provided in our amended and restated memorandum and articles of association.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

Directors’ Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.

As a matter of Cayman Islands law, a director of a Cayman Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a profit based on his position as director (unless the company permits him to do so), a duty not to put himself in a position where the interests of the company conflict with his personal interest or his duty to a third party, and a duty to exercise powers for the purpose for which such powers were intended. A director of a Cayman Islands company owes to the company a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. It was previously considered that a director need not exhibit in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the Cayman Islands.

Shareholder Action by Written Consent. Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Our amended and restated memorandum and articles of association provide that our shareholders may not approve corporate matters by way of a unanimous written resolution.

Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders; provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.

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The Companies Act provides shareholders with only limited rights to requisition a general meeting, and does not provide shareholders with any right to put any proposal before a general meeting. However, these rights may be provided in a company’s articles of association. Our amended and restated memorandum and articles of association allow any one or more of our shareholders holding shares which carry in aggregate not less than one-third of the paid up capital of our company entitled to vote at general meetings to requisition an extraordinary general meeting of our shareholders, in which case our board is obliged to convene an extraordinary general meeting and to put the resolutions so requisitioned to a vote at such meeting. Other than this right to requisition a shareholders’ meeting, our amended and restated memorandum and articles of association do not provide our shareholders with any other right to put proposals before annual general meetings or extraordinary general meetings. As an exempted Cayman Islands company, we are not obliged by law to call shareholders’ annual general meetings.

Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the laws of the Cayman Islands but our amended and restated memorandum and articles of association do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.

Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the issued and outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our amended and restated memorandum and articles of association, directors may be removed with or without cause, by an ordinary resolution of our shareholders. A director will also cease to be a director if he (i) resigns his office by notice delivered to us or tendered at a meeting of our board; (ii) becomes of unsound mind or dies; (iii) without special leave of absence from our board, is absent from meetings of our board for three (3) consecutive times, unless the board resolves that his office not be vacated; (iv) becomes bankrupt or has a receiving order made against him or suspends payment or compounds with his creditors; (v) is prohibited by law from being a director; or (vi) ceases to be a director by virtue of any provision of the laws of the Cayman Islands or is removed from office pursuant to any other provision of our articles of association.

Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.

Cayman Islands law has no comparable statute. As a result, we cannot avail ourselves of the types of protections afforded by the Delaware business combination statute. However, although Cayman Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and not with the effect of constituting a fraud on the minority shareholders.

Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by either an order of the courts of the Cayman Islands or by the board of directors.

Under Cayman Islands law, a company may be wound up by either an order of the courts of the Cayman Islands or by a special resolution of its members or, if the company is unable to pay its debts as they fall due, by an ordinary resolution of its members. The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so.

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Variation of Rights of Shares. Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under our amended and restated memorandum and articles of association, if our share capital is divided into more than one class of shares, any or all of the special rights for the time being attached to the shares or any class of shares may, unless otherwise provided by the terms of issue of the shares of that class, from time to time (whether or not our company is being wound up) be varied, modified or abrogated with the sanction of a special resolution passed at a separate general meeting of the holders of the shares of that class. The special rights conferred upon the holders of any shares or class of shares shall not, unless otherwise expressly provided in the rights attaching to or the terms of issue of such shares, be deemed to be varied, modified or abrogated by the creation or issue of further shares ranking pari passu therewith.

Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under the Companies Act and our amended and restated memorandum and articles of association, our memorandum and articles of association may only be amended by a special resolution of our shareholders.

Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

C.Material Contracts

We have not entered into any material contracts other than in the ordinary course of business and other than those described in “Item 4. Information on the Company,” “Item 7. Major Shareholders and Related Party Transactions—B. Related Party Transactions,” in this “Item 10. Additional Information—C. Material Contracts” or elsewhere in this annual report on Form 20-F.

D.Exchange Controls

See “Item 4. Information on the Company—B. Business Overview—Regulation—Regulations Relating to Foreign Exchange” and “Item 3.D. Key Information—Risk Factors—Risks Related to Doing Business in China—PRC regulations relating to offshore investment activities by PRC residents may limit our WFOE’s ability to change its registered capital or distribute profits to us or otherwise expose us or our PRC resident beneficial owners to liability and penalties under PRC law.”

E.Taxation

The following summary of the material Cayman Islands, PRC and U.S. federal income tax consequences of an investment in the ADSs or Class A ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this registration statement, all of which are subject to change. This summary does not deal with all possible tax consequences relating to an investment in the ADSs or Class A ordinary shares, such as the tax consequences under U.S. state and local tax laws or under the tax laws of jurisdictions other than the Cayman Islands, China and the United States.

Cayman Islands Taxation

The Cayman Islands currently levy no taxes on individuals or corporations based upon profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax or estate duty. There are no other taxes likely to be material to the Company levied by the Government of the Cayman Islands save certain stamp duties which may be applicable, from time to time, on certain instruments executed in or brought within the jurisdiction of the Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the United Kingdom in 2010 but otherwise is not party to any double tax treaties.

Further, no stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands companies except those which hold interests in land in the Cayman Islands.

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People’s Republic of China Taxation

Under the PRC Enterprise Income Tax Law and its implementation rules, an enterprise established outside of the PRC with a “de facto management body” within the PRC is considered a resident enterprise and will be subject to the enterprise income tax at the rate of 25% on its global income. The implementation rules define the term “de facto management body” as the body that exercises full and substantial control and overall management over the business, production, personnel, accounts and properties of an enterprise. In April 2009, the State Administration of Taxation issued a circular, known as SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China. Although this circular only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the criteria set forth in the circular may reflect the State Administration of Taxation’s general position on how the “de facto management body” test should be applied in determining the tax resident status of all offshore enterprises. According to SAT Circular 82, an offshore incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be regarded as a PRC tax resident by virtue of having its “de facto management body” in China only if all of the following conditions are met: (i)the primary location of the day-to-day operational management is in the PRC; (ii)decisions relating to the enterprise’s financial and human resource matters are made or are subject to approval by organizations or personnel in the PRC; (iii)the enterprise’s primary assets, accounting books and records, company seals, and board and shareholder resolutions, are located or maintained in the PRC; and (iv)at least 50% of voting board members or senior executives habitually reside in the PRC.

We believe that BlueCity Holdings Limited is not a PRC resident enterprise for PRC tax purposes. BlueCity Holdings Limited is not controlled by a PRC enterprise or PRC enterprise group and we do not believe that BlueCity Holdings Limited meets all of the conditions above. BlueCity Holdings Limited is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. For the same reasons, we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with us.

If the PRC tax authorities determine that BlueCity Holdings Limited is a PRC resident enterprise for enterprise income tax purposes, we may be required to withhold a 10% withholding tax from dividends we pay to our shareholders that are non-resident enterprises, including the holders of the ADSs. In addition, non-resident enterprise shareholders (including the ADS holders) may be subject to a 10% PRC tax on gains realized on the sale or other disposition of ADSs or Class A ordinary shares, if such income is treated as sourced from within the PRC. It is unclear whether our non-PRC individual shareholders (including the ADS holders) would be subject to any PRC tax on dividends or gains obtained by such non-PRC individual shareholders in the event we are determined to be a PRC resident enterprise. If any PRC tax were to apply to such dividends or gains, it would generally apply at a rate of 20%. Any PRC tax imposed on dividends or gains may be subject to reduction if a reduced rate is available under an applicable tax treaty. It is unclear whether non-PRC shareholders of BlueCity Holdings Limited would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that BlueCity Holdings Limited is treated as a PRC resident enterprise.

Provided that our Cayman Islands holding company, BlueCity Holdings Limited, is not deemed to be a PRC resident enterprise, holders of the ADSs and Class A ordinary shares who are not PRC residents will not be subject to PRC income tax on dividends distributed by us or gains realized from the sale or other disposition of our shares or ADSs. However, under SAT Circular 7 and SAT Circular 37, where a non-resident enterprise conducts an “indirect transfer” by transferring taxable assets, including, in particular, equity interests in a PRC resident enterprise, indirectly by disposing of the equity interests of an overseas holding company, the non-resident enterprise, being the transferor, or the transferee, or the PRC entity which directly owns such taxable assets may report to the relevant tax authority such indirect transfer. Using a “substance over form” principle, the PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such indirect transfer may be subject to PRC enterprise income tax, and the transferee or other person who is obligated to pay for the transfer is obligated to withhold the applicable taxes, currently at a rate of 10% for the transfer of equity interests in a PRC resident enterprise. We and our non-PRC resident investors may be at risk of being required to file a return and being taxed under SAT Circular 7 and SAT Circular 37, and we may be required to expend valuable resources to comply with SAT Circular 7 and SAT Circular 37, or to establish that we should not be taxed under these circulars. See “Item 3. Key Information—D. Risk Factors—Risks Related to Doing Business in China—We face uncertainty with respect to indirect transfers of equity interests in PRC resident enterprises by their non-PRC holding companies.”

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United States Federal Income Tax Considerations

The following discussion is a summary of U.S. federal income tax considerations generally applicable to the ownership and disposition of the ADSs or Class A ordinary shares by a U.S. Holder (as defined below) that holds the ADSs or Class A ordinary shares as “capital assets” (generally, property held for investment) under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). This discussion is based upon existing U.S. federal tax law, which is subject to differing interpretations or change, possibly with retroactive effect. There can be no assurance that the Internal Revenue Service (the “IRS”) or a court will not take a contrary position. This discussion, moreover, does not address the U.S. federal estate, gift, Medicare, and alternative minimum tax considerations, or any state, local and non-U.S. tax considerations, relating to the ownership or disposition of the ADSs or Class A ordinary shares. The following summary does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations such as:

● banks and other financial institutions;

● insurance companies;

● pension plans;

● cooperatives;

● regulated investment companies;

● real estate investment trusts;

● broker-dealers;

● traders that elect to use a mark-to-market method of accounting;

● certain former U.S. citizens or long-term residents;

● tax-exempt entities (including private foundations);

● persons liable for alternative minimum tax;

● persons who acquire the ADSs or Class A ordinary shares pursuant to any employee share option or otherwise as compensation;

● investors that will hold the ADSs or Class A ordinary shares as part of a straddle, hedge, conversion, constructive sale or other integrated transaction for U.S. federal income tax purposes;

● investors that have a functional currency other than the U.S. dollar;

● persons that actually or constructively own ADSs or Class A ordinary shares representing 10% or more of our stock (by vote or value); or

● partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding ADSs or Class A ordinary shares through such entities;

all of whom may be subject to tax rules that differ significantly from those discussed below.

Each U.S. Holder is urged to consult its tax advisor regarding the application of U.S. federal taxation to its particular circumstances, and the state, local, non-U.S. and other tax considerations of the ownership and disposition of the ADSs or Class A ordinary shares.

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General

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of the ADSs or Class A ordinary shares that is, for U.S. federal income tax purposes:

● an individual who is a citizen or resident of the United States;

● a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created in, or organized under the laws, of the United States or any state thereof or the District of Columbia;

● an estate the income of which is includible in gross income for U.S. federal income tax purposes regardless of its source; or 128

● a trust (A)the administration of which is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust or (B)that has otherwise validly elected to be treated as a U.S. person under the Code.

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of the ADSs or Class A ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding the ADSs or Class A ordinary shares and their partners are urged to consult their tax advisors regarding an investment in the ADSs or Class A ordinary shares.

For U.S. federal income tax purposes, a U.S. Holder of ADSs generally will be treated as the beneficial owner of the underlying shares represented by the ADSs. The remainder of this discussion assumes that a U.S. Holder of the ADSs will be treated in this manner. Accordingly, deposits or withdrawals of Class A ordinary shares for ADSs generally will not be subject to U.S. federal income tax.

Passive Foreign Investment Company Rules

A non-U.S. corporation, such as our company, will be classified as a PFIC for U.S. federal income tax purposes for any taxable year if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (generally determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. For this purpose, cash and assets readily convertible into cash are categorized as passive assets and the company’s goodwill and other unbooked intangibles not reflected on its balance sheet are taken into account. Passive income generally includes, among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, 25% or more (by value) of the stock.

Although the law in this regard is not entirely clear, we intend to treat the VIE (including its subsidiaries) as being owned by us for U.S. federal income tax purposes, not only because we exercise effective control over the operation of such entities but also because we are entitled to substantially all of their economic benefits, and, as a result, we consolidate their results of operations in our consolidated financial statements. If it were determined, however, that we are not the owner of the VIE for U.S. federal income tax purposes, the composition of our income and assets would change and we may be treated as a PFIC for the current taxable year and any subsequent taxable year.

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Assuming that we are the owner of the VIE (including its subsidiaries) for U.S. federal income tax purposes, and based upon our current and projected income and assets, we do not believe that we were a PFIC for the taxable year ended December 31, 2021 and do not presently expect to be a PFIC for the current taxable year or the foreseeable future. Although we do not expect to be or become a PFIC for the current taxable year or the foreseeable future, no assurance can be given in this regard because the determination of whether we are or will become a PFIC will depend, in part, upon the composition of our income and assets. Furthermore, fluctuations in the market price of the ADSs may cause us to be classified as a PFIC for the current or future taxable years because the value of our assets for purposes of the asset test, including the value of our goodwill and other unbooked intangibles, may be determined by reference to the market price of the ADSs from time to time (which may be volatile). In particular, recent decline in the market price of the ADSs significantly increased our risk of becoming a PFIC. The market price of the ADSs may continue to fluctuate considerably and, consequently, we cannot assure you of our PFIC status for any taxable year. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets. Under circumstances where our revenue from activities that produce passive income significantly increases relative to our revenue from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes or if it were determined that we do not own the stock of the VIE for U.S. federal income tax purpose, our risk of becoming classified as a PFIC may substantially increase. Because PFIC status is a factual determination made annually after the close of each taxable year, there can be no assurance that we will not be a PFIC for the current taxable year or any future taxable year.

If we are a PFIC for any year during which a U.S. Holder holds the ADSs or Class A ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds the ADSs or Class A ordinary shares, unless we were to cease to be a PFIC and the U.S. Holder were to make a “deemed sale” election with respect to the ADSs or Class A ordinary shares.

The discussion below under “—Dividends” and “—Sale or Other Disposition” is written on the basis that we will not be or become classified as a PFIC for U.S. federal income tax purposes. The U.S. federal income tax rules that apply generally if we are treated as a PFIC are discussed below under “—Passive Foreign Investment Company Rules.”

Dividends

The gross amount of any distributions paid on the ADSs or Class A ordinary shares (including the amount of any PRC tax withheld) out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder, in the case of Class A ordinary shares, or by the depositary, in the case of ADSs. Because we do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles, any distribution we pay will generally be treated as a “dividend” for U.S. federal income tax purposes. Dividends received on the ADSs or Class A ordinary shares will not be eligible for the dividends received deduction allowed to corporations in respect of dividends received from U.S. corporations.

Individuals and other non-corporate U.S. Holders will be subject to tax on any such dividends at the lower capital gains tax rate applicable to “qualified dividend income,” provided that certain conditions are satisfied, including that (1)the ADSs or Class A ordinary shares on which the dividends are paid are readily tradable on an established securities market in the United States, or, in the event that we are deemed to be a PRC resident enterprise under the PRC tax law, we are eligible for the benefit of the U.S.-PRC income tax treaty (the “Treaty”), (2) we are neither a PFIC nor treated as such with respect to a U.S. Holder (as discussed below) for the taxable year in which the dividend is paid or the preceding taxable year, and (3) certain holding period requirements are met. The ADSs (but not our ordinary shares) are listed on the Nasdaq Global Market and is considered readily tradable on an established securities market in the United States. Since we do not expect that our ordinary shares will be listed on an established securities market, we do not believe that dividends that we pay on our ordinary shares that are not represented by ADSs will meet the conditions required for the reduced tax rate. There can be no assurance, however, that the ADSs will continue to be considered readily tradable on an established securities market in later years. U.S. Holders are urged to consult their tax advisors regarding the availability of the lower rate for dividends paid with respect to the ADSs or Class A ordinary shares.

In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see “Item 10. Additional Information—E. Taxation—People’s Republic of China Taxation”), we may be eligible for the benefits of the Treaty. If we are eligible for such benefits, dividends we pay on our Class A ordinary shares, regardless of whether such shares are represented by the ADSs, and regardless of whether the ADSs are readily tradable on an established securities market in the United States, would be potentially eligible for the reduced rates of taxation described in the preceding paragraph.

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For U.S. foreign tax credit purposes, dividends paid on the ADSs or Class A ordinary shares generally will be treated as income from foreign sources and generally will constitute passive category income. In the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law, a U.S. Holder may be subject to PRC withholding taxes on dividends paid on the ADSs or Class A ordinary shares (see “Item 10. Additional Information—E. Taxation—People’s Republic of China Taxation”). Depending on the U.S. Holder’s particular facts and circumstances and subject to a number of complex conditions and limitations, PRC withholding taxes on dividends that are non-refundable under the Treaty may be treated as foreign taxes eligible for credit against a U.S. Holder’s U.S. federal income tax liability. A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction for U.S. federal income tax purposes, in respect of such withholding, but only for a year in which such holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex and U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Sale or Other Disposition

A U.S. Holder will generally recognize gain or loss upon the sale or other disposition of ADSs or Class A ordinary shares in an amount equal to the difference between the amount realized upon the disposition and the holder’s adjusted tax basis in such ADSs or Class A ordinary shares. The gain or loss will generally be capital gain or loss. Any capital gain or loss will be long term if the ADSs or Class A ordinary shares have been held for more than one year at the time of disposition. The deductibility of a capital loss may be subject to limitations.

Any such gain or loss that the U.S. Holder recognizes will generally be treated as U.S. source income or loss for foreign tax credit limitation purposes, which will generally limit the availability of foreign tax credits.

However, in the event we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law, and if PRC tax were to be imposed on any gain from the disposition of the ADSs or Class A ordinary shares, a U.S. Holder that is eligible for the benefits of the Treaty may elect to treat such gain as PRC source income for foreign tax credit purposes. Pursuant to recently issued Regulations, however, if a U.S. Holder is not eligible for the benefits of the Treaty or does not elect to apply the Treaty, then such holder may not be able to claim a foreign tax credit arising from any PRC tax imposed on the disposition of ADSs or ordinary shares. The rules regarding foreign tax credits and deduction of foreign taxes are complex. U.S. Holders should consult their tax advisors regarding the availability of a foreign tax credit or deduction in light of their particular circumstances, including their eligibility for benefits under the Treaty and the potential impact of the recently issued Regulations.

Passive Foreign Investment Company Considerations

If we are classified as a PFIC for any taxable year during which a U.S. Holder holds the ADSs or Class A ordinary shares, and unless the U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules on (i)any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a taxable year to a U.S. Holder that is greater than 125 percent of the average annual distributions paid to the U.S. Holder in the three preceding taxable years or, if shorter, the U.S. Holder’s holding period for the ADSs or Class A ordinary shares), and (ii)any gain recognized on the sale or other disposition (including, under certain circumstances, a pledge) of ADSs or Class A ordinary shares. Under the PFIC rules:

● the excess distribution or gain will be allocated ratably over the U.S. Holder’s holding period for the ADSs or Class A ordinary shares;

● the amount allocated to the taxable year of the distribution or gain and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are classified as a PFIC (each, a “pre-PFIC year”), will be taxable as ordinary income; and

● the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for individuals or corporations, as appropriate, for that year, increased by an additional tax equal to the interest on the resulting tax deemed deferred with respect to each such taxable year.

If we are a PFIC for any taxable year during which a U.S. Holder holds the ADSs or Class A ordinary shares and any of our subsidiaries, the VIE or any of the subsidiaries of the VIE is also a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of the lower-tier PFIC for purposes of the application of these rules. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries, the VIE or any of the subsidiaries of the VIE.

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As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” (as defined below) in a PFIC may make a mark-to-market election with respect to such stock, provided that such stock is regularly traded on a qualified exchange or other market, as defined in the applicable United States Treasury regulations. For those purposes, the ADSs, but not our ordinary shares, are listed on the Nasdaq Global Market, which is a qualified exchange. We anticipate that the ADSs should qualify as being regularly traded, but no assurances may be given in this regard. If a U.S. Holder makes this election with respect to the ADSs, the holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ADSs held at the end of the taxable year over the adjusted tax basis of such ADSs and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ADSs over the fair market value of such ADSs held at the end of the taxable year, but such deduction will only be allowed to the extent of the net amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in the ADSs would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of the ADSs and we cease to be classified as a PFIC, the holder will not be required to take into account the gain or loss described above during any period that we are not classified as a PFIC. If a U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other disposition of the ADSs in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election.

The mark-to-market election is available only for “marketable stock,” which is stock that is regularly traded on a qualified exchange or other market, as defined in applicable United States Treasury regulations. For this purpose the ADSs, but not our Class A ordinary shares, are listed on the Nasdaq Global Market which is a qualified exchange. We anticipate that the ADSs should qualify as being regularly traded, but no assurances may be given in this regard.

Because a mark-to-market election cannot technically be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes.

We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, would result in tax treatment different from (and generally less adverse than) the general tax treatment for PFICs described above.

If a U.S. Holder owns the ADSs or Class A ordinary shares during any taxable year that we are a PFIC, the holder must generally file an annual IRS Form 8621. You should consult your tax advisor regarding the U.S. federal income tax consequences of owning and disposing of the ADSs or Class A ordinary shares if we are or become a PFIC.

F.Dividends and Paying Agents

Not applicable.

G.Statement by Experts

Not applicable.

H.Documents on Display

We previously filed with the SEC our registration statement on Form F-1 (Registration No. 333-239205), as amended, including the prospectus contained therein, to register the issuance and sale of our ordinary shares represented by the ADSs in relation to our initial public offering. We have also filed with the SEC our registration statement on Form F-6 (Registration No. 333-239599) to register the ADSs.

We are subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will be required to file reports, including annual reports on Form 20-F, and other information with the SEC. The SEC maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

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As a foreign private issuer, we are exempt under the Exchange Act from, among other things, the rules prescribing the furnishing and content of proxy statements, and our executive officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions contained in Section 16 of the Exchange Act. In addition, we will not be required under the Exchange Act to file periodic reports and financial statements with the SEC as frequently or as promptly as U.S. companies whose securities are registered under the Exchange Act. However, we intend to furnish the depositary with our annual reports, which will include a review of operations and annual audited consolidated financial statements prepared in conformity with U.S. GAAP, and all notices of shareholders’ meetings and other reports and communications that are made generally available to our shareholders. The depositary will make such notices, reports and communications available to holders of ADSs and, if we so request, will mail to all record holders of ADSs the information contained in any notice of a shareholders’ meeting received by the depositary from us.

I.Subsidiary Information

Not applicable.

ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign exchange risk

Substantially all of our revenues and expenses are denominated in RMB. We do not believe that we currently have any significant direct foreign exchange risk and have not used any derivative financial instruments to hedge exposure to such risk. Although our exposure to foreign exchange risks should be limited in general, the value of your investment in the ADSs will be affected by the exchange rate between U.S. dollar and Renminbi because the value of our business is effectively denominated in RMB, while the ADSs will be traded in U.S. dollars.

The value of Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions and the foreign exchange policy adopted by the PRC government. The PRC government may adopt reforms of its exchange rate system, including making the Renminbi freely convertible in the future. Accordingly, it is difficult to predict how market forces or PRC or U.S. government policy may impact the exchange rate between Renminbi and the U.S. dollar in the future. The Renminbi has recently depreciated significantly against the backdrop of a surging U.S. dollar and persistent capital outflows of China, and we cannot assure you that the Renminbi will not appreciate or depreciate significantly in value against the U.S. dollar in the future. Although our exposure to foreign exchange risks should be limited in general, the value of your investment in the ADSs will be affected by the exchange rate between U.S. dollar and Renminbi because the value of our business is effectively denominated in RMB, while the ADSs will be traded in U.S. dollars.

To the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of Renminbi against the U.S. dollar would reduce the Renminbi amount we receive from the conversion. Conversely, if we decide to convert Renminbi into U.S. dollars for the purpose of making payments for dividends on our Class A ordinary shares or ADSs, servicing our outstanding debt, or for other business purposes, appreciation of the U.S. dollar against the Renminbi would reduce the U.S. dollar amounts available to us.

As of December 31, 2021, we had Renminbi-denominated cash and cash equivalents of RMB35.7 million. A 10% depreciation of Renminbi against the U.S. dollar based on the foreign exchange rate on December 31, 2021 would result in a decrease of US$0.5 million in cash and cash equivalents. A 10% appreciation of Renminbi against the U.S. dollar based on the foreign exchange rate on December 31, 2021 would result in an increase of US$0.6 million in cash and cash equivalents.

Interest rate risk

Our exposure to interest rate risk primarily relates to the interest income generated by excess cash, which is mostly held in interest-bearing bank deposits. Interest-earning instruments carry a degree of interest rate risk. We have not been exposed to material risks due to changes in interest rates, and we have not used any derivative financial instruments to manage our interest risk exposure.

We may invest the net proceeds we receive from the offering in interest-earning instruments. Investments in both fixed rate and floating rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less income than expected if interest rates fall.

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ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A.Debt Securities

Not applicable.

B.Warrants and Rights

Not applicable.

C.Other Securities

Not applicable.

D.American Depositary Shares

Fees and Expenses

As an ADS holder, you will be required to pay the following service fees to the depositary bank and certain taxes and governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented by any of your ADSs):

Service	Fees
●   To any person to which ADSs are issued or to any person to which a distribution is made in respect of ADS distributions pursuant to stock dividends or other free distributions of stock, bonus distributions, stock splits or other distributions (except where converted to cash)	Up to US$0.05 per ADS issued
●   Cancellation of ADSs, including the case of termination of the deposit agreement	Up to US$0.05 per ADS cancelled
●  Distribution of cash dividends	Up to US$0.05 per ADS held
●   Distribution of cash entitlements (other than cash dividends) and/or cash proceeds from the sale of rights, securities and other entitlements	Up to US$0.05 per ADS held
●  Distribution of ADSs pursuant to exercise of rights.	Up to US$0.05 per ADS held
●   Distribution of securities other than ADSs or rights to purchase additional ADSs	Up to US$0.05 per ADS held
●  Depositary services	Up to US$0.05 per ADS held on the applicable record date(s) established by the depositary bank

As an ADS holder, you will also be responsible for paying certain fees and expenses incurred by the depositary bank and certain taxes and governmental charges (in addition to any applicable fees, expenses, taxes and other governmental charges payable on the deposited securities represented by any of your ADSs) such as:

● Fees for the transfer and registration of ordinary shares charged by the registrar and transfer agent for the ordinary shares in the Cayman Islands (i.e., upon deposit and withdrawal of ordinary shares).

● Expenses incurred for converting foreign currency into U.S. dollars.

● Expenses for cable, telex and fax transmissions and for delivery of securities.

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● Taxes and duties upon the transfer of securities, including any applicable stamp duties, any stock transfer charges or withholding taxes (i.e., when ordinary shares are deposited or withdrawn from deposit).

● Fees and expenses incurred in connection with the delivery or servicing of ordinary shares on deposit.

● Fees and expenses incurred in connection with complying with exchange control regulations and other regulatory requirements applicable to ordinary shares, deposited securities, ADSs and ADRs.

● Any applicable fees and penalties thereon.

The depositary fees payable upon the issuance and cancellation of ADSs are typically paid to the depositary bank by the brokers (on behalf of their clients) receiving the newly issued ADSs from the depositary bank and by the brokers (on behalf of their clients) delivering the ADSs to the depositary bank for cancellation. The brokers in turn charge these fees to their clients. Depositary fees payable in connection with distributions of cash or securities to ADS holders and the depositary services fee are charged by the depositary bank to the holders of record of ADSs as of the applicable ADS record date.

The depositary fees payable for cash distributions are generally deducted from the cash being distributed or by selling a portion of distributable property to pay the fees. In the case of distributions other than cash (i.e., share dividends, rights), the depositary bank charges the applicable fee to the ADS record date holders concurrent with the distribution. In the case of ADSs registered in the name of the investor (whether certificated or uncertificated in direct registration), the depositary bank sends invoices to the applicable record date ADS holders. In the case of ADSs held in brokerage and custodian accounts (via DTC), the depositary bank generally collects its fees through the systems provided by DTC (whose nominee is the registered holder of the ADSs held in DTC) from the brokers and custodians holding ADSs in their DTC accounts. The brokers and custodians who hold their clients’ ADSs in DTC accounts in turn charge their clients’ accounts the amount of the fees paid to the depositary banks.

In the event of refusal to pay the depositary fees, the depositary bank may, under the terms of the deposit agreement, refuse the requested service until payment is received or may set off the amount of the depositary fees from any distribution to be made to the ADS holder.

The depositary may make payments to us or reimburse us for certain costs and expenses, by making available a portion of the ADS fees collected in respect of the ADR program or otherwise, upon such terms and conditions as we and the depositary bank agree from time to time.

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PART II

ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Material Modifications to the Rights of Security Holders

See “Item 10. Additional Information—B. Memorandum and Articles of Association—Ordinary Shares” for a description of the rights of securities holders, which remain unchanged.

Use of Proceeds

The following “Use of Proceeds” information relates to the registration statement on Form F-1, as amended (File Number 333-239205) (the “F-1 Registration Statement”) in relation to our initial public offering of 5,300,000 ADSs representing 2,650,000 Class A ordinary shares, at an initial offering price of US$16.00 per ADS. AMTD Global Markets Limited, Loop Capital Markets LLC, Tiger Brokers (NZ) Limited, Prime Number Capital LLC and R. F. Lafferty & Co., Inc. were the representatives of the underwriters for our initial public offering.

The F-1 Registration Statement was declared effective by the SEC on July 2, 2020. For the period from the effective date of the F-1 Registration Statement to December 31, 2021, the total expenses incurred for our company’s account in connection with our initial public offering was approximately US$13.4 million, which included US$9.4 million in underwriting discounts and commissions for the initial public offering and approximately US$4.0 million in other costs and expenses for our initial public offering. We received net proceeds of US$78.2 million from our initial public offering. None of the transaction expenses included payments to directors or officers of our company or their associates, persons owning more than 10% or more of our equity securities or our affiliates. None of the net proceeds from the initial public offering were paid, directly or indirectly, to any of our directors or officers or their associates, persons owning 10% or more of our equity securities or our affiliates.

For the period from July 2, 2020, the date that the F-1 Registration Statement was declared effective by the SEC, to December 31, 2021, US$57.9 million of the net proceeds received from our initial public offering were used for investment in business operations, research and development, and for general corporate purpose including acquisitions. There is no material change in the use of proceeds as described in the F-1 Registration statement. We still intend to use the remainder of the proceeds from our initial public offering, as disclosed in our registration statements on Form F-1.

ITEM 15. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in reports filed under the Exchange Act is recorded, processed, summarized and reported within the specified time periods and accumulated and communicated to our management, including our chief executive officer and acting chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Our management, with the participation of our chief executive officer and acting chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) under the Exchange Act) as of the end of the period covered by this report, as required by Rule 13a-15(b) under the Exchange Act. Based on that evaluation, our management has concluded that, as of December 31, 2021, our disclosure controls and procedures are not effective in ensuring that material information required to be disclosed in this annual report is recorded, processed, summarized and reported to them for assessment, and required disclosure is made within the time period specified in the rules and forms of the Commission.

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Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. As required by Section 404 of the Sarbanes-Oxley Act and related rules as promulgated by the SEC, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2021 using criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In connection with the preparation of our consolidated financial statements as of December 31, 2021 and for the year ended December 31, 2021, our management identified one material weakness in our internal control over financial reporting, as defined in the standards established by the Public Company Accounting Oversight Board of the United States. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. The material weakness identified related to the lack of sufficient financial reporting and accounting personnel with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues, and related presentation and disclosure in accordance with U.S. GAAP and SEC financial reporting requirements.

To remedy the identified material weakness, we have adopted and are in the process of implementing a number of measures to improve our internal control over financial reporting, including: (i) hired a new financial reporting manager with appropriate knowledge and experience in U.S. GAAP accounting and SEC reporting, who also have experience in internal control, internal audit and SOX compliance, (ii) establishing a formal and regular training program for accounting personnel, including attending external U.S. GAAP training, (iii) upgrading our financial system to enhance its effectiveness and enhance control of financial analysis, (iv) establishing effective oversight and clarifying reporting requirements for non-recurring and complex transactions to ensure consolidated financial statements and related disclosures are accurate, complete and in compliance with U.S. GAAP and SEC reporting requirements, and (v) continuing to conduct accounting and financial reporting training for our employees.

We are fully committed to the implementation of these and other measures to remediate the material weakness in our internal control over financial reporting. However, the implementation of these measures may not fully address the deficiencies in our internal control over financial reporting. See “Item 3.D. Risk Factors—Risks Related to Our Business—If we fail to implement and maintain an effective system of internal controls over financial reporting, we may be unable to accurately report our results of operations or prevent fraud or fail to meet our reporting obligations, and investor confidence and the market price of the ADSs may be materially and adversely affected.”

Attestation Report of the Registered Public Accounting Firm

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting as we qualify as an “emerging growth company” under section 3(a) of the Securities Exchange Act of 1934, as amended, and are therefore exempt from the attestation requirement.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting that occurred during the period covered by this annual report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

152

ITEM 16A. AUDIT COMMITTEE FINANCIAL EXPERT

Our board of directors has determined that Shengwen (Roy) Rong and Wenjie (Jenny) Wu, members of our audit committee and independent directors (under the standards set forth in Rule 5605(c)(2) of the Nasdaq Stock Market Rules and Rule 10A-3 under the Securities Exchange Act of 1934), each qualifies as an "audit committee financial expert.”

ITEM 16B. CODE OF ETHICS

Our board of directors adopted a Code of Business Conduct and Ethics that applies to our directors, officers and employees. We have posted a copy of our code of business conduct and ethics on our website at https://ir.blue-city.com/.

ITEM 16C. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The following table sets forth the aggregate fees by categories specified below in connection with certain professional services rendered by KPMG Huazhen LLP, our principal accountant, for the periods indicated.

	For the Year Ended December 31,
	2020	2021
	(RMB in thousands)
Audit fees(1)	13,682	8,913
Tax fees(2)	85	1,037
All other fees(3)	—	—

(1) “Audit fees” include the aggregate fees billed in each of the fiscal period listed for professional services rendered by our principal accountant for the audit of our annual financial statements, review of our quarterly financial statements and services related to our initial public offering.

(2) “Tax fees” means the aggregate fees billed in each of the fiscal years listed for professional tax consulting and compliance services rendered by our principal accountant.

(3) “All other fees” include the aggregate fees billed in each of the fiscal years listed for financial due diligence service and environmental, social and governmental report consulting services rendered by our principal accountant.

The policy of our audit committee is to pre-approve all audit and non-audit services provided by KPMG Huazhen LLP as described above.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

153

ITEM 16F. CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

Not applicable.

ITEM 16G. CORPORATE GOVERNANCE

As an exempted company incorporated in the Cayman Islands company that is listed on the Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the Cayman Islands, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. We currently follow our home country practice that does not require us to (i) hold an annual meeting of shareholders no later than one year after the end of its fiscal year, (ii) seek shareholder approval for establishing share incentive plans, and (iii) have an audit committee consisting of two members. Therefore, our shareholders may be afforded less protection than they otherwise would enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers. See “Item 3. Key Information—D. Risk Factors—Risks Related to The ADSs—As an exempted company incorporated in the Cayman Islands, we are permitted to adopt certain home country practices in relation to corporate governance matters that differ significantly from the Nasdaq corporate governance listing standards; these practices may afford less protection to shareholders than they would enjoy if we complied fully with the Nasdaq corporate governance listing standards.”

ITEM 16H. MINE SAFETY DISCLOSURE

Not applicable.

ITEM 16I. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

PART III.

ITEM 17. FINANCIAL STATEMENTS

We have elected to provide financial statements pursuant to Item 18.

ITEM 18. FINANCIAL STATEMENTS

The consolidated financial statements of BlueCity Holdings Limited are included at the end of this annual report.

154

ITEM 19. EXHIBITS

Exhibit Number	Description of Document
1.1	Seventh Amended and Restated Memorandum and Articles of Association of the Registrant of the Registrant, effective April 12, 2018 (incorporated herein by reference to Exhibit 3.2 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
2.1	Registrant’s Specimen American Depositary Receipt (included in Exhibit 4.3) (incorporated herein by reference to Exhibit 4.3 to the Form F-1, as amended, initially filed on July 1, 2020 (File No.333-239205))
2.2	Registrant’s Specimen Certificate for Class A Ordinary Shares (incorporated herein by reference to Exhibit 4.2 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
2.3	Deposit Agreement, among the Registrant, the depositary and the holders and beneficial owners of the American Depositary Receipts (incorporated herein by reference to Exhibit 4.3 to the Form S-8, as amended, initially filed on November 6, 2020 (File No.333- 249899))
2.4	Fifth Amended and Restated Shareholders’ Agreement between the Registrant and other parties thereto dated April 3, 2020 (incorporated herein by reference to Exhibit 4.4 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
2.5	Description of Securities(incorporated herein by reference to Exhibit 2.5 to our annual report on Form 20-F, initially filed on April 29, 2021 (File No.001-39364))
4.1	2015 Stock Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
4.2	2020 Share Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
4.3	2021 Share Incentive Plan (incorporated herein by reference to Exhibit 10.1 to the Form S-8, as amended, initially filed on October 4, 2021 (File No.333-239205))
4.4	Form of Indemnification Agreement between the Registrant and its directors and executive officers (incorporated herein by reference to Exhibit 10.3 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
4.5	Form of Employment Agreement between the Registrant and its executive officers (incorporated herein by reference to Exhibit 10.4 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
4.6	English translation of Powers of Attorney granted by Mr. Baoli Ma, the sole shareholder of Beijing BlueCity Culture and Media Co., Ltd, dated June 26, 2018 (incorporated herein by reference to Exhibit 10.5 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
4.7	English translation of the Equity Interest Pledge Agreement among Mr. Baoli Ma, Mr. Changyou Ma, Beijing BlueCity Information & Technology Co., Ltd and Beijing BlueCity Culture and Media Co., Ltd, dated June 26, 2018 (incorporated herein by reference to Exhibit 10.6 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
4.8	English translation of the Exclusive Consulting and Services Agreement between Beijing BlueCity Information & Technology Co., Ltd and Beijing BlueCity Culture and Media Co., Ltd, dated June 26, 2018 (incorporated herein by reference to Exhibit 10.7 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
4.9	English translation of the Exclusive Option Agreement among Mr. Baoli Ma and Mr. Changyou Ma, Beijing BlueCity Information & Technology Co., Ltd, and Beijing BlueCity Culture and Media Co., Ltd, dated June 26, 2018 (incorporated herein by reference to Exhibit 10.8 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
4.10	English translation of Spousal Consent Letter granted by Shuying Chen (incorporated herein by reference to Exhibit 10.9 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
4.11	English translation of Share Purchase Agreement, among the Registrant, Beijing BlueCity Culture and Media Co., Ltd, and other parties thereto, dated November 25, 2020 (incorporated herein by reference to Exhibit 4.10 to our annual report on Form 20-F, initially filed on April 29, 2021 (File No.001-39364))
8.1*	Significant subsidiaries and consolidated affiliated entities of the Registrant
11.1	Code of Business Conduct and Ethics of the Registrant (incorporated herein by reference to Exhibit 99.1 to the Form F-1, as amended, initially filed on June 16, 2020 (File No.333-239205))
12.1*	CEO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
12.2*	CFO Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
13.1**	CEO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
13.2**	CFO Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
15.1*	Consent of Conyers Dill & Pearman
15.2*	Consent of King & Wood Mallesons
15.3*	Consent of KPMG Huazhen LLP
101.INS*	Inline XBRL Instance Document - this instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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
104*	Cover Page Interactive Data File (embedded within the Inline XBRL document)

*      Filed herewith.

**    Furnished herewith.

155

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

		BlueCity Holdings Limited
		By:	/s/ Baoli Ma
			Name: Baoli Ma
			Title: Chairman of the Board of Directors and
			Chief Executive Officer
Date:	April 28, 2022

156

BLUECITY HOLDINGS LIMITED

INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS

Contents	PAGE(S)
Report of Independent Registered Public Accounting Firm (KPMG Huazhen LLP, Beijing, China, PCAOB ID: 1186)	F-2
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 2020 and 2021	F-3 – F-4
Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2019, 2020 and 2021	F-5
Consolidated Statements of Changes in Shareholders’ Equity (Deficit) for the Years Ended December 31, 2019, 2020 and 2021	F-6 – F-8
Consolidated Statements of Cash Flows for the Years Ended December 31, 2019, 2020 and 2021	F-9
Notes to the Consolidated Financial Statements	F-10 – F-47

F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors

BlueCity Holdings Limited:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of BlueCity Holdings Limited and subsidiaries (the Company) as of December 31, 2020 and 2021, the related consolidated statements of comprehensive loss, changes in shareholders’ equity (deficit), and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ KPMG Huazhen LLP

We have served as the Company’s auditor since 2017.

Beijing, China

April 28, 2022

F-2

BLUECITY HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2020 AND 2021

		As of December 31,
	Note	2020	2021
		RMB	RMB	US$
				(Note 2(d))
ASSETS
Current assets
Cash and cash equivalents	2(f)	439,492,788	349,785,624	54,888,997
Term deposits		172,257,360	—	—
Accounts receivable, net (net of allowance of nil as of December 31, 2020 and 2021, respectively)	3	5,588,023	12,878,562	2,020,927
Inventories	4	6,853,202	7,401,509	1,161,458
Prepayments and other current assets	5	58,629,416	99,777,088	15,657,202
Total current assets		682,820,789	469,842,783	73,728,584
Non-current assets
Investment securities	6	50,000	—	—
Property and equipment, net	7	11,445,548	11,186,159	1,755,352
Intangible assets, net	8	52,084,512	44,204,317	6,936,622
Goodwill	9	196,002,568	81,751,864	12,828,651
Other non-current assets		2,426,128	3,177,465	498,614
Total non-current assets		262,008,756	140,319,805	22,019,239
Total assets		944,829,545	610,162,588	95,747,823
LIABILITIES
Current liabilities
Accounts payable (including accounts payable of VIE without recourse to the Company of 6,817,776 and RMB11,444,579 as of December 31, 2020 and 2021, respectively)		20,372,680	28,507,188	4,473,400
Deferred revenue (including deferred revenue of VIE without recourse to the Company of RMB34,541,710 and RMB35,217,012 as of December 31, 2020 and 2021, respectively)		35,226,237	35,796,254	5,617,213
Income tax payable (including income tax payable of VIE without recourse to the Company of RMB291,441 and RMB1,460,149 as of December 31, 2020 and 2021, respectively)		2,122,765	5,047,173	792,012
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of VIE without recourse to the Company of RMB49,315,134 and RMB27,246,274 as of December 31, 2020 and 2021, respectively)	10	118,958,796	82,962,351	13,018,602
Total current liabilities		176,680,478	152,312,966	23,901,227
Non-current liabilities
Deferred income tax liabilities (including deferred income tax liabilities of VIE without recourse to the Company of 10,954,883 and RMB9,603,096 as of December 31, 2020 and 2021, respectively)	16	10,954,883	9,603,096	1,506,935
Other non-current liabilities (including other non-current liabilities of VIE without recourse to the Company of nil and RMB2,300,000 as of December 31, 2020 and 2021, respectively)		—	2,300,000	360,920
Total non-current liabilities		10,954,883	11,903,096	1,867,855
Total liabilities		187,635,361	164,216,062	25,769,082
Commitments and contingencies (Note 20)

The accompanying notes are an integral part of these consolidated financial statements.

F-3

BLUECITY HOLDINGS LIMITED

CONSOLIDATED BALANCE SHEETS (Continued)

AS OF DECEMBER 31, 2020 AND 2021

		As of December 31,
	Note	2020	2021
		RMB	RMB	US$
				(Note 2(d))
SHAREHOLDERS’ EQUITY:
Class A Ordinary Shares (US$0.0001 par value; 4,600,000,000 shares authorized, 12,210,830 and 13,618,609 shares issued and outstanding as of December 31, 2020 and 2021 respectively)	13	8,572	9,487	1,489
Class B Ordinary Shares (US$0.0001 par value; 200,000,000 shares authorized, 5,614,840 and 5,114,840 shares issued and outstanding as of December 31, 2020 and 2021 respectively)	13	3,446	3,118	489
Additional paid-in capital		2,188,870,625	2,204,845,216	345,988,328
Accumulated other comprehensive loss		(107,514,737)	(125,113,629)	(19,633,059)
Accumulated deficit		(1,324,173,722)	(1,633,797,666)	(256,378,506)
Total shareholders’ equity		757,194,184	445,946,526	69,978,741
Total liabilities and shareholders’ equity		944,829,545	610,162,588	95,747,823

The accompanying notes are an integral part of these consolidated financial statements.

F-4

BLUECITY HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021

		For the year ended December 31,
	Note	2019	2020	2021
		RMB	RMB	RMB	US$
					(Note 2 (d))
Revenues	19	758,887,906	1,031,323,444	1,076,591,430	168,940,688
Cost and expenses:
Cost of revenues		(546,211,172)	(720,370,586)	(728,065,167)	(114,249,312)
Selling and marketing expenses		(119,436,794)	(187,281,558)	(220,464,208)	(34,595,645)
Technology and development expenses		(129,651,820)	(149,255,609)	(219,741,246)	(34,482,197)
General and administrative expenses		(24,439,169)	(209,086,316)	(109,099,156)	(17,120,038)
Impairment of intangible assets		—	—	(2,915,000)	(457,427)
Impairment of goodwill		—	—	(106,949,249)	(16,782,671)
Total cost and expenses		(819,738,955)	(1,265,994,069)	(1,387,234,026)	(217,687,290)
Operating loss		(60,851,049)	(234,670,625)	(310,642,596)	(48,746,602)
Changes in fair value of financial instruments		(9,024,437)	(5,247)	—	—
Gain (loss) on disposal of an investment security		—	4,863,233	(50,000)	(7,846)
Gain on extinguishment of a convertible debt		8,986,048	—	—	—
Interest income		8,890,484	6,517,961	1,889,658	296,529
Loss before income taxes		(51,998,954)	(223,294,678)	(308,802,938)	(48,457,919)
Income tax (expense) benefit	16	(930,554)	1,441,814	(821,006)	(128,834)
Net loss		(52,929,508)	(221,852,864)	(309,623,944)	(48,586,753)
(Accretion) reversal of accretion and modification of Redeemable Convertible Preferred Shares to redemption value		(631,005,563)	244,080,678	—	—
Net (loss) income available for distribution		(683,935,071)	22,227,814	(309,623,944)	(48,586,753)
Net (loss) income per Class A and Class B Ordinary Share
—Basic	17	(121.81)	1.30	(16.00)	(2.51)
—Diluted	17	(121.81)	(14.63)	(16.00)	(2.51)
Weighted average number of Class A and Class B Ordinary Share and ordinary share equivalents outstanding used in computing net (loss) income per Class A and Class B Ordinary Share
—Basic	17	5,614,840	11,974,046	19,352,595	19,352,595
—Diluted	17	5,614,840	15,208,426	19,352,595	19,352,595
Net loss		(52,929,508)	(221,852,864)	(309,623,944)	(48,586,753)
Other comprehensive loss
Unrealized gains on an available-for-sale investment, net of nil income taxes		1,591,098	1,456,370	—	—
Reclassification adjustment for gains on available-for-sale investment realized in net income, net of nil income taxes		—	(4,863,233)	—	—
Foreign currency translation adjustment, net of nil income taxes		(20,118,769)	(63,005,931)	(17,598,892)	(2,761,650)
Comprehensive loss		(71,457,179)	(288,265,658)	(327,222,836)	(51,348,403)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

BLUECITY HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ (DEFICIT) EQUITY
​

FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021

				Accumulated
			Additional	other		Total
			paid-in	comprehensive	Accumulated	shareholders’
	Ordinary shares		capital	income (loss)	deficit	deficit
	Shares	RMB	RMB	RMB	RMB	RMB
Balance as of January 1, 2019	5,614,840	3,446	—	(22,574,272)	(662,466,465)	(685,037,291)
Net loss	—	—	—	—	(52,929,508)	(52,929,508)
Accretion of redeemable convertible preferred shares	—	—	—	—	(631,005,563)	(631,005,563)
Unrealized gain on an available-for-sale investment, net of nil income taxes	—	—	—	1,591,098	—	1,591,098
Foreign currency translation adjustment, net of nil income taxes	—	—	—	(20,118,769)	—	(20,118,769)
Balance as of December 31, 2019	5,614,840	3,446	—	(41,101,943)	(1,346,401,536)	(1,387,500,033)

The accompanying notes are an integral part of these consolidated financial statements.

F-6

BLUECITY HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (Continued)
​

FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021

								Accumulated
							Additional	other		Total
							paid-in	comprehensive	Accumulated	shareholders’
	Ordinary shares		Class A Ordinary Shares		Class B Ordinary Shares		capital	income (loss)	deficit	equity (deficit)
	Shares	RMB	Shares	RMB	Shares	RMB	RMB	RMB	RMB	RMB
Balance as of December 31, 2019	5,614,840	3,446	—	—	—	—	—	(41,101,943)	(1,346,401,536)	(1,387,500,033)
Net loss	—	—	—	—	—	—	—	—	(221,852,864)	(221,852,864)
Change in redemption value of redeemable convertible preferred shares	—	—	—	—	—	—	—	—	244,080,678	244,080,678
Re-designation of Ordinary Shares into Class B Ordinary Shares immediately prior to the completion of the initial public offering	(5,614,840)	(3,446)	—	—	5,614,840	3,446	—	—	—	—
Issuance of ordinary shares upon initial public offering (“IPO”), net of offering costs of RMB94,128,112	—	—	2,650,000	1,860	—	—	501,225,388	—	—	501,227,248
Conversion of Series A Convertible Preferred Shares into Ordinary Shares	—	—	1,439,102	1,010	—	—	33,041,467	—	—	33,042,477
Conversion of Series A-1 Redeemable Convertible Preferred Shares into Ordinary Shares	—	—	1,891,291	1,328	—	—	18,779,626	—	—	18,780,954
Conversion of Series B Redeemable Convertible Preferred Shares into Ordinary Shares	—	—	1,862,069	1,307	—	—	418,335,584	—	—	418,336,891
Conversion of Series C Redeemable Convertible Preferred Shares into Ordinary Shares	—	—	1,246,621	875	—	—	280,067,991	—	—	280,068,866
Conversion of Series C-1 Redeemable Convertible Preferred Shares into Ordinary Shares	—	—	977,961	687	—	—	219,710,378	—	—	219,711,065
Conversion of Series D Redeemable Convertible Preferred Shares into Ordinary Shares	—	—	2,143,786	1,505	—	—	530,806,760	—	—	530,808,265
Share-based compensation	—	—	—	—	—	—	186,903,431	—	—	186,903,431
Unrealized gain on an available-for-sale investment, net of nil income taxes	—	—	—	—	—	—	—	1,456,370	—	1,456,370
Reclassification adjustment for gain from disposal of available-for-sale securities realized in net income, net of nil income taxes	—	—	—	—	—	—	—	(4,863,233)	—	(4,863,233)
Foreign currency translation adjustment, net of nil income taxes	—	—	—	—	—	—	—	(63,005,931)	—	(63,005,931)
Balance as of December 31, 2020	—	—	12,210,830	8,572	5,614,840	3,446	2,188,870,625	(107,514,737)	(1,324,173,722)	757,194,184

The accompanying notes are an integral part of these consolidated financial statements.

F-7

BLUECITY HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT) (Continued)
​

FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021

						Accumulated
					Additional	other		Total
					paid-in	comprehensive	Accumulated	shareholders’
	Class A Ordinary Shares		Class B Ordinary Shares		capital	income (loss)	deficit	equity
	Shares	RMB	Shares	RMB	RMB	RMB	RMB	RMB
Balance as of December 31, 2020	12,210,830	8,572	5,614,840	3,446	2,188,870,625	(107,514,737)	(1,324,173,722)	757,194,184
Net loss	—	—	—	—	—	—	(309,623,944)	(309,623,944)
Ordinary shares issued in connection with exercise of share options	907,779	587	—	—	63,447	—	—	64,034
Ordinary Shares B transferred to Ordinary Share A	500,000	328	(500,000)	(328)	—	—	—	—
Share-based compensation	—	—	—	—	15,911,144	—	—	15,911,144
Foreign currency translation adjustment, net of nil income taxes	—	—	—	—	—	(17,598,892)	—	(17,598,892)
Balance as of December 31, 2021	13,618,609	9,487	5,114,840	3,118	2,204,845,216	(125,113,629)	(1,633,797,666)	445,946,526
Balance as of December 31, 2021-US$ (Note 2(d))		1,489		489	345,988,328	(19,633,059)	(256,378,506)	69,978,741

The accompanying notes are an integral part of these consolidated financial statements.

F-8

BLUECITY HOLDINGS LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2019, 2020 AND 2021

	For the Year Ended December 31
	2019	2020	2021
	RMB	RMB	RMB	US$
				(Note 2(d))
Operating activities:
Net loss	(52,929,508)	(221,852,864)	(309,623,944)	(48,586,753)
Adjustments to reconcile net loss to net cash used in operating activities
Allowance for doubtful accounts	592,717	—	682,085	107,034
Share-based compensation	—	186,903,431	15,911,144	2,496,806
Deferred income tax benefits	—	(2,495,332)	(2,167,099)	(340,065)
Depreciation and amortization	2,619,682	5,618,984	14,931,572	2,343,089
Impairment of intangible assets	—	—	2,915,000	457,427
Impairment of goodwill	—	—	106,949,249	16,782,671
Changes in fair value of financial instruments	9,024,437	5,247	—	—
(Gain) loss on disposal of an investment security	—	(4,863,233)	50,000	7,846
Gain on extinguishment of a convertible debt	(8,986,048)	—	—	—
Loss (gain) on disposal of property and equipment	15,765	(35,572)	432,298	67,837
Gain on disposal of a subsidiary	—	—	(917,251)	(143,937)
Unrealized foreign currency exchange (gain) losses	(750,270)	3,113,970	—	—
Changes in operating assets and liabilities, net of effect of acquisitions and disposal of a subsidiary:
Accounts receivable	7,679,995	(2,667,688)	(7,998,240)	(1,255,098)
Inventories	—	(6,853,202)	(548,307)	(86,041)
Prepayments and other current assets	(4,186,913)	(6,104,334)	(41,473,243)	(6,508,057)
Other non-current assets	(516,780)	(1,065,699)	(751,337)	(117,901)
Accounts payable	9,023,623	2,380,364	8,491,260	1,332,464
Amount due to a related party	(6,898,800)	—	—	—
Deferred revenue	8,787,345	(2,814,922)	4,252,823	667,361
Income tax payable	930,554	1,246,030	2,988,106	468,899
Accrued expenses and other current liabilities	3,952,391	9,182,914	(7,325,654)	(1,149,555)
Other non-current liabilities	—	—	2,300,000	360,920
Net cash used in operating activities	(31,641,810)	(40,301,906)	(210,901,538)	(33,095,053)
Investing activities:
Purchase of property and equipment	(5,881,767)	(7,471,486)	(7,004,705)	(1,099,191)
Proceeds from disposal of property and equipment	—	100,960	126,670	19,877
Purchase of term deposits	(82,061,210)	(841,183,485)	—	—
Proceeds from maturity of term deposits	373,537,111	741,124,785	170,857,260	26,811,232
Payment for asset acquisitions	—	(3,250,000)	(2,550,000)	(400,151)
Payment for business combinations, net of cash acquired of nil,RMB10,497,237 and nil in 2019, 2020 and 2021, respectively	—	(203,081,831)	(24,491,600)	(3,843,266)
Proceeds from disposal of financial instruments	—	25,023,165	—	—
Issuance of interest free loans to an employee	—	—	(1,600,000)	(251,075)
Disposal of a subsidiary, net of cash received	—	—	(4,985,220)	(782,290)
Net cash provided by (used in) investing activities	285,594,134	(288,737,892)	130,352,405	20,455,136
Financing activities:
Proceeds from issuance of Class A Ordinary Shares, net of underwriting commissions, discounts and underwriter's lawyer fee of RMB46,589,365	—	548,765,995	—	—
Payments for initial public offering (“IPO”) costs	(2,252,291)	(45,286,456)	—	—
Repayment of a convertible debt	(20,000,000)	—	—	—
Issuance of interest free loans to a shareholder	(8,000,000)	—	—	—
Proceeds from repayment of interest free loans to a shareholder	8,000,000	—	—	—
Payment made on behalf of Mr. Baoli Ma	—	(4,722,814)	—	—
Proceeds from repayment made by Mr. Baoli Ma	—	4,722,814	—	—
Proceeds from exercising of share options	—	—	64,034	10,048
Net cash (used in) provided by financing activities	(22,252,291)	503,479,539	64,034	10,048
Effect of foreign currency exchange rate changes on cash and cash equivalents	2,527,206	(32,220,775)	(9,222,065)	(1,447,143)
Net (decrease) increase in cash and cash equivalents	234,227,239	142,218,966	(89,707,164)	(14,077,012)
Cash and cash equivalents at the beginning of the year	63,046,583	297,273,822	439,492,788	68,966,009
Cash and cash equivalents at the end of the year	297,273,822	439,492,788	349,785,624	54,888,997
Supplemental cash flow information:
Interest paid	—	2,695,890	—	—
Income taxes paid	—	—	—	—
Non-cash investing and financing activities:
Accrual of IPO costs	6,227,056	—	—	—
Consideration payable in connection with business combinations	—	24,742,025	—	—
Automatic conversion of convertible redeemable preferred shares to Class A ordinary shares upon the IPO	—	1,500,748,518	—	—
Consideration receivable in connection with disposal of a subsidiary	—	—	300,000	47,077

The accompanying notes are an integral part of these consolidated financial statements.

F-9

BLUECITY HOLDINGS LIMITED

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. DESCRIPTION OF BUSINESS AND ORGANIZATION

Description of business

BlueCity Holdings Limited (“the Company”), through its wholly-owned subsidiaries, consolidated variable interest entity (“VIE”) and VIE’s subsidiaries (collectively referred to as “the Group”), is principally engaged in mobile-based social and entertainment services which includes live streaming, advertising, membership, merchandise sales and other services. The Group’s principal operations and geographic markets are in the People’s Republic of China (“PRC”).

Organization

The Group operates its business in the PRC through Beijing BlueCity Culture and Media Co., Ltd. (“BlueCity Culture Media”, or the “VIE”), a limited liability company established under the laws of the PRC on September 7, 2011, and its subsidiaries. BlueCity Culture Media and its subsidiaries hold certain recognized and unrecognized revenue-generating assets in order to carry out mobile platform operations in China. The recognized revenue-generating assets include goodwill and intangible assets acquired through business combinations and purchased intangible assets. Goodwill primarily represents the expected assembled workforce and synergies from combining the acquired business. Intangible assets acquired through business combinations mainly consist of user bases, brand names and technologies. Purchased intangible assets mainly include pharmaceutical operation licenses. Unrecognized revenue-generating assets mainly consist of licenses and intellectual property. Licenses include operations licenses, such as internet information service licenses and internet culture operation licenses. Intellectual property developed by the Group mainly consists of patents, copyrights and trademarks. The equity interests of BlueCity Culture Media are legally held by Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Group, and Mr. Changyou Ma, a family member of the founder, who act as nominee equity holders of the VIE on behalf of Beijing BlueCity Information & Technology Co., Ltd., (“BlueCity Information Technology”, or WFOE), the Company’s wholly owned subsidiary in the PRC. A series of contractual agreements, including Powers of Attorney, Exclusive Consulting and Service Agreement, Equity Interest Pledge Agreement, Exclusive Option Agreement and Spouse Consent Letter (collectively, the “VIE Agreements”), were entered among BlueCity Information Technology, BlueCity Culture Media and its nominee equity holders. Through the VIE Agreements, the nominee equity holders of the VIE have granted all their legal rights including voting rights and disposition rights of their equity interests in the VIE to WFOE. The nominee equity holders of the VIE do not participate significantly in income and loss and do not have the power to direct the activities of the VIE that most significantly impact their economic performance. Accordingly, the VIE is considered a variable interest entity.

In accordance with Accounting Standards Codification (“ASC”) 810-10-25-38A, the Company, through the WFOE, has a controlling financial interest in the VIE because the WFOE has (i) the power to direct activities of the VIE that most significantly impact the economic performance of the VIE; and (ii) the obligation to absorb the expected losses and the right to receive expected residual return of the VIE that could potentially be significant to the VIE. Thus, the Company, through the WFOE, is the primary beneficiary of the VIE.

Under the terms of the VIE Agreements, the WFOE has (i) the right to receive economic benefits that could potentially be significant to the VIE in the form of service fees under the Exclusive Consulting and Service Agreement; (ii) the right to receive all dividends declared by the VIE and the right to all undistributed earnings of the VIE; (iii) the obligation to absorb the substantially expected losses and the right to receive the residual benefits of the VIE through its exclusive option to acquire 100% of the equity interests in the VIE, to the extent permitted under PRC law. Accordingly, the financial statements of the VIE are consolidated in the Company’s consolidated financial statements.

Under the terms of the VIE Agreements, the VIE’s nominee equity holders have no rights to the net assets nor have the obligations to fund the deficit, and such rights and obligations have been vested to the Company. All of the deficit (net liabilities) and net loss of the VIE are attributed to the Company.

F-10

1. DESCRIPTION OF BUSINESS AND ORGANIZATION (Continued)

The principal terms of the VIE Agreements are further described below.

1) Powers of Attorney

Pursuant to the Powers of Attorney, the equity holders of the VIE irrevocably appointed WFOE as their attorney-in-fact to exercise all equity holder rights, including, but not limited to: (1) the right to attend shareholders’ meeting of the VIE, (2) the right to vote on their behalf on all matters of the VIE requiring shareholder’s approval under the laws of China and the Articles of Association of the VIE, including but not limited to the sale or transfer or pledge or disposition of their shareholding in part or in whole, and (3) designate and appoint on behalf of such nominee equity holders the legal representative, the directors, supervisors, the chief executive officer and other senior management members of the VIE. Each Powers of Attorney agreement is irrevocable and continuously effective from the execution date.

2) Exclusive Consulting and Service Agreement

WFOE and the VIE entered into an Exclusive Consulting and Service Agreement, whereby WFOE is engaged as the exclusive service provider for the provision of business support, technology and consulting services to the VIE. Unless a written consent is given by WFOE, the VIE is not allowed to engage a third party to provide such services. The VIE shall pay WFOE on a quarterly basis a service fee at an amount confirmed by WFOE. WFOE owns the exclusive intellectual property rights, whether created by WFOE or the VIE, as a result of the performance of the Exclusive Consulting and Service Agreement. The Exclusive Consulting and Service Agreement will be in effect permanent unless terminated by WFOE.

3) Equity Interest Pledge Agreement

Pursuant to Equity Interest Pledge Agreement, the nominee equity holders of the VIE have pledged all of their equity interest in the VIE to guarantee the nominee equity holders’ and the VIE’s performance of their obligations under Exclusive Consulting and Service Agreement. If the VIE or the nominee equity holders breach their contractual obligations under these agreements, WFOE, as pledgee, will be entitled to certain rights regarding the pledged interests, including receiving proceeds from the auction or sale of all or part of the pledged interests of the VIE in accordance with the law. The nominee equity holders of the VIE agree that, during the term of the Equity Interest Pledge Agreement, they will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests without the prior written consent of WFOE. The Equity Interest Pledge Agreements remain effective until (i) the termination of the Exclusive Consulting and Services Agreement with all service fees under the Exclusive Consulting and Services Agreement have been paid and no further obligation shall be undertaken by the VIE; or (ii) the equity interests of the VIE have been transferred to WFOE or any third party designated by it. The pledge was registered with the relevant local administration for industry and commerce in November 2019 and will remain binding until the VIE and its nominee equity holders discharge all their obligations under the contractual arrangements. The registration of the equity pledge enables the WFOE to enforce the equity pledge against third parties who acquire the equity interests of the VIE in good faith.

4) Exclusive Option Agreement

Pursuant to the Exclusive Option Agreement, the equity holders of the VIE have irrevocably granted WFOE or any third party designated by WFOE an exclusive option to purchase, at its discretion, to the extent permitted under PRC law, all or part of the equity interests in the VIE. The purchase price shall be the minimum price permitted under PRC law and regulations, which price may be adjusted based on the valuation of the equity interests of the assets, if required by PRC laws and regulations. The equity holders should remit to the Company any amount that is paid by the Company or its designated person(s) in connection with the purchased equity interest. Without prior written consent of WFOE, the VIE and the equity holders shall not (i) transfer or otherwise dispose of, create any pledge or encumbrance on their equity interests in the VIE, (ii) change the VIE’s registered capital, or increase or decrease the VIE’s current equity interests owners, (iii) amend the VIE’s articles of association, or (iv) dispose or make the VIE’s management to dispose any assets of the VIE, other than in the ordinary course of business. The VIE and its equity holders shall appoint those individuals recommended by WFOE as directors of the VIE. The agreement will remain effective until WFOE has exercised all of its rights under the agreement, unless otherwise terminated by WFOE immediately in its sole discretion with written notice.

F-11

1. DESCRIPTION OF BUSINESS AND ORGANIZATION (Continued)

5) Spouse Consent Letter

Pursuant to the Spouse Consent Letter, the spouse of Mr. Changyou Ma, confirmed that she can perform the obligations under VIE Agreements. The spouse of Mr. Changyou Ma agreed that the equity interest in VIE held by Mr. Changyou Ma and registered in the name of Mr. Changyou Ma will be disposed of pursuant to the Powers of Attorney, Exclusive Consulting and Service Agreement, Equity Interest Pledge Agreement and Exclusive Option Agreement. In addition, in the event that the spouse of Mr. Changyou Ma obtains any equity interest in the VIE for any reason, she agreed to be bound by the VIE Agreements.

The Company relies on the VIE Agreements to operate and control VIE. All of the VIE Agreements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements. In the event that the Company is unable to enforce these contractual arrangements, or if the Company suffers significant time delays or other obstacles in the process of enforcing these contractual arrangements, it would be difficult to exert effective control over VIE, and the Company’s ability to conduct its business and the results of operations and financial condition may be materially and adversely affected.

In the opinion of management, based on the legal opinion obtained from the Company’s PRC legal counsel, the above contractual arrangements are legally binding and enforceable and do not violate current PRC laws and regulations. However, there are uncertainties regarding the interpretation and application of existing and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the Company’s corporate structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:

● revoking the business licenses and/or operating licenses of the Company;

● discontinuing or placing restrictions or onerous conditions on the operations;

● imposing fines, confiscating the income from WFOE or the VIE, or imposing other requirements with which the Company or the VIE may not be able to comply;

● requiring the Company to restructure the ownership structure or operations, including terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over the VIE, or imposing restrictions on the Company’s right to collect revenues;

● shutting down the Company’s servers or blocking the Company’s app/websites;

● imposing additional conditions or requirements with which the Company may not be able to comply;

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

● restricting or prohibiting the Company use of the proceeds of overseas offering to finance the business and operations in China.

If the imposition of any of these penalties or requirement to restructure the Company’s corporate structure causes it to lose the rights to direct the activities of the VIE or the Company’s right to receive its economic benefits, the Company would no longer be able to consolidate the financial results of the VIE in its consolidated financial statements. In the opinion of management, the likelihood of deconsolidation of the VIE is remote based on current facts and circumstances.

F-12

1. DESCRIPTION OF BUSINESS AND ORGANIZATION (Continued)

The equity interests of VIE are legally held by Mr. Baoli Ma and Mr. Changyou Ma as nominee equity holders on behalf of the Company. Mr. Baoli Ma holds 30.2% of the total ordinary shares and share options issued and outstanding of the Company as of December 31, 2021, assuming the vesting and exercising of all outstanding share options held by Mr. Baoli Ma as of such date. The Company cannot assure that when conflicts of interest arise, either of the nominee equity holders will act in the best interests of the Company or such conflicts will be resolved in the Company’s favor. Currently, the Company does not have any arrangements to address potential conflicts of interest between the nominee equity holders and the Company, except that the Company could exercise the purchase option under the Exclusive Option Agreement with the nominee equity holders to request them to transfer all of their equity ownership in VIE to a PRC entity or individual designated by the Company. The Company relies on the nominee equity holders, one of them is the Company’s director and owes a fiduciary duty to the Company, to comply with the terms and conditions of the contractual arrangements. Such fiduciary duty requires the director to act in good faith and in the best interests of the Company and not to use his positions for personal gains. If the Company cannot resolve any conflict of interest or dispute between the Company and the nominee equity holders of VIE, the Company would have to rely on legal proceedings, which could result in disruption of the Company’s business and subject the Company to substantial uncertainty as to the outcome of any such legal proceedings.

The Company’s involvement with the VIE under the VIE Agreements affected the Company’s consolidated financial position, results of operations and cash flows as indicated below.

The following consolidated assets and liabilities information of the Group’s VIE as of December 31, 2020 and 2021, and consolidated revenues, net loss and cash flow information for the years ended December 31, 2019, 2020 and 2021, have been included in the accompanying consolidated financial statements. All intercompany transactions and balances with the Company, and its wholly-owned subsidiaries have been eliminated upon consolidation.

	As of December 31,
	2020	2021
	RMB	RMB
Cash	42,017,215	26,835,970
Accounts receivable, net (net of allowance of nil as of December 31, 2020 and 2021, respectively)	5,588,023	10,368,064
Inventories	6,853,202	7,401,509
Prepayments and other current assets	32,496,610	48,686,054
Total current assets	86,955,050	93,291,597
Investment securities	50,000	—
Property and equipment, net	4,994,809	4,509,052
Intangible assets, net	52,084,512	44,204,317
Goodwill	3,054,923	—
Other non-current assets	1,749,304	2,389,069
Total non-current assets	61,933,548	51,102,438
Total assets	148,888,598	144,394,035
Accounts payable	6,817,776	11,444,579
Amounts due to inter-companies	129,873,104	98,986,401
Deferred revenue	34,541,710	35,217,012
Income tax payable	291,441	1,460,149
Accrued expenses and other current liabilities	49,315,134	27,246,274
Total current liabilities	220,839,165	174,354,415
Deferred income tax liabilities	10,954,883	9,603,096
Other non-current liabilities	—	2,300,000
Total non-current liabilities	10,954,883	11,903,096
Total liabilities	231,794,048	186,257,511

F-13

1. DESCRIPTION OF BUSINESS AND ORGANIZATION (Continued)

	For the Year Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Revenues	42,007,427	651,069,900	974,103,315
Net (loss) income	(8,856,826)	(79,742,764)	31,859,163
Net cash provided by (used in) operating activities	11,267,766	20,705,405	(34,200,424)
Net cash used in investing activities	(2,901,588)	(12,532,972)	(11,745,086)
Net cash provided by financing activities	2,007,447	17,510,000	30,764,265
Net increase (decrease) in cash	10,373,625	25,682,433	(15,181,245)
Cash at the beginning of the year	5,961,157	16,334,782	42,017,215
Cash at the end of the year	16,334,782	42,017,215	26,835,970

In accordance with VIE Agreements, WFOE has the power to direct the activities of the VIE. Therefore, the Company considers that there are no assets in the VIE that can be used only to settle obligations of the VIE, except for paid in capital of RMB1 million as of December 31, 2020 and 2021. The creditors of the VIE do not have recourse to the general credit of WFOE.

During the years presented, the Company and its wholly-owned subsidiaries provided financial support to VIE that they were not previously contractually required to provide in the form of advances. To the extent VIE requires financial support, the WFOE may, at its option and to the extent permitted under the PRC law, provide such support to VIE through loans to VIE’s nominee equity holders or entrustment loans to VIE.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)   Basis of presentation

The accompanying consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

(b)   Principles of consolidation

The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, the VIE in which the Company, through its WFOE, has a controlling financial interest, and VIE’s wholly-owned subsidiaries.

All intercompany transactions and balances among the Company, its wholly-owned subsidiaries, the VIE, and the VIE’s wholly-owned subsidiaries have been eliminated upon consolidation.

(c)   Use of estimates

The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenues and expenses during the reported periods. Significant accounting estimates include, but not limited to, the realization of deferred income tax assets, fair value of identifiable intangible assets in business combinations, useful lives and recoverability of property and equipment and intangible assets, impairment of goodwill, fair values of share-based compensation awards, investment securities, convertible debt, redeemable convertible preferred shares and ordinary shares.  Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements.

F-14

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(d)   Convenience translation

Translations of the consolidated financial statements from RMB into US$ as of and for the year ended December 31, 2021 are solely for the convenience of the readers and were calculated at the rate of US$1.00= RMB6.3726, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on December 30, 2021. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 31, 2021, or at any other rate.

The US$ convenience translation is not required under U.S. GAAP and all US$ convenience translation amounts in the accompanying consolidated financial statements are unaudited.

(e)   Commitments and contingencies

In the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and non-income tax matters. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed.

(f)   Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash at bank and term deposits, which have original maturities of three months or less and are readily convertible to know amounts of cash. The Group’s cash and cash equivalents, excluding cash on hand, are deposited in financial institutions at below locations:

	As of December 31,
	2020	2021
	RMB	RMB
Financial institutions in the mainland of the PRC
—Denominated in RMB	76,352,748	35,656,085
—Denominated in USD	89,289,111	258,690,388
Total cash and cash equivalents balances held at mainland PRC financial institutions	165,641,859	294,346,473
Financial institution in Hong Kong Special Administrative Region (“Hong Kong S.A.R.”)
—Denominated in HKD	1,074,294	14,306,671
—Denominated in USD	261,797,195	15,084,574
Total cash balances held at the Hong Kong S.A.R. financial institution	262,871,489	29,391,245
Financial institutions in the United States
—Denominated in USD	8,540,607	22,950,413
Total cash balances held at the United States financial institutions	8,540,607	22,950,413
Financial institution in Vietnam
—Denominated in VND	6,596	6,278
Total cash balances held at the Vietnam financial institution	6,596	6,278
Financial institution in Japan
—Denominated in JPY	2,415,660	3,090,453
Total cash balances held at the Japan financial institution	2,415,660	3,090,453
Total cash and cash equivalents balances held at financial institutions	439,476,211	349,784,862

(g)   Term deposits

Term deposits represent deposits at bank with original maturities more than three months but less than one year. The Group’s term deposits are denominated in USD and are deposited at financial institutions in the mainland of the PRC.

F-15

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(h)   Accounts receivable and allowance for doubtful accounts

Accounts receivable are recognized in the period when the Group has provided services to its customers and when its right to consideration is unconditional. The Group reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. The group considers many factors in assessing the collectability of its receivables, such as the age of the amounts due, the customer’s payment history and credit-worthiness. An allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted.

(i)   Inventories

Inventories, consisting of products available for sale, are stated at the lower of cost or net realizable value. The cost of inventory is determined using the first-in-first-out ("FIFO") method. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. Inventory is written down for damaged goods and slow-moving merchandise, which is dependent upon factors such as historical and forecasted consumer demand, and any sales promotions.

(j)   Property and equipment, net

Property and equipment are stated at cost less accumulated depreciation and depreciated using the straight-line method over the estimated useful lives of the assets, as follows:

Office and electronic equipment	3 years
Leasehold improvements	Shorter of 3 years or lease term

When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and the proceeds received thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized and amortized over the remaining useful life.

(k)   Intangible assets, net

Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they are capable of being separated or arise from contractual or other legal rights. Purchased intangible assets and intangible assets arising from acquisitions are recognized and measured at fair value upon acquisition. Separately identifiable intangible assets that have determinable lives are amortized over their estimated useful lives using the straight-line method as follows:

Licenses	5 years
User bases	3-4 years
Brand names	10 years
Technologies	3 years

The estimated life of intangible assets subject to amortization is reassessed if circumstances occur that indicate the life has changed.

(l)   Impairment of property and equipment and intangible assets

Property and equipment and intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment for the asset or asset group by comparing the carrying value of the asset or asset group to an estimate of future undiscounted cash flows expected to be generated from the use of the asset or asset group and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the asset or asset group, the Group recognizes an impairment loss based on the excess of the carrying value of the asset or asset group over the fair value of the asset or asset group.

F-16

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(m)   Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates Step 2 from the goodwill impairment test. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this ASU 2017-04 for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. On January 1, 2020, the Group adopted ASU 2017-04.

Goodwill is not amortized but tested annually for impairment on a qualitative or quantitative basis for the reporting unit as of December 31, or more frequently when events or circumstances indicate an impairment may exist at the reporting unit level. In the qualitative assessment, the Group considers primary factors such as industry and market considerations, the overall financial performance of the reporting unit, and other specific information related to the operations. When performing the annual impairment test, the Group has the option of first performing a qualitative assessment to determine the existence of events and circumstances that would lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If such a conclusion is reached, the Group would then be required to perform a quantitative impairment assessment of goodwill. However, if the assessment leads to a determination that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then no further assessments are required. A quantitative assessment for the determination of impairment is made by comparing the carrying amount of the reporting unit with its fair value, which is generally calculated using the discounted cash flow method. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered impaired. If the carrying amount of a reporting unit exceeds its fair value, the Group recognizes the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit identified.

(n)   Investment securities

The Group’s investment securities consist of debt securities and equity securities with readily determinable fair values.

Debt securities

The Group accounts for debt securities as available-for-sale (“AFS”) when they are not classified as either trading or held-to-maturity. AFS securities are recorded at fair value, with unrealized gains and losses, net of related tax effect, are excluded from earnings and are reported as a separate component of accumulated other comprehensive loss until realized. Realized gains and losses from the sale of AFS securities are determined on a specific-identification basis. An impairment loss on the AFS securities are recognized in the consolidated statement of comprehensive loss when the decline in value is determined to be other-than-temporary. No impairment loss was recognized for the years ended December 31, 2019 and 2020.

Equity investments

All equity investments with readily determinable fair values, other than those accounted for under equity method of accounting or those that result in consolidation of the investee, are measured at fair value with changes in the fair value recognized through net income.

F-17

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(o)   Value added taxes

The Company’s PRC subsidiaries, VIE and VIE’s subsidiaries are subject to value added tax (“VAT”). Revenues from providing online services are generally subject to VAT at the rate of 6% and revenues from sales of merchandise are generally subject to VAT at the rate of 13% and subsequently paid to PRC tax authorities after netting input VAT on purchases. The excess of output VAT over input VAT is reflected in accrued expenses and other current liabilities, and the excess of input VAT over output VAT is reflected in prepayments and other current assets in the consolidated balance sheets.

(p)   Fair value measurements

Fair value represents 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. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Accounting guidance establishes a three-level fair value hierarchy and 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. The three levels of inputs are:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

Accounting guidance also describes three main approaches to measuring 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.

Financial assets and liabilities of the Group primarily consist of cash and cash equivalents, term deposits, accounts receivable, investment securities, accounts payable, and convertible debt. The Group measures investment securities and convertible debt at fair value on a recurring basis. Investment securities and convertible debt were measured at fair value using unobservable inputs and categorized in Level 3 of the fair value hierarchy. As of December 31, 2020 and 2021, the carrying amounts of other financial instruments approximated to their fair values due to the short term maturity of these instruments.

The Group’s non-financial assets, such as property and equipment, would be measured at fair value only if they were determined to be impaired.

(q)   Revenue recognition

The Group principally derives its revenues from live streaming, advertising, membership, merchandise sales and other services. The Group recognizes revenue when control of the promised service is transferred to the customers, in an amount that reflects the consideration that the Group expects to receive in exchange for those services.

Live streaming service

The Group operates integrated platforms, Blued, Finka and LESDO, consisting of IT infrastructure, mobile applications and its proprietary algorithm, to offer live and interactive streaming services to individual viewers as its customers. The Group engages broadcasters to perform on the Group’s platform, which through its proprietary algorithm, enables individual viewers to discover live streaming channels and broadcasters they may find interesting and provide more personal experience.

F-18

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Individual viewer can purchase virtual gifts on the Group’s platform, and simultaneously present to broadcasters during their live streaming performance to show their support for their favorite broadcasters. The Group has sole discretion in designing and establishing pricing of virtual gifts. Individual viewer purchases virtual gifts using the Group’s virtual currency which is in turn acquired through online third-party payment platforms. Virtual currency is non-refundable and does not have expiration date. It is often consumed soon after it is purchased.

The Group considers live streaming service as one performance obligation to its customers. The consideration received from individual viewers varies at viewers’ discretion, as they purchase and present variable quantity or value of virtual gifts to broadcasters during a performance. The recognition of such variable consideration is constrained until the amount is known, which is when an individual viewer purchases virtual gifts and simultaneously presents them to broadcasters during their live streaming performance. Accordingly, revenue is recognized when virtual gifts are consumed as they are presented to broadcasters. Unconsumed virtual currency is recorded as deferred revenue.

The Group evaluates and determines individual viewers as its customers and the Group is the principal in providing live streaming services to them, and hence reports live streaming revenues on a gross basis. Accordingly, the amounts billed to viewers are recorded as revenues and revenue sharing fee paid to broadcasters through talent agencies are recorded as cost of revenues. The Group controls the integrated live streaming services, which is evidenced by its contractual relationship with individual viewers and primary responsibility for fulfilling the promise to provide the live streaming services, including operating the self-developed live streaming platform and maintaining the operation of the platform, engaging broadcasters through talent agencies to perform on its platform, investing in and using its algorithm to optimize individual viewers’ live streaming experience, enabling individual viewers to discover the broadcasters and shows they may be interested in, developing new features in the platform, promoting activities including the general promotion of the platform and the promotion of popular broadcasters and offering the virtual items to viewers to be purchased and used in the platform. Its control is also evidenced by its sole ability to monetize the live streaming services and the level of discretion in establishing pricing. The Group also has latitude in establishing the amount of compensation that broadcasters and talent agencies receive as a percentage of revenues generated from virtual gift sales. Such percentage is subject to the achievement of broadcasters and talent agencies on the Key Performance Indicators set by the Group.

Advertising

The Group offers marketing services on the Group’s mobile app, primarily through banner advertisements. Marketing services allow customers to place advertisements on particular areas of the Group’s mobile app, in particular formats and over particular periods of time. The marketing services typically last from several days to one year. The Group determines that the customer simultaneously receives and consumes benefits provided by the Group’s performance as the Group performs during the term of the contract. Revenues from marketing services are recognized, net of sales incentives, if any, ratably over the service period.

The Group provides sales incentives in the forms of discounts and rebates to customers based on purchase volume. Sales incentives are estimated and recorded at the time of revenue recognition based on the contracted rebate rates and estimated sales volume based on historical experience.

Membership

Membership revenues include subscription-based membership services and Pay-Per-Use Services. Subscription-based membership services enable individual users to enjoy additional functions and privileges over a period of time ranging from one month to one year. Pay-Per-Use services enable individual users to better promote themselves and raise their profile through advanced enhancement functions on a pay-per-service basis. The Group collects non-refundable membership service fee in advance and records it as deferred revenue. Subscription-based membership revenue is recognized on a straight-line basis over the membership period. Pay-Per-Use revenue is recognized at the point in time when control of promised service is transferred to the users.

F-19

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Merchandise sales

The Group generates revenues from merchandise sales to customers through the Group’s own and third-parties' platforms. The Group controls the specified good before that good is transferred to a customer, which is evidenced by the primary responsibility for fulfilling the promise to provide the specified good, including responsible for the acceptability of the specified good; having inventory risk before the specified good has been transferred to a customer; and having discretion in establishing the price for the specified good. Accordingly, the Group concludes that it is principal in merchandise sales and reports revenue from merchandise sales on a gross basis. Revenues are measured as the amount of consideration the Group expects to receive in exchange for transferring the specified good to customers.

Other revenue

Other revenue mainly consists of family planning service revenues, service fee from the provision of consulting service to healthcare and medical institutions and marketplace service revenues. Revenue is recognized when control of promised service is transferred to the customers in an amount of consideration to which the Group expects to be entitled to in exchange for those services.

Contract balances

Contract balances include accounts receivable and deferred revenue. The timing of revenue recognition and cash collections result in accounts receivable and contract liabilities (i.e. deferred revenue). The allowance for doubtful accounts reflects the Group’s best estimate of probable losses inherent in the accounts receivable balance. The activity in the allowance for doubtful accounts for the years presented is disclosed in Note 3.

Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.

Deferred revenue (a contract liability) is recognized when the Group has an obligation to transfer services to a customer for which the Group has received consideration related to the Group’s live streaming services, membership services and family planning services from the customer, or for which an amount of consideration is due from the customer.

The opening balance of deferred revenue as of January 1, 2020 and 2021 was RMB32,555,402 and RMB35,226,237, respectively. During the year ended December 31, 2019, 2020 and 2021, the Group recognized revenue in the amount of RMB23,757,459, RMB32,555,402 and RMB35,226,237 which was included in the deferred revenue balance at the beginning of the year, respectively.

(r)   Cost of revenues

Cost of revenues consists primarily of (i) revenue sharing fees paid to broadcasters, (ii) commission fees paid to mobile application stores and third party payment platforms, (iii) staff cost, rental and depreciation related to operation of its business, and (iv) other cost related to the business operation.

(s)   Selling and marketing expenses

Selling and marketing expenses mainly consist of (i) advertising costs and promotion expenses, (ii) staff cost, rental and depreciation related to selling and marketing functions. Advertising costs, which consist primarily of online and offline advertisements, are expensed as incurred. The advertising costs were RMB60,136,876, RMB80,711,586 and RMB110,978,677 for the years ended December 31, 2019, 2020 and 2021, respectively.

(t)   Technology and development expenses

Technology and development expenses consist primarily of payroll and related expenses for technology and development professionals and technology infrastructure costs. Technology infrastructure costs include servers, bandwidth and cloud infrastructure costs, depreciation and utilities and other expenses related to technology and development functions. Technology and development expenses are expensed as incurred.

F-20

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(u)   General and administrative expenses

General and administrative expenses mainly consist of (i) staff cost, rental and depreciation related to general and administrative personnel, (ii) professional fees, (iii) share-based compensation for management and administrative personnel, and (iv) other corporate expenses.

(v)   Government grants

Government grants are recognized when there are reasonable assurances that the Group will comply with the conditions attach to them and the grants will be received. Government grants for the purpose of giving immediate financial support to the Group with no future related costs or obligation are recognized as a reduction of general and administrative expenses in the Group’s consolidated statements of comprehensive loss when the grants become receivable.

(w)   Share-based compensation

The Group periodically grants share-based awards, mainly including share options to eligible employees, directors and consultants, which are subject to service and performance conditions.

All share-based awards granted to directors, employees and consultants of the Group are measured at the grant-date fair value and are recognized as compensation expense over the vesting period, and when the Group considers that it is probable that the performance condition will be achieved. The Group elected to account for forfeitures as they occur, rather than estimate expected forfeitures.

Share-based compensation in relation to the share options is estimated using the Binominal Option Pricing Model. The determination of the fair value of share options is affected by the share price of the Group’s ordinary shares as well as the assumptions regarding a number of complex and subjective variables, including the expected share price volatility, risk-free interest rate, exercise multiple, forfeiture rate and expected dividend yield.

For share options granted with service conditions only, share-based compensation expenses are recorded using straight-line method during the requisite service period.

For share options granted with service condition and the occurrence of an IPO as performance condition, share-based compensation expenses are recorded on a straight-line basis over the requisite service period for each separately vesting portion of the award.

A change in any of the terms or conditions of share-based awards is accounted for as a modification of the awards. The Group calculates incremental compensation cost of a modification as the excess of the fair value of the modified awards over the fair value of the original awards immediately before its terms are modified at the modification date. For vested awards, the Group recognizes incremental compensation cost in the period the modification occurs. For awards not being fully vested, the Group recognizes the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original awards over the remaining requisite service period after modification.

(x)   Employee benefits

The Company’s subsidiaries and the VIE and VIE’s subsidiaries in PRC participate in a government mandated, multiemployer, defined contribution plan, pursuant to which certain retirement, medical, housing and other welfare benefits are provided to employees. PRC labor laws require the entities incorporated in China to pay to the local labor bureau a monthly contribution calculated at a stated contribution rate on the monthly basic compensation of qualified employees. The Group has no further commitments beyond its monthly contribution. Employee social benefits included as expenses in the accompanying consolidated statements of comprehensive loss amounted to RMB26,900,928, RMB20,354,331 and RMB55,265,678 for the years ended December 31, 2019, 2020 and 2021, respectively.

F-21

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

As a result of COVID-19, the PRC government exempted or reduced certain enterprises’ contributions to basic pension insurance, unemployment insurance, and work injury insurance (“certain social insurance”). The Group’s PRC subsidiaries, VIE and VIE’s subsidiaries were exempted from contributions to certain social insurance between February 2020 and December 2020. The exemption was recognized as a reduction of cost of revenues, selling and marketing expenses, technology and development expenses and general and administrative expenses in the amount of RMB15,857,367 for the year ended December 31, 2020.

(y)   Income taxes

Current income taxes are provided on the basis of net income for financial reporting purposes, and adjusted for income and expense items which are not taxable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.

Deferred income taxes are provided using the liability method. Under this method, deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and are determined by applying enacted statutory tax rates that will be in effect in the period in which the temporary differences are expected to reverse. A valuation allowance is provided to reduce the amount of deferred income tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred income tax assets will not be realized. The effect on deferred income taxes arising from a change in tax rates is recognized in the consolidated statements of comprehensive loss in the period of change.

The Group applies a “more likely than not” recognition threshold in the evaluation of uncertain tax positions. The Group recognizes the benefit of a tax position in its consolidated financial statements if the tax position is “more likely than not” to prevail based on the facts and technical merits of the position. Tax positions that meet the “more likely than not” recognition threshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. Unrecognized tax benefits may be affected by changes in interpretation of laws, rulings of tax authorities, tax audits, and expiry of statutory limitations. In addition, changes in facts, circumstances and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Accordingly, unrecognized tax benefits are periodically reviewed and re-assessed. Adjustments, if required, are recorded in the Group’s consolidated financial statements in the period in which the change that necessities the adjustments occur. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, in certain circumstances, a tax appeal or litigation process. The Group records interest and penalties related to unrecognized tax benefits (if any) in interest expenses and general and administrative expenses, respectively. As of December 31, 2020 and 2021, the Group did not have any unrecognized uncertain tax positions.

(z)   Operating leases

The Group leases premises for offices under non-cancellable operating leases. Leases with escalated rent provisions are recognized on a straight-line basis over the lease term.

(aa)  Foreign currency translation and foreign currency risks

The Group’s reporting currency is Renminbi (“RMB”). The functional currency of the Company and its subsidiaries incorporated at Hong Kong S.A.R. and the United States is the United States dollars (“US$”). The functional currency of the Company’s PRC subsidiaries, VIE and VIE’s subsidiaries is the RMB.

Transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in a foreign currency are remeasured into the functional currency using the applicable exchange rate at the balance sheet date. The resulted exchange differences are recorded as general and administrative expenses in the consolidated statements of comprehensive loss.

F-22

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The financial statements of the Company and its subsidiaries incorporated at Hong Kong S.A.R., and the United States are translated from US$ into RMB. Assets and liabilities are translated into RMB using the applicable exchange rates at the balance sheet date. Equity accounts other than deficits generated in the current period are translated into RMB using the appropriate historical rates. Revenues, expenses, gains and losses are translated into RMB using the average exchange rates for the relevant period. The resulted foreign currency translation adjustments are recorded as a component of other comprehensive income or loss in the consolidated statements of comprehensive loss, and the accumulated foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income or loss in the consolidated statements of changes in shareholders’ equity (deficit).

The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the PRC government, controls the conversion of RMB to foreign currencies. The value of the RMB is subject to changes of central government policies and international economic and political developments affecting supply and demand in the China foreign exchange trading system market.

(bb)  Concentration and risk

Concentration of suppliers

The Group purchases all its computing, storage and bandwidth services (“cloud services”) from two suppliers for the years ended December 31, 2019, four suppliers for the year ended December 31, 2020 and five suppliers for the year ended December 31, 2021. Although there are a limited number of cloud providers of the particular cloud services, management believes that other cloud providers could provide similar services on comparable terms. A change in cloud providers, however, could cause negatively impact on the business operation and a possible loss of sales, which would affect operating results adversely.

Concentration of credit risk

Financial instruments that potentially expose the Group to concentrations of credit risk consist principally of cash and cash equivalents, term deposits and accounts receivable.

The Group’s investment policy requires cash and cash equivalents and term deposits to be placed with high-quality financial institutions and to limit the amount of credit risk from any one financial institution. The Group regularly evaluates the credit standing of the counterparties or financial institutions.

The Group conducts credit evaluations on its customers prior to delivery of services. The assessment of customer creditworthiness is primarily based on historical collection records, research of publicly available information and customer on-site visits by senior management. Based on this analysis, the Group determines what credit terms, if any, to offer to each customer individually. If the assessment indicates a likelihood of collection risk, the Group will not deliver the services to the customer or require the customer to pay cash, post letters of credit to secure payment or to make significant down payments.

(cc)  Statutory reserves

In accordance with the PRC Company Laws, the Group’s PRC subsidiaries, VIE and VIE’s subsidiaries must make appropriations from their after-tax profits as determined under the generally accepted accounting principles in the PRC (“PRC GAAP”) to non-distributable reserve funds including statutory surplus fund and discretionary surplus fund. The appropriation to the statutory surplus fund must be 10% of the after-tax profits as determined under PRC GAAP. Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of the PRC companies. Appropriation to the discretionary surplus fund is made at the discretion of the PRC companies.

The statutory surplus fund and discretionary surplus fund are restricted for use. They may only be applied to offset losses or increase the registered capital of the respective companies. These reserves are not allowed to be transferred to the Company by way of cash dividends, loans or advances, nor can they be distributed except for liquidation.

For the years ended December 31, 2019, 2020 and 2021, profit appropriation to general statutory surplus fund and discretionary surplus fund for the Group’s entities incorporated in the PRC was nil, RMB139,773 and nil, respectively.

F-23

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(dd)  (Loss) earnings per share

Basic (loss) income per share is computed by dividing net (loss) income attributable to ordinary shareholders, considering the accretion and reversal of accretion of redemption feature related to the Group’s redeemable convertible preferred shares, by the weighted average number of ordinary shares outstanding during the period using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating securities based on their participating rights. Shares issuable for little to no consideration upon the satisfaction of certain conditions are considered as outstanding shares and included in the computation of basic (loss) income per share as of the date that all necessary conditions have been satisfied. Net losses are not allocated to other participating securities if based on their contractual terms they are not obligated to share the losses.

Diluted (loss) income per share is calculated by dividing net (loss) income attributable to ordinary shareholders, as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of ordinary shares issuable upon the conversion of the preferred shares, using the if-converted method, and shares issuable upon the exercise of share options using the treasury stock method. Ordinary equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such share would be anti-dilutive.

(ee)  Segment reporting

The Group uses the management approach in determining its operating segments. The Group’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. For the purpose of internal reporting and management’s operation review, the Group’s Chief Executive Officer do not segregate the Group’s business by service lines. Management has determined that the Group has one operating segment, which is the mobile platform operations.

(ff)  Business combination

The Group accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. The assets acquired, the liabilities assumed, and any non-controlling interests of the acquiree at the acquisition date, if any, are measured at their fair values as of the acquisition date. The excess of the purchase price over those fair values is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the acquiree, the difference is recognized directly in the consolidated statements of comprehensive loss. The Group charges acquisition related costs that are not part of the purchase price consideration to general and administrative expenses as they are incurred.

F-24

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(gg)  Recent accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”), Leases. ASU 2016-02 specifies the accounting for leases. For operating leases, ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. ASU 2016-02 was further amended in November 2019 by ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and in June 2020 by ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842), which deferred the effective date of new lease standard. As a result, Accounting Standards Codification (“ASC”) 842, Leases, is effective for public companies for annual reporting periods, and interim periods within those years beginning after December 15, 2018. For all other entities, it is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. As the Company is an "emerging growth company" and elects to apply for the new and revised accounting standards at the effective date for a private company, the Group adopts the new standard for the year ending December 31, 2022 and plans to use the effective date as the date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2022. The new standard provides a number of optional practical expedients in transition. The Group plans to elect the ‘package of practical expedients’, which permits the Group not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Group is finalizing its evaluation of its existing population of contracts to ensure all contracts that meet the definition of a lease contract under the new standard are identified. The Group is currently evaluating the qualitative and quantitative impact that the adoption of this standard will have on its consolidated financial statements and footnote disclosures and expects the standard will have a material impact on the consolidated balance sheet related to the recognition of right-of-use assets and lease liabilities for operating leases.

In June 2016, the FASB amended ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. ASU 2016-13 was further amended in November 2019 by ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). As a result, ASC 326, Financial Instruments — Credit Losses is effective for public companies for annual reporting periods, and interim periods within those years beginning after December 15, 2019. For all other entities, it is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As the Company is an "emerging growth company" and elects to apply for the new and revised accounting standards at the effective date for a private company, the Group will adopt the new standard on January 1, 2023. The Group is currently evaluating the impact of this new guidance on its consolidated financial statements.

3. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Accounts receivable	5,588,023	12,878,562
Allowance for doubtful accounts	—	—
Accounts receivable, net	5,588,023	12,878,562

The movements of the allowance for doubtful accounts were as follows:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Balance at the beginning of the year	1,857,463	—	—
Additions charged to bad debt expense	592,717	—	682,085
Write-off of bad debt allowance	(2,450,180)	—	(682,085)
Balance at the end of the year	—	—	—

F-25

4. INVENTORIES

Inventories consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Merchandise	6,853,202	7,401,509
Inventories	6,853,202	7,401,509

No write-down of inventories from the carrying amount to its estimated net realizable value was made for the year ended December 31, 2019, 2020 and 2021.

5. PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments and other current assets as of December 31, 2020 and 2021 consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Receivable from third party payment platforms	31,821,937	63,747,704
Prepaid expenses	14,955,773	15,239,076
Deposits and prepaid rental fees	3,373,228	4,202,244
Deferred payment platforms commission fee	2,553,825	3,126,394
Interest receivable	1,460,642	1,260,880
Deductible input VAT	1,639,485	1,012,009
Others*	2,824,526	11,188,781
Prepayments and Other Current Assets	58,629,416	99,777,088

*   Others mainly include advances to suppliers and employees and other receivables.

6. INVESTMENT SECURITIES

Investment securities consisted of the following:

	As of December 31,
	2020	2021
Available-for-sale debt securities:	RMB	RMB
Mengmei Life Pty. Ltd (“Mengmei”)(a).	—	—
Equity securities with readily determinable fair value:
Warrant to purchase Mengmei’s interests(a).	—	—
Others.	50,000	—
	50,000	—

(a)   On September 7, 2018, the Group entered into an investment agreement with Mengmei to acquire 9,375,000 redeemable convertible preferred shares, which represented 8.15% equity interest of Mengmei on a fully-diluted basis, in exchange for a cash consideration of US$3 million (equivalent to RMB20,587,500). The investment was classified as AFS debt security because the investment contains substantive liquidation preference and redemption provision and is redeemable at the option of the investor. The Group recorded the investment at fair value. Unrealized gain of US$230,731 (equivalent to RMB1,591,098) and US$208,098 (equivalent to RMB1,456,370), net of nil income taxes were recorded in other comprehensive income for the years ended December 31, 2019 and 2020, respectively.

F-26

6. INVESTMENT SECURITIES (Continued)

In connection with this transaction, the Group also received a warrant to purchase certain number of shares in a single transaction or a series of related transactions from Mengmei’s founders within three years from the issuance date, so as to enable the Group holding no less than 51% of all equity interests of Mengmei on a fully-diluted basis. The exercise price of the warrant was determined based on the 100% equity value of Mengmei between US$100,000,000 and US$200,000,000. The warrant is an equity security with readily determinable fair value.

Losses of US$39,854 (equivalent to RMB274,829) and US$750 (equivalent to RMB5,268) were recorded in changes in fair value of financial instruments for the years ended December 31, 2019 and 2020, respectively.

For initial recognition, the Group allocated the total consideration to AFS debt security and warrant based on their relative fair values.

On July 28, 2020, the Group entered into a share purchase agreement with Jinxin Fertility Group Company Limited to sell 9,375,000 redeemable convertible preferred shares of Mengmei and the warrant issued by Mengmei's founders in exchange for a cash consideration of US$3,580,108 (equivalent to RMB25,023,165). Accumulated unrealized gain of US$694,897 (equivalent to RMB4,863,233) was recorded in gain on disposal of an investment security for the year ended December 31, 2020.

7. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Office and electronic equipment	11,200,226	13,832,466
Leasehold improvements	11,040,082	13,785,017
Property and Equipment	22,240,308	27,617,483
Accumulated depreciation	(10,794,760)	(16,431,324)
Property and Equipment, net	11,445,548	11,186,159

Depreciation expenses on property and equipment were allocated to the following expense items:

	As of December 31,
	2019	2020	2021
	RMB	RMB	RMB
Cost of revenues	525,956	821,401	948,069
Selling and marketing expenses	997,224	1,511,562	2,381,693
Technology and development expenses	845,318	1,176,602	2,640,921
General and administrative expenses	251,184	393,071	734,443
Total depreciation expenses	2,619,682	3,902,636	6,705,126

8. INTANGIBLE ASSETS, NET

Intangible assets consisted of the following:

	As of December 31, 2020
	Gross Carrying	Accumulated		Net carrying
	Amount	amoritization	Impairment	amount
	RMB	RMB	RMB	RMB
Licenses	4,110,860	(822,172)	—	3,288,688
User bases	7,730,000	(287,232)	—	7,442,768
Brand names	38,500,000	(390,833)	—	38,109,167
Technologies	3,460,000	(216,111)	—	3,243,889
Total intangible assets	53,800,860	(1,716,348)	—	52,084,512

F-27

8. INTANGIBLE ASSETS, NET (Continued)

	As of December 31, 2021
	Gross Carrying	Accumulated		Net carrying
	Amount	amoritization	Impairment	amount
	RMB	RMB	RMB	RMB
Licenses	7,372,111	(2,198,142)	—	5,173,969
User bases	7,730,000	(2,276,875)	(400,000)	5,053,125
Brand names	38,500,000	(4,188,333)	(1,855,000)	32,456,667
Technologies	3,460,000	(1,279,444)	(660,000)	1,520,556
Total intangible assets	57,062,111	(9,942,794)	(2,915,000)	44,204,317

Amortization expense on intangible assets was allocated to the following expense items:

	Years ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Cost of revenues	—	1,429,116	6,236,802
Selling and marketing expenses	—	287,232	1,989,644
Total amortization expenses	—	1,716,348	8,226,446

For the year ended December 31, 2021, the Group terminated the operation of Lesdo platform. As a result, the Group recognized impairment loss of RMB2,915,000 for intangible assets acquired in Lesdo acquisition (Note 21). The Group provided no impairment for intangible assets for the years ended December 31, 2019 and 2020.

Amortization expense for intangible assets is nil, RMB1,716,348 and RMB8,226,446 for the years ended December 31, 2019, 2020 and 2021, respectively. The estimated amortization expenses for the above intangible assets for future years are as follows:

	Amortization for
Year ending December 31,	Intangible Assets
	RMB
2022	7,726,402
2023	7,660,291
2024	6,788,693
2025	4,123,264
2026	3,640,000
Thereafter	14,256,667
Total	44,204,317

9. GOODWILL

The change in the carrying amount of goodwill was as follows:

	As of December 31,
	2020	2021
	RMB	RMB
Beginning Balance of the year	—	196,002,568
Additions in goodwill related to business combinations (Note 21)	196,002,568	—
Impairment of goodwill	—	(106,949,249)
Foreign currency translation adjustment	—	(7,301,455)
Balance as of December 31, 2021	196,002,568	81,751,864

The Group has one reporting unit, which is mobile platform operations.

F-28

9. GOODWILL (Continued)

As of December 31, 2021, The Group performed quantitative impairment test for goodwill using the discounted cash flow method when determining the fair value of the reporting unit. Key assumptions used to determine the estimated fair value include: (a) internal cash flows forecasts including expected revenue growth, operating margins and estimated capital needs, (b) an estimated terminal value using a terminal year long-term future growth rate determined based on the growth prospects of the reporting unit; and (c) a discount rate that reflects the weighted-average cost of capital adjusted for the relevant risk associated with the reporting unit’s operations and the uncertainty inherent in the Group’s internally developed forecasts. The Group corroborates the reasonableness of the inputs and outcomes of its discounted cash flow analysis through a market capitalization reconciliation to determine whether the implied control premium is reasonable. The Group recognized impairment loss of RMB106,949,249 for goodwill for the year ended December 31, 2021, primarily due to more intensive competition on its mobile platform operations, which brought adverse impact on the Group’s ability to generate revenues and net income from its mobile platform operations.

The Group did not record impairment charges of goodwill for the years ended December 31, 2019 and 2020.

10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Accrued payroll and welfare	29,859,310	24,015,031
Technology supporting fees payable	9,856,805	20,609,458
Advertising and marketing fees payable	13,855,032	5,144,789
Other taxes payable	9,513,024	6,525,618
Rebate to advertising customers	11,896,947	4,263,036
Professional fee payable	1,350,153	3,069,892
Deposits received from suppliers	1,120,000	1,170,000
Payable for business combinations	24,742,025	—
Cash collected on behalf of service providers*	10,356,117	—
Other accrued expenses**	6,409,383	18,164,527
Accrued Expenses and Other Current Liabilities	118,958,796	82,962,351

*      This is the cash the Group received on behalf of the service providers from the customers for the family planning services.

**    Other accrued expenses mainly represent accrued office expenses and other operating costs.

F-29

11. CONVERTIBLE DEBT

On March 9, 2017, the Company entered into a convertible debt agreement with ShanShui CongRong Media Investment Co., Ltd (“ShanShui CongRong”), a third party investor, to borrow a one-year loan in the amount of USD3.0 million. During the period of the loan, ShanShui CongRong was entitled to convert all of the outstanding principal of the convertible debt into 116,640 shares of Series C-2 Redeemable Convertible Preferred Shares (“Series C-2 Preferred Shares”) of the Company. The interest rate of this convertible debt is 5% simple interest per annum. However, no interest shall be accrued on the outstanding principal amount, if any portion of the principal amount is converted to the Company’s Series C-2 Preferred Shares. The conversion price is US$ 25.72 per share. On March 8, 2018, the term of maturity date of this convertible debt was extended to March 8, 2020.

The Company concluded the embedded conversion option did not need to be bifurcated pursuant to ASC 815 because these terms do not permit net settlement, nor they can be readily settled net by a means outside the contract, nor they can provide for delivery of an asset that puts the holders in a position not substantially different from net settlement. The Company further determined that there was no beneficial conversion feature attributable to the convertible debt because the initial effective conversion price of the convertible debt was higher than the fair value of the Company’s Series C-2 Preferred Shares at the commitment date. The Company elected to measure the convertible debt in its entirety at fair value with changes in fair value recognized in earnings in consolidated statement of comprehensive loss.

The Company adopted a scenario-weighted average method to estimate fair value of the convertible debt based on the probability of each scenario and pay-off of convertible debt under each scenario. Changes in fair value of convertible debt in the amount of RMB8,749,608 and nil for the years ended December 31, 2019 and 2020, respectively, were recognized in the consolidated statements of comprehensive loss.

On November 20, 2019, the Group and ShanShui CongRong agreed to terminate the convertible debt agreement, pursuant to which the principal amount of USD3.0 million (equivalent to RMB20.0 million) was fully paid in November 2019 and the accrued interest of RMB2.7 million was paid by the end of the first quarter of 2020. The difference in the amount of USD1.3 million (equivalent to RMB9.0 million) between the settlement amount of USD3.2 million (equivalent to RMB22.7 million) and the carrying amount of USD 4.5 million (equivalent to RMB31.8 million) as at November 20, 2019 was recognized as a gain on extinguishment of a convertible debt for the year ended December 31, 2019. The Company has paid the interest in the amount of RMB2.7 million on March 9, 2020.

12. MEZZANINE EQUITY

Series A Convertible Preferred Shares

On April 27, 2013, the Company entered into a share purchase agreement with an investor, pursuant to which the Company issued 1,275,000 Series A convertible preferred shares (“Series A Preferred Shares”) at US$0.38 per share for an aggregated cash consideration of US$482,253 (equivalent to RMB3,000,000).

On November 4, 2014, the Company, the shareholder of the Series A Preferred Shares and a new investor entered into a share transfer agreement, pursuant to which the shareholder of Series A Preferred Shares sold 124,138 Series A Preferred Shares to the new investor, and the shares were immediately re-designated into Series A-1 redeemable convertible preferred shares (“Series A-1 Preferred Shares”).

On February 8, 2018, the Company entered into a share purchase agreement with an investor pursuant to which the Company issued 288,240 Series A Preferred Shares at US$27.75 per share for an aggregated cash consideration of US$8,000,000 (equivalent to RMB50,753,200).

The rights, preferences and privileges of the Series A Preferred Shares are as follows:

Conversion Rights

Each Series A Preferred Shares is convertible, at the option of the holder, at any time after the issuance date according to a conversion ratio, subject to adjustments for dilution, including but not limited to stock splits, stock dividends and certain other events. The conversion price of Series A Preferred Shares is the same as its original issuance price and no adjustments to conversion price have occurred.

F-30

12. MEZZANINE EQUITY (Continued)

Each Series A Preferred Shares shall automatically be converted into Ordinary Shares at a 1 to 1 initial conversion ratio immediately upon the closing of a Qualified Initial Public Offering (“Qualified IPO”), if the Qualified IPO is approved by the preferred shareholders as defined below.

The “Qualified IPO” was defined as within four anniversary of the Closing Date (January 26, 2018), a firm commitment underwritten public offering of the Ordinary Shares (or securities representing Ordinary Shares) in the United States, Hong Kong S.A.R. or Mainland China (excluding the National Equities Exchange and Quotations), or other jurisdiction with a pre-offering valuation of at least US$850,000,000 and raising at least US$100,000,000 proceeds. The number of shares to be issued by the Company shall be negotiable at the time of the Qualified IPO and after the expiration of the lock-up period after the Qualified IPO in such jurisdiction and subject to the approval by the shareholders of at least ninety-two (92%) of the preferred shares (voting together as a single class and calculated on an as-converted basis).

Voting Rights

Each Series A Preferred Shares shall be entitled to that number of votes corresponding to the number of ordinary shares on an as-converted basis. The shareholders of Series A Preferred Shares shall vote separately as a class with respect to certain specified matters. Otherwise, the shareholders of Series A Preferred Shares, Series A-1, Series B, Series C, Series C-1, Series D redeemable convertible preferred shares, and ordinary shares shall vote together as a single class.

Liquidation Preferences

In the event of any liquidation, dissolution or winding up of the Company, or upon occurrence of a Liquidation Event as defined in the Sixth Amended And Restated Memorandum And Articles Of Association, either voluntary or involuntary, and after the distribution to the shareholders of Series D Preferred Shares, Series C-1 Preferred Shares, Series B Preferred Shares and Series A-1 Preferred Shares, the shareholders of Series A Preferred Shares shall be entitled to receive, on a pro rata, pari passu basis but prior to any distribution to the shareholders of the Ordinary Shares or any other class or series of shares then outstanding, an amount per Series A Preferred Shares equal to the greater of (i) one hundred and twenty percent (120%) of Series A Preferred Shares issue price, plus all declared but unpaid dividends thereon (as adjusted), and (ii) the aggregate amount that each such Series A Preferred Shares shall be entitled to receive from the total proceeds in connection with such liquidation, dissolution, winding up, or liquidation event calculated on a pro rata basis and as-converted basis.

Drag-along rights

In the event that the shareholders of at least ninety-two (92%) of the preferred shares (“Drag-Along Shareholders”, i.e. the preferred shares in the capital of the Company with a par value of US$0.0001 per share, including Series A Preferred Shares, Series A-1 Preferred Shares, Series B Preferred Shares, Series C Preferred Shares, Series C-1 Preferred Shares and Series D Preferred Shares), voting together as a single class and calculated on an as-converted basis, approve a transaction that qualifies as a Liquidation Event (“Drag-Along Sale”) and the valuation of the Company immediately prior to the Drag-Along Sale reaches US$2,500,000,000 or more in the contemplated Drag-Along Sale, then, upon written notice from such Drag-Along Shareholders requesting them to do so, each of the other shareholders of the Company shall (i) vote, or give its written consent with respect to, all the Equity Securities held by them in favor of such proposed Drag-Along Sale and in opposition of any proposal that could reasonably be expected to delay or impair the consummation of any such proposed Drag-Along Sale; (ii) sell, transfer, and/or exchange, as the case may be, all of its Equity Securities in such Drag-Along Sale to such purchaser on the same terms and conditions as were agreed by the Drag-Along Shareholders; (iii) refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to or in connection with such proposed Drag-Along Sale; and (iv) take all actions reasonably necessary to consummate the proposed Drag-Along Sale, including without limitation amending the then existing Articles. If any Dragged Shareholder does not elect to vote, or give its written consent with respect to such proposed Drag-Along Sale, such Dragged Shareholder shall be obliged to purchase all the shares held by the Drag-Along Shareholders at the price. A Drag-Along Sale shall be deemed as a liquidation event.

The Company classified Series A Preferred Shares as mezzanine equity instead of permanent equity on the consolidated balance sheet because of the existence of such drag-along rights. Triggering of this drag-along right results in a deemed liquidation of the Company at the option of a majority of the shareholders of preferred shares with a required distribution of the transaction proceeds in accordance with the Company’s Memorandum and Articles of Association.

F-31

12. MEZZANINE EQUITY (Continued)

The Company concluded the embedded conversion option in the Series A Preferred Shares did not need to be bifurcated pursuant to ASC 815 because these terms do not permit net settlement, nor they can be readily settled net by a means outside the contract, nor they can provide for delivery of an asset that puts the holders in a position not substantially different from net settlement. The Company also determined that there was no beneficial conversion feature attributable to Series A Preferred Shares because the initial effective conversion prices of Series A Preferred Shares were higher than the fair value of the Company’s ordinary shares at the relevant commitment dates. The fair value of the Company’s ordinary shares on the commitment date was estimated by management with the assistance of an independent valuation firm.

The Series A Preferred Shares were recorded initially at fair value.

The Series A Preferred Shares were converted to equivalent number of Class A Ordinary Shares immediately upon the completion of the Company’s initial public offering on July 8, 2020.

The Company’s Series A Preferred Shares activities for the years ended December 31, 2019 and 2020 are as follows:

	Amount
	RMB
Balance as of January 1, 2019 and December 31, 2019	29,751,569
Conversion to Class A Ordinary Shares	(33,042,477)
Foreign currency translation adjustment	3,290,908
Balance as of December 31, 2020	—

Series A-1, Series B, Series C, Series C-1 and Series D Redeemable Convertible Preferred Shares (collectively “Redeemable Convertible Preferred Shares”)

On May 15, 2014, the Company entered into a share purchase agreement with an investor, pursuant to which the Company issued 2,000,000 Series A-1 Preferred Shares at US$0.88 per share for an aggregated cash consideration of US$1,764,700 (equivalent to RMB10,877,611).

On October 30, 2014, the Company entered into a share purchase agreement with an investor, pursuant to which the Company issued 1,862,069 Series B redeemable convertible preferred shares (“Series B Preferred Shares”) at US$6.63 per share for an aggregated cash consideration of US$12,350,000 (equivalent to RMB75,899,395).

On November 4, 2014, 124,138 Series A Preferred Shares were re-designated into Series A-1 Preferred Shares.

On March 18, 2016 and April 8, 2016, the Company entered into share purchase agreement with a group of investors, pursuant to which the Company issued 1,091,391 Series C redeemable convertible preferred shares (“Series C Preferred Shares”) at US$12.88 per share for an aggregated cash consideration of US$14,061,477 (equivalent to RMB90,876,514).

On May 9, 2016, the Company issued convertible promissory notes in the amount of US$1,999,983 (equivalent to RMB13,020,889) to certain investors, which were subsequently converted into 155,230 Series C Preferred Shares upon the issuance of Series C-1 redeemable convertible preferred shares (“Series C-1 Preferred Shares”) on June 27, 2016.

On June 27, 2016, the Company entered into a share purchase agreement with certain investors, pursuant to which the Company issued 745,114 Series C-1 Preferred Shares at US$16.10 per share for an aggregated cash consideration of US$12,000,000 (equivalent to RMB79,650,000). On June 27, 2016, a shareholder of the Series A-1 Preferred Shares sold 232,847 Series A-1 Preferred Shares to a holder of the Series C-1 Preferred Shares, and the shares were immediately re-designated into Series C-1 Preferred Shares at issuance price of US$12.88 per share.

F-32

12. MEZZANINE EQUITY (Continued)

From June 9, 2017 to November 2, 2017, the Company entered into share purchase agreements with a group of investors (“Series D Preferred Shareholders”), and pursuant to which the Company issued 1,080,901 Series D redeemable convertible preferred shares (“Series D Preferred Shares”) at US$27.75 per share for an aggregated cash consideration of US$29,999,974 (equivalent to RMB200,622,325) in 2017. The issuance costs for the above Series D Preferred Shares were US$740,313 (equivalent to RMB4,950,781). From January 26, 2018 to November 1, 2018, the Company issued 1,062,885 Series D Preferred Shares at US$27.75 per share for an aggregated cash consideration of US$29,499,990 (equivalent to RMB196,648,046) to a group of Series D Preferred Shareholders. The issuance costs for the Series D Preferred Shares issued in 2018 were US$1,045,254 (equivalent to RMB6,913,310).

The rights, preferences and privileges of the Series A-1 Preferred Shares, Series B Preferred Shares, Series C Preferred Shares, Series C-1 Preferred Shares, and Series D Preferred Shares are as follows:

Redemption Rights

If the Company fails to complete the Qualified IPO prior to the fourth year anniversary of January 26, 2018, the shareholders of Series D Preferred Shares shall be entitled to request the Company to redeem the Series D Preferred Shares in cash out of funds legally available therefor. In addition, if any of the entities within the Group or Mr. Baoli Ma (the “Founder”) materially breaches any of the Transaction Agreements (as respectively defined in the Series D Share Purchase Agreements), the shareholders of Series D Preferred Shares shall be entitled to request the Company to redeem the Series D Preferred Shares in cash out of funds legally available therefor. Upon the completion of the redemption of the Series D Preferred Shares, shareholders of other Redeemable Convertible Preferred Shares shall also be entitled to request the Company to redeem their shares.

In addition, if the Company fails to complete the Qualified IPO prior to the respective fourth year anniversaries of the respective closing dates of Series C-1 Preferred Shares, Series C Preferred Shares, and Series B Preferred Shares together with Series A-1 Preferred Shares, respective (the “Redemption Start Date”), shareholders shall be entitled to request the Company to redeem in cash out of funds legally available therefor. When any of such shareholders request to redeem their shares, shareholders with higher priority of preference shall also be entitled to request the Company to redeem in cash out of funds legally available therefor. The original Redemption Start Date was November 4, 2018 for Series B Preferred Shares together with Series A-1 Preferred Shares, April 8, 2020 for Series C Preferred Shares, June 27, 2020 for Series C-1 Preferred Shares and January 26, 2022 for Series D Preferred Shares. On November 11, 2019, Series A-1, Series B, Series C and Series C-1 Preferred shareholders entered into an amendment to the redemption rights with the Company and agreed to extend the Redemption Start Date to the earlier of the following: (1) June 30, 2021, if the Company has not completed a Qualified IPO by then, (2) official termination of the IPO process of the Company, (3) the occurrence of liquidation, winding up or dissolution of the Company or substantive change of the principal business of the Company, and (4) any Preferred Share is redeemed by the Company.

The redemption preference from high priority to low priority is as follows in sequence: Series D Preferred Shares, Series C-1 Preferred Shares, Series C Preferred Shares, and Series B Preferred Shares together with Series A-1 Preferred Shares.

For Series D Preferred Shares, the redemption price shall be the greater of (i) sum of the issue price plus all declared but unpaid dividends, and a compounded ten percent (10%) per annum return measured from the issuance date to actual payment date of the redemption; (ii) the fair market value as determined through an independent appraisal performed by a reputable appraisal firm mutually agreed upon by the Company and the majority shareholders of Series D Preferred Shares; provided that such valuation shall not take into account any liquidity or minority interest discounts. The redemption price shall be proportionally adjusted for share splits, share consolidations, share dividends, recapitalizations and the like.

For Series C-1 Preferred Shares, Series C Preferred Shares, and Series B Preferred Shares, the redemption price shall be the greater of (i) sum of the respective issue prices plus all declared but unpaid dividends, and a compounded eight percent (8%) per annum return measured from the respective issuance dates to actual payment dates of the redemption; (ii) the fair market value of respective preferred shares as determined through an independent appraisal performed by a reputable appraisal firm mutually agreed upon by the Company and the respective majority shareholders of preferred shares; provided that such valuation shall not take into account any liquidity or minority interest discounts. The redemption price shall be proportionally adjusted for share splits, share consolidations, share dividends, recapitalizations and the like.

For Series A-1 Preferred Shares, the redemption price shall be sum of the issue price plus all declared but unpaid dividends, and a compounded eight percent (8%) per annum return measured from the issuance date to actual payment date of the redemption.

F-33

12. MEZZANINE EQUITY (Continued)

The Company determines whether an amendment to the redemption rights of Series A-1, Series B, Series C and Series C-1 Preferred shareholders represents an extinguishment based on a fair value approach. If the fair value of the preferred shares immediately before and after the amendment is significantly different (by more than 10%), the amendment represents an extinguishment. The Company has determined that the amendment to the redemption rights of Series A-1, Series B, Series C and Series C-1 Preferred Shares did not represent an extinguishment, and therefore modification accounting was applied by analogy to the modification guidance contained in ASC718-20, Compensation—Stock Compensation. The Company accounts for modifications that result in an increase to the fair value of the modified preferred shares as a deemed dividend reconciling net loss to net loss attributable to ordinary shareholders as there is a transfer of value from the ordinary shareholders to the preferred shareholders. Modifications that result in a decrease in the fair value of the modified preferred shares were not recognized.

Conversion Rights

Each Redeemable Convertible Preferred Share is convertible, at the option of the shareholder, at any time after the issuance date according to a conversion ratio, subject to adjustments for dilution, including but not limited to stock splits, stock dividends and certain other events. Each Redeemable Convertible Preferred Share is convertible into a number of ordinary shares determined by dividing the applicable original issuance price by the conversion price. The conversion price of each Redeemable Convertible Preferred Share is the same as its original issuance price and no adjustments to conversion price have occurred. As of December 31, 2018, each Redeemable Convertible Preferred Share is convertible into one ordinary share.

Each Redeemable Convertible Preferred Share shall automatically be converted into Ordinary Shares at a 1-to-1 initial conversion ratio immediately upon the closing of the Qualified IPO.

Voting Rights

Each Redeemable Convertible Preferred Share shall be entitled to that number of votes corresponding to the number of ordinary shares on an as-converted basis. The shareholders of Redeemable Convertible Preferred Shares shall vote separately as a class with respect to certain specified matters. Otherwise, the shareholders of Redeemable Convertible Preferred Shares, convertible preferred shares and ordinary shares shall vote together as a single class.

Dividend Rights

Each holder of Redeemable Convertible Preferred Shares shall be entitled to receive dividends at the rate of eight percent (8%) per annum of the applicable issue price. Such dividends shall be payable only when, as, and if declared by the Board of Directors and shall be non-cumulative. Dividend rights preference is as follows in sequence: Series D Preferred Shares, Series C-1 Preferred Shares, Series C Preferred Shares, Series B Preferred Shares, and Series A-1 Preferred Shares.

After the preferential dividends relating to the Redeemable Convertible Preferred Shares and dividends related to the Series A Preferred Shares have been paid in full or declared and set apart in any fiscal year of the Company, any additional dividends out of funds legally available therefor may be declared in that fiscal year for the Ordinary Shares and, if such additional dividends are declared, then such additional dividends shall be declared pro rata on the Ordinary Shares and all Preferred Shares on an as-converted basis.

No dividends or other distributions shall be made or declared, whether in cash, in property, or in any other shares of the Company, with respect to any other class or series of shares of the Company, unless and until the dividends of preferred shares with higher priority of preference has been paid in full.

F-34

12. MEZZANINE EQUITY (Continued)

Liquidation Preferences

In the event of any liquidation, dissolution or winding up of the Company, or upon occurrence of a Liquidation Event as defined in the Sixth Amended And Restated Memorandum And Articles Of Association, either voluntary or involuntary, shareholders of Series D Preferred Shares shall be entitled to receive a per share amount equal to the greater of (i) one hundred and fifty percent (150%) of the issuance price, plus all declared but unpaid dividends thereon, (ii) the sum of one hundred percent (100%) of the issuance price, plus a compounded ten percent (10%) per annum return measured from the actual payment date of purchase price to actual payment date of liquidation amount, and (iii) the aggregate amount that each such Series D Preferred Share shall be entitled to receive from the total proceeds in connection with such liquidation, dissolution, winding up, or Liquidation Event calculated on a pro rata basis and as-converted basis.

In the event of any liquidation, dissolution or winding up of the Company, or upon occurrence of a Liquidation Event as defined in the Sixth Amended And Restated Memorandum And Articles Of Association, either voluntary or involuntary, shareholders of Series C-1 Preferred Shares, Series C Preferred Shares, and Series B Preferred Shares shall be entitled to receive a per share amount equal to the greater of (i) one hundred and fifty percent (150%) of the issuance price, plus all declared but unpaid dividends thereon, and (ii) the aggregate amount that each such preferred share shall be entitled to receive from the total proceeds in connection with such liquidation, dissolution, winding up, or Liquidation Event calculated on a pro rata basis and as-converted basis.

In the event of any liquidation, dissolution or winding up of the Company, or upon occurrence of a Liquidation Event as defined in the Sixth Amended And Restated Memorandum And Articles of Association, either voluntary or involuntary, shareholders of Series A-1 Preferred Shares shall be entitled to receive a per share amount equal to the greater of (i) one hundred and twenty percent (120%) of the issuance price, plus all declared but unpaid dividends thereon, and (ii) the aggregate amount that each such preferred share shall be entitled to receive from the total proceeds in connection with such liquidation, dissolution, winding up, or Liquidation Event calculated on a pro rata basis and as-converted basis.

Liquidation preference is as follows in sequence: Series D Preferred Shares, Series C-1 Preferred Shares, Series C Preferred Shares, Series B Preferred Shares, and Series A-1 Preferred Shares together with Series A Preferred Shares.

Drag-along rights

Drag-along rights of the Redeemable Convertible Preferred Shares are the same as the rights of Series A Preferred Shares.

The Company classified the Redeemable Convertible Preferred Shares as mezzanine equity in the consolidated balance sheet as they are contingently redeemable upon the occurrence of certain events outside of the Company’s control.

The Company concluded the embedded conversion and redemption option of the Redeemable Convertible Preferred Shares did not need to be bifurcated pursuant to ASC 815 because these terms do not permit net settlement, nor they can be readily settled net by a means outside the contract, nor they can provide for delivery of an asset that puts the holders in a position not substantially different from net settlement.

The Company also determined that there was no beneficial conversion feature attributable to the Redeemable Convertible Preferred Shares because the initial effective conversion prices of these Redeemable Convertible Preferred Shares were higher than the fair value of the Company’s ordinary shares at the relevant commitment dates. The fair value of the Company’s ordinary shares on the commitment date was estimated by management with the assistance of an independent valuation firm.

The Redeemable Convertible Preferred Shares were recorded initially at fair value, net of issuance costs. The Company recognized changes in the redemption value immediately as they occur and adjust the carrying value of the Redeemable Convertible Preferred Shares to equal the redemption value at the end of each reporting period, as if it were also the redemption date for the Redeemable Convertible Preferred Shares. The reversal of accretion in the carrying amount is only to the extent of the amount of accretion the Company previously recognized.

All of the Redeemable Convertible Preferred Shares were converted to equivalent number of Class A Ordinary Shares immediately upon the completion of the Company’s initial public offering on July 8, 2020.

F-35

12. MEZZANINE EQUITY (Continued)

The Company’s Redeemable Convertible Preferred Shares activities for the years ended December 31, 2019 and 2020 consist of the following:

	Series A-1	Series B	Series C	Series C-1	Series D
	Preferred	Preferred	Preferred	Preferred	Preferred
	Shares	Shares	Shares	Shares	Shares	Total
	RMB	RMB	RMB	RMB	RMB	RMB
Balance as of January 1, 2019	16,359,651	239,225,246	178,003,498	150,811,043	460,765,137	1,045,164,575
Accretion and modification of redeemable convertible preferred shares	1,315,008	237,680,316	144,659,627	104,388,417	142,962,195	631,005,563
Foreign currency translation adjustment	284,668	6,706,446	4,615,264	3,698,609	9,251,062	24,556,049
Balance as of December 31, 2019	17,959,327	483,612,008	327,278,389	258,898,069	612,978,394	1,700,726,187
Accretion (reversal of accretion) of redeemable convertible preferred shares	707,682	(68,419,392)	(49,340,009)	(40,873,954)	(86,155,005)	(244,080,678)
Conversion to Class A Ordinary Shares	(18,780,954)	(418,336,891)	(280,068,866)	(219,711,065)	(530,808,265)	(1,467,706,041)
Foreign currency translation adjustment	113,945	3,144,275	2,130,486	1,686,950	3,984,876	11,060,532
Balance as of December 31, 2020	—	—	—	—	—	—

13. ORDINARY SHARES

Upon incorporation in 2013, the Company’s authorized ordinary shares were 500,000,000 shares with a par value of US$0.0001 per share. The number of ordinary shares issued and outstanding was 5,614,840 as of December 31, 2019.

Immediately prior to the completion of IPO, the Company’s authorized share capital was US$500,000 divided into 5,000,000,000 shares comprising of (i) 4,600,000,000 Class A Ordinary Shares with a par value of US$0.0001 each, (ii) 200,000,000 Class B Ordinary Shares with a par value of US$0.0001 each, (iii) 200,000,000 shares with a par value of US$0.0001 each of such class or classes (however designated) as the board of directors may determine in accordance with the amended and restated memorandum of association.

Immediately prior to the completion of the IPO, all outstanding preferred shares, including (i)1,439,102 shares of Series A Convertible Preferred Shares with a par value of US$0.0001 each, (ii)1,891,291 Series A-1 Redeemable Convertible Preferred Shares with a par value of US$0.0001 each, (iii)1,862,069 Series B Redeemable Convertible Preferred Shares with a par value of US$0.0001 each, (iv)1,246,621 Series C Redeemable Convertible Preferred Shares with a par value of US$0.0001 each, (v)977,961 Series C-1 Redeemable Convertible Preferred Shares with a par value of US$0.0001 each, and (vi)2,143,786 Series D Redeemable Convertible Preferred Shares with a par value of US$0.0001 each, were converted into Class A ordinary shares on a one-for-one basis. All issued and outstanding ordinary shares were re-designated as Class A ordinary shares on a one-for-one basis, except that the 5,614,840 ordinary shares held by BlueCity Media Limited were re-designated as Class B ordinary shares.

In July 2020, the Company completed its IPO of 2,650,000 newly issued Class A ordinary shares, at a public offering price of US$32.0 per share. The net proceeds after deducting underwriting commissions, discounts and underwriter's lawyer fee were approximately US$78 million (RMB549 million).

In April 2021, 500,000 Class B ordinary shares was converted into 500,000 Class A ordinary shares.

As of December 31, 2021, there were 13,618,609 Class A Ordinary Shares and 5,114,840 Class B ordinary shares issued and outstanding.

Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to five votes and is convertible into one Class A ordinary share. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances.

F-36

14. SHARE-BASED COMPENSATION

On March 11, 2015, the Board of Directors of the Company approved and adopted the 2015 Stock Incentive Plan (the “2015 Plan”), under which the Company reserves 1,551,724 shares to motivate directors, employees and consultants of the Group. Stock options granted to an employee under the 2015 Plan are generally subject to a four-year service schedule, under which 25% of the option shall vest on the first anniversary of the vesting commencement date, and the remaining portion shall vest monthly over subsequent 36 months on a pro-rata basis. In addition, no options can be exercised until the Company completes an initial public offering.

On June 15, 2020, the Board of Directors of the Company approved and adopted the 2020 Share Incentive Plan (the “2020 Plan”), under which the Company reserves 758,783 shares to motivate directors, employees and consultants of the Group. Stock options granted to an employee under the 2020 Plan are generally subject to a four-year service schedule, under which 25% of the option shall vest on the first anniversary of the vesting commencement date, and the remaining portion shall vest monthly over subsequent 36 months on a pro-rata basis.

On August 24, 2021, the Board of Directors of the Company approved and adopted the 2021 Share Incentive Plan (the “2021 Plan”), under which the Company reserves 833,550 shares to motivate directors, employees and consultants of the Group. Stock options granted to an employee under the 2021 Plan are generally subject to a four-year service schedule, under which 25% of the option shall vest on the first anniversary of the vesting commencement date, and the remaining portion shall vest monthly over subsequent 36 months on a pro­ rata basis.

In June 2020, the Company granted 303,513 share options to Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Company, under the 2020 Plan. Such share options were vested and exercisable upon the completion of an IPO of the Company with exercise price of US$0.01 per share option. The Company recorded compensation expenses of RMB68,166,664 in general and administrative expenses for the year ended December 31, 2020 relating to these options.

Since the exercisability of all share options granted prior to the Company’s initial public offering is dependent upon the completion of an initial public offering of the Company, no compensation expense relating to the options was recorded for the years ended December 31, 2019. Upon the completion of IPO, the Company immediately recognized share-based compensation expenses of RMB139,374,113 of share options vested cumulatively.

In October 2020, the Company granted 268,487 share options to a former employee in recognition of his past service to the Company. The Company recorded compensation expenses of RMB31,082,306 in general and administrative expenses for the year ended December 31, 2020 relating to these options.

The following table sets forth the stock options activity for the year ended December 31, 2021:

		Weighted	Weighted
		average	remaining	Aggregate
	Number of	exercise	contractual	intrinsic
	shares	price	years	value
		US$		US$
Outstanding as of January 1, 2021	2,005,600	0.01
Granted	508,619	0.01
Expired	(304)	0.01
Exercised	(907,779)	0.01
Forfeited	(234,872)	0.01
Outstanding as of December 31, 2021	1,371,264	0.01	8.24	4,182,355
Vested and expect to be vested as of December 31, 2021	1,371,264	0.01	8.24	4,182,355
Exercisable as of December 31, 2021	809,499	0.01	7.80	2,468,972

F-37

14. SHARE-BASED COMPENSATION (Continued)

The fair value of the options is estimated on the dates of grant using the binomial option pricing model with the following key assumptions used:

	2019	2020	2021
Risk-free rate of return (per annum)	1.78%-2.56%	0.23%-1.70%	1.61%
Volatility	57.20%-60.91%	50.92%-56.70%	59.23%
Expected dividend yield	0%	0%	0%
Exercise multiple	2.2-2.8	2.2-2.8	2.2-2.8
Fair value of underlying ordinary share	US$17.95-US$31.15	US$17.11-US$37.71	US$5.96
Expected term	10 years	10 years	10 years

The expected volatility was estimated based on the historical volatility of the Company and comparable peer public companies with a time horizon close to the expected term of the Company’s options. The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in USD for a term consistent with the expected term of the Company’s options in effect at the option valuation date. The expected exercise multiple was estimated as the average ratio of the stock price to the exercise price of when employees would decide to voluntarily exercise their vested options. Expected dividend yield is zero as the Company has never declared or paid any cash dividends on its shares, and the Company does not anticipate any dividend payments in the foreseeable future.

The weighted average grant date fair value of the share options for the years ended December 31, 2019, 2020 and 2021 were US$29.02, US$28.70 and US$16.19, respectively.

Compensation costs recognized for share options for the year ended December 31, 2019, 2020 and 2021 were allocated to the following expense items:

	As of December 31,
	2019	2020	2021
	RMB	RMB	RMB
Cost of revenues	—	11,698,603	2,140,523
Selling and marketing expenses	—	16,922,885	7,678,679
Technology and product development expenses	—	16,737,624	5,261,232
General and administrative expenses	—	141,544,319	830,710
Total share option compensation expenses	—	186,903,431	15,911,144

As of December 31, 2021, RMB40,677,525 of total unrecognized compensation expense related to non-vested share options is expected to be recognized over a weighted average period of 2.76 years.

15. FAIR VALUE MEASUREMENT

Assets and liabilities measured at fair value on a recurring basis

The following tables present the fair value hierarchy for the asset measured at fair value on a recurring basis as of December 31, 2020:

	As of December 31, 2020			Total Fair
RMB	Level 1	Level 2	Level 3	Value
Investment securities:
Equity securities with readily determinable fair value	—	—	50,000	50,000
Total	—	—	50,000	50,000

No assets and liabilities were measured at fair value on a recurring basis as of December 31, 2021.

F-38

15. FAIR VALUE MEASUREMENT (Continued)

The tables below reflect the reconciliation from the opening balances to the closing balances for recurring fair value measurements categorized as Level 3 of the fair value hierarchy for the years ended December 31, 2019, 2020 and 2021:

		For the Year Ended December 31, 2019
		Gain or Losses
			Included in	Foreign
			Other	Currency
	January 1,	Included in	Comprehensive	Translation		December 31,
RMB	2019	Earnings	Loss	Adjustment	Extinguishment	2019
Investment securities:
Debt securities	21,559,157	—	1,591,098	373,491	—	23,523,746
Equity securities with readily determinable fair value	328,742	(274,829)	—	1,389	—	55,302
Total	21,887,899	(274,829)	1,591,098	374,880	—	23,579,048
Liabilities:
Convertible debt	(22,450,219)	(8,749,608)	—	(633,141)	31,832,968	—

		For the Year Ended December 31, 2020
		Gain or Losses
			Included in	Foreign
			Other	Currency
	January 1,	Included in	Comprehensive	Translation		December 31,
RMB	2020	Earnings	Loss	Adjustment	Disposal	2020
Investment securities:
Debt securities	23,523,746	4,863,233	(3,406,863)	42,977	(25,023,093)	—
Equity securities with readily determinable fair value	55,302	(5,247)	—	17	(72)	50,000
Total	23,579,048	4,857,986	(3,406,863)	42,994	(25,023,165)	50,000

		For the Year Ended December 31, 2021
		Gain or Losses
			Included in	Foreign
			Other	Currency
	January 1,	Included in	Comprehensive	Translation		December 31,
RMB	2021	Earnings	Loss	Adjustment	Disposal	2021
Investment securities:
Equity securities with readily determinable fair value	50,000	—	—	—	(50,000)	—
Total	50,000	—	—	—	(50,000)	—

For debt securities, equity securities with readily determinable fair value and convertible debt that do not have a quoted market rate, the Company measured their fair value based on the market approach or income approach when no recent transactions are available. The market approach takes into consideration a number of factors including market multiple and discount rates from traded companies in the industry and requires the Company to make certain assumptions and estimates regarding industry factors. Specifically, some of the significant unobservable inputs included the investee’s historical earning on sale, discount of lack of marketability, investee’s time to initial public offering as well as related volatility. The income approach takes into consideration a number of factors including management projection of discounted future cash flow of the investee as well as an appropriate discount rate. The Company has classified those as level 3 measurement. The assumptions are inherently uncertain and subjective. Changes in any unobservable inputs may have a significant impact on the fair values.

F-39

15. FAIR VALUE MEASUREMENT (Continued)

Assets measured at fair value on a nonrecurring basis

The Company measured its property and equipment, intangible assets and goodwill at fair value on a nonrecurring basis whenever events or changes in circumstances indicate that the carrying value may no longer be recoverable.

Goodwill is evaluated for impairment annually or more frequently if events or conditions were to indicate the carrying value of a reporting unit may be greater than its fair value. Impairment testing compares the carrying amount of the reporting unit with its fair value. As of December 31, 2021, The Group performed quantitative impairment test for goodwill using the discounted cash flow method when determining the fair value of the reporting unit. The fair value of goodwill is a Level 3 valuation based on certain unobservable inputs, see Note 9 for details.

16. INCOME TAX

(a)     Income tax

Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.

Hong Kong S.A.R.

Under the current Hong Kong S.A.R. Inland Revenue Ordinance, the Company’s Hong Kong S.A.R. subsidiaries are subject to Hong Kong S.A.R. profits tax at the rate of 16.5% on its taxable income generated from the operations in Hong Kong S.A.R.. Payments of dividends by the Hong Kong S.A.R. subsidiaries to the Company is not subject to withholding tax in Hong Kong S.A.R.. A two-tiered profits tax rates regime was introduced in 2018 where the first HK$2 million of assessable profits earned by a company will be taxed at half of the current tax rate (8.25%) whilst the remaining profits will continue to be taxed at 16.5%. There is an anti-fragmentation measure where each group will have to nominate only one company in the group to benefit from the progressive rates.

PRC

The Group’s PRC subsidiaries, VIE and VIE’s subsidiaries are subject to the PRC Corporate Income Tax Law (“CIT Law”) at the statutory income tax rate of 25%, unless otherwise specified. According to the CIT Law, entities that qualify as “high-and-new technology enterprises” (“HNTE”) are entitled to a preferential income tax rate of 15%.

In 2017, BlueCity Information Technology received the approval from the tax authority that it qualified as an HNTE. The certificate entitled BlueCity Information Technology to the preferential income tax rate of 15% effective retroactively from January 1, 2017 to December 31, 2019. In 2020, BlueCity Information Technology completed the renewal of HNTE certificate. The renewed certificate entitled BlueCity Information Technology to the preferential income tax rate of 15% effective retroactively from January 1, 2020 to December 31, 2022, if all the criteria for HNTE status could be satisfied in the relevant year.

The components of loss before income taxes are as follows:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
PRC, excluding Hong Kong S.A.R.	13,363,885	165,783,490	229,692,055
Hong Kong S.A.R.	36,302,843	38,305,342	59,079,524
Japan	258,209	7,697,439	3,446,328
Cayman	646,803	5,332,840	14,378,166
Others	1,427,214	6,175,567	2,206,865
Total	51,998,954	223,294,678	308,802,938

F-40

16. INCOME TAX (Continued)

The Group’s income tax expense (benefit) recognized in the consolidated statements of comprehensive loss consists of the following:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Current income tax expense (benefit)-PRC, excluding Hong Kong S.A.R..	112,473	(64,615)	1,168,707
Current income tax expense-Others	818,081	1,118,133	1,819,398
Current income tax expense-total	930,554	1,053,518	2,988,105
Deferred income tax benefit-PRC, excluding Hong Kong S.A.R	—	(2,495,332)	(2,167,099)
Income tax expense (benefit)	930,554	(1,441,814)	821,006

Reconciliation of the differences between PRC statutory income tax rate and the Group’s effective income tax rate for the years ended December 31, 2019, 2020 and 2021 are as follows:

	For the Year Ended
	December 31,
	2019		2020		2021
	RMB		RMB		RMB
PRC Statutory income tax rate	(25.0)	%	(25.0)	%	(25.0)	%
Increase (decrease) in effective income tax rate resulting from:
Tax rate differential for non-PRC entities	6.1	%	1.8	%	2.9	%
Preferential tax rate	6.5	%	(3.2)	%	7.3	%
Research and development expenses additional deduction	(15.5)	%	(3.7)	%	(6.8)	%
Non-deductible share-based compensation expenses	—		20.9	%	1.3	%
Non-taxable income	—		(0.5)	%	(0.1)	%
Impairment of goodwill	—		—		8.7	%
Other non-deductible expenses	0.5	%	2.4	%	2.8	%
Change in valuation allowance	29.2	%	6.7	%	9.2	%
Effective income tax rate	1.8	%	(0.6)	%	0.3	%

(b)     Deferred income tax assets and deferred income tax liabilities

	As of December 31,
	2020	2021
	RMB	RMB
Net operating loss carry forwards	72,435,457	99,347,341
Donation	457,730	480,684
Deductible advertising expenses	867,094	2,103,893
Total deferred income tax assets	73,760,281	101,931,918
Less: Valuation allowance	(71,676,908)	(100,483,935)
Deferred income tax assets, net	2,083,373	1,447,983
Intangible assets	(13,038,256)	(11,051,079)
Deferred income tax liabilities	(13,038,256)	(11,051,079)
Net deferred income tax liabilities	(10,954,883)	(9,603,096)

As of December 31, 2021, the Group had net operating loss carry forwards of RMB383,226,479 attributable to the PRC subsidiaries, consolidated VIE and VIE’s subsidiaries, of which RMB379,756, RMB 206,696, RMB1,466,535, RMB8,271,951, RMB11,009,934, RMB50,611,222, RMB49,150,819, RMB35,279,589 and RMB226,849,977 will expire if unused by December 31, 2022, 2023, 2024, 2025, 2026, 2027, 2028, 2029 and 2031, respectively.

F-41

16. INCOME TAX (Continued)

A valuation allowance is provided against deferred income tax assets when the Group determines that it is more likely than not that the deferred income tax assets will not be utilized in the foreseeable future. The Group evaluates the potential realization of deferred income tax assets on an entity-by-entity basis. Accordingly, the Group has provided full valuation allowance against deferred income tax assets in entities where it was determined it was more-likely-than-not that the benefits of the deferred income tax assets will not be realized as of December 31, 2021.

Changes in valuation allowance are as follows:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Balance at the beginning of the year	42,910,959	57,960,509	71,676,908
Additions of valuation allowance	14,728,024	28,879,521	46,283,222
Reductions of valuation allowance	—	(13,070,605)	(16,639,886)
Foreign exchange translation adjustments	321,526	(2,092,517)	(836,309)
Balance at the end of the year	57,960,509	71,676,908	100,483,935

According to the PRC Tax Administration and Collection Law, the statute of limitation is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitation is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000. In the case of transfer pricing issues, the statute of limitation is 10 years. There is no statute of limitation in the case of tax evasion. The income tax returns of the Company’s PRC subsidiaries, consolidated VIE and VIE’s subsidiaries for the years from 2017 to 2021 are open to examination by the PRC tax authorities. The Hong Kong tax authorities have up to six years to conduct examinations of the Company’s tax filings. Accordingly, the Hong Kong subsidiaries’ tax years 2016 through 2021 remain open to examination by the Hong Kong tax authorities.

17. NET (LOSS ) INCOME PER SHARE

The following table sets forth the basic net (loss) income and diluted net loss per share computation and provides a reconciliation of the numerator and denominator for the years presented. Shares issuable for little consideration relating to the vested share options have been included in the number of outstanding shares used for basic (loss) income per share:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Numerator:
Net loss	(52,929,508)	(221,852,864)	(309,623,944)
(Accretion) reversal of accretion and modification of redeemable convertible preferred shares	(631,005,563)	244,080,678	—
Net income attributable to preferred shareholders	—	(6,706,551)	—
Numerator for basic net (loss) income per Class A and Class B Ordinary Share calculation	(683,935,071)	15,521,263	(309,623,944)
Denominator:
Weighted average number of Class A and Class B Ordinary Share and ordinary share equivalents	5,614,840	11,974,046	19,352,595
Denominator for basic net (loss) income per Class A and Class B Ordinary Share calculation	5,614,840	11,974,046	19,352,595
Net (loss) income per Class A and Class B Ordinary Share
—Basic	(121.81)	1.30	(16.00)
Numerator:
Net (loss) income allocated to Class A and Class B ordinary shareholders as reported in basic net loss (income) per Class A and Class B Ordinary Share	(683,935,071)	15,521,263	(309,623,944)
Net income attributable to preferred shareholders	—	6,706,551	—
Reversal of accretion on Series B, C, C-1, and D Redeemable Convertible Preferred Shares	—	(244,788,360)	—
Numerator for diluted net loss per share calculation	(683,935,071)	(222,560,546)	(309,623,944)
Denominator:
Weighted average number of Class A and Class B Ordinary Share and ordinary share equivalents	5,614,840	11,974,046	19,352,595
Effect of dilutive securities of Series B, C, C-1, and D Redeemable Convertible Preferred Shares	—	3,234,380	—
Denominator for diluted net loss per share calculation	5,614,840	15,208,426	19,352,595
Net loss per Class A and Class B Ordinary Share
—Diluted	(121.81)	(14.63)	(16.00)

F-42

17. NET (LOSS ) INCOME PER SHARE (Continued)

The potentially dilutive securities that have not been included in the calculation of diluted net loss per share as their inclusion would be anti-dilutive are as follows:

	As of December 31,
	2019	2020	2021
Stock options	1,084,545	762,167	561,765
Preferred shares	9,560,830	—	—

18. RELATED PARTY TRANSACTIONS

On April 12, 2018, the Board of Directors of the Company approved to repurchase 288,240 unvested share options from BlueCity Media Limited, which is controlled by Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Company, with consideration of US$8 million. US$7 million was paid in the year of 2018, and the remaining US$1 million (equivalent to RMB6,898,800) was paid in the year of 2019.

During the year ended December 31, 2019, the Group provided interest free loans in the amount of RMB8.0 million to Mr. Baoli Ma. All the loans were repaid by Mr. Baoli Ma during the year ended December 31, 2019.

On April 3, 2020, the Company made a payment of RMB4,722,814 on behalf of Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Company. All the amount was repaid by Mr. Baoli Ma on August 19, 2020.

Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Company, subscribed for, through BlueCity Media Limited, and were allocated by the underwriters, an aggregate of 312,500 American depositary shares (the “ADSs”), which represents 156,250 Class A Ordinary Shares, in the Company’s initial public offering at the initial public offering price and on the same terms as the other ADSs being offered, for consideration of US$5.0 million (equivalent to RMB35,103,500).

19. REVENUE INFORMATION

Revenues consisted of the following:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Services
Live streaming	671,410,681	868,946,403	820,825,553
Advertising	35,383,571	45,452,681	53,881,336
Membership	36,738,369	71,227,203	128,809,051
Others	15,355,285	17,022,768	8,866,367
Total service revenues	758,887,906	1,002,649,055	1,012,382,307
Merchandise sales	—	28,674,389	64,209,123
Total revenues	758,887,906	1,031,323,444	1,076,591,430

F-43

20. COMMITMENTS AND CONTINGENCIES

Lease commitments

The Group leases its offices under non-cancelable operating lease agreements. Rental expenses were RMB8,127,122, RMB12,673,230 and RMB15,403,884 for the years ended December 31, 2019, 2020 and 2021, respectively.

As of December 31, 2021, future minimum lease commitments under office non-cancelable operating lease agreements, were as follows:

	Offices
Year ending December 31,	RMB
2022	13,315,511
2023	3,718,738
2024	486,426
2025	123,072

Except for those disclosed above, the Group did not have any significant capital or other commitments, long-term obligations, or guarantees as of December 31, 2021.

Litigation contingencies

In April and July 2021, the Company and its certain executives and directors were named as defendants in two consolidated class action lawsuits filed in the New York Supreme Court and United States District Court, respectively. The complaints in the action allege that the Company’s registration statements contained misstatements or omissions regarding its business, operation, and compliance in violation of the U.S. securities laws. As the case remains in its early stage, the likelihood of any unfavorable outcome or any estimate of the amount or range of any potential loss cannot be reasonably estimated at the issuance of this report. As a result, the Company did not record any liabilities pertaining to this.

21. BUSINESS COMBINATIONS

Acquisition of Guangzhou Yingyoutianxia Networks Technology Co., Ltd ("Lesdo")

On August 25, 2020, the Group acquired 100% equity interest of Lesdo, a leading location-based social networking service provider targeting the lesbian community in China. The consideration was RMB1,328,418, of which RMB805,418 and RMB523,000 were paid for the years ended December 31, 2020 and 2021, respectively.

The identifiable assets acquired and liabilities assumed in the business combination were recorded at their fair values on the acquisition date and consisted of the following major items.

		Estimated useful
	RMB	lives
Cash and cash equivalents	77
Intangible assets
User base	800,000	3	years
Brand name	2,100,000	10	years
Technology	1,080,000	3	years
Total assets	3,980,077
Other current liabilities	(4,711,582)
Deferred income tax liabilities	(995,000)
Goodwill	3,054,923
Total consideration	1,328,418

F-44

21. BUSINESS COMBINATIONS (Continued)

Acquisition of iRainbow Hong Kong Limited (“Finka”) and all of its subsidiaries and other entities under the control of Finka

On December 1, 2020, the Group acquired 100% equity interest of Finka, which is a leading gay social networking app in China targeting younger generations. The consideration was USD35,997,984 (RMB237,227,055) in cash, of which USD32,286,199 (RMB212,773,650) and USD3,711,785 (RMB23,968,600) were paid for the years ended December 31, 2020 and 2021, respectively.

The identifiable assets acquired and liabilities assumed in the business combination were recorded at their fair values on the acquisition date and consisted of the following major items.

		Estimated useful
	RMB	lives
Cash and cash equivalents	10,497,160
Accounts receivable	1,716,623
Other current assets	6,323,155
Intangible assets
User base	6,930,000	4	years
Brand name	36,400,000	10	years
Technology	2,380,000	3	years
Total assets	64,246,938
Accounts payable	(208,984)
Other current liabilities	(8,331,044)
Deferred income tax liabilities	(11,427,500)
Goodwill	192,947,645
Total consideration	237,227,055

Goodwill, which is not tax deductible, is primarily attributable to the assembled workforce and synergies expected to be achieved from the two acquisitions. The synergies mainly come from the enhancement of the Group’s position in the LGBTQ community.

F-45

22. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

The following condensed parent company financial information of BlueCity Holdings Limited has been prepared using the same accounting policies as set out in the accompanying consolidated financial statements. As of December 31, 2021 there were no material contingencies, significant provisions of long term obligations, mandatory dividend or redemption requirements of redeemable stocks or guarantees of BlueCity Holdings Limited, except for those which have been separately disclosed in the consolidated financial statements.

(a)    Condensed Balance Sheets

	As of December 31,
	2020	2021
	RMB	RMB
Assets
Current assets
Cash	261,878,455	15,988,107
Prepayments and other current assets	1,483,169	4,285,975
Total current assets	263,361,624	20,274,082
Non-current assets
Investment in subsidiaries and consolidated VIE and VIE’s subsidiaries	517,611,994	437,336,118
Total non-current assets	517,611,994	437,336,118
Total assets	780,973,618	457,610,200
Liabilities
Current liabilities
Accrued expenses and other current liabilities	23,779,434	11,663,674
Total current liabilities and total liabilities	23,779,434	11,663,674
Shareholders’ equity:
Class A Ordinary Shares	8,572	9,487
Class B Ordinary Shares	3,446	3,118
Additional paid-in capital	2,188,870,625	2,204,845,216
Accumulated other comprehensive loss	(107,514,737)	(125,113,629)
Accumulated deficit	(1,324,173,722)	(1,633,797,666)
Total shareholders’ equity	757,194,184	445,946,526
Total liabilities and shareholders’ equity	780,973,618	457,610,200

(b)    Condensed Statements of Results of Operations

	For the Year Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Total operating expenses	(883,243)	(5,209,656)	(14,378,165)
Change in fair value of a convertible debt	(8,749,608)	—	—
Gain on extinguishment of a convertible debt	8,986,048	—	—
Share of losses from subsidiaries, VIE and VIE’s subsidiaries	(52,282,705)	(216,643,208)	(295,245,779)
Loss before income tax	(52,929,508)	(221,852,864)	(309,623,944)
Income tax expense	—	—	—
Net loss	(52,929,508)	(221,852,864)	(309,623,944)

F-46

22. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)

(c)    Condensed Statements of Cash Flows

	For the Year Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Net cash (used in) provided by operating activities	(702,200)	1,961,394	(6,796,246)
Net cash provided by (used in) investing activities	2,015,462	(252,497,206)	(234,224,099)
Net cash (used in) provided by financing activities	(920,710)	532,995,338	64,034
Effect of foreign currency exchange rate changes on cash	76,203	(21,301,631)	(4,934,037)
Net (decrease) increase in cash	468,755	261,157,895	(245,890,348)
Cash at the beginning of the year	251,805	720,560	261,878,455
Cash at the end of the year	720,560	261,878,455	15,988,107

23. SUBSEQUENT EVENTS

The Company received a preliminary non-binding proposal letter, dated January 2, 2022, from Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Group, and Spriver Tech Limited.  According to the proposal letter, Mr. Baoli Ma and Spriver Tech Limited are interested in acquiring all of the Company’s outstanding ordinary shares that are not currently beneficially owned by them, including Class A ordinary shares represented by the Company’s American depositary shares or “ADSs” (each two representing one Class A ordinary share), at a price of $1.85 in cash per ADS (or approximately $3.7 in cash per ordinary share).

The Company received a preliminary non-binding proposal letter, dated April 18, 2022, from Mr. Baoli Ma and Metaclass Management ELP, an affiliate of Spriver Tech Limited. The proposal letter updates the original proposal to (i) inform the Board of Directors of the Company that Metaclass Management ELP is replacing Spriver Tech Limited as Sponsor and (ii) reduce the proposed purchase price from US$3.70 per ordinary share or US$1.85 per ADS in cash to US$3.20 per ordinary share or US$1.60 per ADS in cash.

F-47

EX-8.1

Exhibit 8.1

LIST OF PRINCIPAL SUBSIDIARIES AND CONSOLIDATED AFFILIATED ENTITIES*

Subsidiaries	Place of Incorporation
BlueCity Holdings Hong Kong Limited	Hong Kong
BlueCity Holdings Global Limited	Hong Kong
Bluedbaby Global Limited	Hong Kong
Fleeper Holdings Limited	Hong Kong
iRainbow Hong Kong Limited	Hong Kong
BlueCity Vietnam Company Limited	Vietnam
Bluebaby LLC	U.S.
Blued Japan Co., Ltd.	Japan
Land of Glory Ltd.	Cayman Islands
Catchme LLC	U.S.
Beijing BlueCity Information & Technology Co., Ltd.	PRC
Beijing Aloha Technology Co., Ltd.	PRC

Principal Consolidated Variable Interest Entity and its Subsidiaries	Place of Incorporation
Beijing BlueCity Culture and Media Co., Ltd.	PRC
Beijing BlueCity Youning Health Management Co., Ltd.	PRC
Danlan (Beijing) Media Co., Ltd.	PRC
City of Glory Chengdu Information Technology Co., Ltd.	PRC
Shandong Youping Pharmacy Chain Co., Ltd.	PRC
Beijing Asphere Interactive Network Technology Co., Ltd.	PRC
Shandong He Health Internet Hospital Co., Ltd.	PRC
Chongqing Changyuan Pharmaceutical Co., Ltd.	PRC
Guangzhou Yingyoutianxia Networks Technology Co., Ltd.	PRC
Beijing You Ji Technology Culture Co., Ltd	PRC
Beijing Aiyou Jiuyou Network Technology Co., Ltd	PRC
Beijing Lanpengyou Catering Management Co., Ltd	PRC
Beijing Duoyuanyin Culture Media Co., Ltd	PRC

EX-12.1

Exhibit 12.1

CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Baoli Ma, certify that:

1.     I have reviewed this annual report on Form 20-F of BlueCity Holdings Limited;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a mate­rial fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly pres­ent in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.     The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)       Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)      Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.     The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)      Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:	April 28, 2022
/s/ Baoli Ma
Name: Baoli Ma
Title: Chief Executive Officer

EX-12.2

Exhibit 12.2

CERTIFICATION BY THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002

I, Alfred Chung-Chieh Ying, certify that:

1.     I have reviewed this annual report on Form 20-F of BlueCity Holdings Limited;

2.     Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a mate­rial fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.     Based on my knowledge, the financial statements, and other financial information included in this report, fairly pres­ent in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;

4.     The company’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the company and have:

(a)       Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)      Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)       Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)      Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and

5.     The company’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal con­trol over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):

(a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and

(b)      Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:	April 28, 2022
/s/ Alfred Chung-Chieh Ying
Name: Alfred Chung-Chieh Ying
Title: Chief Strategy Officer

EX-13.1

Exhibit 13.1

CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of BlueCity Holdings Limited (the “Company”) on Form 20-F for the year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Baoli Ma, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)     The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)     The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	April 28, 2022
By:	/s/ Baoli Ma
Name:	Baoli Ma
Title:	Chief Executive Officer

EX-13.2

Exhibit 13.2

CERTIFICATION BY THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF
THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of BlueCity Holdings Limited (the “Company”) on Form 20-F for the year ended December 31, 2021 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Alfred Chung-Chieh Ying, Chief Strategy Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

(1)    The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)    The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	April 28, 2022
By:	/s/ Alfred Chung-Chieh Ying
Name:	Alfred Chung-Chieh Ying
Title:	Chief Strategy Officer

EX-15.1

Exhibit 15.1

	nd Floor, Cricket Square
	CONYERS DILL & PEARMAN SIX, 2nd Floor, Cricket Square PO Box 2681, Grand Cayman KY1-1111 Cayman Islands T +1 345 945 3901 conyers.com

28 April 2022

Matter No.: 833063852 2842 9530Richard.Hall@conyers.com

BlueCity Holdings Limited

Block 2 Tower B Room 028

No. 22 Pingguo Shequ Bai Zi Wan Road

Chaoyang District

Beijing 100022

People’s Republic of China

Dear Sir/Madam,

Re: BlueCity Holdings Limited

We have acted as special legal advisers as to the laws of the Cayman Islands to BlueCity Holdings Limited, an exempted company incorporated with limited liability in the Cayman Islands (the “Company”), in connection with the filing by the Company with the United States Securities and Exchange Commission (the “SEC”) of an annual report on Form 20-F for the year ended 31 December 2021 (the “Annual Report”).

We hereby consent to the reference to our firm under the headings “Item 5.A Operating Results—Taxation” and “Item 10.B. Additional Information—Memorandum and Articles of Association” in the Annual Report, and we further consent to the incorporation by reference of the summary of our opinions under these headings into the Company’s registration statement on Form S-8 (File No. 333-249899) that was filed on 6 November 2020 pertaining to the Company’s 2015 Stock Incentive Plan and 2020 Share Incentive Plan, and the Company’s registration statement on Form S-8 (File No. 333- 239205) that was filed on 4 October 2021 pertaining to the and 2021 Share Incentive Plan.

We consent to the filing with the SEC of this consent letter as an exhibit to the Annual Report. In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.

Yours faithfully,

/s/ Conyers Dill & Pearman

Conyers Dill & Pearman

EX-15.2

Exhibit 15.2

	April 28, 2022

BlueCity Holdings Limited

Block 2 Tower B Room 028, No. 22 Pingguo Shequ

Bai Zi Wan Road, Chaoyang District

Beijing 100022

People’s Republic of China

Re: Consent of People’s Republic of China Counsel

Dear Sirs,

We consent to the reference to our firm under the headings “Item 3.D. Key Information - Risk Factors - Risks Related to Our Corporate Structure” and “Item 4. Information on the Company - C. Organizational Structure” in the annual report of BlueCity Holdings Limited on Form 20-F for the year ended December 31, 2021 (the “Annual Report”), which is filed with the U.S. Securities and Exchange Commission on the date hereof. We also consent to the filing of this consent letter with the U.S. Securities and Exchange Commission as an exhibit to the Annual Report.

In giving such consent, we do not thereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, or under the Securities Exchange Act of 1934, in each case, as amended, or the regulations promulgated thereunder.

Very truly yours,

/s/ King & Wood Mallesons

King & Wood Mallesons

EX-15.3

Exhibit 15.3

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statements (No. 333-249899 and No. 333-259999) on Form S-8 of our report dated April 28, 2022, with respect to the consolidated financial statements of BlueCity Holdings Limited.

/s/ KPMG Huazhen LLP

Beijing, China

April 28, 2022

XML

Document and Entity Information	12 Months Ended
	Dec. 31, 2021 shares
Document Information [Line Items]
Document Type	20-F
Document Registration Statement	false
Document Annual Report	true
Document Transition Report	false
Document Shell Company Report	false
Document Period End Date	Dec. 31, 2021
Entity File Number	001-39364
Entity Registrant Name	BlueCity Holdings Limited
Entity Incorporation, State or Country Code	E9
Entity Address, Address Line One	Block 2 Tower B Room 028,
Entity Address, Address Line Two	No. 22 Pingguo Shequ,
Entity Address, Address Line Three	Bai Zi Wan Road, Chaoyang District
Entity Address, City or Town	Beijing
Entity Address, Postal Zip Code	100022
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Document Accounting Standard	U.S. GAAP
Entity Emerging Growth Company	true
Entity Ex Transition Period	false
Entity Shell Company	false
Entity Central Index Key	0001791278
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	FY
Amendment Flag	false
ICFR Auditor Attestation Flag	false
Entity Address, Country	CN
Auditor Name	KPMG Huazhen LLP
Auditor Firm ID	1186
Auditor Location	Beijing, China
American Depository shares
Document Information [Line Items]
Title of 12(b) Security	American depositary shares, each two American depositary shares representing one Class A ordinary share
Trading Symbol	BLCT
Security Exchange Name	NASDAQ
Ordinary shares.
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	18,733,449
Class A
Document Information [Line Items]
Title of 12(b) Security	Class A ordinary shares, par value US$0.0001 per share*
Security Exchange Name	NASDAQ
Entity Common Stock, Shares Outstanding	13,618,609
No Trading Symbol Flag	true
Class B
Document Information [Line Items]
Entity Common Stock, Shares Outstanding	5,114,840
Business Contact
Document Information [Line Items]
Contact Personnel Name	Junchen Sun, Acting
Entity Address, Address Line One	Block 2 Tower B Room 028, No. 22
Entity Address, Address Line Two	Pingguo Shequ
Entity Address, Address Line Three	Bai Zi Wan Road, Chaoyang District
Entity Address, City or Town	Beijing
Entity Address, Postal Zip Code	100022
City Area Code	86 10
Local Phone Number	5876-9855
Contact Personnel Email Address	sunjunchen@bluecity.com
Entity Address, Country	CN

XML

CONSOLIDATED BALANCE SHEETS	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)
Current assets
Cash and cash equivalents	¥ 349,785,624	$ 54,888,997	¥ 439,492,788
Term deposits			172,257,360
Accounts receivable, net (net of allowance of nil as of December 31, 2020 and 2021, respectively)	12,878,562	2,020,927	5,588,023
Inventories	7,401,509	1,161,458	6,853,202
Prepayments and other current assets	99,777,088	15,657,202	58,629,416
Total current assets	469,842,783	73,728,584	682,820,789
Non-current assets
Investment securities			50,000
Property and equipment, net	11,186,159	1,755,352	11,445,548
Intangible assets, net	44,204,317	6,936,622	52,084,512
Goodwill	81,751,864	12,828,651	196,002,568
Other non-current assets	3,177,465	498,614	2,426,128
Total non-current assets	140,319,805	22,019,239	262,008,756
Total assets	610,162,588	95,747,823	944,829,545
Current liabilities
Accounts payable (including accounts payable of VIE without recourse to the Company of 6,817,776 and RMB11,444,579 as of December 31, 2020 and 2021, respectively)	28,507,188	4,473,400	20,372,680
Deferred revenue (including deferred revenue of VIE without recourse to the Company of RMB34,541,710 and RMB35,217,012 as of December 31, 2020 and 2021, respectively)	35,796,254	5,617,213	35,226,237
Income tax payable (including income tax payable of VIE without recourse to the Company of RMB291,441 and RMB1,460,149 as of December 31, 2020 and 2021, respectively)	5,047,173	792,012	2,122,765
Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of VIE without recourse to the Company of RMB49,315,134 and RMB27,246,274 as of December 31, 2020 and 2021, respectively)	82,962,351	13,018,602	118,958,796
Total current liabilities	152,312,966	23,901,227	176,680,478
Non-current liabilities
Deferred income tax liabilities (including deferred income tax liabilities of VIE without recourse to the Company of 10,954,883 and RMB9,603,096 as of December 31, 2020 and 2021, respectively)	9,603,096	1,506,935	10,954,883
Other non-current liabilities (including other non-current liabilities of VIE without recourse to the Company of nil and RMB2,300,000 as of December 31, 2020 and 2021, respectively)	2,300,000	360,920
Total non-current liabilities	11,903,096	1,867,855	10,954,883
Total liabilities	164,216,062	25,769,082	187,635,361
Commitments and contingencies (Note 20)
SHAREHOLDERS' EQUITY:
Additional paid-in capital	2,204,845,216	345,988,328	2,188,870,625
Accumulated other comprehensive loss	(125,113,629)	(19,633,059)	(107,514,737)
Accumulated deficit	(1,633,797,666)	(256,378,506)	(1,324,173,722)
Total shareholders' equity	445,946,526	69,978,741	757,194,184
Total liabilities and shareholders' equity	610,162,588	95,747,823	944,829,545
Class A
SHAREHOLDERS' EQUITY:
Ordinary Shares	9,487	1,489	8,572
Class B
SHAREHOLDERS' EQUITY:
Ordinary Shares	¥ 3,118	$ 489	¥ 3,446

XML

CONSOLIDATED BALANCE SHEETS (Parenthetical)	Dec. 31, 2021 CNY (¥) shares	Dec. 31, 2021 USD ($) $ / shares shares	Jan. 01, 2021 CNY (¥)	Dec. 31, 2020 CNY (¥) shares	Jul. 31, 2020 $ / shares shares	Jan. 01, 2020 CNY (¥)	Dec. 31, 2019 shares	Dec. 31, 2018 CNY (¥)	Dec. 31, 2013 $ / shares shares
Accounts receivable, allowance | ¥	¥ 0			¥ 0				¥ 1,857,463
Accounts payable	28,507,188	$ 4,473,400		20,372,680
Deferred revenue	35,796,254	5,617,213	¥ 35,226,237	35,226,237		¥ 32,555,402
Income tax payable	5,047,173	792,012		2,122,765
Accrued expenses and other current liabilities	82,962,351	13,018,602		118,958,796
Deferred income tax liabilities	9,603,096	1,506,935		¥ 10,954,883
Other non-current liabilities	¥ 2,300,000	$ 360,920
Ordinary Shares
Par value per share (in dollars per share) | $ / shares									$ 0.0001
Shares authorized (in shares)					5,000,000,000				500,000,000
Shares issued (in shares)	5,114,840	5,114,840					5,614,840
Shares outstanding (in shares)							5,614,840
Class A
Ordinary Shares
Par value per share (in dollars per share) | $ / shares		$ 0.0001			$ 0.0001
Shares authorized (in shares)	4,600,000,000	4,600,000,000		4,600,000,000	4,600,000,000
Shares issued (in shares)	13,618,609	13,618,609		12,210,830
Shares outstanding (in shares)	13,618,609	13,618,609		12,210,830
Class B
Ordinary Shares
Par value per share (in dollars per share) | $ / shares		$ 0.0001			$ 0.0001
Shares authorized (in shares)	200,000,000	200,000,000		200,000,000	200,000,000
Shares issued (in shares)	5,114,840	5,114,840		5,614,840
Shares outstanding (in shares)	5,114,840	5,114,840		5,614,840
VIE
Accounts payable | ¥	¥ 11,444,579			¥ 6,817,776
Deferred revenue | ¥	35,217,012			34,541,710
Income tax payable | ¥	1,460,149			291,441
Accrued expenses and other current liabilities | ¥	27,246,274			49,315,134
Deferred income tax liabilities | ¥	9,603,096			10,954,883
Other non-current liabilities | ¥	¥ 2,300,000			¥ 0

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS	12 Months Ended
	Dec. 31, 2021 CNY (¥) ¥ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares	Dec. 31, 2020 CNY (¥) ¥ / shares shares	Dec. 31, 2019 CNY (¥) ¥ / shares shares
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Revenues	¥ 1,076,591,430	$ 168,940,688	¥ 1,031,323,444	¥ 758,887,906
Cost and expenses:
Cost of revenues	(728,065,167)	(114,249,312)	(720,370,586)	(546,211,172)
Selling and marketing expenses	(220,464,208)	(34,595,645)	(187,281,558)	(119,436,794)
Technology and development expenses	(219,741,246)	(34,482,197)	(149,255,609)	(129,651,820)
General and administrative expenses	(109,099,156)	(17,120,038)	(209,086,316)	(24,439,169)
Impairment of intangible assets	(2,915,000)	(457,427)	0	0
Impairment of goodwill	(106,949,249)	(16,782,671)
Total cost and expenses	(1,387,234,026)	(217,687,290)	(1,265,994,069)	(819,738,955)
Operating loss	(310,642,596)	(48,746,602)	(234,670,625)	(60,851,049)
Changes in fair value of financial instruments			(5,247)	(9,024,437)
Gain (loss) on disposal of an investment security	(50,000)	(7,846)	4,863,233
Gain on extinguishment of a convertible debt				8,986,048
Interest income	1,889,658	296,529	6,517,961	8,890,484
Loss before income taxes	(308,802,938)	(48,457,919)	(223,294,678)	(51,998,954)
Income tax (expense) benefit	(821,006)	(128,834)	1,441,814	(930,554)
Net loss	(309,623,944)	(48,586,753)	(221,852,864)	(52,929,508)
(Accretion) reversal of accretion and modification of Redeemable Convertible Preferred Shares to redemption value			244,080,678	(631,005,563)
Net (loss) income available for distribution	¥ (309,623,944)	$ (48,586,753)	¥ 22,227,814	¥ (683,935,071)
Net (loss) income per Class A and Class B Ordinary Share
-Basic | (per share)	¥ (16.00)	$ (2.51)	¥ 1.30	¥ (121.81)
-Diluted | (per share)	¥ (16.00)	$ (2.51)	¥ (14.63)	¥ (121.81)
Weighted average number of Class A and Class B Ordinary Share and ordinary share equivalents outstanding used in computing net (loss) income per Class A and Class B Ordinary Share
-Basic | shares	19,352,595	19,352,595	11,974,046	5,614,840
-Diluted | shares	19,352,595	19,352,595	15,208,426	5,614,840
Other comprehensive loss
Unrealized gains on an available-for-sale investment, net of nil income taxes			¥ 1,456,370	¥ 1,591,098
Reclassification adjustment for gains on available-for-sale investment realized in net income, net of nil income taxes			(4,863,233)
Foreign currency translation adjustment, net of nil income taxes	¥ (17,598,892)	$ (2,761,650)	(63,005,931)	(20,118,769)
Comprehensive loss	¥ (327,222,836)	$ (51,348,403)	¥ (288,265,658)	¥ (71,457,179)

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) - CNY (¥)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Unrealized gain on an available-for-sale investment, income taxes	¥ 0	¥ 0	¥ 0
Foreign currency translation adjustment, income taxes	0	0	0
Reclassification adjustment for gains on available-for-sale securities realized in net income, income taxes	¥ 0	¥ 0	¥ 0

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (DEFICIT)	Ordinary shares. Series A Convertible Preferred Shares CNY (¥) shares	Ordinary shares. Series A-1 Redeemable Convertible Preferred Shares CNY (¥) shares	Ordinary shares. Series B Redeemable Convertible Preferred Shares CNY (¥) shares	Ordinary shares. Series C Redeemable Convertible Preferred Shares CNY (¥) shares	Ordinary shares. Series C-1 Redeemable Convertible Preferred Shares CNY (¥) shares	Ordinary shares. Series D Redeemable Convertible Preferred Shares CNY (¥) shares	Ordinary shares. Class A CNY (¥) shares	Ordinary shares. Class A USD ($) shares	Ordinary shares. Class B CNY (¥) shares	Ordinary shares. Class B USD ($) shares	Ordinary shares. CNY (¥) shares	Additional paid in capital. Series A Convertible Preferred Shares CNY (¥)	Additional paid in capital. Series A-1 Redeemable Convertible Preferred Shares CNY (¥)	Additional paid in capital. Series B Redeemable Convertible Preferred Shares CNY (¥)	Additional paid in capital. Series C Redeemable Convertible Preferred Shares CNY (¥)	Additional paid in capital. Series C-1 Redeemable Convertible Preferred Shares CNY (¥)	Additional paid in capital. Series D Redeemable Convertible Preferred Shares CNY (¥)	Additional paid in capital. CNY (¥)	Additional paid in capital. USD ($)	Accumulated other comprehensive income (loss) CNY (¥)	Accumulated other comprehensive income (loss) USD ($)	Accumulated deficit CNY (¥)	Accumulated deficit USD ($)	Series A Convertible Preferred Shares CNY (¥)	Series A-1 Redeemable Convertible Preferred Shares CNY (¥)	Series B Redeemable Convertible Preferred Shares CNY (¥)	Series C Redeemable Convertible Preferred Shares CNY (¥)	Series C-1 Redeemable Convertible Preferred Shares CNY (¥)	Series D Redeemable Convertible Preferred Shares CNY (¥)	CNY (¥) shares	USD ($) shares
Beginning balance at Dec. 31, 2018											¥ 3,446							¥ 0		¥ (22,574,272)		¥ (662,466,465)								¥ (685,037,291)
Beginning balance (in shares) at Dec. 31, 2018 | shares											5,614,840
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss											¥ 0							0				(52,929,508)								(52,929,508)
Change in redemption value of redeemable convertible preferred shares																									¥ 1,315,008	¥ 237,680,316	¥ 144,659,627	¥ 104,388,417	¥ 142,962,195
Accretion of redeemable convertible preferred shares											0							0				(631,005,563)								(631,005,563)
Unrealized gain on an available-for-sale investment, net of nil income taxes											0							0		1,591,098										1,591,098	$ 230,731
Foreign currency translation adjustment, net of nil income taxes											0							0		(20,118,769)										(20,118,769)
Ending balance at Dec. 31, 2019											¥ 3,446							0		(41,101,943)		(1,346,401,536)								(1,387,500,033)
Ending balance (in shares) at Dec. 31, 2019 | shares											5,614,840
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss																						(221,852,864)								(221,852,864)
Change in redemption value of redeemable convertible preferred shares																						244,080,678								244,080,678
Change in redemption value of redeemable convertible preferred shares																									707,682	(68,419,392)	(49,340,009)	(40,873,954)	(86,155,005)
Re-designation of Ordinary Shares into Class B Ordinary Shares immediately prior to the completion of the initial public offering									¥ 3,446		¥ (3,446)
Re-designation of Ordinary Shares into Class B Ordinary Shares immediately prior to the completion of the initial public offering (in shares) | shares									5,614,840	5,614,840	(5,614,840)
Issuance of ordinary shares upon initial public offering ("IPO"), net of offering costs of US$[]							¥ 1,860											501,225,388												501,227,248
Issuance of ordinary shares upon initial public offering ("IPO"), net of offering costs of US$[] (in shares) | shares							2,650,000	2,650,000
Conversion of Preferred Shares into ordinary shares	¥ 1,010	¥ 1,328	¥ 1,307	¥ 875	¥ 687	¥ 1,505						¥ 33,041,467	¥ 18,779,626	¥ 418,335,584	¥ 280,067,991	¥ 219,710,378	¥ 530,806,760							¥ 33,042,477	¥ 18,780,954	¥ 418,336,891	¥ 280,068,866	¥ 219,711,065	¥ 530,808,265
Conversion of Preferred Shares into ordinary shares (in shares) | shares	1,439,102	1,891,291	1,862,069	1,246,621	977,961	2,143,786
Share-based compensation																		186,903,431												186,903,431
Accretion of redeemable convertible preferred shares																														244,080,678
Unrealized gain on an available-for-sale investment, net of nil income taxes																				1,456,370										1,456,370
Reclassification adjustment for gain from disposal of available-for-sale securities realized in net income, net of nil income taxes																				(4,863,233)										(4,863,233)
Foreign currency translation adjustment, net of nil income taxes																				(63,005,931)										(63,005,931)
Ending balance at Dec. 31, 2020							¥ 8,572		¥ 3,446									2,188,870,625		(107,514,737)		(1,324,173,722)								757,194,184
Ending balance (in shares) at Dec. 31, 2020 | shares							12,210,830	12,210,830	5,614,840	5,614,840
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net loss																						(309,623,944)								(309,623,944)	(48,586,753)
Share-based compensation																		15,911,144												15,911,144
Foreign currency translation adjustment, net of nil income taxes																				(17,598,892)										(17,598,892)	$ (2,761,650)
Ordinary shares issued in connection with exercise of share options							¥ 587											63,447												¥ 64,034
Ordinary shares issued in connection with exercise of share options (in Shares) | shares							907,779	907,779																						907,779	907,779
Ordinary Shares B transferred to Ordinary Share A							¥ 328		¥ (328)
Ordinary Shares B transferred to Ordinary Share A (in Shares) | shares							500,000	500,000	(500,000)	(500,000)
Ending balance at Dec. 31, 2021							¥ 9,487	$ 1,489	¥ 3,118	$ 489								¥ 2,204,845,216	$ 345,988,328	¥ (125,113,629)	$ (19,633,059)	¥ (1,633,797,666)	$ (256,378,506)							¥ 445,946,526	$ 69,978,741
Ending balance (in shares) at Dec. 31, 2021 | shares							13,618,609	13,618,609	5,114,840	5,114,840

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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (DEFICIT) (Parenthetical)	12 Months Ended
	Dec. 31, 2020 CNY (¥)
Unrealized gain on an available-for-sale investment, income taxes	¥ 0
Foreign currency translation adjustment, income taxes	0
Reclassification adjustment for gains on available-for-sale securities realized in net income, income taxes	0
IPO
Offering Costs	¥ 94,128,112

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CONSOLIDATED STATEMENTS OF CASH FLOWS	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)
Operating activities:
Net loss	¥ (309,623,944)	$ (48,586,753)	¥ (221,852,864)	¥ (52,929,508)
Adjustments to reconcile net loss to net cash used in operating activities
Allowance for doubtful accounts	682,085	107,034		592,717
Share-based compensation	15,911,144	2,496,806	186,903,431
Deferred income tax benefits	(2,167,099)	(340,065)	(2,495,332)
Depreciation and amortization	14,931,572	2,343,089	5,618,984	2,619,682
Impairment of intangible assets	2,915,000	457,427	0	0
Impairment of goodwill	106,949,249	16,782,671
Changes in fair value of financial instruments			5,247	9,024,437
Gain (loss) on disposal of an investment security	50,000	7,846	(4,863,233)
Gain on extinguishment of a convertible debt				(8,986,048)
Loss (gain) on disposal of property and equipment	432,298	67,837	(35,572)	15,765
Gain on disposal of a subsidiary	(917,251)	(143,937)
Unrealized foreign currency exchange (gain) losses			3,113,970	(750,270)
Changes in operating assets and liabilities, net of effect of acquisitions and disposal of a subsidiary:
Accounts receivable	(7,998,240)	(1,255,098)	(2,667,688)	7,679,995
Inventories	(548,307)	(86,041)	(6,853,202)
Prepayments and other current assets	(41,473,243)	(6,508,057)	(6,104,334)	(4,186,913)
Other non-current assets	(751,337)	(117,901)	(1,065,699)	(516,780)
Accounts payable	8,491,260	1,332,464	2,380,364	9,023,623
Amount due to a related party				(6,898,800)
Deferred revenue	4,252,823	667,361	(2,814,922)	8,787,345
Income tax payable	2,988,106	468,899	1,246,030	930,554
Accrued expenses and other current liabilities	(7,325,654)	(1,149,555)	9,182,914	3,952,391
Other non-current liabilities	2,300,000	360,920
Net cash used in operating activities	(210,901,538)	(33,095,053)	(40,301,906)	(31,641,810)
Investing activities:
Purchase of property and equipment	(7,004,705)	(1,099,191)	(7,471,486)	(5,881,767)
Proceeds from disposal of property and equipment	126,670	19,877	100,960
Purchase of term deposits			(841,183,485)	(82,061,210)
Proceeds from maturity of term deposits	170,857,260	26,811,232	741,124,785	373,537,111
Payment for asset acquisitions	(2,550,000)	(400,151)	(3,250,000)
Payment for business combinations, net of cash acquired of nil,RMB10,497,237 and nil in 2019, 2020 and 2021, respectively	(24,491,600)	(3,843,266)	(203,081,831)
Proceeds from disposal of financial instruments			25,023,165
Issuance of interest free loans to an employee	(1,600,000)	(251,075)
Disposal of a subsidiary, net of cash received	(4,985,220)	(782,290)
Net cash provided by (used in) investing activities	130,352,405	20,455,136	(288,737,892)	285,594,134
Financing activities:
Proceeds from issuance of Class A Ordinary Shares, net of underwriting commissions, discounts and underwriter's lawyer fee of RMB46,589,365			548,765,995
Payments for initial public offering ("IPO") costs			(45,286,456)	(2,252,291)
Repayment of a convertible debt				(20,000,000)
Issuance of interest free loans to a shareholder				(8,000,000)
Proceeds from repayment of interest free loans to a shareholder				8,000,000
Payment made on behalf of Mr. Baoli Ma			(4,722,814)
Proceeds from repayment made by Mr. Baoli Ma			4,722,814
Proceeds from exercising of share options	64,034	10,048
Net cash (used in) provided by financing activities	64,034	10,048	503,479,539	(22,252,291)
Effect of foreign currency exchange rate changes on cash and cash equivalents	(9,222,065)	(1,447,143)	(32,220,775)	2,527,206
Net (decrease) increase in cash and cash equivalents	(89,707,164)	(14,077,012)	142,218,966	234,227,239
Cash and cash equivalents at the beginning of the year	439,492,788	68,966,009	297,273,822	63,046,583
Cash and cash equivalents at the end of the year	349,785,624	54,888,997	439,492,788	297,273,822
Supplemental cash flow information:
Interest paid	0	0	2,695,890	0
Income taxes paid	0	0	0	0
Non-cash investing and financing activities:
Accrual of IPO costs	0	0	0	6,227,056
Consideration payable in connection with business combinations	0	0	24,742,025	0
Automatic conversion of convertible redeemable preferred shares to Class A ordinary shares upon the IPO	0	0	1,500,748,518	0
Consideration receivable in connection with disposal of a subsidiary	¥ 300,000	$ 47,077	¥ 0	¥ 0

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Parenthetical) - CNY (¥)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash acquired	¥ 0	¥ 10,497,237	¥ 0
Underwriting commissions, discounts and underwriter's lawyer fee		¥ 46,589,365

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DESCRIPTION OF BUSINESS AND ORGANIZATION

12 Months Ended

Dec. 31, 2021

DESCRIPTION OF BUSINESS AND ORGANIZATION

DESCRIPTION OF BUSINESS AND ORGANIZATION

1. DESCRIPTION OF BUSINESS AND ORGANIZATION

Description of business

BlueCity Holdings Limited (“the Company”), through its wholly-owned subsidiaries, consolidated variable interest entity (“VIE”) and VIE’s subsidiaries (collectively referred to as “the Group”), is principally engaged in mobile-based social and entertainment services which includes live streaming, advertising, membership, merchandise sales and other services. The Group’s principal operations and geographic markets are in the People’s Republic of China (“PRC”).

Organization

The Group operates its business in the PRC through Beijing BlueCity Culture and Media Co., Ltd. (“BlueCity Culture Media”, or the “VIE”), a limited liability company established under the laws of the PRC on September 7, 2011, and its subsidiaries. BlueCity Culture Media and its subsidiaries hold certain recognized and unrecognized revenue-generating assets in order to carry out mobile platform operations in China. The recognized revenue-generating assets include goodwill and intangible assets acquired through business combinations and purchased intangible assets. Goodwill primarily represents the expected assembled workforce and synergies from combining the acquired business. Intangible assets acquired through business combinations mainly consist of user bases, brand names and technologies. Purchased intangible assets mainly include pharmaceutical operation licenses. Unrecognized revenue-generating assets mainly consist of licenses and intellectual property. Licenses include operations licenses, such as internet information service licenses and internet culture operation licenses. Intellectual property developed by the Group mainly consists of patents, copyrights and trademarks. The equity interests of BlueCity Culture Media are legally held by Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Group, and Mr. Changyou Ma, a family member of the founder, who act as nominee equity holders of the VIE on behalf of Beijing BlueCity Information & Technology Co., Ltd., (“BlueCity Information Technology”, or WFOE), the Company’s wholly owned subsidiary in the PRC. A series of contractual agreements, including Powers of Attorney, Exclusive Consulting and Service Agreement, Equity Interest Pledge Agreement, Exclusive Option Agreement and Spouse Consent Letter (collectively, the “VIE Agreements”), were entered among BlueCity Information Technology, BlueCity Culture Media and its nominee equity holders. Through the VIE Agreements, the nominee equity holders of the VIE have granted all their legal rights including voting rights and disposition rights of their equity interests in the VIE to WFOE. The nominee equity holders of the VIE do not participate significantly in income and loss and do not have the power to direct the activities of the VIE that most significantly impact their economic performance. Accordingly, the VIE is considered a variable interest entity.

In accordance with Accounting Standards Codification (“ASC”) 810-10-25-38A, the Company, through the WFOE, has a controlling financial interest in the VIE because the WFOE has (i) the power to direct activities of the VIE that most significantly impact the economic performance of the VIE; and (ii) the obligation to absorb the expected losses and the right to receive expected residual return of the VIE that could potentially be significant to the VIE. Thus, the Company, through the WFOE, is the primary beneficiary of the VIE.

Under the terms of the VIE Agreements, the WFOE has (i) the right to receive economic benefits that could potentially be significant to the VIE in the form of service fees under the Exclusive Consulting and Service Agreement; (ii) the right to receive all dividends declared by the VIE and the right to all undistributed earnings of the VIE; (iii) the obligation to absorb the substantially expected losses and the right to receive the residual benefits of the VIE through its exclusive option to acquire 100% of the equity interests in the VIE, to the extent permitted under PRC law. Accordingly, the financial statements of the VIE are consolidated in the Company’s consolidated financial statements.

Under the terms of the VIE Agreements, the VIE’s nominee equity holders have no rights to the net assets nor have the obligations to fund the deficit, and such rights and obligations have been vested to the Company. All of the deficit (net liabilities) and net loss of the VIE are attributed to the Company.

1. DESCRIPTION OF BUSINESS AND ORGANIZATION (Continued)

The principal terms of the VIE Agreements are further described below.

1) Powers of Attorney

Pursuant to the Powers of Attorney, the equity holders of the VIE irrevocably appointed WFOE as their attorney-in-fact to exercise all equity holder rights, including, but not limited to: (1) the right to attend shareholders’ meeting of the VIE, (2) the right to vote on their behalf on all matters of the VIE requiring shareholder’s approval under the laws of China and the Articles of Association of the VIE, including but not limited to the sale or transfer or pledge or disposition of their shareholding in part or in whole, and (3) designate and appoint on behalf of such nominee equity holders the legal representative, the directors, supervisors, the chief executive officer and other senior management members of the VIE. Each Powers of Attorney agreement is irrevocable and continuously effective from the execution date.

2) Exclusive Consulting and Service Agreement

WFOE and the VIE entered into an Exclusive Consulting and Service Agreement, whereby WFOE is engaged as the exclusive service provider for the provision of business support, technology and consulting services to the VIE. Unless a written consent is given by WFOE, the VIE is not allowed to engage a third party to provide such services. The VIE shall pay WFOE on a quarterly basis a service fee at an amount confirmed by WFOE. WFOE owns the exclusive intellectual property rights, whether created by WFOE or the VIE, as a result of the performance of the Exclusive Consulting and Service Agreement. The Exclusive Consulting and Service Agreement will be in effect permanent unless terminated by WFOE.

3) Equity Interest Pledge Agreement

Pursuant to Equity Interest Pledge Agreement, the nominee equity holders of the VIE have pledged all of their equity interest in the VIE to guarantee the nominee equity holders’ and the VIE’s performance of their obligations under Exclusive Consulting and Service Agreement. If the VIE or the nominee equity holders breach their contractual obligations under these agreements, WFOE, as pledgee, will be entitled to certain rights regarding the pledged interests, including receiving proceeds from the auction or sale of all or part of the pledged interests of the VIE in accordance with the law. The nominee equity holders of the VIE agree that, during the term of the Equity Interest Pledge Agreement, they will not dispose of the pledged equity interests or create or allow any encumbrance on the pledged equity interests without the prior written consent of WFOE. The Equity Interest Pledge Agreements remain effective until (i) the termination of the Exclusive Consulting and Services Agreement with all service fees under the Exclusive Consulting and Services Agreement have been paid and no further obligation shall be undertaken by the VIE; or (ii) the equity interests of the VIE have been transferred to WFOE or any third party designated by it. The pledge was registered with the relevant local administration for industry and commerce in November 2019 and will remain binding until the VIE and its nominee equity holders discharge all their obligations under the contractual arrangements. The registration of the equity pledge enables the WFOE to enforce the equity pledge against third parties who acquire the equity interests of the VIE in good faith.

4) Exclusive Option Agreement

Pursuant to the Exclusive Option Agreement, the equity holders of the VIE have irrevocably granted WFOE or any third party designated by WFOE an exclusive option to purchase, at its discretion, to the extent permitted under PRC law, all or part of the equity interests in the VIE. The purchase price shall be the minimum price permitted under PRC law and regulations, which price may be adjusted based on the valuation of the equity interests of the assets, if required by PRC laws and regulations. The equity holders should remit to the Company any amount that is paid by the Company or its designated person(s) in connection with the purchased equity interest. Without prior written consent of WFOE, the VIE and the equity holders shall not (i) transfer or otherwise dispose of, create any pledge or encumbrance on their equity interests in the VIE, (ii) change the VIE’s registered capital, or increase or decrease the VIE’s current equity interests owners, (iii) amend the VIE’s articles of association, or (iv) dispose or make the VIE’s management to dispose any assets of the VIE, other than in the ordinary course of business. The VIE and its equity holders shall appoint those individuals recommended by WFOE as directors of the VIE. The agreement will remain effective until WFOE has exercised all of its rights under the agreement, unless otherwise terminated by WFOE immediately in its sole discretion with written notice.

1. DESCRIPTION OF BUSINESS AND ORGANIZATION (Continued)

5) Spouse Consent Letter

Pursuant to the Spouse Consent Letter, the spouse of Mr. Changyou Ma, confirmed that she can perform the obligations under VIE Agreements. The spouse of Mr. Changyou Ma agreed that the equity interest in VIE held by Mr. Changyou Ma and registered in the name of Mr. Changyou Ma will be disposed of pursuant to the Powers of Attorney, Exclusive Consulting and Service Agreement, Equity Interest Pledge Agreement and Exclusive Option Agreement. In addition, in the event that the spouse of Mr. Changyou Ma obtains any equity interest in the VIE for any reason, she agreed to be bound by the VIE Agreements.

The Company relies on the VIE Agreements to operate and control VIE. All of the VIE Agreements are governed by PRC laws and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC laws and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit the Company’s ability to enforce these contractual arrangements. In the event that the Company is unable to enforce these contractual arrangements, or if the Company suffers significant time delays or other obstacles in the process of enforcing these contractual arrangements, it would be difficult to exert effective control over VIE, and the Company’s ability to conduct its business and the results of operations and financial condition may be materially and adversely affected.

In the opinion of management, based on the legal opinion obtained from the Company’s PRC legal counsel, the above contractual arrangements are legally binding and enforceable and do not violate current PRC laws and regulations. However, there are uncertainties regarding the interpretation and application of existing and future PRC laws and regulations. Accordingly, the Company cannot be assured that PRC regulatory authorities will not ultimately take a contrary view to its opinion. If the Company’s corporate structure and contractual arrangements are found to be in violation of any existing or future PRC laws or regulations, the relevant regulatory authorities would have broad discretion in dealing with such violations, including:

● revoking the business licenses and/or operating licenses of the Company;

● discontinuing or placing restrictions or onerous conditions on the operations;

● imposing fines, confiscating the income from WFOE or the VIE, or imposing other requirements with which the Company or the VIE may not be able to comply;

● requiring the Company to restructure the ownership structure or operations, including terminating the contractual arrangements with the VIE and deregistering the equity pledges of the VIE, which in turn would affect our ability to consolidate, derive economic interests from, or exert effective control over the VIE, or imposing restrictions on the Company’s right to collect revenues;

● shutting down the Company’s servers or blocking the Company’s app/websites;

● imposing additional conditions or requirements with which the Company may not be able to comply;

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

● restricting or prohibiting the Company use of the proceeds of overseas offering to finance the business and operations in China.

If the imposition of any of these penalties or requirement to restructure the Company’s corporate structure causes it to lose the rights to direct the activities of the VIE or the Company’s right to receive its economic benefits, the Company would no longer be able to consolidate the financial results of the VIE in its consolidated financial statements. In the opinion of management, the likelihood of deconsolidation of the VIE is remote based on current facts and circumstances.

1. DESCRIPTION OF BUSINESS AND ORGANIZATION (Continued)

The equity interests of VIE are legally held by Mr. Baoli Ma and Mr. Changyou Ma as nominee equity holders on behalf of the Company. Mr. Baoli Ma holds 30.2% of the total ordinary shares and share options issued and outstanding of the Company as of December 31, 2021, assuming the vesting and exercising of all outstanding share options held by Mr. Baoli Ma as of such date. The Company cannot assure that when conflicts of interest arise, either of the nominee equity holders will act in the best interests of the Company or such conflicts will be resolved in the Company’s favor. Currently, the Company does not have any arrangements to address potential conflicts of interest between the nominee equity holders and the Company, except that the Company could exercise the purchase option under the Exclusive Option Agreement with the nominee equity holders to request them to transfer all of their equity ownership in VIE to a PRC entity or individual designated by the Company. The Company relies on the nominee equity holders, one of them is the Company’s director and owes a fiduciary duty to the Company, to comply with the terms and conditions of the contractual arrangements. Such fiduciary duty requires the director to act in good faith and in the best interests of the Company and not to use his positions for personal gains. If the Company cannot resolve any conflict of interest or dispute between the Company and the nominee equity holders of VIE, the Company would have to rely on legal proceedings, which could result in disruption of the Company’s business and subject the Company to substantial uncertainty as to the outcome of any such legal proceedings.

The Company’s involvement with the VIE under the VIE Agreements affected the Company’s consolidated financial position, results of operations and cash flows as indicated below.

The following consolidated assets and liabilities information of the Group’s VIE as of December 31, 2020 and 2021, and consolidated revenues, net loss and cash flow information for the years ended December 31, 2019, 2020 and 2021, have been included in the accompanying consolidated financial statements. All intercompany transactions and balances with the Company, and its wholly-owned subsidiaries have been eliminated upon consolidation.

	As of December 31,
	2020	2021
	RMB	RMB
Cash	42,017,215	26,835,970
Accounts receivable, net (net of allowance of nil as of December 31, 2020 and 2021, respectively)	5,588,023	10,368,064
Inventories	6,853,202	7,401,509
Prepayments and other current assets	32,496,610	48,686,054
Total current assets	86,955,050	93,291,597
Investment securities	50,000	—
Property and equipment, net	4,994,809	4,509,052
Intangible assets, net	52,084,512	44,204,317
Goodwill	3,054,923	—
Other non-current assets	1,749,304	2,389,069
Total non-current assets	61,933,548	51,102,438
Total assets	148,888,598	144,394,035
Accounts payable	6,817,776	11,444,579
Amounts due to inter-companies	129,873,104	98,986,401
Deferred revenue	34,541,710	35,217,012
Income tax payable	291,441	1,460,149
Accrued expenses and other current liabilities	49,315,134	27,246,274
Total current liabilities	220,839,165	174,354,415
Deferred income tax liabilities	10,954,883	9,603,096
Other non-current liabilities	—	2,300,000
Total non-current liabilities	10,954,883	11,903,096
Total liabilities	231,794,048	186,257,511

1. DESCRIPTION OF BUSINESS AND ORGANIZATION (Continued)

	For the Year Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Revenues	42,007,427	651,069,900	974,103,315
Net (loss) income	(8,856,826)	(79,742,764)	31,859,163
Net cash provided by (used in) operating activities	11,267,766	20,705,405	(34,200,424)
Net cash used in investing activities	(2,901,588)	(12,532,972)	(11,745,086)
Net cash provided by financing activities	2,007,447	17,510,000	30,764,265
Net increase (decrease) in cash	10,373,625	25,682,433	(15,181,245)
Cash at the beginning of the year	5,961,157	16,334,782	42,017,215
Cash at the end of the year	16,334,782	42,017,215	26,835,970

In accordance with VIE Agreements, WFOE has the power to direct the activities of the VIE. Therefore, the Company considers that there are no assets in the VIE that can be used only to settle obligations of the VIE, except for paid in capital of RMB1 million as of December 31, 2020 and 2021. The creditors of the VIE do not have recourse to the general credit of WFOE.

During the years presented, the Company and its wholly-owned subsidiaries provided financial support to VIE that they were not previously contractually required to provide in the form of advances. To the extent VIE requires financial support, the WFOE may, at its option and to the extent permitted under the PRC law, provide such support to VIE through loans to VIE’s nominee equity holders or entrustment loans to VIE.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)   Basis of presentation

The accompanying consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

(b)   Principles of consolidation

The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, the VIE in which the Company, through its WFOE, has a controlling financial interest, and VIE’s wholly-owned subsidiaries.

All intercompany transactions and balances among the Company, its wholly-owned subsidiaries, the VIE, and the VIE’s wholly-owned subsidiaries have been eliminated upon consolidation.

(c)   Use of estimates

The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenues and expenses during the reported periods. Significant accounting estimates include, but not limited to, the realization of deferred income tax assets, fair value of identifiable intangible assets in business combinations, useful lives and recoverability of property and equipment and intangible assets, impairment of goodwill, fair values of share-based compensation awards, investment securities, convertible debt, redeemable convertible preferred shares and ordinary shares.  Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(d)   Convenience translation

Translations of the consolidated financial statements from RMB into US$ as of and for the year ended December 31, 2021 are solely for the convenience of the readers and were calculated at the rate of US$1.00= RMB6.3726, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on December 30, 2021. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 31, 2021, or at any other rate.

The US$ convenience translation is not required under U.S. GAAP and all US$ convenience translation amounts in the accompanying consolidated financial statements are unaudited.

(e)   Commitments and contingencies

In the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and non-income tax matters. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed.

(f)   Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash at bank and term deposits, which have original maturities of three months or less and are readily convertible to know amounts of cash. The Group’s cash and cash equivalents, excluding cash on hand, are deposited in financial institutions at below locations:

	As of December 31,
	2020	2021
	RMB	RMB
Financial institutions in the mainland of the PRC
—Denominated in RMB	76,352,748	35,656,085
—Denominated in USD	89,289,111	258,690,388
Total cash and cash equivalents balances held at mainland PRC financial institutions	165,641,859	294,346,473
Financial institution in Hong Kong Special Administrative Region (“Hong Kong S.A.R.”)
—Denominated in HKD	1,074,294	14,306,671
—Denominated in USD	261,797,195	15,084,574
Total cash balances held at the Hong Kong S.A.R. financial institution	262,871,489	29,391,245
Financial institutions in the United States
—Denominated in USD	8,540,607	22,950,413
Total cash balances held at the United States financial institutions	8,540,607	22,950,413
Financial institution in Vietnam
—Denominated in VND	6,596	6,278
Total cash balances held at the Vietnam financial institution	6,596	6,278
Financial institution in Japan
—Denominated in JPY	2,415,660	3,090,453
Total cash balances held at the Japan financial institution	2,415,660	3,090,453
Total cash and cash equivalents balances held at financial institutions	439,476,211	349,784,862

(g)   Term deposits

Term deposits represent deposits at bank with original maturities more than three months but less than one year. The Group’s term deposits are denominated in USD and are deposited at financial institutions in the mainland of the PRC.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(h)   Accounts receivable and allowance for doubtful accounts

Accounts receivable are recognized in the period when the Group has provided services to its customers and when its right to consideration is unconditional. The Group reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. The group considers many factors in assessing the collectability of its receivables, such as the age of the amounts due, the customer’s payment history and credit-worthiness. An allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted.

(i)   Inventories

Inventories, consisting of products available for sale, are stated at the lower of cost or net realizable value. The cost of inventory is determined using the first-in-first-out ("FIFO") method. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. Inventory is written down for damaged goods and slow-moving merchandise, which is dependent upon factors such as historical and forecasted consumer demand, and any sales promotions.

(j)   Property and equipment, net

Property and equipment are stated at cost less accumulated depreciation and depreciated using the straight-line method over the estimated useful lives of the assets, as follows:

Office and electronic equipment	3 years
Leasehold improvements	Shorter of 3 years or lease term

When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and the proceeds received thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized and amortized over the remaining useful life.

(k)   Intangible assets, net

Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they are capable of being separated or arise from contractual or other legal rights. Purchased intangible assets and intangible assets arising from acquisitions are recognized and measured at fair value upon acquisition. Separately identifiable intangible assets that have determinable lives are amortized over their estimated useful lives using the straight-line method as follows:

Licenses	5 years
User bases	3-4 years
Brand names	10 years
Technologies	3 years

The estimated life of intangible assets subject to amortization is reassessed if circumstances occur that indicate the life has changed.

(l)   Impairment of property and equipment and intangible assets

Property and equipment and intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment for the asset or asset group by comparing the carrying value of the asset or asset group to an estimate of future undiscounted cash flows expected to be generated from the use of the asset or asset group and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the asset or asset group, the Group recognizes an impairment loss based on the excess of the carrying value of the asset or asset group over the fair value of the asset or asset group.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(m)   Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates Step 2 from the goodwill impairment test. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this ASU 2017-04 for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. On January 1, 2020, the Group adopted ASU 2017-04.

Goodwill is not amortized but tested annually for impairment on a qualitative or quantitative basis for the reporting unit as of December 31, or more frequently when events or circumstances indicate an impairment may exist at the reporting unit level. In the qualitative assessment, the Group considers primary factors such as industry and market considerations, the overall financial performance of the reporting unit, and other specific information related to the operations. When performing the annual impairment test, the Group has the option of first performing a qualitative assessment to determine the existence of events and circumstances that would lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If such a conclusion is reached, the Group would then be required to perform a quantitative impairment assessment of goodwill. However, if the assessment leads to a determination that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then no further assessments are required. A quantitative assessment for the determination of impairment is made by comparing the carrying amount of the reporting unit with its fair value, which is generally calculated using the discounted cash flow method. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered impaired. If the carrying amount of a reporting unit exceeds its fair value, the Group recognizes the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit identified.

(n)   Investment securities

The Group’s investment securities consist of debt securities and equity securities with readily determinable fair values.

Debt securities

The Group accounts for debt securities as available-for-sale (“AFS”) when they are not classified as either trading or held-to-maturity. AFS securities are recorded at fair value, with unrealized gains and losses, net of related tax effect, are excluded from earnings and are reported as a separate component of accumulated other comprehensive loss until realized. Realized gains and losses from the sale of AFS securities are determined on a specific-identification basis. An impairment loss on the AFS securities are recognized in the consolidated statement of comprehensive loss when the decline in value is determined to be other-than-temporary. No impairment loss was recognized for the years ended December 31, 2019 and 2020.

Equity investments

All equity investments with readily determinable fair values, other than those accounted for under equity method of accounting or those that result in consolidation of the investee, are measured at fair value with changes in the fair value recognized through net income.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(o)   Value added taxes

The Company’s PRC subsidiaries, VIE and VIE’s subsidiaries are subject to value added tax (“VAT”). Revenues from providing online services are generally subject to VAT at the rate of 6% and revenues from sales of merchandise are generally subject to VAT at the rate of 13% and subsequently paid to PRC tax authorities after netting input VAT on purchases. The excess of output VAT over input VAT is reflected in accrued expenses and other current liabilities, and the excess of input VAT over output VAT is reflected in prepayments and other current assets in the consolidated balance sheets.

(p)   Fair value measurements

Fair value represents 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. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Accounting guidance establishes a three-level fair value hierarchy and 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. The three levels of inputs are:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

Accounting guidance also describes three main approaches to measuring 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.

Financial assets and liabilities of the Group primarily consist of cash and cash equivalents, term deposits, accounts receivable, investment securities, accounts payable, and convertible debt. The Group measures investment securities and convertible debt at fair value on a recurring basis. Investment securities and convertible debt were measured at fair value using unobservable inputs and categorized in Level 3 of the fair value hierarchy. As of December 31, 2020 and 2021, the carrying amounts of other financial instruments approximated to their fair values due to the short term maturity of these instruments.

The Group’s non-financial assets, such as property and equipment, would be measured at fair value only if they were determined to be impaired.

(q)   Revenue recognition

The Group principally derives its revenues from live streaming, advertising, membership, merchandise sales and other services. The Group recognizes revenue when control of the promised service is transferred to the customers, in an amount that reflects the consideration that the Group expects to receive in exchange for those services.

Live streaming service

The Group operates integrated platforms, Blued, Finka and LESDO, consisting of IT infrastructure, mobile applications and its proprietary algorithm, to offer live and interactive streaming services to individual viewers as its customers. The Group engages broadcasters to perform on the Group’s platform, which through its proprietary algorithm, enables individual viewers to discover live streaming channels and broadcasters they may find interesting and provide more personal experience.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Individual viewer can purchase virtual gifts on the Group’s platform, and simultaneously present to broadcasters during their live streaming performance to show their support for their favorite broadcasters. The Group has sole discretion in designing and establishing pricing of virtual gifts. Individual viewer purchases virtual gifts using the Group’s virtual currency which is in turn acquired through online third-party payment platforms. Virtual currency is non-refundable and does not have expiration date. It is often consumed soon after it is purchased.

The Group considers live streaming service as one performance obligation to its customers. The consideration received from individual viewers varies at viewers’ discretion, as they purchase and present variable quantity or value of virtual gifts to broadcasters during a performance. The recognition of such variable consideration is constrained until the amount is known, which is when an individual viewer purchases virtual gifts and simultaneously presents them to broadcasters during their live streaming performance. Accordingly, revenue is recognized when virtual gifts are consumed as they are presented to broadcasters. Unconsumed virtual currency is recorded as deferred revenue.

The Group evaluates and determines individual viewers as its customers and the Group is the principal in providing live streaming services to them, and hence reports live streaming revenues on a gross basis. Accordingly, the amounts billed to viewers are recorded as revenues and revenue sharing fee paid to broadcasters through talent agencies are recorded as cost of revenues. The Group controls the integrated live streaming services, which is evidenced by its contractual relationship with individual viewers and primary responsibility for fulfilling the promise to provide the live streaming services, including operating the self-developed live streaming platform and maintaining the operation of the platform, engaging broadcasters through talent agencies to perform on its platform, investing in and using its algorithm to optimize individual viewers’ live streaming experience, enabling individual viewers to discover the broadcasters and shows they may be interested in, developing new features in the platform, promoting activities including the general promotion of the platform and the promotion of popular broadcasters and offering the virtual items to viewers to be purchased and used in the platform. Its control is also evidenced by its sole ability to monetize the live streaming services and the level of discretion in establishing pricing. The Group also has latitude in establishing the amount of compensation that broadcasters and talent agencies receive as a percentage of revenues generated from virtual gift sales. Such percentage is subject to the achievement of broadcasters and talent agencies on the Key Performance Indicators set by the Group.

Advertising

The Group offers marketing services on the Group’s mobile app, primarily through banner advertisements. Marketing services allow customers to place advertisements on particular areas of the Group’s mobile app, in particular formats and over particular periods of time. The marketing services typically last from several days to one year. The Group determines that the customer simultaneously receives and consumes benefits provided by the Group’s performance as the Group performs during the term of the contract. Revenues from marketing services are recognized, net of sales incentives, if any, ratably over the service period.

The Group provides sales incentives in the forms of discounts and rebates to customers based on purchase volume. Sales incentives are estimated and recorded at the time of revenue recognition based on the contracted rebate rates and estimated sales volume based on historical experience.

Membership

Membership revenues include subscription-based membership services and Pay-Per-Use Services. Subscription-based membership services enable individual users to enjoy additional functions and privileges over a period of time ranging from one month to one year. Pay-Per-Use services enable individual users to better promote themselves and raise their profile through advanced enhancement functions on a pay-per-service basis. The Group collects non-refundable membership service fee in advance and records it as deferred revenue. Subscription-based membership revenue is recognized on a straight-line basis over the membership period. Pay-Per-Use revenue is recognized at the point in time when control of promised service is transferred to the users.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Merchandise sales

The Group generates revenues from merchandise sales to customers through the Group’s own and third-parties' platforms. The Group controls the specified good before that good is transferred to a customer, which is evidenced by the primary responsibility for fulfilling the promise to provide the specified good, including responsible for the acceptability of the specified good; having inventory risk before the specified good has been transferred to a customer; and having discretion in establishing the price for the specified good. Accordingly, the Group concludes that it is principal in merchandise sales and reports revenue from merchandise sales on a gross basis. Revenues are measured as the amount of consideration the Group expects to receive in exchange for transferring the specified good to customers.

Other revenue

Other revenue mainly consists of family planning service revenues, service fee from the provision of consulting service to healthcare and medical institutions and marketplace service revenues. Revenue is recognized when control of promised service is transferred to the customers in an amount of consideration to which the Group expects to be entitled to in exchange for those services.

Contract balances

Contract balances include accounts receivable and deferred revenue. The timing of revenue recognition and cash collections result in accounts receivable and contract liabilities (i.e. deferred revenue). The allowance for doubtful accounts reflects the Group’s best estimate of probable losses inherent in the accounts receivable balance. The activity in the allowance for doubtful accounts for the years presented is disclosed in Note 3.

Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.

Deferred revenue (a contract liability) is recognized when the Group has an obligation to transfer services to a customer for which the Group has received consideration related to the Group’s live streaming services, membership services and family planning services from the customer, or for which an amount of consideration is due from the customer.

The opening balance of deferred revenue as of January 1, 2020 and 2021 was RMB32,555,402 and RMB35,226,237, respectively. During the year ended December 31, 2019, 2020 and 2021, the Group recognized revenue in the amount of RMB23,757,459, RMB32,555,402 and RMB35,226,237 which was included in the deferred revenue balance at the beginning of the year, respectively.

(r)   Cost of revenues

Cost of revenues consists primarily of (i) revenue sharing fees paid to broadcasters, (ii) commission fees paid to mobile application stores and third party payment platforms, (iii) staff cost, rental and depreciation related to operation of its business, and (iv) other cost related to the business operation.

(s)   Selling and marketing expenses

Selling and marketing expenses mainly consist of (i) advertising costs and promotion expenses, (ii) staff cost, rental and depreciation related to selling and marketing functions. Advertising costs, which consist primarily of online and offline advertisements, are expensed as incurred. The advertising costs were RMB60,136,876, RMB80,711,586 and RMB110,978,677 for the years ended December 31, 2019, 2020 and 2021, respectively.

(t)   Technology and development expenses

Technology and development expenses consist primarily of payroll and related expenses for technology and development professionals and technology infrastructure costs. Technology infrastructure costs include servers, bandwidth and cloud infrastructure costs, depreciation and utilities and other expenses related to technology and development functions. Technology and development expenses are expensed as incurred.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(u)   General and administrative expenses

General and administrative expenses mainly consist of (i) staff cost, rental and depreciation related to general and administrative personnel, (ii) professional fees, (iii) share-based compensation for management and administrative personnel, and (iv) other corporate expenses.

(v)   Government grants

Government grants are recognized when there are reasonable assurances that the Group will comply with the conditions attach to them and the grants will be received. Government grants for the purpose of giving immediate financial support to the Group with no future related costs or obligation are recognized as a reduction of general and administrative expenses in the Group’s consolidated statements of comprehensive loss when the grants become receivable.

(w)   Share-based compensation

The Group periodically grants share-based awards, mainly including share options to eligible employees, directors and consultants, which are subject to service and performance conditions.

All share-based awards granted to directors, employees and consultants of the Group are measured at the grant-date fair value and are recognized as compensation expense over the vesting period, and when the Group considers that it is probable that the performance condition will be achieved. The Group elected to account for forfeitures as they occur, rather than estimate expected forfeitures.

Share-based compensation in relation to the share options is estimated using the Binominal Option Pricing Model. The determination of the fair value of share options is affected by the share price of the Group’s ordinary shares as well as the assumptions regarding a number of complex and subjective variables, including the expected share price volatility, risk-free interest rate, exercise multiple, forfeiture rate and expected dividend yield.

For share options granted with service conditions only, share-based compensation expenses are recorded using straight-line method during the requisite service period.

For share options granted with service condition and the occurrence of an IPO as performance condition, share-based compensation expenses are recorded on a straight-line basis over the requisite service period for each separately vesting portion of the award.

A change in any of the terms or conditions of share-based awards is accounted for as a modification of the awards. The Group calculates incremental compensation cost of a modification as the excess of the fair value of the modified awards over the fair value of the original awards immediately before its terms are modified at the modification date. For vested awards, the Group recognizes incremental compensation cost in the period the modification occurs. For awards not being fully vested, the Group recognizes the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original awards over the remaining requisite service period after modification.

(x)   Employee benefits

The Company’s subsidiaries and the VIE and VIE’s subsidiaries in PRC participate in a government mandated, multiemployer, defined contribution plan, pursuant to which certain retirement, medical, housing and other welfare benefits are provided to employees. PRC labor laws require the entities incorporated in China to pay to the local labor bureau a monthly contribution calculated at a stated contribution rate on the monthly basic compensation of qualified employees. The Group has no further commitments beyond its monthly contribution. Employee social benefits included as expenses in the accompanying consolidated statements of comprehensive loss amounted to RMB26,900,928, RMB20,354,331 and RMB55,265,678 for the years ended December 31, 2019, 2020 and 2021, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

As a result of COVID-19, the PRC government exempted or reduced certain enterprises’ contributions to basic pension insurance, unemployment insurance, and work injury insurance (“certain social insurance”). The Group’s PRC subsidiaries, VIE and VIE’s subsidiaries were exempted from contributions to certain social insurance between February 2020 and December 2020. The exemption was recognized as a reduction of cost of revenues, selling and marketing expenses, technology and development expenses and general and administrative expenses in the amount of RMB15,857,367 for the year ended December 31, 2020.

(y)   Income taxes

Current income taxes are provided on the basis of net income for financial reporting purposes, and adjusted for income and expense items which are not taxable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.

Deferred income taxes are provided using the liability method. Under this method, deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and are determined by applying enacted statutory tax rates that will be in effect in the period in which the temporary differences are expected to reverse. A valuation allowance is provided to reduce the amount of deferred income tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred income tax assets will not be realized. The effect on deferred income taxes arising from a change in tax rates is recognized in the consolidated statements of comprehensive loss in the period of change.

The Group applies a “more likely than not” recognition threshold in the evaluation of uncertain tax positions. The Group recognizes the benefit of a tax position in its consolidated financial statements if the tax position is “more likely than not” to prevail based on the facts and technical merits of the position. Tax positions that meet the “more likely than not” recognition threshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. Unrecognized tax benefits may be affected by changes in interpretation of laws, rulings of tax authorities, tax audits, and expiry of statutory limitations. In addition, changes in facts, circumstances and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Accordingly, unrecognized tax benefits are periodically reviewed and re-assessed. Adjustments, if required, are recorded in the Group’s consolidated financial statements in the period in which the change that necessities the adjustments occur. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, in certain circumstances, a tax appeal or litigation process. The Group records interest and penalties related to unrecognized tax benefits (if any) in interest expenses and general and administrative expenses, respectively. As of December 31, 2020 and 2021, the Group did not have any unrecognized uncertain tax positions.

(z)   Operating leases

The Group leases premises for offices under non-cancellable operating leases. Leases with escalated rent provisions are recognized on a straight-line basis over the lease term.

(aa)  Foreign currency translation and foreign currency risks

The Group’s reporting currency is Renminbi (“RMB”). The functional currency of the Company and its subsidiaries incorporated at Hong Kong S.A.R. and the United States is the United States dollars (“US$”). The functional currency of the Company’s PRC subsidiaries, VIE and VIE’s subsidiaries is the RMB.

Transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in a foreign currency are remeasured into the functional currency using the applicable exchange rate at the balance sheet date. The resulted exchange differences are recorded as general and administrative expenses in the consolidated statements of comprehensive loss.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The financial statements of the Company and its subsidiaries incorporated at Hong Kong S.A.R., and the United States are translated from US$ into RMB. Assets and liabilities are translated into RMB using the applicable exchange rates at the balance sheet date. Equity accounts other than deficits generated in the current period are translated into RMB using the appropriate historical rates. Revenues, expenses, gains and losses are translated into RMB using the average exchange rates for the relevant period. The resulted foreign currency translation adjustments are recorded as a component of other comprehensive income or loss in the consolidated statements of comprehensive loss, and the accumulated foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income or loss in the consolidated statements of changes in shareholders’ equity (deficit).

The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the PRC government, controls the conversion of RMB to foreign currencies. The value of the RMB is subject to changes of central government policies and international economic and political developments affecting supply and demand in the China foreign exchange trading system market.

(bb)  Concentration and risk

Concentration of suppliers

The Group purchases all its computing, storage and bandwidth services (“cloud services”) from two suppliers for the years ended December 31, 2019, four suppliers for the year ended December 31, 2020 and five suppliers for the year ended December 31, 2021. Although there are a limited number of cloud providers of the particular cloud services, management believes that other cloud providers could provide similar services on comparable terms. A change in cloud providers, however, could cause negatively impact on the business operation and a possible loss of sales, which would affect operating results adversely.

Concentration of credit risk

Financial instruments that potentially expose the Group to concentrations of credit risk consist principally of cash and cash equivalents, term deposits and accounts receivable.

The Group’s investment policy requires cash and cash equivalents and term deposits to be placed with high-quality financial institutions and to limit the amount of credit risk from any one financial institution. The Group regularly evaluates the credit standing of the counterparties or financial institutions.

The Group conducts credit evaluations on its customers prior to delivery of services. The assessment of customer creditworthiness is primarily based on historical collection records, research of publicly available information and customer on-site visits by senior management. Based on this analysis, the Group determines what credit terms, if any, to offer to each customer individually. If the assessment indicates a likelihood of collection risk, the Group will not deliver the services to the customer or require the customer to pay cash, post letters of credit to secure payment or to make significant down payments.

(cc)  Statutory reserves

In accordance with the PRC Company Laws, the Group’s PRC subsidiaries, VIE and VIE’s subsidiaries must make appropriations from their after-tax profits as determined under the generally accepted accounting principles in the PRC (“PRC GAAP”) to non-distributable reserve funds including statutory surplus fund and discretionary surplus fund. The appropriation to the statutory surplus fund must be 10% of the after-tax profits as determined under PRC GAAP. Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of the PRC companies. Appropriation to the discretionary surplus fund is made at the discretion of the PRC companies.

The statutory surplus fund and discretionary surplus fund are restricted for use. They may only be applied to offset losses or increase the registered capital of the respective companies. These reserves are not allowed to be transferred to the Company by way of cash dividends, loans or advances, nor can they be distributed except for liquidation.

For the years ended December 31, 2019, 2020 and 2021, profit appropriation to general statutory surplus fund and discretionary surplus fund for the Group’s entities incorporated in the PRC was nil, RMB139,773 and nil, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(dd)  (Loss) earnings per share

Basic (loss) income per share is computed by dividing net (loss) income attributable to ordinary shareholders, considering the accretion and reversal of accretion of redemption feature related to the Group’s redeemable convertible preferred shares, by the weighted average number of ordinary shares outstanding during the period using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating securities based on their participating rights. Shares issuable for little to no consideration upon the satisfaction of certain conditions are considered as outstanding shares and included in the computation of basic (loss) income per share as of the date that all necessary conditions have been satisfied. Net losses are not allocated to other participating securities if based on their contractual terms they are not obligated to share the losses.

Diluted (loss) income per share is calculated by dividing net (loss) income attributable to ordinary shareholders, as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of ordinary shares issuable upon the conversion of the preferred shares, using the if-converted method, and shares issuable upon the exercise of share options using the treasury stock method. Ordinary equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such share would be anti-dilutive.

(ee)  Segment reporting

The Group uses the management approach in determining its operating segments. The Group’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. For the purpose of internal reporting and management’s operation review, the Group’s Chief Executive Officer do not segregate the Group’s business by service lines. Management has determined that the Group has one operating segment, which is the mobile platform operations.

(ff)  Business combination

The Group accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. The assets acquired, the liabilities assumed, and any non-controlling interests of the acquiree at the acquisition date, if any, are measured at their fair values as of the acquisition date. The excess of the purchase price over those fair values is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the acquiree, the difference is recognized directly in the consolidated statements of comprehensive loss. The Group charges acquisition related costs that are not part of the purchase price consideration to general and administrative expenses as they are incurred.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(gg)  Recent accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”), Leases. ASU 2016-02 specifies the accounting for leases. For operating leases, ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. ASU 2016-02 was further amended in November 2019 by ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and in June 2020 by ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842), which deferred the effective date of new lease standard. As a result, Accounting Standards Codification (“ASC”) 842, Leases, is effective for public companies for annual reporting periods, and interim periods within those years beginning after December 15, 2018. For all other entities, it is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. As the Company is an "emerging growth company" and elects to apply for the new and revised accounting standards at the effective date for a private company, the Group adopts the new standard for the year ending December 31, 2022 and plans to use the effective date as the date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2022. The new standard provides a number of optional practical expedients in transition. The Group plans to elect the ‘package of practical expedients’, which permits the Group not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Group is finalizing its evaluation of its existing population of contracts to ensure all contracts that meet the definition of a lease contract under the new standard are identified. The Group is currently evaluating the qualitative and quantitative impact that the adoption of this standard will have on its consolidated financial statements and footnote disclosures and expects the standard will have a material impact on the consolidated balance sheet related to the recognition of right-of-use assets and lease liabilities for operating leases.

In June 2016, the FASB amended ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. ASU 2016-13 was further amended in November 2019 by ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). As a result, ASC 326, Financial Instruments — Credit Losses is effective for public companies for annual reporting periods, and interim periods within those years beginning after December 15, 2019. For all other entities, it is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As the Company is an "emerging growth company" and elects to apply for the new and revised accounting standards at the effective date for a private company, the Group will adopt the new standard on January 1, 2023. The Group is currently evaluating the impact of this new guidance on its consolidated financial statements.

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ACCOUNTS RECEIVABLE, NET

12 Months Ended

Dec. 31, 2021

ACCOUNTS RECEIVABLE, NET

ACCOUNTS RECEIVABLE, NET

3. ACCOUNTS RECEIVABLE, NET

Accounts receivable, net consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Accounts receivable	5,588,023	12,878,562
Allowance for doubtful accounts	—	—
Accounts receivable, net	5,588,023	12,878,562

The movements of the allowance for doubtful accounts were as follows:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Balance at the beginning of the year	1,857,463	—	—
Additions charged to bad debt expense	592,717	—	682,085
Write-off of bad debt allowance	(2,450,180)	—	(682,085)
Balance at the end of the year	—	—	—

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INVENTORIES

12 Months Ended

Dec. 31, 2021

INVENTORIES

INVENTORIES

4. INVENTORIES

Inventories consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Merchandise	6,853,202	7,401,509
Inventories	6,853,202	7,401,509

No write-down of inventories from the carrying amount to its estimated net realizable value was made for the year ended December 31, 2019, 2020 and 2021.

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PREPAYMENTS AND OTHER CURRENT ASSETS

12 Months Ended

Dec. 31, 2021

PREPAYMENTS AND OTHER CURRENT ASSETS

PREPAYMENTS AND OTHER CURRENT ASSETS

5. PREPAYMENTS AND OTHER CURRENT ASSETS

Prepayments and other current assets as of December 31, 2020 and 2021 consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Receivable from third party payment platforms	31,821,937	63,747,704
Prepaid expenses	14,955,773	15,239,076
Deposits and prepaid rental fees	3,373,228	4,202,244
Deferred payment platforms commission fee	2,553,825	3,126,394
Interest receivable	1,460,642	1,260,880
Deductible input VAT	1,639,485	1,012,009
Others*	2,824,526	11,188,781
Prepayments and Other Current Assets	58,629,416	99,777,088

*   Others mainly include advances to suppliers and employees and other receivables.

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INVESTMENT SECURITIES

12 Months Ended

Dec. 31, 2021

INVESTMENT SECURITIES

INVESTMENT SECURITIES

6. INVESTMENT SECURITIES

Investment securities consisted of the following:

	As of December 31,
	2020	2021
Available-for-sale debt securities:	RMB	RMB
Mengmei Life Pty. Ltd (“Mengmei”)(a).	—	—
Equity securities with readily determinable fair value:
Warrant to purchase Mengmei’s interests(a).	—	—
Others.	50,000	—
	50,000	—

(a)   On September 7, 2018, the Group entered into an investment agreement with Mengmei to acquire 9,375,000 redeemable convertible preferred shares, which represented 8.15% equity interest of Mengmei on a fully-diluted basis, in exchange for a cash consideration of US$3 million (equivalent to RMB20,587,500). The investment was classified as AFS debt security because the investment contains substantive liquidation preference and redemption provision and is redeemable at the option of the investor. The Group recorded the investment at fair value. Unrealized gain of US$230,731 (equivalent to RMB1,591,098) and US$208,098 (equivalent to RMB1,456,370), net of nil income taxes were recorded in other comprehensive income for the years ended December 31, 2019 and 2020, respectively.

6. INVESTMENT SECURITIES (Continued)

In connection with this transaction, the Group also received a warrant to purchase certain number of shares in a single transaction or a series of related transactions from Mengmei’s founders within three years from the issuance date, so as to enable the Group holding no less than 51% of all equity interests of Mengmei on a fully-diluted basis. The exercise price of the warrant was determined based on the 100% equity value of Mengmei between US$100,000,000 and US$200,000,000. The warrant is an equity security with readily determinable fair value.

Losses of US$39,854 (equivalent to RMB274,829) and US$750 (equivalent to RMB5,268) were recorded in changes in fair value of financial instruments for the years ended December 31, 2019 and 2020, respectively.

For initial recognition, the Group allocated the total consideration to AFS debt security and warrant based on their relative fair values.

On July 28, 2020, the Group entered into a share purchase agreement with Jinxin Fertility Group Company Limited to sell 9,375,000 redeemable convertible preferred shares of Mengmei and the warrant issued by Mengmei's founders in exchange for a cash consideration of US$3,580,108 (equivalent to RMB25,023,165). Accumulated unrealized gain of US$694,897 (equivalent to RMB4,863,233) was recorded in gain on disposal of an investment security for the year ended December 31, 2020.

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PROPERTY AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2021

PROPERTY AND EQUIPMENT, NET

PROPERTY AND EQUIPMENT, NET

7. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Office and electronic equipment	11,200,226	13,832,466
Leasehold improvements	11,040,082	13,785,017
Property and Equipment	22,240,308	27,617,483
Accumulated depreciation	(10,794,760)	(16,431,324)
Property and Equipment, net	11,445,548	11,186,159

Depreciation expenses on property and equipment were allocated to the following expense items:

	As of December 31,
	2019	2020	2021
	RMB	RMB	RMB
Cost of revenues	525,956	821,401	948,069
Selling and marketing expenses	997,224	1,511,562	2,381,693
Technology and development expenses	845,318	1,176,602	2,640,921
General and administrative expenses	251,184	393,071	734,443
Total depreciation expenses	2,619,682	3,902,636	6,705,126

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INTANGIBLE ASSET, NET

12 Months Ended

Dec. 31, 2021

INTANGIBLE ASSET, NET

INTANGIBLE ASSET, NET

8. INTANGIBLE ASSETS, NET

Intangible assets consisted of the following:

	As of December 31, 2020
	Gross Carrying	Accumulated		Net carrying
	Amount	amoritization	Impairment	amount
	RMB	RMB	RMB	RMB
Licenses	4,110,860	(822,172)	—	3,288,688
User bases	7,730,000	(287,232)	—	7,442,768
Brand names	38,500,000	(390,833)	—	38,109,167
Technologies	3,460,000	(216,111)	—	3,243,889
Total intangible assets	53,800,860	(1,716,348)	—	52,084,512

8. INTANGIBLE ASSETS, NET (Continued)

	As of December 31, 2021
	Gross Carrying	Accumulated		Net carrying
	Amount	amoritization	Impairment	amount
	RMB	RMB	RMB	RMB
Licenses	7,372,111	(2,198,142)	—	5,173,969
User bases	7,730,000	(2,276,875)	(400,000)	5,053,125
Brand names	38,500,000	(4,188,333)	(1,855,000)	32,456,667
Technologies	3,460,000	(1,279,444)	(660,000)	1,520,556
Total intangible assets	57,062,111	(9,942,794)	(2,915,000)	44,204,317

Amortization expense on intangible assets was allocated to the following expense items:

	Years ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Cost of revenues	—	1,429,116	6,236,802
Selling and marketing expenses	—	287,232	1,989,644
Total amortization expenses	—	1,716,348	8,226,446

For the year ended December 31, 2021, the Group terminated the operation of Lesdo platform. As a result, the Group recognized impairment loss of RMB2,915,000 for intangible assets acquired in Lesdo acquisition (Note 21). The Group provided no impairment for intangible assets for the years ended December 31, 2019 and 2020.

Amortization expense for intangible assets is nil, RMB1,716,348 and RMB8,226,446 for the years ended December 31, 2019, 2020 and 2021, respectively. The estimated amortization expenses for the above intangible assets for future years are as follows:

	Amortization for
Year ending December 31,	Intangible Assets
	RMB
2022	7,726,402
2023	7,660,291
2024	6,788,693
2025	4,123,264
2026	3,640,000
Thereafter	14,256,667
Total	44,204,317

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GOODWILL

12 Months Ended

Dec. 31, 2021

GOODWILL.

GOODWILL

9. GOODWILL

The change in the carrying amount of goodwill was as follows:

	As of December 31,
	2020	2021
	RMB	RMB
Beginning Balance of the year	—	196,002,568
Additions in goodwill related to business combinations (Note 21)	196,002,568	—
Impairment of goodwill	—	(106,949,249)
Foreign currency translation adjustment	—	(7,301,455)
Balance as of December 31, 2021	196,002,568	81,751,864

The Group has one reporting unit, which is mobile platform operations.

9. GOODWILL (Continued)

As of December 31, 2021, The Group performed quantitative impairment test for goodwill using the discounted cash flow method when determining the fair value of the reporting unit. Key assumptions used to determine the estimated fair value include: (a) internal cash flows forecasts including expected revenue growth, operating margins and estimated capital needs, (b) an estimated terminal value using a terminal year long-term future growth rate determined based on the growth prospects of the reporting unit; and (c) a discount rate that reflects the weighted-average cost of capital adjusted for the relevant risk associated with the reporting unit’s operations and the uncertainty inherent in the Group’s internally developed forecasts. The Group corroborates the reasonableness of the inputs and outcomes of its discounted cash flow analysis through a market capitalization reconciliation to determine whether the implied control premium is reasonable. The Group recognized impairment loss of RMB106,949,249 for goodwill for the year ended December 31, 2021, primarily due to more intensive competition on its mobile platform operations, which brought adverse impact on the Group’s ability to generate revenues and net income from its mobile platform operations.

The Group did not record impairment charges of goodwill for the years ended December 31, 2019 and 2020.

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

12 Months Ended

Dec. 31, 2021

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

10. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Accrued payroll and welfare	29,859,310	24,015,031
Technology supporting fees payable	9,856,805	20,609,458
Advertising and marketing fees payable	13,855,032	5,144,789
Other taxes payable	9,513,024	6,525,618
Rebate to advertising customers	11,896,947	4,263,036
Professional fee payable	1,350,153	3,069,892
Deposits received from suppliers	1,120,000	1,170,000
Payable for business combinations	24,742,025	—
Cash collected on behalf of service providers*	10,356,117	—
Other accrued expenses**	6,409,383	18,164,527
Accrued Expenses and Other Current Liabilities	118,958,796	82,962,351

*      This is the cash the Group received on behalf of the service providers from the customers for the family planning services.

**    Other accrued expenses mainly represent accrued office expenses and other operating costs.

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CONVERTIBLE DEBT

12 Months Ended

Dec. 31, 2021

CONVERTIBLE DEBT

CONVERTIBLE DEBT

11. CONVERTIBLE DEBT

On March 9, 2017, the Company entered into a convertible debt agreement with ShanShui CongRong Media Investment Co., Ltd (“ShanShui CongRong”), a third party investor, to borrow a one-year loan in the amount of USD3.0 million. During the period of the loan, ShanShui CongRong was entitled to convert all of the outstanding principal of the convertible debt into 116,640 shares of Series C-2 Redeemable Convertible Preferred Shares (“Series C-2 Preferred Shares”) of the Company. The interest rate of this convertible debt is 5% simple interest per annum. However, no interest shall be accrued on the outstanding principal amount, if any portion of the principal amount is converted to the Company’s Series C-2 Preferred Shares. The conversion price is US$ 25.72 per share. On March 8, 2018, the term of maturity date of this convertible debt was extended to March 8, 2020.

The Company concluded the embedded conversion option did not need to be bifurcated pursuant to ASC 815 because these terms do not permit net settlement, nor they can be readily settled net by a means outside the contract, nor they can provide for delivery of an asset that puts the holders in a position not substantially different from net settlement. The Company further determined that there was no beneficial conversion feature attributable to the convertible debt because the initial effective conversion price of the convertible debt was higher than the fair value of the Company’s Series C-2 Preferred Shares at the commitment date. The Company elected to measure the convertible debt in its entirety at fair value with changes in fair value recognized in earnings in consolidated statement of comprehensive loss.

The Company adopted a scenario-weighted average method to estimate fair value of the convertible debt based on the probability of each scenario and pay-off of convertible debt under each scenario. Changes in fair value of convertible debt in the amount of RMB8,749,608 and nil for the years ended December 31, 2019 and 2020, respectively, were recognized in the consolidated statements of comprehensive loss.

On November 20, 2019, the Group and ShanShui CongRong agreed to terminate the convertible debt agreement, pursuant to which the principal amount of USD3.0 million (equivalent to RMB20.0 million) was fully paid in November 2019 and the accrued interest of RMB2.7 million was paid by the end of the first quarter of 2020. The difference in the amount of USD1.3 million (equivalent to RMB9.0 million) between the settlement amount of USD3.2 million (equivalent to RMB22.7 million) and the carrying amount of USD 4.5 million (equivalent to RMB31.8 million) as at November 20, 2019 was recognized as a gain on extinguishment of a convertible debt for the year ended December 31, 2019. The Company has paid the interest in the amount of RMB2.7 million on March 9, 2020.

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MEZZANINE EQUITY

12 Months Ended

Dec. 31, 2021

MEZZANINE EQUITY

MEZZANINE EQUITY

12. MEZZANINE EQUITY

Series A Convertible Preferred Shares

On April 27, 2013, the Company entered into a share purchase agreement with an investor, pursuant to which the Company issued 1,275,000 Series A convertible preferred shares (“Series A Preferred Shares”) at US$0.38 per share for an aggregated cash consideration of US$482,253 (equivalent to RMB3,000,000).

On November 4, 2014, the Company, the shareholder of the Series A Preferred Shares and a new investor entered into a share transfer agreement, pursuant to which the shareholder of Series A Preferred Shares sold 124,138 Series A Preferred Shares to the new investor, and the shares were immediately re-designated into Series A-1 redeemable convertible preferred shares (“Series A-1 Preferred Shares”).

On February 8, 2018, the Company entered into a share purchase agreement with an investor pursuant to which the Company issued 288,240 Series A Preferred Shares at US$27.75 per share for an aggregated cash consideration of US$8,000,000 (equivalent to RMB50,753,200).

The rights, preferences and privileges of the Series A Preferred Shares are as follows:

Conversion Rights

Each Series A Preferred Shares is convertible, at the option of the holder, at any time after the issuance date according to a conversion ratio, subject to adjustments for dilution, including but not limited to stock splits, stock dividends and certain other events. The conversion price of Series A Preferred Shares is the same as its original issuance price and no adjustments to conversion price have occurred.

12. MEZZANINE EQUITY (Continued)

Each Series A Preferred Shares shall automatically be converted into Ordinary Shares at a 1 to 1 initial conversion ratio immediately upon the closing of a Qualified Initial Public Offering (“Qualified IPO”), if the Qualified IPO is approved by the preferred shareholders as defined below.

The “Qualified IPO” was defined as within four anniversary of the Closing Date (January 26, 2018), a firm commitment underwritten public offering of the Ordinary Shares (or securities representing Ordinary Shares) in the United States, Hong Kong S.A.R. or Mainland China (excluding the National Equities Exchange and Quotations), or other jurisdiction with a pre-offering valuation of at least US$850,000,000 and raising at least US$100,000,000 proceeds. The number of shares to be issued by the Company shall be negotiable at the time of the Qualified IPO and after the expiration of the lock-up period after the Qualified IPO in such jurisdiction and subject to the approval by the shareholders of at least ninety-two (92%) of the preferred shares (voting together as a single class and calculated on an as-converted basis).

Voting Rights

Each Series A Preferred Shares shall be entitled to that number of votes corresponding to the number of ordinary shares on an as-converted basis. The shareholders of Series A Preferred Shares shall vote separately as a class with respect to certain specified matters. Otherwise, the shareholders of Series A Preferred Shares, Series A-1, Series B, Series C, Series C-1, Series D redeemable convertible preferred shares, and ordinary shares shall vote together as a single class.

Liquidation Preferences

In the event of any liquidation, dissolution or winding up of the Company, or upon occurrence of a Liquidation Event as defined in the Sixth Amended And Restated Memorandum And Articles Of Association, either voluntary or involuntary, and after the distribution to the shareholders of Series D Preferred Shares, Series C-1 Preferred Shares, Series B Preferred Shares and Series A-1 Preferred Shares, the shareholders of Series A Preferred Shares shall be entitled to receive, on a pro rata, pari passu basis but prior to any distribution to the shareholders of the Ordinary Shares or any other class or series of shares then outstanding, an amount per Series A Preferred Shares equal to the greater of (i) one hundred and twenty percent (120%) of Series A Preferred Shares issue price, plus all declared but unpaid dividends thereon (as adjusted), and (ii) the aggregate amount that each such Series A Preferred Shares shall be entitled to receive from the total proceeds in connection with such liquidation, dissolution, winding up, or liquidation event calculated on a pro rata basis and as-converted basis.

Drag-along rights

In the event that the shareholders of at least ninety-two (92%) of the preferred shares (“Drag-Along Shareholders”, i.e. the preferred shares in the capital of the Company with a par value of US$0.0001 per share, including Series A Preferred Shares, Series A-1 Preferred Shares, Series B Preferred Shares, Series C Preferred Shares, Series C-1 Preferred Shares and Series D Preferred Shares), voting together as a single class and calculated on an as-converted basis, approve a transaction that qualifies as a Liquidation Event (“Drag-Along Sale”) and the valuation of the Company immediately prior to the Drag-Along Sale reaches US$2,500,000,000 or more in the contemplated Drag-Along Sale, then, upon written notice from such Drag-Along Shareholders requesting them to do so, each of the other shareholders of the Company shall (i) vote, or give its written consent with respect to, all the Equity Securities held by them in favor of such proposed Drag-Along Sale and in opposition of any proposal that could reasonably be expected to delay or impair the consummation of any such proposed Drag-Along Sale; (ii) sell, transfer, and/or exchange, as the case may be, all of its Equity Securities in such Drag-Along Sale to such purchaser on the same terms and conditions as were agreed by the Drag-Along Shareholders; (iii) refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect to or in connection with such proposed Drag-Along Sale; and (iv) take all actions reasonably necessary to consummate the proposed Drag-Along Sale, including without limitation amending the then existing Articles. If any Dragged Shareholder does not elect to vote, or give its written consent with respect to such proposed Drag-Along Sale, such Dragged Shareholder shall be obliged to purchase all the shares held by the Drag-Along Shareholders at the price. A Drag-Along Sale shall be deemed as a liquidation event.

The Company classified Series A Preferred Shares as mezzanine equity instead of permanent equity on the consolidated balance sheet because of the existence of such drag-along rights. Triggering of this drag-along right results in a deemed liquidation of the Company at the option of a majority of the shareholders of preferred shares with a required distribution of the transaction proceeds in accordance with the Company’s Memorandum and Articles of Association.

12. MEZZANINE EQUITY (Continued)

The Company concluded the embedded conversion option in the Series A Preferred Shares did not need to be bifurcated pursuant to ASC 815 because these terms do not permit net settlement, nor they can be readily settled net by a means outside the contract, nor they can provide for delivery of an asset that puts the holders in a position not substantially different from net settlement. The Company also determined that there was no beneficial conversion feature attributable to Series A Preferred Shares because the initial effective conversion prices of Series A Preferred Shares were higher than the fair value of the Company’s ordinary shares at the relevant commitment dates. The fair value of the Company’s ordinary shares on the commitment date was estimated by management with the assistance of an independent valuation firm.

The Series A Preferred Shares were recorded initially at fair value.

The Series A Preferred Shares were converted to equivalent number of Class A Ordinary Shares immediately upon the completion of the Company’s initial public offering on July 8, 2020.

The Company’s Series A Preferred Shares activities for the years ended December 31, 2019 and 2020 are as follows:

	Amount
	RMB
Balance as of January 1, 2019 and December 31, 2019	29,751,569
Conversion to Class A Ordinary Shares	(33,042,477)
Foreign currency translation adjustment	3,290,908
Balance as of December 31, 2020	—

Series A-1, Series B, Series C, Series C-1 and Series D Redeemable Convertible Preferred Shares (collectively “Redeemable Convertible Preferred Shares”)

On May 15, 2014, the Company entered into a share purchase agreement with an investor, pursuant to which the Company issued 2,000,000 Series A-1 Preferred Shares at US$0.88 per share for an aggregated cash consideration of US$1,764,700 (equivalent to RMB10,877,611).

On October 30, 2014, the Company entered into a share purchase agreement with an investor, pursuant to which the Company issued 1,862,069 Series B redeemable convertible preferred shares (“Series B Preferred Shares”) at US$6.63 per share for an aggregated cash consideration of US$12,350,000 (equivalent to RMB75,899,395).

On November 4, 2014, 124,138 Series A Preferred Shares were re-designated into Series A-1 Preferred Shares.

On March 18, 2016 and April 8, 2016, the Company entered into share purchase agreement with a group of investors, pursuant to which the Company issued 1,091,391 Series C redeemable convertible preferred shares (“Series C Preferred Shares”) at US$12.88 per share for an aggregated cash consideration of US$14,061,477 (equivalent to RMB90,876,514).

On May 9, 2016, the Company issued convertible promissory notes in the amount of US$1,999,983 (equivalent to RMB13,020,889) to certain investors, which were subsequently converted into 155,230 Series C Preferred Shares upon the issuance of Series C-1 redeemable convertible preferred shares (“Series C-1 Preferred Shares”) on June 27, 2016.

On June 27, 2016, the Company entered into a share purchase agreement with certain investors, pursuant to which the Company issued 745,114 Series C-1 Preferred Shares at US$16.10 per share for an aggregated cash consideration of US$12,000,000 (equivalent to RMB79,650,000). On June 27, 2016, a shareholder of the Series A-1 Preferred Shares sold 232,847 Series A-1 Preferred Shares to a holder of the Series C-1 Preferred Shares, and the shares were immediately re-designated into Series C-1 Preferred Shares at issuance price of US$12.88 per share.

12. MEZZANINE EQUITY (Continued)

From June 9, 2017 to November 2, 2017, the Company entered into share purchase agreements with a group of investors (“Series D Preferred Shareholders”), and pursuant to which the Company issued 1,080,901 Series D redeemable convertible preferred shares (“Series D Preferred Shares”) at US$27.75 per share for an aggregated cash consideration of US$29,999,974 (equivalent to RMB200,622,325) in 2017. The issuance costs for the above Series D Preferred Shares were US$740,313 (equivalent to RMB4,950,781). From January 26, 2018 to November 1, 2018, the Company issued 1,062,885 Series D Preferred Shares at US$27.75 per share for an aggregated cash consideration of US$29,499,990 (equivalent to RMB196,648,046) to a group of Series D Preferred Shareholders. The issuance costs for the Series D Preferred Shares issued in 2018 were US$1,045,254 (equivalent to RMB6,913,310).

The rights, preferences and privileges of the Series A-1 Preferred Shares, Series B Preferred Shares, Series C Preferred Shares, Series C-1 Preferred Shares, and Series D Preferred Shares are as follows:

Redemption Rights

If the Company fails to complete the Qualified IPO prior to the fourth year anniversary of January 26, 2018, the shareholders of Series D Preferred Shares shall be entitled to request the Company to redeem the Series D Preferred Shares in cash out of funds legally available therefor. In addition, if any of the entities within the Group or Mr. Baoli Ma (the “Founder”) materially breaches any of the Transaction Agreements (as respectively defined in the Series D Share Purchase Agreements), the shareholders of Series D Preferred Shares shall be entitled to request the Company to redeem the Series D Preferred Shares in cash out of funds legally available therefor. Upon the completion of the redemption of the Series D Preferred Shares, shareholders of other Redeemable Convertible Preferred Shares shall also be entitled to request the Company to redeem their shares.

In addition, if the Company fails to complete the Qualified IPO prior to the respective fourth year anniversaries of the respective closing dates of Series C-1 Preferred Shares, Series C Preferred Shares, and Series B Preferred Shares together with Series A-1 Preferred Shares, respective (the “Redemption Start Date”), shareholders shall be entitled to request the Company to redeem in cash out of funds legally available therefor. When any of such shareholders request to redeem their shares, shareholders with higher priority of preference shall also be entitled to request the Company to redeem in cash out of funds legally available therefor. The original Redemption Start Date was November 4, 2018 for Series B Preferred Shares together with Series A-1 Preferred Shares, April 8, 2020 for Series C Preferred Shares, June 27, 2020 for Series C-1 Preferred Shares and January 26, 2022 for Series D Preferred Shares. On November 11, 2019, Series A-1, Series B, Series C and Series C-1 Preferred shareholders entered into an amendment to the redemption rights with the Company and agreed to extend the Redemption Start Date to the earlier of the following: (1) June 30, 2021, if the Company has not completed a Qualified IPO by then, (2) official termination of the IPO process of the Company, (3) the occurrence of liquidation, winding up or dissolution of the Company or substantive change of the principal business of the Company, and (4) any Preferred Share is redeemed by the Company.

The redemption preference from high priority to low priority is as follows in sequence: Series D Preferred Shares, Series C-1 Preferred Shares, Series C Preferred Shares, and Series B Preferred Shares together with Series A-1 Preferred Shares.

For Series D Preferred Shares, the redemption price shall be the greater of (i) sum of the issue price plus all declared but unpaid dividends, and a compounded ten percent (10%) per annum return measured from the issuance date to actual payment date of the redemption; (ii) the fair market value as determined through an independent appraisal performed by a reputable appraisal firm mutually agreed upon by the Company and the majority shareholders of Series D Preferred Shares; provided that such valuation shall not take into account any liquidity or minority interest discounts. The redemption price shall be proportionally adjusted for share splits, share consolidations, share dividends, recapitalizations and the like.

For Series C-1 Preferred Shares, Series C Preferred Shares, and Series B Preferred Shares, the redemption price shall be the greater of (i) sum of the respective issue prices plus all declared but unpaid dividends, and a compounded eight percent (8%) per annum return measured from the respective issuance dates to actual payment dates of the redemption; (ii) the fair market value of respective preferred shares as determined through an independent appraisal performed by a reputable appraisal firm mutually agreed upon by the Company and the respective majority shareholders of preferred shares; provided that such valuation shall not take into account any liquidity or minority interest discounts. The redemption price shall be proportionally adjusted for share splits, share consolidations, share dividends, recapitalizations and the like.

For Series A-1 Preferred Shares, the redemption price shall be sum of the issue price plus all declared but unpaid dividends, and a compounded eight percent (8%) per annum return measured from the issuance date to actual payment date of the redemption.

12. MEZZANINE EQUITY (Continued)

The Company determines whether an amendment to the redemption rights of Series A-1, Series B, Series C and Series C-1 Preferred shareholders represents an extinguishment based on a fair value approach. If the fair value of the preferred shares immediately before and after the amendment is significantly different (by more than 10%), the amendment represents an extinguishment. The Company has determined that the amendment to the redemption rights of Series A-1, Series B, Series C and Series C-1 Preferred Shares did not represent an extinguishment, and therefore modification accounting was applied by analogy to the modification guidance contained in ASC718-20, Compensation—Stock Compensation. The Company accounts for modifications that result in an increase to the fair value of the modified preferred shares as a deemed dividend reconciling net loss to net loss attributable to ordinary shareholders as there is a transfer of value from the ordinary shareholders to the preferred shareholders. Modifications that result in a decrease in the fair value of the modified preferred shares were not recognized.

Conversion Rights

Each Redeemable Convertible Preferred Share is convertible, at the option of the shareholder, at any time after the issuance date according to a conversion ratio, subject to adjustments for dilution, including but not limited to stock splits, stock dividends and certain other events. Each Redeemable Convertible Preferred Share is convertible into a number of ordinary shares determined by dividing the applicable original issuance price by the conversion price. The conversion price of each Redeemable Convertible Preferred Share is the same as its original issuance price and no adjustments to conversion price have occurred. As of December 31, 2018, each Redeemable Convertible Preferred Share is convertible into one ordinary share.

Each Redeemable Convertible Preferred Share shall automatically be converted into Ordinary Shares at a 1-to-1 initial conversion ratio immediately upon the closing of the Qualified IPO.

Voting Rights

Each Redeemable Convertible Preferred Share shall be entitled to that number of votes corresponding to the number of ordinary shares on an as-converted basis. The shareholders of Redeemable Convertible Preferred Shares shall vote separately as a class with respect to certain specified matters. Otherwise, the shareholders of Redeemable Convertible Preferred Shares, convertible preferred shares and ordinary shares shall vote together as a single class.

Dividend Rights

Each holder of Redeemable Convertible Preferred Shares shall be entitled to receive dividends at the rate of eight percent (8%) per annum of the applicable issue price. Such dividends shall be payable only when, as, and if declared by the Board of Directors and shall be non-cumulative. Dividend rights preference is as follows in sequence: Series D Preferred Shares, Series C-1 Preferred Shares, Series C Preferred Shares, Series B Preferred Shares, and Series A-1 Preferred Shares.

After the preferential dividends relating to the Redeemable Convertible Preferred Shares and dividends related to the Series A Preferred Shares have been paid in full or declared and set apart in any fiscal year of the Company, any additional dividends out of funds legally available therefor may be declared in that fiscal year for the Ordinary Shares and, if such additional dividends are declared, then such additional dividends shall be declared pro rata on the Ordinary Shares and all Preferred Shares on an as-converted basis.

No dividends or other distributions shall be made or declared, whether in cash, in property, or in any other shares of the Company, with respect to any other class or series of shares of the Company, unless and until the dividends of preferred shares with higher priority of preference has been paid in full.

12. MEZZANINE EQUITY (Continued)

Liquidation Preferences

In the event of any liquidation, dissolution or winding up of the Company, or upon occurrence of a Liquidation Event as defined in the Sixth Amended And Restated Memorandum And Articles Of Association, either voluntary or involuntary, shareholders of Series D Preferred Shares shall be entitled to receive a per share amount equal to the greater of (i) one hundred and fifty percent (150%) of the issuance price, plus all declared but unpaid dividends thereon, (ii) the sum of one hundred percent (100%) of the issuance price, plus a compounded ten percent (10%) per annum return measured from the actual payment date of purchase price to actual payment date of liquidation amount, and (iii) the aggregate amount that each such Series D Preferred Share shall be entitled to receive from the total proceeds in connection with such liquidation, dissolution, winding up, or Liquidation Event calculated on a pro rata basis and as-converted basis.

In the event of any liquidation, dissolution or winding up of the Company, or upon occurrence of a Liquidation Event as defined in the Sixth Amended And Restated Memorandum And Articles Of Association, either voluntary or involuntary, shareholders of Series C-1 Preferred Shares, Series C Preferred Shares, and Series B Preferred Shares shall be entitled to receive a per share amount equal to the greater of (i) one hundred and fifty percent (150%) of the issuance price, plus all declared but unpaid dividends thereon, and (ii) the aggregate amount that each such preferred share shall be entitled to receive from the total proceeds in connection with such liquidation, dissolution, winding up, or Liquidation Event calculated on a pro rata basis and as-converted basis.

In the event of any liquidation, dissolution or winding up of the Company, or upon occurrence of a Liquidation Event as defined in the Sixth Amended And Restated Memorandum And Articles of Association, either voluntary or involuntary, shareholders of Series A-1 Preferred Shares shall be entitled to receive a per share amount equal to the greater of (i) one hundred and twenty percent (120%) of the issuance price, plus all declared but unpaid dividends thereon, and (ii) the aggregate amount that each such preferred share shall be entitled to receive from the total proceeds in connection with such liquidation, dissolution, winding up, or Liquidation Event calculated on a pro rata basis and as-converted basis.

Liquidation preference is as follows in sequence: Series D Preferred Shares, Series C-1 Preferred Shares, Series C Preferred Shares, Series B Preferred Shares, and Series A-1 Preferred Shares together with Series A Preferred Shares.

Drag-along rights

Drag-along rights of the Redeemable Convertible Preferred Shares are the same as the rights of Series A Preferred Shares.

The Company classified the Redeemable Convertible Preferred Shares as mezzanine equity in the consolidated balance sheet as they are contingently redeemable upon the occurrence of certain events outside of the Company’s control.

The Company concluded the embedded conversion and redemption option of the Redeemable Convertible Preferred Shares did not need to be bifurcated pursuant to ASC 815 because these terms do not permit net settlement, nor they can be readily settled net by a means outside the contract, nor they can provide for delivery of an asset that puts the holders in a position not substantially different from net settlement.

The Company also determined that there was no beneficial conversion feature attributable to the Redeemable Convertible Preferred Shares because the initial effective conversion prices of these Redeemable Convertible Preferred Shares were higher than the fair value of the Company’s ordinary shares at the relevant commitment dates. The fair value of the Company’s ordinary shares on the commitment date was estimated by management with the assistance of an independent valuation firm.

The Redeemable Convertible Preferred Shares were recorded initially at fair value, net of issuance costs. The Company recognized changes in the redemption value immediately as they occur and adjust the carrying value of the Redeemable Convertible Preferred Shares to equal the redemption value at the end of each reporting period, as if it were also the redemption date for the Redeemable Convertible Preferred Shares. The reversal of accretion in the carrying amount is only to the extent of the amount of accretion the Company previously recognized.

All of the Redeemable Convertible Preferred Shares were converted to equivalent number of Class A Ordinary Shares immediately upon the completion of the Company’s initial public offering on July 8, 2020.

12. MEZZANINE EQUITY (Continued)

The Company’s Redeemable Convertible Preferred Shares activities for the years ended December 31, 2019 and 2020 consist of the following:

	Series A-1	Series B	Series C	Series C-1	Series D
	Preferred	Preferred	Preferred	Preferred	Preferred
	Shares	Shares	Shares	Shares	Shares	Total
	RMB	RMB	RMB	RMB	RMB	RMB
Balance as of January 1, 2019	16,359,651	239,225,246	178,003,498	150,811,043	460,765,137	1,045,164,575
Accretion and modification of redeemable convertible preferred shares	1,315,008	237,680,316	144,659,627	104,388,417	142,962,195	631,005,563
Foreign currency translation adjustment	284,668	6,706,446	4,615,264	3,698,609	9,251,062	24,556,049
Balance as of December 31, 2019	17,959,327	483,612,008	327,278,389	258,898,069	612,978,394	1,700,726,187
Accretion (reversal of accretion) of redeemable convertible preferred shares	707,682	(68,419,392)	(49,340,009)	(40,873,954)	(86,155,005)	(244,080,678)
Conversion to Class A Ordinary Shares	(18,780,954)	(418,336,891)	(280,068,866)	(219,711,065)	(530,808,265)	(1,467,706,041)
Foreign currency translation adjustment	113,945	3,144,275	2,130,486	1,686,950	3,984,876	11,060,532
Balance as of December 31, 2020	—	—	—	—	—	—

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ORDINARY SHARES

12 Months Ended

Dec. 31, 2021

ORDINARY SHARES

ORDINARY SHARES

13. ORDINARY SHARES

Upon incorporation in 2013, the Company’s authorized ordinary shares were 500,000,000 shares with a par value of US$0.0001 per share. The number of ordinary shares issued and outstanding was 5,614,840 as of December 31, 2019.

Immediately prior to the completion of IPO, the Company’s authorized share capital was US$500,000 divided into 5,000,000,000 shares comprising of (i) 4,600,000,000 Class A Ordinary Shares with a par value of US$0.0001 each, (ii) 200,000,000 Class B Ordinary Shares with a par value of US$0.0001 each, (iii) 200,000,000 shares with a par value of US$0.0001 each of such class or classes (however designated) as the board of directors may determine in accordance with the amended and restated memorandum of association.

Immediately prior to the completion of the IPO, all outstanding preferred shares, including (i)1,439,102 shares of Series A Convertible Preferred Shares with a par value of US$0.0001 each, (ii)1,891,291 Series A-1 Redeemable Convertible Preferred Shares with a par value of US$0.0001 each, (iii)1,862,069 Series B Redeemable Convertible Preferred Shares with a par value of US$0.0001 each, (iv)1,246,621 Series C Redeemable Convertible Preferred Shares with a par value of US$0.0001 each, (v)977,961 Series C-1 Redeemable Convertible Preferred Shares with a par value of US$0.0001 each, and (vi)2,143,786 Series D Redeemable Convertible Preferred Shares with a par value of US$0.0001 each, were converted into Class A ordinary shares on a one-for-one basis. All issued and outstanding ordinary shares were re-designated as Class A ordinary shares on a one-for-one basis, except that the 5,614,840 ordinary shares held by BlueCity Media Limited were re-designated as Class B ordinary shares.

In July 2020, the Company completed its IPO of 2,650,000 newly issued Class A ordinary shares, at a public offering price of US$32.0 per share. The net proceeds after deducting underwriting commissions, discounts and underwriter's lawyer fee were approximately US$78 million (RMB549 million).

In April 2021, 500,000 Class B ordinary shares was converted into 500,000 Class A ordinary shares.

As of December 31, 2021, there were 13,618,609 Class A Ordinary Shares and 5,114,840 Class B ordinary shares issued and outstanding.

Holders of Class A ordinary shares and Class B ordinary shares have the same rights except for voting and conversion rights. Each Class A ordinary share is entitled to one vote, and each Class B ordinary share is entitled to five votes and is convertible into one Class A ordinary share. Class A ordinary shares are not convertible into Class B ordinary shares under any circumstances.

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SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2021

SHARE-BASED COMPENSATION

SHARE-BASED COMPENSATION

14. SHARE-BASED COMPENSATION

On March 11, 2015, the Board of Directors of the Company approved and adopted the 2015 Stock Incentive Plan (the “2015 Plan”), under which the Company reserves 1,551,724 shares to motivate directors, employees and consultants of the Group. Stock options granted to an employee under the 2015 Plan are generally subject to a four-year service schedule, under which 25% of the option shall vest on the first anniversary of the vesting commencement date, and the remaining portion shall vest monthly over subsequent 36 months on a pro-rata basis. In addition, no options can be exercised until the Company completes an initial public offering.

On June 15, 2020, the Board of Directors of the Company approved and adopted the 2020 Share Incentive Plan (the “2020 Plan”), under which the Company reserves 758,783 shares to motivate directors, employees and consultants of the Group. Stock options granted to an employee under the 2020 Plan are generally subject to a four-year service schedule, under which 25% of the option shall vest on the first anniversary of the vesting commencement date, and the remaining portion shall vest monthly over subsequent 36 months on a pro-rata basis.

On August 24, 2021, the Board of Directors of the Company approved and adopted the 2021 Share Incentive Plan (the “2021 Plan”), under which the Company reserves 833,550 shares to motivate directors, employees and consultants of the Group. Stock options granted to an employee under the 2021 Plan are generally subject to a four-year service schedule, under which 25% of the option shall vest on the first anniversary of the vesting commencement date, and the remaining portion shall vest monthly over subsequent 36 months on a pro­ rata basis.

In June 2020, the Company granted 303,513 share options to Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Company, under the 2020 Plan. Such share options were vested and exercisable upon the completion of an IPO of the Company with exercise price of US$0.01 per share option. The Company recorded compensation expenses of RMB68,166,664 in general and administrative expenses for the year ended December 31, 2020 relating to these options.

Since the exercisability of all share options granted prior to the Company’s initial public offering is dependent upon the completion of an initial public offering of the Company, no compensation expense relating to the options was recorded for the years ended December 31, 2019. Upon the completion of IPO, the Company immediately recognized share-based compensation expenses of RMB139,374,113 of share options vested cumulatively.

In October 2020, the Company granted 268,487 share options to a former employee in recognition of his past service to the Company. The Company recorded compensation expenses of RMB31,082,306 in general and administrative expenses for the year ended December 31, 2020 relating to these options.

The following table sets forth the stock options activity for the year ended December 31, 2021:

		Weighted	Weighted
		average	remaining	Aggregate
	Number of	exercise	contractual	intrinsic
	shares	price	years	value
		US$		US$
Outstanding as of January 1, 2021	2,005,600	0.01
Granted	508,619	0.01
Expired	(304)	0.01
Exercised	(907,779)	0.01
Forfeited	(234,872)	0.01
Outstanding as of December 31, 2021	1,371,264	0.01	8.24	4,182,355
Vested and expect to be vested as of December 31, 2021	1,371,264	0.01	8.24	4,182,355
Exercisable as of December 31, 2021	809,499	0.01	7.80	2,468,972

14. SHARE-BASED COMPENSATION (Continued)

The fair value of the options is estimated on the dates of grant using the binomial option pricing model with the following key assumptions used:

	2019	2020	2021
Risk-free rate of return (per annum)	1.78%-2.56%	0.23%-1.70%	1.61%
Volatility	57.20%-60.91%	50.92%-56.70%	59.23%
Expected dividend yield	0%	0%	0%
Exercise multiple	2.2-2.8	2.2-2.8	2.2-2.8
Fair value of underlying ordinary share	US$17.95-US$31.15	US$17.11-US$37.71	US$5.96
Expected term	10 years	10 years	10 years

The expected volatility was estimated based on the historical volatility of the Company and comparable peer public companies with a time horizon close to the expected term of the Company’s options. The risk-free interest rate was estimated based on the yield to maturity of U.S. treasury bonds denominated in USD for a term consistent with the expected term of the Company’s options in effect at the option valuation date. The expected exercise multiple was estimated as the average ratio of the stock price to the exercise price of when employees would decide to voluntarily exercise their vested options. Expected dividend yield is zero as the Company has never declared or paid any cash dividends on its shares, and the Company does not anticipate any dividend payments in the foreseeable future.

The weighted average grant date fair value of the share options for the years ended December 31, 2019, 2020 and 2021 were US$29.02, US$28.70 and US$16.19, respectively.

Compensation costs recognized for share options for the year ended December 31, 2019, 2020 and 2021 were allocated to the following expense items:

	As of December 31,
	2019	2020	2021
	RMB	RMB	RMB
Cost of revenues	—	11,698,603	2,140,523
Selling and marketing expenses	—	16,922,885	7,678,679
Technology and product development expenses	—	16,737,624	5,261,232
General and administrative expenses	—	141,544,319	830,710
Total share option compensation expenses	—	186,903,431	15,911,144

As of December 31, 2021, RMB40,677,525 of total unrecognized compensation expense related to non-vested share options is expected to be recognized over a weighted average period of 2.76 years.

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FAIR VALUE MEASUREMENT

12 Months Ended

Dec. 31, 2021

FAIR VALUE MEASUREMENT

FAIR VALUE MEASUREMENT

15. FAIR VALUE MEASUREMENT

Assets and liabilities measured at fair value on a recurring basis

The following tables present the fair value hierarchy for the asset measured at fair value on a recurring basis as of December 31, 2020:

	As of December 31, 2020			Total Fair
RMB	Level 1	Level 2	Level 3	Value
Investment securities:
Equity securities with readily determinable fair value	—	—	50,000	50,000
Total	—	—	50,000	50,000

No assets and liabilities were measured at fair value on a recurring basis as of December 31, 2021.

15. FAIR VALUE MEASUREMENT (Continued)

The tables below reflect the reconciliation from the opening balances to the closing balances for recurring fair value measurements categorized as Level 3 of the fair value hierarchy for the years ended December 31, 2019, 2020 and 2021:

		For the Year Ended December 31, 2019
		Gain or Losses
			Included in	Foreign
			Other	Currency
	January 1,	Included in	Comprehensive	Translation		December 31,
RMB	2019	Earnings	Loss	Adjustment	Extinguishment	2019
Investment securities:
Debt securities	21,559,157	—	1,591,098	373,491	—	23,523,746
Equity securities with readily determinable fair value	328,742	(274,829)	—	1,389	—	55,302
Total	21,887,899	(274,829)	1,591,098	374,880	—	23,579,048
Liabilities:
Convertible debt	(22,450,219)	(8,749,608)	—	(633,141)	31,832,968	—

		For the Year Ended December 31, 2020
		Gain or Losses
			Included in	Foreign
			Other	Currency
	January 1,	Included in	Comprehensive	Translation		December 31,
RMB	2020	Earnings	Loss	Adjustment	Disposal	2020
Investment securities:
Debt securities	23,523,746	4,863,233	(3,406,863)	42,977	(25,023,093)	—
Equity securities with readily determinable fair value	55,302	(5,247)	—	17	(72)	50,000
Total	23,579,048	4,857,986	(3,406,863)	42,994	(25,023,165)	50,000

		For the Year Ended December 31, 2021
		Gain or Losses
			Included in	Foreign
			Other	Currency
	January 1,	Included in	Comprehensive	Translation		December 31,
RMB	2021	Earnings	Loss	Adjustment	Disposal	2021
Investment securities:
Equity securities with readily determinable fair value	50,000	—	—	—	(50,000)	—
Total	50,000	—	—	—	(50,000)	—

For debt securities, equity securities with readily determinable fair value and convertible debt that do not have a quoted market rate, the Company measured their fair value based on the market approach or income approach when no recent transactions are available. The market approach takes into consideration a number of factors including market multiple and discount rates from traded companies in the industry and requires the Company to make certain assumptions and estimates regarding industry factors. Specifically, some of the significant unobservable inputs included the investee’s historical earning on sale, discount of lack of marketability, investee’s time to initial public offering as well as related volatility. The income approach takes into consideration a number of factors including management projection of discounted future cash flow of the investee as well as an appropriate discount rate. The Company has classified those as level 3 measurement. The assumptions are inherently uncertain and subjective. Changes in any unobservable inputs may have a significant impact on the fair values.

15. FAIR VALUE MEASUREMENT (Continued)

Assets measured at fair value on a nonrecurring basis

The Company measured its property and equipment, intangible assets and goodwill at fair value on a nonrecurring basis whenever events or changes in circumstances indicate that the carrying value may no longer be recoverable.

Goodwill is evaluated for impairment annually or more frequently if events or conditions were to indicate the carrying value of a reporting unit may be greater than its fair value. Impairment testing compares the carrying amount of the reporting unit with its fair value. As of December 31, 2021, The Group performed quantitative impairment test for goodwill using the discounted cash flow method when determining the fair value of the reporting unit. The fair value of goodwill is a Level 3 valuation based on certain unobservable inputs, see Note 9 for details.

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INCOME TAX

12 Months Ended

Dec. 31, 2021

INCOME TAX

INCOME TAX

16. INCOME TAX

(a)     Income tax

Cayman Islands

Under the current laws of the Cayman Islands, the Company is not subject to tax on income or capital gain. Additionally, the Cayman Islands does not impose a withholding tax on payments of dividends to shareholders.

Hong Kong S.A.R.

Under the current Hong Kong S.A.R. Inland Revenue Ordinance, the Company’s Hong Kong S.A.R. subsidiaries are subject to Hong Kong S.A.R. profits tax at the rate of 16.5% on its taxable income generated from the operations in Hong Kong S.A.R.. Payments of dividends by the Hong Kong S.A.R. subsidiaries to the Company is not subject to withholding tax in Hong Kong S.A.R.. A two-tiered profits tax rates regime was introduced in 2018 where the first HK$2 million of assessable profits earned by a company will be taxed at half of the current tax rate (8.25%) whilst the remaining profits will continue to be taxed at 16.5%. There is an anti-fragmentation measure where each group will have to nominate only one company in the group to benefit from the progressive rates.

PRC

The Group’s PRC subsidiaries, VIE and VIE’s subsidiaries are subject to the PRC Corporate Income Tax Law (“CIT Law”) at the statutory income tax rate of 25%, unless otherwise specified. According to the CIT Law, entities that qualify as “high-and-new technology enterprises” (“HNTE”) are entitled to a preferential income tax rate of 15%.

In 2017, BlueCity Information Technology received the approval from the tax authority that it qualified as an HNTE. The certificate entitled BlueCity Information Technology to the preferential income tax rate of 15% effective retroactively from January 1, 2017 to December 31, 2019. In 2020, BlueCity Information Technology completed the renewal of HNTE certificate. The renewed certificate entitled BlueCity Information Technology to the preferential income tax rate of 15% effective retroactively from January 1, 2020 to December 31, 2022, if all the criteria for HNTE status could be satisfied in the relevant year.

The components of loss before income taxes are as follows:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
PRC, excluding Hong Kong S.A.R.	13,363,885	165,783,490	229,692,055
Hong Kong S.A.R.	36,302,843	38,305,342	59,079,524
Japan	258,209	7,697,439	3,446,328
Cayman	646,803	5,332,840	14,378,166
Others	1,427,214	6,175,567	2,206,865
Total	51,998,954	223,294,678	308,802,938

16. INCOME TAX (Continued)

The Group’s income tax expense (benefit) recognized in the consolidated statements of comprehensive loss consists of the following:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Current income tax expense (benefit)-PRC, excluding Hong Kong S.A.R..	112,473	(64,615)	1,168,707
Current income tax expense-Others	818,081	1,118,133	1,819,398
Current income tax expense-total	930,554	1,053,518	2,988,105
Deferred income tax benefit-PRC, excluding Hong Kong S.A.R	—	(2,495,332)	(2,167,099)
Income tax expense (benefit)	930,554	(1,441,814)	821,006

Reconciliation of the differences between PRC statutory income tax rate and the Group’s effective income tax rate for the years ended December 31, 2019, 2020 and 2021 are as follows:

	For the Year Ended
	December 31,
	2019		2020		2021
	RMB		RMB		RMB
PRC Statutory income tax rate	(25.0)	%	(25.0)	%	(25.0)	%
Increase (decrease) in effective income tax rate resulting from:
Tax rate differential for non-PRC entities	6.1	%	1.8	%	2.9	%
Preferential tax rate	6.5	%	(3.2)	%	7.3	%
Research and development expenses additional deduction	(15.5)	%	(3.7)	%	(6.8)	%
Non-deductible share-based compensation expenses	—		20.9	%	1.3	%
Non-taxable income	—		(0.5)	%	(0.1)	%
Impairment of goodwill	—		—		8.7	%
Other non-deductible expenses	0.5	%	2.4	%	2.8	%
Change in valuation allowance	29.2	%	6.7	%	9.2	%
Effective income tax rate	1.8	%	(0.6)	%	0.3	%

(b)     Deferred income tax assets and deferred income tax liabilities

	As of December 31,
	2020	2021
	RMB	RMB
Net operating loss carry forwards	72,435,457	99,347,341
Donation	457,730	480,684
Deductible advertising expenses	867,094	2,103,893
Total deferred income tax assets	73,760,281	101,931,918
Less: Valuation allowance	(71,676,908)	(100,483,935)
Deferred income tax assets, net	2,083,373	1,447,983
Intangible assets	(13,038,256)	(11,051,079)
Deferred income tax liabilities	(13,038,256)	(11,051,079)
Net deferred income tax liabilities	(10,954,883)	(9,603,096)

As of December 31, 2021, the Group had net operating loss carry forwards of RMB383,226,479 attributable to the PRC subsidiaries, consolidated VIE and VIE’s subsidiaries, of which RMB379,756, RMB 206,696, RMB1,466,535, RMB8,271,951, RMB11,009,934, RMB50,611,222, RMB49,150,819, RMB35,279,589 and RMB226,849,977 will expire if unused by December 31, 2022, 2023, 2024, 2025, 2026, 2027, 2028, 2029 and 2031, respectively.

16. INCOME TAX (Continued)

A valuation allowance is provided against deferred income tax assets when the Group determines that it is more likely than not that the deferred income tax assets will not be utilized in the foreseeable future. The Group evaluates the potential realization of deferred income tax assets on an entity-by-entity basis. Accordingly, the Group has provided full valuation allowance against deferred income tax assets in entities where it was determined it was more-likely-than-not that the benefits of the deferred income tax assets will not be realized as of December 31, 2021.

Changes in valuation allowance are as follows:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Balance at the beginning of the year	42,910,959	57,960,509	71,676,908
Additions of valuation allowance	14,728,024	28,879,521	46,283,222
Reductions of valuation allowance	—	(13,070,605)	(16,639,886)
Foreign exchange translation adjustments	321,526	(2,092,517)	(836,309)
Balance at the end of the year	57,960,509	71,676,908	100,483,935

According to the PRC Tax Administration and Collection Law, the statute of limitation is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitation is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000. In the case of transfer pricing issues, the statute of limitation is 10 years. There is no statute of limitation in the case of tax evasion. The income tax returns of the Company’s PRC subsidiaries, consolidated VIE and VIE’s subsidiaries for the years from 2017 to 2021 are open to examination by the PRC tax authorities. The Hong Kong tax authorities have up to six years to conduct examinations of the Company’s tax filings. Accordingly, the Hong Kong subsidiaries’ tax years 2016 through 2021 remain open to examination by the Hong Kong tax authorities.

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NET (LOSS ) INCOME PER SHARE

12 Months Ended

Dec. 31, 2021

NET (LOSS ) INCOME PER SHARE

NET (LOSS ) INCOME PER SHARE

17. NET (LOSS ) INCOME PER SHARE

The following table sets forth the basic net (loss) income and diluted net loss per share computation and provides a reconciliation of the numerator and denominator for the years presented. Shares issuable for little consideration relating to the vested share options have been included in the number of outstanding shares used for basic (loss) income per share:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Numerator:
Net loss	(52,929,508)	(221,852,864)	(309,623,944)
(Accretion) reversal of accretion and modification of redeemable convertible preferred shares	(631,005,563)	244,080,678	—
Net income attributable to preferred shareholders	—	(6,706,551)	—
Numerator for basic net (loss) income per Class A and Class B Ordinary Share calculation	(683,935,071)	15,521,263	(309,623,944)
Denominator:
Weighted average number of Class A and Class B Ordinary Share and ordinary share equivalents	5,614,840	11,974,046	19,352,595
Denominator for basic net (loss) income per Class A and Class B Ordinary Share calculation	5,614,840	11,974,046	19,352,595
Net (loss) income per Class A and Class B Ordinary Share
—Basic	(121.81)	1.30	(16.00)
Numerator:
Net (loss) income allocated to Class A and Class B ordinary shareholders as reported in basic net loss (income) per Class A and Class B Ordinary Share	(683,935,071)	15,521,263	(309,623,944)
Net income attributable to preferred shareholders	—	6,706,551	—
Reversal of accretion on Series B, C, C-1, and D Redeemable Convertible Preferred Shares	—	(244,788,360)	—
Numerator for diluted net loss per share calculation	(683,935,071)	(222,560,546)	(309,623,944)
Denominator:
Weighted average number of Class A and Class B Ordinary Share and ordinary share equivalents	5,614,840	11,974,046	19,352,595
Effect of dilutive securities of Series B, C, C-1, and D Redeemable Convertible Preferred Shares	—	3,234,380	—
Denominator for diluted net loss per share calculation	5,614,840	15,208,426	19,352,595
Net loss per Class A and Class B Ordinary Share
—Diluted	(121.81)	(14.63)	(16.00)

17. NET (LOSS ) INCOME PER SHARE (Continued)

The potentially dilutive securities that have not been included in the calculation of diluted net loss per share as their inclusion would be anti-dilutive are as follows:

	As of December 31,
	2019	2020	2021
Stock options	1,084,545	762,167	561,765
Preferred shares	9,560,830	—	—

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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2021

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

18. RELATED PARTY TRANSACTIONS

On April 12, 2018, the Board of Directors of the Company approved to repurchase 288,240 unvested share options from BlueCity Media Limited, which is controlled by Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Company, with consideration of US$8 million. US$7 million was paid in the year of 2018, and the remaining US$1 million (equivalent to RMB6,898,800) was paid in the year of 2019.

During the year ended December 31, 2019, the Group provided interest free loans in the amount of RMB8.0 million to Mr. Baoli Ma. All the loans were repaid by Mr. Baoli Ma during the year ended December 31, 2019.

On April 3, 2020, the Company made a payment of RMB4,722,814 on behalf of Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Company. All the amount was repaid by Mr. Baoli Ma on August 19, 2020.

Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Company, subscribed for, through BlueCity Media Limited, and were allocated by the underwriters, an aggregate of 312,500 American depositary shares (the “ADSs”), which represents 156,250 Class A Ordinary Shares, in the Company’s initial public offering at the initial public offering price and on the same terms as the other ADSs being offered, for consideration of US$5.0 million (equivalent to RMB35,103,500).

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REVENUE INFORMATION

12 Months Ended

Dec. 31, 2021

REVENUE INFORMATION

REVENUE INFORMATION

19. REVENUE INFORMATION

Revenues consisted of the following:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Services
Live streaming	671,410,681	868,946,403	820,825,553
Advertising	35,383,571	45,452,681	53,881,336
Membership	36,738,369	71,227,203	128,809,051
Others	15,355,285	17,022,768	8,866,367
Total service revenues	758,887,906	1,002,649,055	1,012,382,307
Merchandise sales	—	28,674,389	64,209,123
Total revenues	758,887,906	1,031,323,444	1,076,591,430

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2021

COMMITMENTS AND CONTINGENCIES.

COMMITMENTS AND CONTINGENCIES

20. COMMITMENTS AND CONTINGENCIES

Lease commitments

The Group leases its offices under non-cancelable operating lease agreements. Rental expenses were RMB8,127,122, RMB12,673,230 and RMB15,403,884 for the years ended December 31, 2019, 2020 and 2021, respectively.

As of December 31, 2021, future minimum lease commitments under office non-cancelable operating lease agreements, were as follows:

	Offices
Year ending December 31,	RMB
2022	13,315,511
2023	3,718,738
2024	486,426
2025	123,072

Except for those disclosed above, the Group did not have any significant capital or other commitments, long-term obligations, or guarantees as of December 31, 2021.

Litigation contingencies

In April and July 2021, the Company and its certain executives and directors were named as defendants in two consolidated class action lawsuits filed in the New York Supreme Court and United States District Court, respectively. The complaints in the action allege that the Company’s registration statements contained misstatements or omissions regarding its business, operation, and compliance in violation of the U.S. securities laws. As the case remains in its early stage, the likelihood of any unfavorable outcome or any estimate of the amount or range of any potential loss cannot be reasonably estimated at the issuance of this report. As a result, the Company did not record any liabilities pertaining to this.

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BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2021

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS

21. BUSINESS COMBINATIONS

Acquisition of Guangzhou Yingyoutianxia Networks Technology Co., Ltd ("Lesdo")

On August 25, 2020, the Group acquired 100% equity interest of Lesdo, a leading location-based social networking service provider targeting the lesbian community in China. The consideration was RMB1,328,418, of which RMB805,418 and RMB523,000 were paid for the years ended December 31, 2020 and 2021, respectively.

The identifiable assets acquired and liabilities assumed in the business combination were recorded at their fair values on the acquisition date and consisted of the following major items.

		Estimated useful
	RMB	lives
Cash and cash equivalents	77
Intangible assets
User base	800,000	3	years
Brand name	2,100,000	10	years
Technology	1,080,000	3	years
Total assets	3,980,077
Other current liabilities	(4,711,582)
Deferred income tax liabilities	(995,000)
Goodwill	3,054,923
Total consideration	1,328,418

21. BUSINESS COMBINATIONS (Continued)

Acquisition of iRainbow Hong Kong Limited (“Finka”) and all of its subsidiaries and other entities under the control of Finka

On December 1, 2020, the Group acquired 100% equity interest of Finka, which is a leading gay social networking app in China targeting younger generations. The consideration was USD35,997,984 (RMB237,227,055) in cash, of which USD32,286,199 (RMB212,773,650) and USD3,711,785 (RMB23,968,600) were paid for the years ended December 31, 2020 and 2021, respectively.

The identifiable assets acquired and liabilities assumed in the business combination were recorded at their fair values on the acquisition date and consisted of the following major items.

		Estimated useful
	RMB	lives
Cash and cash equivalents	10,497,160
Accounts receivable	1,716,623
Other current assets	6,323,155
Intangible assets
User base	6,930,000	4	years
Brand name	36,400,000	10	years
Technology	2,380,000	3	years
Total assets	64,246,938
Accounts payable	(208,984)
Other current liabilities	(8,331,044)
Deferred income tax liabilities	(11,427,500)
Goodwill	192,947,645
Total consideration	237,227,055

Goodwill, which is not tax deductible, is primarily attributable to the assembled workforce and synergies expected to be achieved from the two acquisitions. The synergies mainly come from the enhancement of the Group’s position in the LGBTQ community.

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PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

12 Months Ended

Dec. 31, 2021

PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

22. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

The following condensed parent company financial information of BlueCity Holdings Limited has been prepared using the same accounting policies as set out in the accompanying consolidated financial statements. As of December 31, 2021 there were no material contingencies, significant provisions of long term obligations, mandatory dividend or redemption requirements of redeemable stocks or guarantees of BlueCity Holdings Limited, except for those which have been separately disclosed in the consolidated financial statements.

(a)    Condensed Balance Sheets

	As of December 31,
	2020	2021
	RMB	RMB
Assets
Current assets
Cash	261,878,455	15,988,107
Prepayments and other current assets	1,483,169	4,285,975
Total current assets	263,361,624	20,274,082
Non-current assets
Investment in subsidiaries and consolidated VIE and VIE’s subsidiaries	517,611,994	437,336,118
Total non-current assets	517,611,994	437,336,118
Total assets	780,973,618	457,610,200
Liabilities
Current liabilities
Accrued expenses and other current liabilities	23,779,434	11,663,674
Total current liabilities and total liabilities	23,779,434	11,663,674
Shareholders’ equity:
Class A Ordinary Shares	8,572	9,487
Class B Ordinary Shares	3,446	3,118
Additional paid-in capital	2,188,870,625	2,204,845,216
Accumulated other comprehensive loss	(107,514,737)	(125,113,629)
Accumulated deficit	(1,324,173,722)	(1,633,797,666)
Total shareholders’ equity	757,194,184	445,946,526
Total liabilities and shareholders’ equity	780,973,618	457,610,200

(b)    Condensed Statements of Results of Operations

	For the Year Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Total operating expenses	(883,243)	(5,209,656)	(14,378,165)
Change in fair value of a convertible debt	(8,749,608)	—	—
Gain on extinguishment of a convertible debt	8,986,048	—	—
Share of losses from subsidiaries, VIE and VIE’s subsidiaries	(52,282,705)	(216,643,208)	(295,245,779)
Loss before income tax	(52,929,508)	(221,852,864)	(309,623,944)
Income tax expense	—	—	—
Net loss	(52,929,508)	(221,852,864)	(309,623,944)

22. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)

(c)    Condensed Statements of Cash Flows

	For the Year Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Net cash (used in) provided by operating activities	(702,200)	1,961,394	(6,796,246)
Net cash provided by (used in) investing activities	2,015,462	(252,497,206)	(234,224,099)
Net cash (used in) provided by financing activities	(920,710)	532,995,338	64,034
Effect of foreign currency exchange rate changes on cash	76,203	(21,301,631)	(4,934,037)
Net (decrease) increase in cash	468,755	261,157,895	(245,890,348)
Cash at the beginning of the year	251,805	720,560	261,878,455
Cash at the end of the year	720,560	261,878,455	15,988,107

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SUBSEQUENT EVENT

12 Months Ended

Dec. 31, 2021

SUBSEQUENT EVENT

SUBSEQUENT EVENT

23. SUBSEQUENT EVENTS

The Company received a preliminary non-binding proposal letter, dated January 2, 2022, from Mr. Baoli Ma, founder, Chairman and Chief Executive Officer of the Group, and Spriver Tech Limited.  According to the proposal letter, Mr. Baoli Ma and Spriver Tech Limited are interested in acquiring all of the Company’s outstanding ordinary shares that are not currently beneficially owned by them, including Class A ordinary shares represented by the Company’s American depositary shares or “ADSs” (each two representing one Class A ordinary share), at a price of $1.85 in cash per ADS (or approximately $3.7 in cash per ordinary share).

The Company received a preliminary non-binding proposal letter, dated April 18, 2022, from Mr. Baoli Ma and Metaclass Management ELP, an affiliate of Spriver Tech Limited. The proposal letter updates the original proposal to (i) inform the Board of Directors of the Company that Metaclass Management ELP is replacing Spriver Tech Limited as Sponsor and (ii) reduce the proposed purchase price from US$3.70 per ordinary share or US$1.85 per ADS in cash to US$3.20 per ordinary share or US$1.60 per ADS in cash.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

(a)   Basis of presentation

The accompanying consolidated financial statements of the Group have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Principles of consolidation

(b)   Principles of consolidation

The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries, the VIE in which the Company, through its WFOE, has a controlling financial interest, and VIE’s wholly-owned subsidiaries.

All intercompany transactions and balances among the Company, its wholly-owned subsidiaries, the VIE, and the VIE’s wholly-owned subsidiaries have been eliminated upon consolidation.

Use of estimates

(c)   Use of estimates

The preparation of the consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, related disclosures of contingent assets and liabilities at the balance sheet date, and the reported revenues and expenses during the reported periods. Significant accounting estimates include, but not limited to, the realization of deferred income tax assets, fair value of identifiable intangible assets in business combinations, useful lives and recoverability of property and equipment and intangible assets, impairment of goodwill, fair values of share-based compensation awards, investment securities, convertible debt, redeemable convertible preferred shares and ordinary shares.  Changes in facts and circumstances may result in revised estimates. Actual results could differ from those estimates, and as such, differences may be material to the consolidated financial statements.

Convenience translation

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(d)   Convenience translation

Translations of the consolidated financial statements from RMB into US$ as of and for the year ended December 31, 2021 are solely for the convenience of the readers and were calculated at the rate of US$1.00= RMB6.3726, representing the noon buying rate in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York on December 30, 2021. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate on December 31, 2021, or at any other rate.

The US$ convenience translation is not required under U.S. GAAP and all US$ convenience translation amounts in the accompanying consolidated financial statements are unaudited.

Commitments and contingencies

(e)   Commitments and contingencies

In the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, shareholder lawsuits, and non-income tax matters. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. If a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, is disclosed.

Cash and cash equivalents

(f)   Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash at bank and term deposits, which have original maturities of three months or less and are readily convertible to know amounts of cash. The Group’s cash and cash equivalents, excluding cash on hand, are deposited in financial institutions at below locations:

	As of December 31,
	2020	2021
	RMB	RMB
Financial institutions in the mainland of the PRC
—Denominated in RMB	76,352,748	35,656,085
—Denominated in USD	89,289,111	258,690,388
Total cash and cash equivalents balances held at mainland PRC financial institutions	165,641,859	294,346,473
Financial institution in Hong Kong Special Administrative Region (“Hong Kong S.A.R.”)
—Denominated in HKD	1,074,294	14,306,671
—Denominated in USD	261,797,195	15,084,574
Total cash balances held at the Hong Kong S.A.R. financial institution	262,871,489	29,391,245
Financial institutions in the United States
—Denominated in USD	8,540,607	22,950,413
Total cash balances held at the United States financial institutions	8,540,607	22,950,413
Financial institution in Vietnam
—Denominated in VND	6,596	6,278
Total cash balances held at the Vietnam financial institution	6,596	6,278
Financial institution in Japan
—Denominated in JPY	2,415,660	3,090,453
Total cash balances held at the Japan financial institution	2,415,660	3,090,453
Total cash and cash equivalents balances held at financial institutions	439,476,211	349,784,862

Term deposits

(g)   Term deposits

Term deposits represent deposits at bank with original maturities more than three months but less than one year. The Group’s term deposits are denominated in USD and are deposited at financial institutions in the mainland of the PRC.

Accounts receivable and allowance for doubtful accounts

(h)   Accounts receivable and allowance for doubtful accounts

Accounts receivable are recognized in the period when the Group has provided services to its customers and when its right to consideration is unconditional. The Group reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. The group considers many factors in assessing the collectability of its receivables, such as the age of the amounts due, the customer’s payment history and credit-worthiness. An allowance for doubtful accounts is recorded in the period in which a loss is determined to be probable. Accounts receivable balances are written off after all collection efforts have been exhausted.

Inventories

(i)   Inventories

Inventories, consisting of products available for sale, are stated at the lower of cost or net realizable value. The cost of inventory is determined using the first-in-first-out ("FIFO") method. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and the estimated costs necessary to make the sale. Inventory is written down for damaged goods and slow-moving merchandise, which is dependent upon factors such as historical and forecasted consumer demand, and any sales promotions.

Property and equipment, net

(j)   Property and equipment, net

Property and equipment are stated at cost less accumulated depreciation and depreciated using the straight-line method over the estimated useful lives of the assets, as follows:

Office and electronic equipment	3 years
Leasehold improvements	Shorter of 3 years or lease term

When items are retired or otherwise disposed of, income is charged or credited for the difference between net book value and the proceeds received thereon. Ordinary maintenance and repairs are charged to expense as incurred, and replacements and betterments are capitalized and amortized over the remaining useful life.

Intangible assets, net

(k)   Intangible assets, net

Intangible assets acquired through business acquisitions are recognized as assets separate from goodwill if they are capable of being separated or arise from contractual or other legal rights. Purchased intangible assets and intangible assets arising from acquisitions are recognized and measured at fair value upon acquisition. Separately identifiable intangible assets that have determinable lives are amortized over their estimated useful lives using the straight-line method as follows:

Licenses	5 years
User bases	3-4 years
Brand names	10 years
Technologies	3 years

The estimated life of intangible assets subject to amortization is reassessed if circumstances occur that indicate the life has changed.

Impairment of long-lived asset

(l)   Impairment of property and equipment and intangible assets

Property and equipment and intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be fully recoverable or that the useful life is shorter than the Group had originally estimated. When these events occur, the Group evaluates the impairment for the asset or asset group by comparing the carrying value of the asset or asset group to an estimate of future undiscounted cash flows expected to be generated from the use of the asset or asset group and their eventual disposition. If the sum of the expected future undiscounted cash flows is less than the carrying value of the asset or asset group, the Group recognizes an impairment loss based on the excess of the carrying value of the asset or asset group over the fair value of the asset or asset group.

Goodwill

(m)   Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations.

In January 2017, the Financial Accounting Standards Board (“FASB”) issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment (“ASU 2017-04”), which eliminates Step 2 from the goodwill impairment test. A public business entity that is a U.S. Securities and Exchange Commission (SEC) filer should adopt the amendments in this ASU 2017-04 for its annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019. On January 1, 2020, the Group adopted ASU 2017-04.

Goodwill is not amortized but tested annually for impairment on a qualitative or quantitative basis for the reporting unit as of December 31, or more frequently when events or circumstances indicate an impairment may exist at the reporting unit level. In the qualitative assessment, the Group considers primary factors such as industry and market considerations, the overall financial performance of the reporting unit, and other specific information related to the operations. When performing the annual impairment test, the Group has the option of first performing a qualitative assessment to determine the existence of events and circumstances that would lead to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If such a conclusion is reached, the Group would then be required to perform a quantitative impairment assessment of goodwill. However, if the assessment leads to a determination that it is more likely than not that the fair value of a reporting unit is greater than its carrying amount, then no further assessments are required. A quantitative assessment for the determination of impairment is made by comparing the carrying amount of the reporting unit with its fair value, which is generally calculated using the discounted cash flow method. If the fair value of a reporting unit exceeds its carrying amount, goodwill is not considered impaired. If the carrying amount of a reporting unit exceeds its fair value, the Group recognizes the amount of goodwill impairment as the excess of a reporting unit’s carrying amount over its fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit identified.

Investment securities

(n)   Investment securities

The Group’s investment securities consist of debt securities and equity securities with readily determinable fair values.

Debt securities

The Group accounts for debt securities as available-for-sale (“AFS”) when they are not classified as either trading or held-to-maturity. AFS securities are recorded at fair value, with unrealized gains and losses, net of related tax effect, are excluded from earnings and are reported as a separate component of accumulated other comprehensive loss until realized. Realized gains and losses from the sale of AFS securities are determined on a specific-identification basis. An impairment loss on the AFS securities are recognized in the consolidated statement of comprehensive loss when the decline in value is determined to be other-than-temporary. No impairment loss was recognized for the years ended December 31, 2019 and 2020.

Equity investments

All equity investments with readily determinable fair values, other than those accounted for under equity method of accounting or those that result in consolidation of the investee, are measured at fair value with changes in the fair value recognized through net income.

Value added taxes

(o)   Value added taxes

The Company’s PRC subsidiaries, VIE and VIE’s subsidiaries are subject to value added tax (“VAT”). Revenues from providing online services are generally subject to VAT at the rate of 6% and revenues from sales of merchandise are generally subject to VAT at the rate of 13% and subsequently paid to PRC tax authorities after netting input VAT on purchases. The excess of output VAT over input VAT is reflected in accrued expenses and other current liabilities, and the excess of input VAT over output VAT is reflected in prepayments and other current assets in the consolidated balance sheets.

Fair value measurements

(p)   Fair value measurements

Fair value represents 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. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

ASC 820, Fair Value Measurements and Disclosures (“ASC 820”) defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. Accounting guidance establishes a three-level fair value hierarchy and 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. The three levels of inputs are:

Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2—Include other inputs that are directly or indirectly observable in the marketplace.

Level 3—Unobservable inputs which are supported by little or no market activity.

Accounting guidance also describes three main approaches to measuring 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.

Financial assets and liabilities of the Group primarily consist of cash and cash equivalents, term deposits, accounts receivable, investment securities, accounts payable, and convertible debt. The Group measures investment securities and convertible debt at fair value on a recurring basis. Investment securities and convertible debt were measured at fair value using unobservable inputs and categorized in Level 3 of the fair value hierarchy. As of December 31, 2020 and 2021, the carrying amounts of other financial instruments approximated to their fair values due to the short term maturity of these instruments.

The Group’s non-financial assets, such as property and equipment, would be measured at fair value only if they were determined to be impaired.

Revenue recognition

(q)   Revenue recognition

The Group principally derives its revenues from live streaming, advertising, membership, merchandise sales and other services. The Group recognizes revenue when control of the promised service is transferred to the customers, in an amount that reflects the consideration that the Group expects to receive in exchange for those services.

Live streaming service

The Group operates integrated platforms, Blued, Finka and LESDO, consisting of IT infrastructure, mobile applications and its proprietary algorithm, to offer live and interactive streaming services to individual viewers as its customers. The Group engages broadcasters to perform on the Group’s platform, which through its proprietary algorithm, enables individual viewers to discover live streaming channels and broadcasters they may find interesting and provide more personal experience.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Individual viewer can purchase virtual gifts on the Group’s platform, and simultaneously present to broadcasters during their live streaming performance to show their support for their favorite broadcasters. The Group has sole discretion in designing and establishing pricing of virtual gifts. Individual viewer purchases virtual gifts using the Group’s virtual currency which is in turn acquired through online third-party payment platforms. Virtual currency is non-refundable and does not have expiration date. It is often consumed soon after it is purchased.

The Group considers live streaming service as one performance obligation to its customers. The consideration received from individual viewers varies at viewers’ discretion, as they purchase and present variable quantity or value of virtual gifts to broadcasters during a performance. The recognition of such variable consideration is constrained until the amount is known, which is when an individual viewer purchases virtual gifts and simultaneously presents them to broadcasters during their live streaming performance. Accordingly, revenue is recognized when virtual gifts are consumed as they are presented to broadcasters. Unconsumed virtual currency is recorded as deferred revenue.

The Group evaluates and determines individual viewers as its customers and the Group is the principal in providing live streaming services to them, and hence reports live streaming revenues on a gross basis. Accordingly, the amounts billed to viewers are recorded as revenues and revenue sharing fee paid to broadcasters through talent agencies are recorded as cost of revenues. The Group controls the integrated live streaming services, which is evidenced by its contractual relationship with individual viewers and primary responsibility for fulfilling the promise to provide the live streaming services, including operating the self-developed live streaming platform and maintaining the operation of the platform, engaging broadcasters through talent agencies to perform on its platform, investing in and using its algorithm to optimize individual viewers’ live streaming experience, enabling individual viewers to discover the broadcasters and shows they may be interested in, developing new features in the platform, promoting activities including the general promotion of the platform and the promotion of popular broadcasters and offering the virtual items to viewers to be purchased and used in the platform. Its control is also evidenced by its sole ability to monetize the live streaming services and the level of discretion in establishing pricing. The Group also has latitude in establishing the amount of compensation that broadcasters and talent agencies receive as a percentage of revenues generated from virtual gift sales. Such percentage is subject to the achievement of broadcasters and talent agencies on the Key Performance Indicators set by the Group.

Advertising

The Group offers marketing services on the Group’s mobile app, primarily through banner advertisements. Marketing services allow customers to place advertisements on particular areas of the Group’s mobile app, in particular formats and over particular periods of time. The marketing services typically last from several days to one year. The Group determines that the customer simultaneously receives and consumes benefits provided by the Group’s performance as the Group performs during the term of the contract. Revenues from marketing services are recognized, net of sales incentives, if any, ratably over the service period.

The Group provides sales incentives in the forms of discounts and rebates to customers based on purchase volume. Sales incentives are estimated and recorded at the time of revenue recognition based on the contracted rebate rates and estimated sales volume based on historical experience.

Membership

Membership revenues include subscription-based membership services and Pay-Per-Use Services. Subscription-based membership services enable individual users to enjoy additional functions and privileges over a period of time ranging from one month to one year. Pay-Per-Use services enable individual users to better promote themselves and raise their profile through advanced enhancement functions on a pay-per-service basis. The Group collects non-refundable membership service fee in advance and records it as deferred revenue. Subscription-based membership revenue is recognized on a straight-line basis over the membership period. Pay-Per-Use revenue is recognized at the point in time when control of promised service is transferred to the users.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Merchandise sales

The Group generates revenues from merchandise sales to customers through the Group’s own and third-parties' platforms. The Group controls the specified good before that good is transferred to a customer, which is evidenced by the primary responsibility for fulfilling the promise to provide the specified good, including responsible for the acceptability of the specified good; having inventory risk before the specified good has been transferred to a customer; and having discretion in establishing the price for the specified good. Accordingly, the Group concludes that it is principal in merchandise sales and reports revenue from merchandise sales on a gross basis. Revenues are measured as the amount of consideration the Group expects to receive in exchange for transferring the specified good to customers.

Other revenue

Other revenue mainly consists of family planning service revenues, service fee from the provision of consulting service to healthcare and medical institutions and marketplace service revenues. Revenue is recognized when control of promised service is transferred to the customers in an amount of consideration to which the Group expects to be entitled to in exchange for those services.

Contract balances

Contract balances include accounts receivable and deferred revenue. The timing of revenue recognition and cash collections result in accounts receivable and contract liabilities (i.e. deferred revenue). The allowance for doubtful accounts reflects the Group’s best estimate of probable losses inherent in the accounts receivable balance. The activity in the allowance for doubtful accounts for the years presented is disclosed in Note 3.

Amounts collected on accounts receivable are included in net cash provided by operating activities in the consolidated statements of cash flows.

Deferred revenue (a contract liability) is recognized when the Group has an obligation to transfer services to a customer for which the Group has received consideration related to the Group’s live streaming services, membership services and family planning services from the customer, or for which an amount of consideration is due from the customer.

The opening balance of deferred revenue as of January 1, 2020 and 2021 was RMB32,555,402 and RMB35,226,237, respectively. During the year ended December 31, 2019, 2020 and 2021, the Group recognized revenue in the amount of RMB23,757,459, RMB32,555,402 and RMB35,226,237 which was included in the deferred revenue balance at the beginning of the year, respectively.

Cost of revenues

(r)   Cost of revenues

Cost of revenues consists primarily of (i) revenue sharing fees paid to broadcasters, (ii) commission fees paid to mobile application stores and third party payment platforms, (iii) staff cost, rental and depreciation related to operation of its business, and (iv) other cost related to the business operation.

Selling and marketing expenses

(s)   Selling and marketing expenses

Selling and marketing expenses mainly consist of (i) advertising costs and promotion expenses, (ii) staff cost, rental and depreciation related to selling and marketing functions. Advertising costs, which consist primarily of online and offline advertisements, are expensed as incurred. The advertising costs were RMB60,136,876, RMB80,711,586 and RMB110,978,677 for the years ended December 31, 2019, 2020 and 2021, respectively.

Technology and development expenses

(t)   Technology and development expenses

Technology and development expenses consist primarily of payroll and related expenses for technology and development professionals and technology infrastructure costs. Technology infrastructure costs include servers, bandwidth and cloud infrastructure costs, depreciation and utilities and other expenses related to technology and development functions. Technology and development expenses are expensed as incurred.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

General and administrative expenses

(u)   General and administrative expenses

General and administrative expenses mainly consist of (i) staff cost, rental and depreciation related to general and administrative personnel, (ii) professional fees, (iii) share-based compensation for management and administrative personnel, and (iv) other corporate expenses.

Government grants

(v)   Government grants

Government grants are recognized when there are reasonable assurances that the Group will comply with the conditions attach to them and the grants will be received. Government grants for the purpose of giving immediate financial support to the Group with no future related costs or obligation are recognized as a reduction of general and administrative expenses in the Group’s consolidated statements of comprehensive loss when the grants become receivable.

Share-based compensation

(w)   Share-based compensation

The Group periodically grants share-based awards, mainly including share options to eligible employees, directors and consultants, which are subject to service and performance conditions.

All share-based awards granted to directors, employees and consultants of the Group are measured at the grant-date fair value and are recognized as compensation expense over the vesting period, and when the Group considers that it is probable that the performance condition will be achieved. The Group elected to account for forfeitures as they occur, rather than estimate expected forfeitures.

Share-based compensation in relation to the share options is estimated using the Binominal Option Pricing Model. The determination of the fair value of share options is affected by the share price of the Group’s ordinary shares as well as the assumptions regarding a number of complex and subjective variables, including the expected share price volatility, risk-free interest rate, exercise multiple, forfeiture rate and expected dividend yield.

For share options granted with service conditions only, share-based compensation expenses are recorded using straight-line method during the requisite service period.

For share options granted with service condition and the occurrence of an IPO as performance condition, share-based compensation expenses are recorded on a straight-line basis over the requisite service period for each separately vesting portion of the award.

A change in any of the terms or conditions of share-based awards is accounted for as a modification of the awards. The Group calculates incremental compensation cost of a modification as the excess of the fair value of the modified awards over the fair value of the original awards immediately before its terms are modified at the modification date. For vested awards, the Group recognizes incremental compensation cost in the period the modification occurs. For awards not being fully vested, the Group recognizes the sum of the incremental compensation cost and the remaining unrecognized compensation cost for the original awards over the remaining requisite service period after modification.

Employee benefits

(x)   Employee benefits

The Company’s subsidiaries and the VIE and VIE’s subsidiaries in PRC participate in a government mandated, multiemployer, defined contribution plan, pursuant to which certain retirement, medical, housing and other welfare benefits are provided to employees. PRC labor laws require the entities incorporated in China to pay to the local labor bureau a monthly contribution calculated at a stated contribution rate on the monthly basic compensation of qualified employees. The Group has no further commitments beyond its monthly contribution. Employee social benefits included as expenses in the accompanying consolidated statements of comprehensive loss amounted to RMB26,900,928, RMB20,354,331 and RMB55,265,678 for the years ended December 31, 2019, 2020 and 2021, respectively.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

As a result of COVID-19, the PRC government exempted or reduced certain enterprises’ contributions to basic pension insurance, unemployment insurance, and work injury insurance (“certain social insurance”). The Group’s PRC subsidiaries, VIE and VIE’s subsidiaries were exempted from contributions to certain social insurance between February 2020 and December 2020. The exemption was recognized as a reduction of cost of revenues, selling and marketing expenses, technology and development expenses and general and administrative expenses in the amount of RMB15,857,367 for the year ended December 31, 2020.

Income taxes

(y)   Income taxes

Current income taxes are provided on the basis of net income for financial reporting purposes, and adjusted for income and expense items which are not taxable or deductible for income tax purposes, in accordance with the regulations of the relevant tax jurisdictions.

Deferred income taxes are provided using the liability method. Under this method, deferred income tax assets and liabilities are recognized for the tax effects of temporary differences and are determined by applying enacted statutory tax rates that will be in effect in the period in which the temporary differences are expected to reverse. A valuation allowance is provided to reduce the amount of deferred income tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred income tax assets will not be realized. The effect on deferred income taxes arising from a change in tax rates is recognized in the consolidated statements of comprehensive loss in the period of change.

The Group applies a “more likely than not” recognition threshold in the evaluation of uncertain tax positions. The Group recognizes the benefit of a tax position in its consolidated financial statements if the tax position is “more likely than not” to prevail based on the facts and technical merits of the position. Tax positions that meet the “more likely than not” recognition threshold are measured at the largest amount of tax benefit that has a greater than fifty percent likelihood of being realized upon settlement. Unrecognized tax benefits may be affected by changes in interpretation of laws, rulings of tax authorities, tax audits, and expiry of statutory limitations. In addition, changes in facts, circumstances and new information may require the Group to adjust the recognition and measurement estimates with regard to individual tax positions. Accordingly, unrecognized tax benefits are periodically reviewed and re-assessed. Adjustments, if required, are recorded in the Group’s consolidated financial statements in the period in which the change that necessities the adjustments occur. The ultimate outcome for a particular tax position may not be determined with certainty prior to the conclusion of a tax audit and, in certain circumstances, a tax appeal or litigation process. The Group records interest and penalties related to unrecognized tax benefits (if any) in interest expenses and general and administrative expenses, respectively. As of December 31, 2020 and 2021, the Group did not have any unrecognized uncertain tax positions.

Operating leases

(z)   Operating leases

The Group leases premises for offices under non-cancellable operating leases. Leases with escalated rent provisions are recognized on a straight-line basis over the lease term.

Foreign currency translation and foreign currency risks

(aa)  Foreign currency translation and foreign currency risks

The Group’s reporting currency is Renminbi (“RMB”). The functional currency of the Company and its subsidiaries incorporated at Hong Kong S.A.R. and the United States is the United States dollars (“US$”). The functional currency of the Company’s PRC subsidiaries, VIE and VIE’s subsidiaries is the RMB.

Transactions denominated in currencies other than the functional currency are remeasured into the functional currency at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in a foreign currency are remeasured into the functional currency using the applicable exchange rate at the balance sheet date. The resulted exchange differences are recorded as general and administrative expenses in the consolidated statements of comprehensive loss.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The financial statements of the Company and its subsidiaries incorporated at Hong Kong S.A.R., and the United States are translated from US$ into RMB. Assets and liabilities are translated into RMB using the applicable exchange rates at the balance sheet date. Equity accounts other than deficits generated in the current period are translated into RMB using the appropriate historical rates. Revenues, expenses, gains and losses are translated into RMB using the average exchange rates for the relevant period. The resulted foreign currency translation adjustments are recorded as a component of other comprehensive income or loss in the consolidated statements of comprehensive loss, and the accumulated foreign currency translation adjustments are recorded as a component of accumulated other comprehensive income or loss in the consolidated statements of changes in shareholders’ equity (deficit).

The RMB is not a freely convertible currency. The PRC State Administration for Foreign Exchange, under the authority of the PRC government, controls the conversion of RMB to foreign currencies. The value of the RMB is subject to changes of central government policies and international economic and political developments affecting supply and demand in the China foreign exchange trading system market.

Concentration and risk

(bb)  Concentration and risk

Concentration of suppliers

The Group purchases all its computing, storage and bandwidth services (“cloud services”) from two suppliers for the years ended December 31, 2019, four suppliers for the year ended December 31, 2020 and five suppliers for the year ended December 31, 2021. Although there are a limited number of cloud providers of the particular cloud services, management believes that other cloud providers could provide similar services on comparable terms. A change in cloud providers, however, could cause negatively impact on the business operation and a possible loss of sales, which would affect operating results adversely.

Concentration of credit risk

Financial instruments that potentially expose the Group to concentrations of credit risk consist principally of cash and cash equivalents, term deposits and accounts receivable.

The Group’s investment policy requires cash and cash equivalents and term deposits to be placed with high-quality financial institutions and to limit the amount of credit risk from any one financial institution. The Group regularly evaluates the credit standing of the counterparties or financial institutions.

The Group conducts credit evaluations on its customers prior to delivery of services. The assessment of customer creditworthiness is primarily based on historical collection records, research of publicly available information and customer on-site visits by senior management. Based on this analysis, the Group determines what credit terms, if any, to offer to each customer individually. If the assessment indicates a likelihood of collection risk, the Group will not deliver the services to the customer or require the customer to pay cash, post letters of credit to secure payment or to make significant down payments.

Statutory reserves

(cc)  Statutory reserves

In accordance with the PRC Company Laws, the Group’s PRC subsidiaries, VIE and VIE’s subsidiaries must make appropriations from their after-tax profits as determined under the generally accepted accounting principles in the PRC (“PRC GAAP”) to non-distributable reserve funds including statutory surplus fund and discretionary surplus fund. The appropriation to the statutory surplus fund must be 10% of the after-tax profits as determined under PRC GAAP. Appropriation is not required if the statutory surplus fund has reached 50% of the registered capital of the PRC companies. Appropriation to the discretionary surplus fund is made at the discretion of the PRC companies.

The statutory surplus fund and discretionary surplus fund are restricted for use. They may only be applied to offset losses or increase the registered capital of the respective companies. These reserves are not allowed to be transferred to the Company by way of cash dividends, loans or advances, nor can they be distributed except for liquidation.

For the years ended December 31, 2019, 2020 and 2021, profit appropriation to general statutory surplus fund and discretionary surplus fund for the Group’s entities incorporated in the PRC was nil, RMB139,773 and nil, respectively.

(Loss)/earnings per share

(dd)  (Loss) earnings per share

Basic (loss) income per share is computed by dividing net (loss) income attributable to ordinary shareholders, considering the accretion and reversal of accretion of redemption feature related to the Group’s redeemable convertible preferred shares, by the weighted average number of ordinary shares outstanding during the period using the two-class method. Under the two-class method, net income is allocated between ordinary shares and other participating securities based on their participating rights. Shares issuable for little to no consideration upon the satisfaction of certain conditions are considered as outstanding shares and included in the computation of basic (loss) income per share as of the date that all necessary conditions have been satisfied. Net losses are not allocated to other participating securities if based on their contractual terms they are not obligated to share the losses.

Diluted (loss) income per share is calculated by dividing net (loss) income attributable to ordinary shareholders, as adjusted for the effect of dilutive ordinary equivalent shares, if any, by the weighted average number of ordinary and dilutive ordinary equivalent shares outstanding during the period. Ordinary equivalent shares consist of ordinary shares issuable upon the conversion of the preferred shares, using the if-converted method, and shares issuable upon the exercise of share options using the treasury stock method. Ordinary equivalent shares are not included in the denominator of the diluted loss per share calculation when inclusion of such share would be anti-dilutive.

Segment reporting

(ee)  Segment reporting

The Group uses the management approach in determining its operating segments. The Group’s chief operating decision maker has been identified as the Chief Executive Officer, who reviews consolidated results when making decisions about allocating resources and assessing performance of the Group. For the purpose of internal reporting and management’s operation review, the Group’s Chief Executive Officer do not segregate the Group’s business by service lines. Management has determined that the Group has one operating segment, which is the mobile platform operations.

Business combination

(ff)  Business combination

The Group accounts for its business combinations using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations. The assets acquired, the liabilities assumed, and any non-controlling interests of the acquiree at the acquisition date, if any, are measured at their fair values as of the acquisition date. The excess of the purchase price over those fair values is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the acquiree, the difference is recognized directly in the consolidated statements of comprehensive loss. The Group charges acquisition related costs that are not part of the purchase price consideration to general and administrative expenses as they are incurred.

Recent accounting pronouncements

(gg)  Recent accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02 (“ASU 2016-02”), Leases. ASU 2016-02 specifies the accounting for leases. For operating leases, ASU 2016-02 requires a lessee to recognize a right-of-use asset and a lease liability, initially measured at the present value of the lease payments, in its balance sheet. The standard also requires a lessee to recognize a single lease cost, calculated so that the cost of the lease is allocated over the lease term, on a generally straight-line basis. ASU 2016-02 was further amended in November 2019 by ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842), and in June 2020 by ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842), which deferred the effective date of new lease standard. As a result, Accounting Standards Codification (“ASC”) 842, Leases, is effective for public companies for annual reporting periods, and interim periods within those years beginning after December 15, 2018. For all other entities, it is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. Early adoption is permitted. As the Company is an "emerging growth company" and elects to apply for the new and revised accounting standards at the effective date for a private company, the Group adopts the new standard for the year ending December 31, 2022 and plans to use the effective date as the date of initial application. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before January 1, 2022. The new standard provides a number of optional practical expedients in transition. The Group plans to elect the ‘package of practical expedients’, which permits the Group not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Group is finalizing its evaluation of its existing population of contracts to ensure all contracts that meet the definition of a lease contract under the new standard are identified. The Group is currently evaluating the qualitative and quantitative impact that the adoption of this standard will have on its consolidated financial statements and footnote disclosures and expects the standard will have a material impact on the consolidated balance sheet related to the recognition of right-of-use assets and lease liabilities for operating leases.

In June 2016, the FASB amended ASU 2016-13, Financial Instruments—Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments. ASU 2016-13 was further amended in November 2019 by ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842). As a result, ASC 326, Financial Instruments — Credit Losses is effective for public companies for annual reporting periods, and interim periods within those years beginning after December 15, 2019. For all other entities, it is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As the Company is an "emerging growth company" and elects to apply for the new and revised accounting standards at the effective date for a private company, the Group will adopt the new standard on January 1, 2023. The Group is currently evaluating the impact of this new guidance on its consolidated financial statements.

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DESCRIPTION OF BUSINESS AND ORGANIZATION (Tables)

12 Months Ended

Dec. 31, 2021

DESCRIPTION OF BUSINESS AND ORGANIZATION

Schedule of consolidated assets and liabilities information and consolidated revenues, net loss and cash flow information of the Group???s VIE

	As of December 31,
	2020	2021
	RMB	RMB
Cash	42,017,215	26,835,970
Accounts receivable, net (net of allowance of nil as of December 31, 2020 and 2021, respectively)	5,588,023	10,368,064
Inventories	6,853,202	7,401,509
Prepayments and other current assets	32,496,610	48,686,054
Total current assets	86,955,050	93,291,597
Investment securities	50,000	—
Property and equipment, net	4,994,809	4,509,052
Intangible assets, net	52,084,512	44,204,317
Goodwill	3,054,923	—
Other non-current assets	1,749,304	2,389,069
Total non-current assets	61,933,548	51,102,438
Total assets	148,888,598	144,394,035
Accounts payable	6,817,776	11,444,579
Amounts due to inter-companies	129,873,104	98,986,401
Deferred revenue	34,541,710	35,217,012
Income tax payable	291,441	1,460,149
Accrued expenses and other current liabilities	49,315,134	27,246,274
Total current liabilities	220,839,165	174,354,415
Deferred income tax liabilities	10,954,883	9,603,096
Other non-current liabilities	—	2,300,000
Total non-current liabilities	10,954,883	11,903,096
Total liabilities	231,794,048	186,257,511

1. DESCRIPTION OF BUSINESS AND ORGANIZATION (Continued)

	For the Year Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Revenues	42,007,427	651,069,900	974,103,315
Net (loss) income	(8,856,826)	(79,742,764)	31,859,163
Net cash provided by (used in) operating activities	11,267,766	20,705,405	(34,200,424)
Net cash used in investing activities	(2,901,588)	(12,532,972)	(11,745,086)
Net cash provided by financing activities	2,007,447	17,510,000	30,764,265
Net increase (decrease) in cash	10,373,625	25,682,433	(15,181,245)
Cash at the beginning of the year	5,961,157	16,334,782	42,017,215
Cash at the end of the year	16,334,782	42,017,215	26,835,970

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2021

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Summary of group's cash and cash equivalents, excluding cash on hand, are deposited in financial institutions at various locations

	As of December 31,
	2020	2021
	RMB	RMB
Financial institutions in the mainland of the PRC
—Denominated in RMB	76,352,748	35,656,085
—Denominated in USD	89,289,111	258,690,388
Total cash and cash equivalents balances held at mainland PRC financial institutions	165,641,859	294,346,473
Financial institution in Hong Kong Special Administrative Region (“Hong Kong S.A.R.”)
—Denominated in HKD	1,074,294	14,306,671
—Denominated in USD	261,797,195	15,084,574
Total cash balances held at the Hong Kong S.A.R. financial institution	262,871,489	29,391,245
Financial institutions in the United States
—Denominated in USD	8,540,607	22,950,413
Total cash balances held at the United States financial institutions	8,540,607	22,950,413
Financial institution in Vietnam
—Denominated in VND	6,596	6,278
Total cash balances held at the Vietnam financial institution	6,596	6,278
Financial institution in Japan
—Denominated in JPY	2,415,660	3,090,453
Total cash balances held at the Japan financial institution	2,415,660	3,090,453
Total cash and cash equivalents balances held at financial institutions	439,476,211	349,784,862

Schedule of estimated useful lives of the assets

Office and electronic equipment	3 years
Leasehold improvements	Shorter of 3 years or lease term

Schedule of estimated lives of intangible assets

Licenses	5 years
User bases	3-4 years
Brand names	10 years
Technologies	3 years

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ACCOUNTS RECEIVABLE, NET (Tables)

12 Months Ended

Dec. 31, 2021

ACCOUNTS RECEIVABLE, NET

Schedule of components of accounts receivable, net

	As of December 31,
	2020	2021
	RMB	RMB
Accounts receivable	5,588,023	12,878,562
Allowance for doubtful accounts	—	—
Accounts receivable, net	5,588,023	12,878,562

Schedule of movements of the allowance for doubtful accounts

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Balance at the beginning of the year	1,857,463	—	—
Additions charged to bad debt expense	592,717	—	682,085
Write-off of bad debt allowance	(2,450,180)	—	(682,085)
Balance at the end of the year	—	—	—

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INVENTORIES (Tables)

12 Months Ended

Dec. 31, 2021

INVENTORIES

Schedule of inventory

	As of December 31,
	2020	2021
	RMB	RMB
Merchandise	6,853,202	7,401,509
Inventories	6,853,202	7,401,509

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PREPAYMENTS AND OTHER CURRENT ASSETS (Tables)

12 Months Ended

Dec. 31, 2021

PREPAYMENTS AND OTHER CURRENT ASSETS

Schedule of prepayments and other current assets

Prepayments and other current assets as of December 31, 2020 and 2021 consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Receivable from third party payment platforms	31,821,937	63,747,704
Prepaid expenses	14,955,773	15,239,076
Deposits and prepaid rental fees	3,373,228	4,202,244
Deferred payment platforms commission fee	2,553,825	3,126,394
Interest receivable	1,460,642	1,260,880
Deductible input VAT	1,639,485	1,012,009
Others*	2,824,526	11,188,781
Prepayments and Other Current Assets	58,629,416	99,777,088

*   Others mainly include advances to suppliers and employees and other receivables.

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INVESTMENT SECURITIES (Tables)

12 Months Ended

Dec. 31, 2021

INVESTMENT SECURITIES

Schedule of Investment securities

Investment securities consisted of the following:

	As of December 31,
	2020	2021
Available-for-sale debt securities:	RMB	RMB
Mengmei Life Pty. Ltd (“Mengmei”)(a).	—	—
Equity securities with readily determinable fair value:
Warrant to purchase Mengmei’s interests(a).	—	—
Others.	50,000	—
	50,000	—

(a)   On September 7, 2018, the Group entered into an investment agreement with Mengmei to acquire 9,375,000 redeemable convertible preferred shares, which represented 8.15% equity interest of Mengmei on a fully-diluted basis, in exchange for a cash consideration of US$3 million (equivalent to RMB20,587,500). The investment was classified as AFS debt security because the investment contains substantive liquidation preference and redemption provision and is redeemable at the option of the investor. The Group recorded the investment at fair value. Unrealized gain of US$230,731 (equivalent to RMB1,591,098) and US$208,098 (equivalent to RMB1,456,370), net of nil income taxes were recorded in other comprehensive income for the years ended December 31, 2019 and 2020, respectively.

6. INVESTMENT SECURITIES (Continued)

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PROPERTY AND EQUIPMENT, NET (Tables)

12 Months Ended

Dec. 31, 2021

PROPERTY AND EQUIPMENT, NET

Schedule of Property and equipment, net

Property and equipment, net consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Office and electronic equipment	11,200,226	13,832,466
Leasehold improvements	11,040,082	13,785,017
Property and Equipment	22,240,308	27,617,483
Accumulated depreciation	(10,794,760)	(16,431,324)
Property and Equipment, net	11,445,548	11,186,159

Depreciation expenses on property and equipment were allocated to the following expense items:

	As of December 31,
	2019	2020	2021
	RMB	RMB	RMB
Cost of revenues	525,956	821,401	948,069
Selling and marketing expenses	997,224	1,511,562	2,381,693
Technology and development expenses	845,318	1,176,602	2,640,921
General and administrative expenses	251,184	393,071	734,443
Total depreciation expenses	2,619,682	3,902,636	6,705,126

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INTANGIBLE ASSET, NET (Tables)

12 Months Ended

Dec. 31, 2021

INTANGIBLE ASSET, NET

Schedule of intangible asset, net

	As of December 31, 2020
	Gross Carrying	Accumulated		Net carrying
	Amount	amoritization	Impairment	amount
	RMB	RMB	RMB	RMB
Licenses	4,110,860	(822,172)	—	3,288,688
User bases	7,730,000	(287,232)	—	7,442,768
Brand names	38,500,000	(390,833)	—	38,109,167
Technologies	3,460,000	(216,111)	—	3,243,889
Total intangible assets	53,800,860	(1,716,348)	—	52,084,512

8. INTANGIBLE ASSETS, NET (Continued)

	As of December 31, 2021
	Gross Carrying	Accumulated		Net carrying
	Amount	amoritization	Impairment	amount
	RMB	RMB	RMB	RMB
Licenses	7,372,111	(2,198,142)	—	5,173,969
User bases	7,730,000	(2,276,875)	(400,000)	5,053,125
Brand names	38,500,000	(4,188,333)	(1,855,000)	32,456,667
Technologies	3,460,000	(1,279,444)	(660,000)	1,520,556
Total intangible assets	57,062,111	(9,942,794)	(2,915,000)	44,204,317

Amortization expense on intangible assets was allocated to the following expense items:

	Years ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Cost of revenues	—	1,429,116	6,236,802
Selling and marketing expenses	—	287,232	1,989,644
Total amortization expenses	—	1,716,348	8,226,446

Schedule of estimated amortization expenses of above intangible assets for future years

	Amortization for
Year ending December 31,	Intangible Assets
	RMB
2022	7,726,402
2023	7,660,291
2024	6,788,693
2025	4,123,264
2026	3,640,000
Thereafter	14,256,667
Total	44,204,317

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GOODWILL (Tables)

12 Months Ended

Dec. 31, 2021

GOODWILL.

Schedule of goodwill

	As of December 31,
	2020	2021
	RMB	RMB
Beginning Balance of the year	—	196,002,568
Additions in goodwill related to business combinations (Note 21)	196,002,568	—
Impairment of goodwill	—	(106,949,249)
Foreign currency translation adjustment	—	(7,301,455)
Balance as of December 31, 2021	196,002,568	81,751,864

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Tables)

12 Months Ended

Dec. 31, 2021

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Schedule of accrued expenses and other current liabilities

Accrued expenses and other current liabilities consisted of the following:

	As of December 31,
	2020	2021
	RMB	RMB
Accrued payroll and welfare	29,859,310	24,015,031
Technology supporting fees payable	9,856,805	20,609,458
Advertising and marketing fees payable	13,855,032	5,144,789
Other taxes payable	9,513,024	6,525,618
Rebate to advertising customers	11,896,947	4,263,036
Professional fee payable	1,350,153	3,069,892
Deposits received from suppliers	1,120,000	1,170,000
Payable for business combinations	24,742,025	—
Cash collected on behalf of service providers*	10,356,117	—
Other accrued expenses**	6,409,383	18,164,527
Accrued Expenses and Other Current Liabilities	118,958,796	82,962,351

*      This is the cash the Group received on behalf of the service providers from the customers for the family planning services.

**    Other accrued expenses mainly represent accrued office expenses and other operating costs.

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MEZZANINE EQUITY (Tables)

12 Months Ended

Dec. 31, 2021

Series A Convertible Preferred Shares

Mezzanine Equity [Line Items]

Schedule of Company's Preferred Shares activities

The Company’s Series A Preferred Shares activities for the years ended December 31, 2019 and 2020 are as follows:

	Amount
	RMB
Balance as of January 1, 2019 and December 31, 2019	29,751,569
Conversion to Class A Ordinary Shares	(33,042,477)
Foreign currency translation adjustment	3,290,908
Balance as of December 31, 2020	—

Redeemable Convertible Preferred Shares

Mezzanine Equity [Line Items]

Schedule of Company's Preferred Shares activities

12. MEZZANINE EQUITY (Continued)

The Company’s Redeemable Convertible Preferred Shares activities for the years ended December 31, 2019 and 2020 consist of the following:

	Series A-1	Series B	Series C	Series C-1	Series D
	Preferred	Preferred	Preferred	Preferred	Preferred
	Shares	Shares	Shares	Shares	Shares	Total
	RMB	RMB	RMB	RMB	RMB	RMB
Balance as of January 1, 2019	16,359,651	239,225,246	178,003,498	150,811,043	460,765,137	1,045,164,575
Accretion and modification of redeemable convertible preferred shares	1,315,008	237,680,316	144,659,627	104,388,417	142,962,195	631,005,563
Foreign currency translation adjustment	284,668	6,706,446	4,615,264	3,698,609	9,251,062	24,556,049
Balance as of December 31, 2019	17,959,327	483,612,008	327,278,389	258,898,069	612,978,394	1,700,726,187
Accretion (reversal of accretion) of redeemable convertible preferred shares	707,682	(68,419,392)	(49,340,009)	(40,873,954)	(86,155,005)	(244,080,678)
Conversion to Class A Ordinary Shares	(18,780,954)	(418,336,891)	(280,068,866)	(219,711,065)	(530,808,265)	(1,467,706,041)
Foreign currency translation adjustment	113,945	3,144,275	2,130,486	1,686,950	3,984,876	11,060,532
Balance as of December 31, 2020	—	—	—	—	—	—

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SHARE-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2021

SHARE-BASED COMPENSATION

Summary of stock options activity

		Weighted	Weighted
		average	remaining	Aggregate
	Number of	exercise	contractual	intrinsic
	shares	price	years	value
		US$		US$
Outstanding as of January 1, 2021	2,005,600	0.01
Granted	508,619	0.01
Expired	(304)	0.01
Exercised	(907,779)	0.01
Forfeited	(234,872)	0.01
Outstanding as of December 31, 2021	1,371,264	0.01	8.24	4,182,355
Vested and expect to be vested as of December 31, 2021	1,371,264	0.01	8.24	4,182,355
Exercisable as of December 31, 2021	809,499	0.01	7.80	2,468,972

Summary of fair value of the options is estimated on the dates of grant using the binomial option pricing model

	2019	2020	2021
Risk-free rate of return (per annum)	1.78%-2.56%	0.23%-1.70%	1.61%
Volatility	57.20%-60.91%	50.92%-56.70%	59.23%
Expected dividend yield	0%	0%	0%
Exercise multiple	2.2-2.8	2.2-2.8	2.2-2.8
Fair value of underlying ordinary share	US$17.95-US$31.15	US$17.11-US$37.71	US$5.96
Expected term	10 years	10 years	10 years

Schedule of compensation costs recognized for share options

Compensation costs recognized for share options for the year ended December 31, 2019, 2020 and 2021 were allocated to the following expense items:

	As of December 31,
	2019	2020	2021
	RMB	RMB	RMB
Cost of revenues	—	11,698,603	2,140,523
Selling and marketing expenses	—	16,922,885	7,678,679
Technology and product development expenses	—	16,737,624	5,261,232
General and administrative expenses	—	141,544,319	830,710
Total share option compensation expenses	—	186,903,431	15,911,144

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FAIR VALUE MEASUREMENT (Tables)

12 Months Ended

Dec. 31, 2021

FAIR VALUE MEASUREMENT

Summary of fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis

	As of December 31, 2020			Total Fair
RMB	Level 1	Level 2	Level 3	Value
Investment securities:
Equity securities with readily determinable fair value	—	—	50,000	50,000
Total	—	—	50,000	50,000

Summary of reconciliation from the opening balances to the closing balances for recurring fair value measurements categorized as Level 3 of the fair value hierarchy

		For the Year Ended December 31, 2019
		Gain or Losses
			Included in	Foreign
			Other	Currency
	January 1,	Included in	Comprehensive	Translation		December 31,
RMB	2019	Earnings	Loss	Adjustment	Extinguishment	2019
Investment securities:
Debt securities	21,559,157	—	1,591,098	373,491	—	23,523,746
Equity securities with readily determinable fair value	328,742	(274,829)	—	1,389	—	55,302
Total	21,887,899	(274,829)	1,591,098	374,880	—	23,579,048
Liabilities:
Convertible debt	(22,450,219)	(8,749,608)	—	(633,141)	31,832,968	—

		For the Year Ended December 31, 2020
		Gain or Losses
			Included in	Foreign
			Other	Currency
	January 1,	Included in	Comprehensive	Translation		December 31,
RMB	2020	Earnings	Loss	Adjustment	Disposal	2020
Investment securities:
Debt securities	23,523,746	4,863,233	(3,406,863)	42,977	(25,023,093)	—
Equity securities with readily determinable fair value	55,302	(5,247)	—	17	(72)	50,000
Total	23,579,048	4,857,986	(3,406,863)	42,994	(25,023,165)	50,000

		For the Year Ended December 31, 2021
		Gain or Losses
			Included in	Foreign
			Other	Currency
	January 1,	Included in	Comprehensive	Translation		December 31,
RMB	2021	Earnings	Loss	Adjustment	Disposal	2021
Investment securities:
Equity securities with readily determinable fair value	50,000	—	—	—	(50,000)	—
Total	50,000	—	—	—	(50,000)	—

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INCOME TAX (Tables)

12 Months Ended

Dec. 31, 2021

INCOME TAX

Summary of components of loss before income taxes

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
PRC, excluding Hong Kong S.A.R.	13,363,885	165,783,490	229,692,055
Hong Kong S.A.R.	36,302,843	38,305,342	59,079,524
Japan	258,209	7,697,439	3,446,328
Cayman	646,803	5,332,840	14,378,166
Others	1,427,214	6,175,567	2,206,865
Total	51,998,954	223,294,678	308,802,938

Summary of income tax expense recognized in the consolidated statements of comprehensive loss

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Current income tax expense (benefit)-PRC, excluding Hong Kong S.A.R..	112,473	(64,615)	1,168,707
Current income tax expense-Others	818,081	1,118,133	1,819,398
Current income tax expense-total	930,554	1,053,518	2,988,105
Deferred income tax benefit-PRC, excluding Hong Kong S.A.R	—	(2,495,332)	(2,167,099)
Income tax expense (benefit)	930,554	(1,441,814)	821,006

Summary of reconciliation of the differences between PRC statutory income tax rate and the Group???s effective income tax rate

	For the Year Ended
	December 31,
	2019		2020		2021
	RMB		RMB		RMB
PRC Statutory income tax rate	(25.0)	%	(25.0)	%	(25.0)	%
Increase (decrease) in effective income tax rate resulting from:
Tax rate differential for non-PRC entities	6.1	%	1.8	%	2.9	%
Preferential tax rate	6.5	%	(3.2)	%	7.3	%
Research and development expenses additional deduction	(15.5)	%	(3.7)	%	(6.8)	%
Non-deductible share-based compensation expenses	—		20.9	%	1.3	%
Non-taxable income	—		(0.5)	%	(0.1)	%
Impairment of goodwill	—		—		8.7	%
Other non-deductible expenses	0.5	%	2.4	%	2.8	%
Change in valuation allowance	29.2	%	6.7	%	9.2	%
Effective income tax rate	1.8	%	(0.6)	%	0.3	%

Summary of deferred income tax assets

	As of December 31,
	2020	2021
	RMB	RMB
Net operating loss carry forwards	72,435,457	99,347,341
Donation	457,730	480,684
Deductible advertising expenses	867,094	2,103,893
Total deferred income tax assets	73,760,281	101,931,918
Less: Valuation allowance	(71,676,908)	(100,483,935)
Deferred income tax assets, net	2,083,373	1,447,983
Intangible assets	(13,038,256)	(11,051,079)
Deferred income tax liabilities	(13,038,256)	(11,051,079)
Net deferred income tax liabilities	(10,954,883)	(9,603,096)

Summary of changes in valuation allowance

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Balance at the beginning of the year	42,910,959	57,960,509	71,676,908
Additions of valuation allowance	14,728,024	28,879,521	46,283,222
Reductions of valuation allowance	—	(13,070,605)	(16,639,886)
Foreign exchange translation adjustments	321,526	(2,092,517)	(836,309)
Balance at the end of the year	57,960,509	71,676,908	100,483,935

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NET (LOSS ) INCOME PER SHARE (Tables)

12 Months Ended

Dec. 31, 2021

NET (LOSS ) INCOME PER SHARE

Schedule of basic and diluted net (loss)/income per share

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Numerator:
Net loss	(52,929,508)	(221,852,864)	(309,623,944)
(Accretion) reversal of accretion and modification of redeemable convertible preferred shares	(631,005,563)	244,080,678	—
Net income attributable to preferred shareholders	—	(6,706,551)	—
Numerator for basic net (loss) income per Class A and Class B Ordinary Share calculation	(683,935,071)	15,521,263	(309,623,944)
Denominator:
Weighted average number of Class A and Class B Ordinary Share and ordinary share equivalents	5,614,840	11,974,046	19,352,595
Denominator for basic net (loss) income per Class A and Class B Ordinary Share calculation	5,614,840	11,974,046	19,352,595
Net (loss) income per Class A and Class B Ordinary Share
—Basic	(121.81)	1.30	(16.00)
Numerator:
Net (loss) income allocated to Class A and Class B ordinary shareholders as reported in basic net loss (income) per Class A and Class B Ordinary Share	(683,935,071)	15,521,263	(309,623,944)
Net income attributable to preferred shareholders	—	6,706,551	—
Reversal of accretion on Series B, C, C-1, and D Redeemable Convertible Preferred Shares	—	(244,788,360)	—
Numerator for diluted net loss per share calculation	(683,935,071)	(222,560,546)	(309,623,944)
Denominator:
Weighted average number of Class A and Class B Ordinary Share and ordinary share equivalents	5,614,840	11,974,046	19,352,595
Effect of dilutive securities of Series B, C, C-1, and D Redeemable Convertible Preferred Shares	—	3,234,380	—
Denominator for diluted net loss per share calculation	5,614,840	15,208,426	19,352,595
Net loss per Class A and Class B Ordinary Share
—Diluted	(121.81)	(14.63)	(16.00)

Schedule of potentially dilutive securities

	As of December 31,
	2019	2020	2021
Stock options	1,084,545	762,167	561,765
Preferred shares	9,560,830	—	—

XML

REVENUE INFORMATION (Tables)

12 Months Ended

Dec. 31, 2021

REVENUE INFORMATION

Schedule of revenues

Revenues consisted of the following:

	For the Year Ended
	December 31,
	2019	2020	2021
	RMB	RMB	RMB
Services
Live streaming	671,410,681	868,946,403	820,825,553
Advertising	35,383,571	45,452,681	53,881,336
Membership	36,738,369	71,227,203	128,809,051
Others	15,355,285	17,022,768	8,866,367
Total service revenues	758,887,906	1,002,649,055	1,012,382,307
Merchandise sales	—	28,674,389	64,209,123
Total revenues	758,887,906	1,031,323,444	1,076,591,430

XML

COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2021

COMMITMENTS AND CONTINGENCIES.

Schedule of future minimum lease commitments under office non-cancelable operating lease agreements

As of December 31, 2021, future minimum lease commitments under office non-cancelable operating lease agreements, were as follows:

	Offices
Year ending December 31,	RMB
2022	13,315,511
2023	3,718,738
2024	486,426
2025	123,072

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BUSINESS COMBINATIONS (Tables)

12 Months Ended

Dec. 31, 2021

Lesdo

Business Acquisition [Line Items]

Schedule of purchase price allocation to assets acquired and liabilities assumed as of the date of acquisition

		Estimated useful
	RMB	lives
Cash and cash equivalents	77
Intangible assets
User base	800,000	3	years
Brand name	2,100,000	10	years
Technology	1,080,000	3	years
Total assets	3,980,077
Other current liabilities	(4,711,582)
Deferred income tax liabilities	(995,000)
Goodwill	3,054,923
Total consideration	1,328,418

Finka

Business Acquisition [Line Items]

Schedule of purchase price allocation to assets acquired and liabilities assumed as of the date of acquisition

		Estimated useful
	RMB	lives
Cash and cash equivalents	10,497,160
Accounts receivable	1,716,623
Other current assets	6,323,155
Intangible assets
User base	6,930,000	4	years
Brand name	36,400,000	10	years
Technology	2,380,000	3	years
Total assets	64,246,938
Accounts payable	(208,984)
Other current liabilities	(8,331,044)
Deferred income tax liabilities	(11,427,500)
Goodwill	192,947,645
Total consideration	237,227,055

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PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Tables)

12 Months Ended

Dec. 31, 2021

PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

Schedule of condensed balance sheets

	As of December 31,
	2020	2021
	RMB	RMB
Assets
Current assets
Cash	261,878,455	15,988,107
Prepayments and other current assets	1,483,169	4,285,975
Total current assets	263,361,624	20,274,082
Non-current assets
Investment in subsidiaries and consolidated VIE and VIE’s subsidiaries	517,611,994	437,336,118
Total non-current assets	517,611,994	437,336,118
Total assets	780,973,618	457,610,200
Liabilities
Current liabilities
Accrued expenses and other current liabilities	23,779,434	11,663,674
Total current liabilities and total liabilities	23,779,434	11,663,674
Shareholders’ equity:
Class A Ordinary Shares	8,572	9,487
Class B Ordinary Shares	3,446	3,118
Additional paid-in capital	2,188,870,625	2,204,845,216
Accumulated other comprehensive loss	(107,514,737)	(125,113,629)
Accumulated deficit	(1,324,173,722)	(1,633,797,666)
Total shareholders’ equity	757,194,184	445,946,526
Total liabilities and shareholders’ equity	780,973,618	457,610,200

Schedule of condensed statements of results of operations

	For the Year Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Total operating expenses	(883,243)	(5,209,656)	(14,378,165)
Change in fair value of a convertible debt	(8,749,608)	—	—
Gain on extinguishment of a convertible debt	8,986,048	—	—
Share of losses from subsidiaries, VIE and VIE’s subsidiaries	(52,282,705)	(216,643,208)	(295,245,779)
Loss before income tax	(52,929,508)	(221,852,864)	(309,623,944)
Income tax expense	—	—	—
Net loss	(52,929,508)	(221,852,864)	(309,623,944)

Schedule of condensed statements of cash flows

	For the Year Ended December 31,
	2019	2020	2021
	RMB	RMB	RMB
Net cash (used in) provided by operating activities	(702,200)	1,961,394	(6,796,246)
Net cash provided by (used in) investing activities	2,015,462	(252,497,206)	(234,224,099)
Net cash (used in) provided by financing activities	(920,710)	532,995,338	64,034
Effect of foreign currency exchange rate changes on cash	76,203	(21,301,631)	(4,934,037)
Net (decrease) increase in cash	468,755	261,157,895	(245,890,348)
Cash at the beginning of the year	251,805	720,560	261,878,455
Cash at the end of the year	720,560	261,878,455	15,988,107

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DESCRIPTION OF BUSINESS AND ORGANIZATION (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)	Dec. 31, 2021 USD ($)	Jan. 01, 2021 CNY (¥)	Jan. 01, 2020 CNY (¥)	Dec. 31, 2018 CNY (¥)
Variable Interest Entity [Line Items]
Total ordinary shares and share options issued and outstanding of the company held by Mr. Baoli Ma (as a percent)	30.20%	30.20%
Cash	¥ 349,785,624		¥ 439,492,788		$ 54,888,997
Accounts receivable, net (net of allowance of nil as of December 31, 2020 and 2021, respectively)	12,878,562		5,588,023		2,020,927
Prepayments and other current assets	99,777,088		58,629,416		15,657,202
Inventories	7,401,509		6,853,202		1,161,458
Total current assets	469,842,783		682,820,789		73,728,584
Property and equipment, net	11,186,159		11,445,548		1,755,352
Intangible assets, net	44,204,317		52,084,512		6,936,622
Investment securities			50,000
Goodwill	81,751,864		196,002,568		12,828,651
Other non-current assets	3,177,465		2,426,128		498,614
Total non-current assets	140,319,805		262,008,756		22,019,239
Total assets	610,162,588		944,829,545		95,747,823
Accounts payable	28,507,188		20,372,680		4,473,400
Deferred revenue	35,796,254		35,226,237		5,617,213	¥ 35,226,237	¥ 32,555,402
Income tax payable	5,047,173		2,122,765		792,012
Accrued expenses and other current liabilities	82,962,351		118,958,796		13,018,602
Total current liabilities	152,312,966		176,680,478		23,901,227
Deferred income tax liabilities	9,603,096		10,954,883		1,506,935
Other non-current liabilities	2,300,000				360,920
Total non-current liabilities	11,903,096		10,954,883		1,867,855
Total liabilities	164,216,062		187,635,361		$ 25,769,082
Accounts receivable, allowance	0		0					¥ 1,857,463
Revenues	1,076,591,430	$ 168,940,688	1,031,323,444	¥ 758,887,906
Net (loss) income	(309,623,944)	(48,586,753)	(221,852,864)	(52,929,508)
Net cash provided by operating activities	(210,901,538)	(33,095,053)	(40,301,906)	(31,641,810)
Net cash used in investing activities	130,352,405	20,455,136	(288,737,892)	285,594,134
Net cash provided by (used in) financing activities	64,034	10,048	503,479,539	(22,252,291)
Net increase (decrease) in cash	(89,707,164)	(14,077,012)	142,218,966	234,227,239
Cash and cash equivalents at the beginning of the year	439,492,788	68,966,009	297,273,822	63,046,583
Cash and cash equivalents at the end of the year	349,785,624	$ 54,888,997	439,492,788	297,273,822
VIE
Variable Interest Entity [Line Items]
Cash	26,835,970		42,017,215
Accounts receivable, net (net of allowance of nil as of December 31, 2020 and 2021, respectively)	10,368,064		5,588,023
Prepayments and other current assets	48,686,054		32,496,610
Inventories	7,401,509		6,853,202
Total current assets	93,291,597		86,955,050
Property and equipment, net	4,509,052		4,994,809
Intangible assets, net	44,204,317		52,084,512
Investment securities			50,000
Goodwill			3,054,923
Other non-current assets	2,389,069		1,749,304
Total non-current assets	51,102,438		61,933,548
Total assets	144,394,035		148,888,598
Accounts payable	11,444,579		6,817,776
Amounts due to inter-companies	98,986,401		129,873,104
Deferred revenue	35,217,012		34,541,710
Income tax payable	1,460,149		291,441
Accrued expenses and other current liabilities	27,246,274		49,315,134
Total current liabilities	174,354,415		220,839,165
Deferred income tax liabilities	9,603,096		10,954,883
Other non-current liabilities	2,300,000
Total non-current liabilities	11,903,096		10,954,883
Total liabilities	186,257,511		231,794,048
Accounts receivable, allowance	0		0
Revenues	974,103,315		651,069,900	42,007,427
Net (loss) income	31,859,163		(79,742,764)	(8,856,826)
Net cash provided by operating activities	(34,200,424)		20,705,405	11,267,766
Net cash used in investing activities	(11,745,086)		(12,532,972)	(2,901,588)
Net cash provided by (used in) financing activities	30,764,265		17,510,000	2,007,447
Net increase (decrease) in cash	(15,181,245)		25,682,433	10,373,625
Cash and cash equivalents at the beginning of the year	42,017,215		16,334,782	5,961,157
Cash and cash equivalents at the end of the year	26,835,970		42,017,215	¥ 16,334,782
Paid in capital amount for which the assets of VIE can be used	1,000,000		1,000,000
VIE | Asset Pledged as Collateral [Member]
Variable Interest Entity [Line Items]
Total assets	¥ 0		¥ 0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥) segment $ / ¥	Dec. 31, 2021 USD ($) segment	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)	Dec. 31, 2021 USD ($) $ / ¥	Jan. 01, 2021 CNY (¥)	Jan. 01, 2020 CNY (¥)
Significant Accounting Policies [Line Items]
Foreign exchange rate | $ / ¥	6.3726				6.3726
Impairment loss on debt securities			¥ 0	¥ 0
Deferred revenue	¥ 35,796,254		35,226,237		$ 5,617,213	¥ 35,226,237	¥ 32,555,402
Deferred revenue, revenue recognized	35,226,237		32,555,402	23,757,459
Advertising costs	110,978,677		80,711,586	60,136,876
Employee social benefits	¥ 55,265,678		¥ 20,354,331	¥ 26,900,928
Concentration of suppliers, number of suppliers	5	5	4	2
Appropriation made to the statutory surplus fund and discretionary surplus fund	¥ 0		¥ 139,773	¥ 0
Number of operating segment | segment	1	1
Exemption of Social security insurance, Covid-19			15,857,367
Unrecognized uncertain tax positions	¥ 0		0
Accumulated deficit	1,633,797,666		1,324,173,722		$ 256,378,506
Net cash used in operating activities	210,901,538	$ 33,095,053	40,301,906	31,641,810
Stock Issued During Period, Value, New Issues			501,227,248
VIE
Significant Accounting Policies [Line Items]
Deferred revenue	35,217,012		34,541,710
Net cash used in operating activities	¥ 34,200,424		¥ (20,705,405)	¥ (11,267,766)
Advertising | Maximum
Significant Accounting Policies [Line Items]
Service period	1 year	1 year
Subscription-based membership services | Minimum
Significant Accounting Policies [Line Items]
Period over which additional functions and privileges can be enjoyed by individual users	1 month	1 month
Subscription-based membership services | Maximum
Significant Accounting Policies [Line Items]
Period over which additional functions and privileges can be enjoyed by individual users	1 year	1 year
Online Services
Significant Accounting Policies [Line Items]
Value added tax rate (as a percent)	6.00%	6.00%
Merchandise
Significant Accounting Policies [Line Items]
Value added tax rate (as a percent)	13.00%	13.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Cash and cash equivalents (Details) - CNY (¥)	Dec. 31, 2021	Dec. 31, 2020
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	¥ 349,784,862	¥ 439,476,211
Mainland PRC
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	294,346,473	165,641,859
Hong Kong S.A.R.
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	29,391,245	262,871,489
United States
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	22,950,413	8,540,607
Vietnam
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	6,278	6,596
Japan
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	3,090,453	2,415,660
Denominated in RMB | Mainland PRC
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	35,656,085	76,352,748
Denominated in USD | Mainland PRC
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	258,690,388	89,289,111
Denominated in USD | Hong Kong S.A.R.
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	15,084,574	261,797,195
Denominated in USD | United States
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	22,950,413	8,540,607
Denominated in HKD | Hong Kong S.A.R.
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	14,306,671	1,074,294
Denominated in VND | Vietnam
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	6,278	6,596
Denominated in JPY | Japan
Cash and Cash Equivalents [Line Items]
Total cash and cash equivalents balances held at financial institutions	¥ 3,090,453	¥ 2,415,660

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Estimated useful life of assets (Details)	12 Months Ended
	Dec. 31, 2021
Office and electronic equipment
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years
Leasehold improvements | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful lives	3 years

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Intangible assets, net (Details)	12 Months Ended
	Dec. 31, 2021
License
Finite-Lived Intangible Assets [Line Items]
Estimated useful lives of intangible assets	5 years
Brand name
Finite-Lived Intangible Assets [Line Items]
Estimated useful lives of intangible assets	10 years
Technology
Finite-Lived Intangible Assets [Line Items]
Estimated useful lives of intangible assets	3 years
Minimum | User base
Finite-Lived Intangible Assets [Line Items]
Estimated useful lives of intangible assets	3 years
Maximum | User base
Finite-Lived Intangible Assets [Line Items]
Estimated useful lives of intangible assets	4 years

XML

ACCOUNTS RECEIVABLE, NET - Components (Details)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2018 CNY (¥)
ACCOUNTS RECEIVABLE, NET
Accounts receivable	¥ 12,878,562		¥ 5,588,023
Allowance for doubtful accounts	0		0	¥ (1,857,463)
Accounts receivable, net	¥ 12,878,562	$ 2,020,927	¥ 5,588,023

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ACCOUNTS RECEIVABLE, NET - Movements of allowance for doubtful accounts (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2019 CNY (¥)
Movements of allowance for doubtful accounts
Balance at the beginning of the year	¥ 0		¥ 1,857,463
Additions charged to bad debt expense	682,085	$ 107,034	592,717
Write-off of bad debt allowance	(682,085)		¥ (2,450,180)
Balance at the end of the year	¥ 0

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INVENTORIES - Inventories (Details)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)
INVENTORIES
Merchandise	¥ 7,401,509		¥ 6,853,202
Inventories	¥ 7,401,509	$ 1,161,458	¥ 6,853,202

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INVENTORIES (Details) - CNY (¥)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
INVENTORIES
Inventories write-down	¥ 0	¥ 0	¥ 0

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PREPAYMENTS AND OTHER CURRENT ASSETS (Details)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)
PREPAYMENTS AND OTHER CURRENT ASSETS
Receivable from third party payment platforms	¥ 63,747,704		¥ 31,821,937
Prepaid expenses	15,239,076		14,955,773
Deposits and prepaid rental fees	4,202,244		3,373,228
Deferred payment platforms commission fee	3,126,394		2,553,825
Interest receivable	1,260,880		1,460,642
Deductible input VAT	1,012,009		1,639,485
Others	11,188,781		2,824,526
Prepayments and Other Current Assets	¥ 99,777,088	$ 15,657,202	¥ 58,629,416

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INVESTMENT SECURITIES (Details)	Dec. 31, 2020 CNY (¥)
Equity securities with readily determinable fair value:
Equity securities with readily determinable fair value	¥ 50,000
Total	50,000
Others.
Equity securities with readily determinable fair value:
Equity securities with readily determinable fair value	¥ 50,000

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INVESTMENT SECURITIES - Additional Information (Details)					12 Months Ended
	Jul. 28, 2020 CNY (¥) shares	Jul. 28, 2020 USD ($) shares	Sep. 07, 2018 CNY (¥)	Sep. 07, 2018 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2019 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2021 USD ($)
Marketable Securities [Line Items]
Cash consideration			¥ 20,587,500	$ 3,000,000
Unrealized gain on disposal of an investment security						¥ 1,456,370	$ 208,098
Unrealized gain on an available-for-sale investment, net of nil income taxes						1,456,370		¥ 1,591,098	$ 230,731
Unrealized gain on an available-for-sale investment, income taxes | ¥					¥ 0	0		0
Losses on change in fair value of warrants						5,268	750	274,829	$ 39,854
Mengmei
Marketable Securities [Line Items]
Number of redeemable convertible preferred shares acquired				9,375,000
Equity interest acquired (as a percent)			8.15%	8.15%
Unrealized gain on an available-for-sale investment, income taxes | ¥						0		¥ 0
Term of warrants										3 years
Equity interest after exercise of warrants										51.00%
Percentage of equity value considered for determining exercise price of warrants										100.00%
Jinxin Fertility Group Company Limited | Shares sale and purchase agreement
Marketable Securities [Line Items]
Cash consideration | ¥	¥ 25,023,165
Unrealized gain on an available-for-sale investment, net of nil income taxes						¥ 4,863,233	$ 694,897
Number of shares sold | shares	9,375,000	9,375,000
Cash consideration		$ 3,580,108
Maximum | Mengmei
Marketable Securities [Line Items]
Exercise price of warrants										$ 200,000,000
Minimum | Mengmei
Marketable Securities [Line Items]
Exercise price of warrants										$ 100,000,000

XML

PROPERTY AND EQUIPMENT, NET (Details)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)
Property, Plant and Equipment [Line Items]
Property and Equipment	¥ 27,617,483		¥ 22,240,308
Accumulated depreciation	(16,431,324)		(10,794,760)
Property and Equipment, net	11,186,159	$ 1,755,352	11,445,548
Office and electronic equipment
Property, Plant and Equipment [Line Items]
Property and Equipment	13,832,466		11,200,226
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and Equipment	¥ 13,785,017		¥ 11,040,082

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PROPERTY AND EQUIPMENT, NET - Depreciation expense on property and equipment (Details) - CNY (¥)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Total depreciation expenses	¥ 6,705,126	¥ 3,902,636	¥ 2,619,682
Cost of revenues
Property, Plant and Equipment [Line Items]
Total depreciation expenses	948,069	821,401	525,956
Selling and marketing expenses
Property, Plant and Equipment [Line Items]
Total depreciation expenses	2,381,693	1,511,562	997,224
Technology and development expenses
Property, Plant and Equipment [Line Items]
Total depreciation expenses	2,640,921	1,176,602	845,318
General and administrative expenses
Property, Plant and Equipment [Line Items]
Total depreciation expenses	¥ 734,443	¥ 393,071	¥ 251,184

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INTANGIBLE ASSET, NET - Schedule of intangible asset, net (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)
Finite-Lived Intangible Assets [Line Items]
Intangible asset	¥ 57,062,111		¥ 53,800,860
Accumulated amortization	(9,942,794)		(1,716,348)
Impairment of intangible assets	(2,915,000)	$ (457,427)	0	¥ 0
Total	44,204,317		52,084,512
Amortization of Intangible Assets, Total	8,226,446		1,716,348	¥ 0
Cost of revenues
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets, Total	6,236,802		1,429,116
Selling and marketing expenses
Finite-Lived Intangible Assets [Line Items]
Amortization of Intangible Assets, Total	1,989,644		287,232
License
Finite-Lived Intangible Assets [Line Items]
Intangible asset	7,372,111		4,110,860
Accumulated amortization	(2,198,142)		(822,172)
Total	5,173,969		3,288,688
User base
Finite-Lived Intangible Assets [Line Items]
Intangible asset	7,730,000		7,730,000
Accumulated amortization	(2,276,875)		(287,232)
Impairment of intangible assets	(400,000)
Total	5,053,125		7,442,768
Brand name
Finite-Lived Intangible Assets [Line Items]
Intangible asset	38,500,000		38,500,000
Accumulated amortization	(4,188,333)		(390,833)
Impairment of intangible assets	(1,855,000)
Total	32,456,667		38,109,167
Technology
Finite-Lived Intangible Assets [Line Items]
Intangible asset	3,460,000		3,460,000
Accumulated amortization	(1,279,444)		(216,111)
Impairment of intangible assets	(660,000)
Total	¥ 1,520,556		¥ 3,243,889

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INTANGIBLE ASSET, NET - Schedule of estimated amortization expenses of above intangible assets for future years (Details) - CNY (¥)	Dec. 31, 2021	Dec. 31, 2020
INTANGIBLE ASSET, NET
2022	¥ 7,726,402
2023	7,660,291
2024	6,788,693
2025	4,123,264
2026	3,640,000
Thereafter	14,256,667
Total	¥ 44,204,317	¥ 52,084,512

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INTANGIBLE ASSETS, NET - Additional Information (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)
INTANGIBLE ASSET, NET
Impairment of intangible assets	¥ 2,915,000	$ 457,427	¥ 0	¥ 0
Amortization expenses	¥ 8,226,446		¥ 1,716,348	¥ 0

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GOODWILL - Carrying amount of goodwill (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)
GOODWILL.
Beginning balance	¥ 196,002,568
Additions in goodwill related to business combinations (Note 21)			¥ 196,002,568
Impairment of goodwill	(106,949,249)	$ (16,782,671)
Foreign currency translation adjustment	(7,301,455)
Ending balance	¥ 81,751,864	$ 12,828,651	¥ 196,002,568

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GOODWILL - Additional Information (Details) - 12 months ended Dec. 31, 2021	CNY (¥)	USD ($)
GOODWILL.
Impairment of goodwill	¥ 106,949,249	$ 16,782,671

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ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES (Details)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued payroll and welfare	¥ 24,015,031		¥ 29,859,310
Technology supporting fees payable	20,609,458		9,856,805
Advertising and marketing fees payable	5,144,789		13,855,032
Other taxes payable	6,525,618		9,513,024
Rebate to advertising customers	4,263,036		11,896,947
Professional fee payable	3,069,892		1,350,153
Deposits received from suppliers	1,170,000		1,120,000
Payable for business combinations			24,742,025
Cash collected on behalf of service providers			10,356,117
Other accrued expenses	18,164,527		6,409,383
Accrued Expenses and Other Current Liabilities	¥ 82,962,351	$ 13,018,602	¥ 118,958,796

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CONVERTIBLE DEBT - Additional information (Details)					12 Months Ended
	Mar. 09, 2020 CNY (¥)	Nov. 20, 2019 CNY (¥)	Nov. 20, 2019 USD ($)	Mar. 09, 2017 USD ($) $ / shares	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)	Nov. 20, 2019 USD ($)
Debt Instrument [Line Items]
Term of convertible debt				1 year
Face amount of convertible debt		¥ 20,000,000.0		$ 3,000,000.0			$ 3,000,000.0
Changes in fair value of convertible debt					¥ 0	¥ 8,749,608
Repayment of a convertible debt						20,000,000
Accrued interest		2,700,000
Gain on extinguishment of a convertible debt		9,000,000.0	$ 1,300,000			¥ 8,986,048
Settlement amount of convertible debt		22,700,000					3,200,000
Carrying amount of convertible debt		¥ 31,800,000					$ 4,500,000
Interest paid	¥ 2,700,000
Series C-2 Preferred Shares
Debt Instrument [Line Items]
Number of shares issuable upon conversion (in shares) | $				116,640
Interest rate (as a percent)				5.00%
Conversion price (in dollars per share) | $ / shares				$ 25.72

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MEZZANINE EQUITY (Details)														1 Months Ended		5 Months Ended		9 Months Ended		12 Months Ended
	Feb. 08, 2018 USD ($) $ / shares shares	Feb. 08, 2018 CNY (¥) shares	Jan. 26, 2018 USD ($)	Jun. 27, 2016 USD ($) $ / shares shares	Jun. 27, 2016 CNY (¥) shares	May 09, 2016 USD ($) shares	Nov. 04, 2014 shares	Oct. 30, 2014 USD ($) $ / shares shares	Oct. 30, 2014 CNY (¥) shares	May 15, 2014 USD ($) $ / shares shares	May 15, 2014 CNY (¥) shares	Apr. 27, 2013 USD ($) $ / shares shares	Apr. 27, 2013 CNY (¥) shares	Apr. 08, 2016 USD ($) $ / shares shares	Apr. 08, 2016 CNY (¥) shares	Nov. 02, 2017 USD ($) $ / shares shares	Nov. 02, 2017 CNY (¥) shares	Nov. 01, 2018 USD ($) $ / shares shares	Nov. 01, 2018 CNY (¥) shares	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($) $ / shares shares	Jul. 31, 2020 $ / shares	Nov. 20, 2019 USD ($)	Nov. 20, 2019 CNY (¥)	Dec. 31, 2018 shares	Mar. 09, 2017 USD ($)	May 09, 2016 CNY (¥)
Mezzanine Equity [Line Items]
Face amount of debt																							$ 3,000,000.0	¥ 20,000,000.0		$ 3,000,000.0
Dividend rate (as a percent)																				8.00%
Series A Convertible Preferred Shares
Mezzanine Equity [Line Items]
Number of shares issued (in shares) | shares	288,240	288,240										1,275,000	1,275,000
Issue price (in dollars per share)	$ 27.75											$ 0.38
Aggregated cash consideration	$ 8,000,000	¥ 50,753,200										$ 482,253	¥ 3,000,000
Liquidation preference, percent of issuance price considered (as a percent)																					120.00%
Par value per share (In dollars per share)																						$ 0.0001
Beneficial conversion feature | ¥																				¥ 0
Series A Convertible Preferred Shares | Shareholder of Series A Preferred Shares
Mezzanine Equity [Line Items]
Number of shares sold (in shares) | shares							124,138
Redeemable Convertible Preferred Shares
Mezzanine Equity [Line Items]
Number of shares issued upon conversion (in shares) | shares																									1
Beneficial conversion feature | ¥																				¥ 0
Series A-1 Redeemable Convertible Preferred Shares
Mezzanine Equity [Line Items]
Number of shares issued (in shares) | shares										2,000,000	2,000,000
Issue price (in dollars per share)										$ 0.88
Aggregated cash consideration										$ 1,764,700	¥ 10,877,611
Liquidation preference, percent of issuance price considered (as a percent)																					120.00%
Par value per share (In dollars per share)																						0.0001
Share re-designated from another series of shares | shares							124,138
Compounded rate of return considered for determination of redemption price (as a percent)																				8.00%
Series B Redeemable Convertible Preferred Shares
Mezzanine Equity [Line Items]
Number of shares issued (in shares) | shares								1,862,069	1,862,069
Issue price (in dollars per share)								$ 6.63
Aggregated cash consideration								$ 12,350,000	¥ 75,899,395
Liquidation preference, percent of issuance price considered (as a percent)																					150.00%
Par value per share (In dollars per share)																						0.0001
Compounded rate of return considered for determination of redemption price (as a percent)																				8.00%
Series C Redeemable Convertible Preferred Shares
Mezzanine Equity [Line Items]
Number of shares issued (in shares) | shares														1,091,391	1,091,391
Issue price (in dollars per share)														$ 12.88
Aggregated cash consideration														$ 14,061,477	¥ 90,876,514
Liquidation preference, percent of issuance price considered (as a percent)																					150.00%
Par value per share (In dollars per share)																						0.0001
Compounded rate of return considered for determination of redemption price (as a percent)																				8.00%
Series C-1 Redeemable Convertible Preferred Shares
Mezzanine Equity [Line Items]
Number of shares issued (in shares) | shares				745,114	745,114
Issue price (in dollars per share)				$ 16.10
Aggregated cash consideration				$ 12,000,000	¥ 79,650,000
Liquidation preference, percent of issuance price considered (as a percent)																					150.00%
Par value per share (In dollars per share)																						0.0001
Re-designation price (in dollars per share)				$ 12.88
Compounded rate of return considered for determination of redemption price (as a percent)																				8.00%
Series C-1 Redeemable Convertible Preferred Shares | Shareholder of Series A 1 Preferred Shares
Mezzanine Equity [Line Items]
Number of shares sold (in shares) | shares				232,847	232,847
Series D Redeemable Convertible Preferred Shares
Mezzanine Equity [Line Items]
Number of shares issued (in shares) | shares																1,080,901	1,080,901	1,062,885	1,062,885
Issue price (in dollars per share)																$ 27.75		$ 27.75
Aggregated cash consideration																$ 29,999,974	¥ 200,622,325	$ 29,499,990	¥ 196,648,046
Par value per share (In dollars per share)																						$ 0.0001
Payments of issuance cost of Series D Redeemable Convertible Preferred Shares																$ 740,313	¥ 4,950,781	$ 1,045,254	¥ 6,913,310
Compounded rate of return considered for determination of redemption price (as a percent)																				10.00%
First HK$2 million of assessable profits | Series D Redeemable Convertible Preferred Shares
Mezzanine Equity [Line Items]
Liquidation preference, percent of issuance price considered (as a percent)																					150.00%
Remaining profits after first HK$2 million of assessable profits | Series D Redeemable Convertible Preferred Shares
Mezzanine Equity [Line Items]
Liquidation preference, percent of issuance price considered (as a percent)																					100.00%
Liquidation preference, compounded rate of return considered (as a percent)																					10.00%
Convertible promissory notes
Mezzanine Equity [Line Items]
Face amount of debt						$ 1,999,983																					¥ 13,020,889
Convertible promissory notes | Series C Redeemable Convertible Preferred Shares
Mezzanine Equity [Line Items]
Shares issued upon conversion (in shares) | shares						155,230
IPO | Series A Convertible Preferred Shares
Mezzanine Equity [Line Items]
Number of shares issued upon conversion (in shares) | shares																					1
Threshold minimum percentage of preferred shareholders to approve (as a percent)			92.00%
IPO | Redeemable Convertible Preferred Shares
Mezzanine Equity [Line Items]
Number of shares issued upon conversion (in shares) | shares																					1
IPO | Minimum | Series A Convertible Preferred Shares
Mezzanine Equity [Line Items]
Pre-offering valuation threshold | $			$ 850,000,000
Pre-offering proceeds threshold | $			$ 100,000,000
Drag-Along Sale
Mezzanine Equity [Line Items]
Drag-along preferred shareholders, ownership (as a percent)																					92.00%
Par value per share (In dollars per share)																					$ 0.0001
Drag-Along Sale | Minimum
Mezzanine Equity [Line Items]
Threshold minimum company valuation to trigger drag-along rights | $																					$ 2,500,000,000

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MEZZANINE EQUITY - Company's Series A Preferred Shares activities (Details) - Series A Convertible Preferred Shares	12 Months Ended
	Dec. 31, 2020 CNY (¥)
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning balance	¥ 29,751,569
Conversion to shares	(33,042,477)
Foreign currency translation adjustment	¥ 3,290,908
Ending balance

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MEZZANINE EQUITY - Company's Redeemable Convertible Preferred Shares activities (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)
Increase (Decrease) in Temporary Equity [Roll Forward]
Accretion of redeemable convertible preferred shares			¥ 244,080,678
Conversion to ordinary shares	¥ 0	$ 0	(1,500,748,518)	¥ 0
Redeemable Convertible Preferred Shares
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning balance			1,700,726,187	1,045,164,575
Accretion of redeemable convertible preferred shares				631,005,563
Accretion and modification of redeemable convertible preferred shares			(244,080,678)
Conversion to ordinary shares			(1,467,706,041)
Foreign currency translation adjustment			11,060,532	24,556,049
Ending balance				1,700,726,187
Series A-1 Redeemable Convertible Preferred Shares
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning balance			17,959,327	16,359,651
Accretion of redeemable convertible preferred shares				1,315,008
Accretion and modification of redeemable convertible preferred shares			707,682
Conversion to ordinary shares			(18,780,954)
Foreign currency translation adjustment			113,945	284,668
Ending balance				17,959,327
Series B Redeemable Convertible Preferred Shares
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning balance			483,612,008	239,225,246
Accretion of redeemable convertible preferred shares				237,680,316
Accretion and modification of redeemable convertible preferred shares			(68,419,392)
Conversion to ordinary shares			(418,336,891)
Foreign currency translation adjustment			3,144,275	6,706,446
Ending balance				483,612,008
Series C Redeemable Convertible Preferred Shares
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning balance			327,278,389	178,003,498
Accretion of redeemable convertible preferred shares				144,659,627
Accretion and modification of redeemable convertible preferred shares			(49,340,009)
Conversion to ordinary shares			(280,068,866)
Foreign currency translation adjustment			2,130,486	4,615,264
Ending balance				327,278,389
Series C-1 Redeemable Convertible Preferred Shares
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning balance			258,898,069	150,811,043
Accretion of redeemable convertible preferred shares				104,388,417
Accretion and modification of redeemable convertible preferred shares			(40,873,954)
Conversion to ordinary shares			(219,711,065)
Foreign currency translation adjustment			1,686,950	3,698,609
Ending balance				258,898,069
Series D Redeemable Convertible Preferred Shares
Increase (Decrease) in Temporary Equity [Roll Forward]
Beginning balance			612,978,394	460,765,137
Accretion of redeemable convertible preferred shares				142,962,195
Accretion and modification of redeemable convertible preferred shares			(86,155,005)
Conversion to ordinary shares			(530,808,265)
Foreign currency translation adjustment			¥ 3,984,876	9,251,062
Ending balance				¥ 612,978,394

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ORDINARY SHARES (Details)	1 Months Ended			12 Months Ended
	Apr. 30, 2021 shares	Jul. 31, 2020 CNY (¥) shares	Jul. 31, 2020 USD ($) $ / shares shares	Dec. 31, 2021 Vote $ / shares shares	Dec. 31, 2020 CNY (¥) shares	Dec. 31, 2019 shares	Nov. 01, 2018 $ / shares	Feb. 08, 2018 $ / shares	Nov. 02, 2017 $ / shares	Jun. 27, 2016 $ / shares	Apr. 08, 2016 $ / shares	Oct. 30, 2014 $ / shares	May 15, 2014 $ / shares	Dec. 31, 2013 $ / shares shares	Apr. 27, 2013 $ / shares
Subsidiary, Sale of Stock [Line Items]
Ordinary shares, Shares authorized			5,000,000,000											500,000,000
Authorized share capital | $			$ 500,000
Ordinary shares, par value (in dollars per share) | $ / shares														$ 0.0001
Shares issued (in shares)				5,114,840		5,614,840
Shares outstanding (in shares)						5,614,840
Proceeds from issuance of Class A Ordinary Shares | ¥					¥ 548,765,995
Class A
Subsidiary, Sale of Stock [Line Items]
Ordinary shares, Shares authorized			4,600,000,000	4,600,000,000	4,600,000,000
Ordinary shares, par value (in dollars per share) | $ / shares			$ 0.0001	$ 0.0001
Shares issued (in shares)				13,618,609	12,210,830
Shares outstanding (in shares)				13,618,609	12,210,830
Number of shares redesigned to ordinary shares, group one		1,439,102	1,439,102
Number of shares redesigned to ordinary shares, group two		1,891,291	1,891,291
Number of shares redesigned to ordinary shares, group three		1,862,069	1,862,069
Number of shares redesigned to ordinary shares, group four		1,246,621	1,246,621
Number of shares redesigned to ordinary shares, group five		977,961	977,961
Number of shares redesigned to ordinary shares, group six		2,143,786	2,143,786
Number of votes | Vote				1
Conversion ratio for each Class B ordinary share				1
Conversion Of Shares	500,000
Class A | IPO
Subsidiary, Sale of Stock [Line Items]
Issuance of ordinary shares upon initial public offering		2,650,000	2,650,000
Issue price (in dollars per share) | $ / shares			$ 32.0
Proceeds from issuance of Class A Ordinary Shares		¥ 549,000,000	$ 78,000,000
Class B
Subsidiary, Sale of Stock [Line Items]
Ordinary shares, Shares authorized			200,000,000	200,000,000	200,000,000
Ordinary shares, par value (in dollars per share) | $ / shares			$ 0.0001	$ 0.0001
Shares issued (in shares)				5,114,840	5,614,840
Shares outstanding (in shares)				5,114,840	5,614,840
Number of shares redesigned to ordinary shares, group seven		5,614,840	5,614,840
Number of votes | Vote				5
Conversion Of Shares	500,000
Series A Convertible Preferred Shares
Subsidiary, Sale of Stock [Line Items]
Issue price (in dollars per share) | $ / shares								$ 27.75							$ 0.38
Redesignation conversion ratio		1	1
Number of shares redesigned to ordinary shares, group one		(1,439,102)	(1,439,102)
Par value per share (In dollars per share) | $ / shares			$ 0.0001
Series A-1 Redeemable Convertible Preferred Shares
Subsidiary, Sale of Stock [Line Items]
Issue price (in dollars per share) | $ / shares													$ 0.88
Redesignation conversion ratio		1	1
Number of shares redesigned to ordinary shares, group two		(1,891,291)	(1,891,291)
Par value per share (In dollars per share) | $ / shares			$ 0.0001
Series B Redeemable Convertible Preferred Shares
Subsidiary, Sale of Stock [Line Items]
Issue price (in dollars per share) | $ / shares												$ 6.63
Redesignation conversion ratio		1	1
Number of shares redesigned to ordinary shares, group three		(1,862,069)	(1,862,069)
Par value per share (In dollars per share) | $ / shares			$ 0.0001
Series C Redeemable Convertible Preferred Shares
Subsidiary, Sale of Stock [Line Items]
Issue price (in dollars per share) | $ / shares											$ 12.88
Redesignation conversion ratio		1	1
Number of shares redesigned to ordinary shares, group four		(1,246,621)	(1,246,621)
Par value per share (In dollars per share) | $ / shares			$ 0.0001
Series C-1 Redeemable Convertible Preferred Shares
Subsidiary, Sale of Stock [Line Items]
Issue price (in dollars per share) | $ / shares										$ 16.10
Redesignation conversion ratio		1	1
Number of shares redesigned to ordinary shares, group five		(977,961)	(977,961)
Par value per share (In dollars per share) | $ / shares			$ 0.0001
Series D Redeemable Convertible Preferred Shares
Subsidiary, Sale of Stock [Line Items]
Issue price (in dollars per share) | $ / shares							$ 27.75		$ 27.75
Redesignation conversion ratio		1	1
Number of shares redesigned to ordinary shares, group six		(2,143,786)	(2,143,786)
Par value per share (In dollars per share) | $ / shares			$ 0.0001
Ordinary shares.
Subsidiary, Sale of Stock [Line Items]
Ordinary shares, Shares authorized			200,000,000
Ordinary shares, par value (in dollars per share) | $ / shares			$ 0.0001
Number of shares redesigned to ordinary shares, group seven		(5,614,840)	(5,614,840)

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SHARE-BASED COMPENSATION (Details)				1 Months Ended	12 Months Ended
	Aug. 24, 2021 shares	Jun. 15, 2020 shares	Mar. 11, 2015 shares	Jun. 30, 2020 $ / shares shares	Dec. 31, 2021 $ / shares	Dec. 31, 2021 CNY (¥)	Dec. 31, 2020 CNY (¥)	Oct. 31, 2020 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	4 years	4 years
Share-based Payment Arrangement, Expense | ¥						¥ 15,911,144	¥ 186,903,431
Exercise price | $ / shares					$ 0.01
Mr. Baoli Ma, founder, Chairman and Chief Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Payment Arrangement, Expense | ¥						68,166,664
Exercise price | $ / shares				$ 0.01
General and administrative expenses
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Payment Arrangement, Expense | ¥						830,710	¥ 141,544,319
General and administrative expenses | Non-employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based Payment Arrangement, Expense | ¥						¥ 31,082,306
2015 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares to motivate directors, employees and consultants of the Group			1,551,724
Vesting period			4 years
2020 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares to motivate directors, employees and consultants of the Group		758,783
2020 Plan | Mr. Baoli Ma, founder, Chairman and Chief Executive Officer
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares to motivate directors, employees and consultants of the Group				303,513
2020 Plan | Non-employee
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares to motivate directors, employees and consultants of the Group								268,487
2021 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares to motivate directors, employees and consultants of the Group	833,550
Option vest on the first anniversary
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage	25.00%	25.00%
Option vest on the first anniversary | 2015 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting percentage			25.00%
Option vest monthly over subsequent 36 months
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period	36 months	36 months
Option vest monthly over subsequent 36 months | 2015 Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			36 months

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SHARE-BASED COMPENSATION - Stock Options Activity (Details)	12 Months Ended
	Dec. 31, 2021 USD ($) $ / shares shares
Number of shares
Outstanding at the beginning | shares	2,005,600
Granted | shares	508,619
Expired | shares	(304)
Exercised | shares	(907,779)
Forfeited | shares	(234,872)
Vested and expect to vested as of December 31, 2021 | shares	1,371,264
Outstanding at the end | shares	1,371,264
Exercisable as of December 31, 2021 | shares	809,499
Weighted average exercise price
Outstanding at the beginning | $ / shares	$ 0.01
Granted | $ / shares	0.01
Expired | $ / shares	0.01
Exercised | $ / shares	0.01
Forfeited | $ / shares	0.01
Vested and expect to vested as of December 31, 2020 | $ / shares	0.01
Outstanding at the end | $ / shares	0.01
Exercisable as of December 31, 2020 | $ / shares	$ 0.01
Weighted remaining contractual years and Aggregate intrinsic value
Weighted remaining contractual years	8 years 2 months 26 days
Vested and expect to vested as of December 31, 2021	8 years 2 months 26 days
Exercisable as of December 31, 2021	7 years 9 months 18 days
Aggregate intrinsic value | $	$ 4,182,355
Vested and expect to vested as of December 31, 2021 | $	4,182,355
Exercisable as of December 31, 2021 | $	$ 2,468,972

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SHARE-BASED COMPENSATION - Binominal option pricing model (Details)	12 Months Ended
	Dec. 31, 2021 $ / shares ¥ / shares	Dec. 31, 2020 $ / shares	Dec. 31, 2019 $ / shares	Dec. 31, 2020 ¥ / shares
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Risk-free rate of return (per annum)	1.61%
Volatility	59.23%
Expected dividend yield	0.00%	0.00%	0.00%
Fair value of underlying ordinary share | ¥ / shares	¥ 5.96
Expected term	10 years	10 years	10 years
Minimum
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Risk-free rate of return (per annum)	1.61%	0.23%	1.78%
Volatility	59.23%	50.92%	57.20%
Exercise multiple	¥ 2.2	$ 2.2	$ 2.2
Fair value of underlying ordinary share		$ 17.11	$ 17.95
Maximum
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions and Methodology [Abstract]
Risk-free rate of return (per annum)		1.70%	2.56%
Volatility		56.70%	60.91%
Exercise multiple	¥ 2.8	$ 2.8	$ 2.8
Fair value of underlying ordinary share | (per share)			$ 31.15	¥ 37.71

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SHARE-BASED COMPENSATION - Additional Information (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 CNY (¥) $ / shares	Dec. 31, 2020 CNY (¥)	Dec. 31, 2020 $ / shares	Dec. 31, 2019 CNY (¥)	Dec. 31, 2019 $ / shares
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Weighted average grant date fair value of the share options | $ / shares		$ 16.19		$ 28.70		$ 29.02
Total unrecognized compensation expense related to non-vested share options	¥ 40,677,525	$ 40,677,525
weighted average period	2 years 9 months 3 days
Compensation expense	¥ 15,911,144		¥ 186,903,431
IPO
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	139,374,113				¥ 0
Mr. Baoli Ma, founder, Chairman and Chief Executive Officer
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	68,166,664
Cost of revenues
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	2,140,523		11,698,603
Selling and marketing expenses
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	7,678,679		16,922,885
General and administrative expenses
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	830,710		141,544,319
General and administrative expenses | Non-employee
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	31,082,306
Technology and product development expenses
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Compensation expense	¥ 5,261,232		¥ 16,737,624

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FAIR VALUE MEASUREMENT (Details)	Dec. 31, 2020 CNY (¥)
Investment securities
Equity securities with readily determinable fair value	¥ 50,000
Total	50,000
Level 3
Investment securities
Equity securities with readily determinable fair value	50,000
Total	¥ 50,000

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FAIR VALUE MEASUREMENT - Additional Information (Details) - CNY (¥)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Gain or Losses included in earnings		¥ 0	¥ (8,749,608)
Convertible debt
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Balance at the beginning			(22,450,219)
Gain or Losses included in earnings			(8,749,608)
Foreign Currency Translation Adjustment			(633,141)
Extinguishment			31,832,968
Investment securities.
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Balance at the beginning	¥ 50,000	23,579,048	21,887,899
Gain or Losses included in earnings		4,857,986	(274,829)
Gain or Losses included in other comprehensive loss		(3,406,863)	1,591,098
Foreign Currency Translation Adjustment		42,994	374,880
Extinguishment	(50,000)	(25,023,165)
Balance at the end		50,000	23,579,048
Debt securities
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Balance at the beginning		23,523,746	21,559,157
Gain or Losses included in earnings		4,863,233
Gain or Losses included in other comprehensive loss		(3,406,863)	1,591,098
Foreign Currency Translation Adjustment		42,977	373,491
Extinguishment		(25,023,093)
Balance at the end			23,523,746
Equity securities with readily determinable fair value
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward]
Balance at the beginning	50,000	55,302	328,742
Gain or Losses included in earnings		(5,247)	(274,829)
Foreign Currency Translation Adjustment		17	1,389
Extinguishment	¥ (50,000)	(72)
Balance at the end		¥ 50,000	¥ 55,302

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INCOME TAX (Details) - HKD ($) $ in Millions	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Income Taxes [Line Items]
Statutory income tax rate	25.00%	25.00%	25.00%
Hong Kong S.A.R
Income Taxes [Line Items]
Statutory income tax rate	16.50%
Assessable profits	$ 2
Hong Kong S.A.R | First HK$2 million of assessable profits
Income Taxes [Line Items]
Statutory income tax rate	8.25%
Hong Kong S.A.R | Remaining profits after first HK$2 million of assessable profits
Income Taxes [Line Items]
Statutory income tax rate	16.50%
PRC
Income Taxes [Line Items]
Statutory income tax rate	25.00%
Preferential income tax rate	15.00%		15.00%

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INCOME TAX - Components of loss before income taxes (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)
Components of loss before income taxes
Loss before income taxes	¥ 308,802,938	$ 48,457,919	¥ 223,294,678	¥ 51,998,954
PRC, excluding Hong Kong S.A.R.
Components of loss before income taxes
Loss before income taxes	229,692,055		165,783,490	13,363,885
Hong Kong S.A.R.
Components of loss before income taxes
Loss before income taxes	59,079,524		38,305,342	36,302,843
Cayman
Components of loss before income taxes
Loss before income taxes	14,378,166		5,332,840	646,803
Japan
Components of loss before income taxes
Loss before income taxes	3,446,328		7,697,439	258,209
Others
Components of loss before income taxes
Loss before income taxes	¥ 2,206,865		¥ 6,175,567	¥ 1,427,214

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INCOME TAX - Income tax expense recognized in consolidated statements of comprehensive loss (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)
Income tax expense recognized in the consolidated statements of comprehensive loss
Current income tax expense-total	¥ 2,988,105		¥ 1,053,518	¥ 930,554
Deferred income tax expense	(2,167,099)	$ (340,065)	(2,495,332)
Income tax expense (benefit)	821,006	$ 128,834	(1,441,814)	930,554
PRC, excluding Hong Kong S.A.R.
Income tax expense recognized in the consolidated statements of comprehensive loss
Current income tax expense-total	1,168,707		(64,615)	112,473
Deferred income tax expense	(2,167,099)		(2,495,332)
Hong Kong S.A.R.
Income tax expense recognized in the consolidated statements of comprehensive loss
Current income tax expense-total	¥ 1,819,398		¥ 1,118,133	¥ 818,081

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INCOME TAX - Reconciliation of differences between PRC statutory income tax rate and group's effective income tax rate (Details)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
INCOME TAX
PRC Statutory income tax rate	(25.00%)	(25.00%)	(25.00%)
Increase (decrease) in effective income tax rate resulting from:
Tax rate differential for non-PRC entities	2.90%	1.80%	6.10%
Preferential tax rate	7.30%	(3.20%)	6.50%
Research and development expenses additional deduction	(6.80%)	(3.70%)	(15.50%)
Non-deductible share-based compensation expenses	1.30%	20.90%
Non-taxable income	(0.10%)	(0.50%)
Impairment of goodwill	8.70%
Other non-deductible expenses	2.80%	2.40%	0.50%
Change in valuation allowance	9.20%	6.70%	29.20%
Effective income tax rate	0.30%	(0.60%)	1.80%

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INCOME TAX - Deferred income tax assets (Details) - CNY (¥)	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2018
Deferred income tax assets
Net operating loss carry forwards	¥ 99,347,341	¥ 72,435,457
Donation	480,684	457,730
Deductible advertising expenses	2,103,893	867,094
Total deferred income tax assets	101,931,918	73,760,281
Less: Valuation allowance	(100,483,935)	(71,676,908)	¥ (57,960,509)	¥ (42,910,959)
Deferred income tax assets, net	1,447,983	2,083,373
Intangible assets	(11,051,079)	(13,038,256)
Deferred income tax liabilities, net	(11,051,079)	(13,038,256)
Net deferred income tax liabilities	(9,603,096)	¥ (10,954,883)
2022
Deferred income tax assets
Net operating loss carry forwards	379,756
2023
Deferred income tax assets
Net operating loss carry forwards	206,696
2024
Deferred income tax assets
Net operating loss carry forwards	1,466,535
2025
Deferred income tax assets
Net operating loss carry forwards	8,271,951
2026
Deferred income tax assets
Net operating loss carry forwards	11,009,934
2027
Deferred income tax assets
Net operating loss carry forwards	50,611,222
2028
Deferred income tax assets
Net operating loss carry forwards	49,150,819
2029
Deferred income tax assets
Net operating loss carry forwards	35,279,589
2031
Deferred income tax assets
Net operating loss carry forwards	226,849,977
PRC
Deferred income tax assets
Net operating loss carry forwards	¥ 383,226,479

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INCOME TAX - Changes in valuation allowance (Details) - CNY (¥)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Changes in valuation allowance
Balance at the beginning of the year	¥ 71,676,908	¥ 57,960,509	¥ 42,910,959
Additions of valuation allowance	46,283,222	28,879,521	14,728,024
Reductions of valuation allowance	(16,639,886)	(13,070,605)
Foreign exchange translation adjustments	(836,309)	(2,092,517)	321,526
Balance at the end of the year	100,483,935	¥ 71,676,908	¥ 57,960,509
Maximum underpayment of taxes	¥ 100,000
Income tax statute of limitation	10 years

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NET (LOSS ) INCOME PER SHARE - Basic and diluted net loss per share computation (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥) ¥ / shares shares	Dec. 31, 2021 USD ($) $ / shares shares	Dec. 31, 2020 CNY (¥) ¥ / shares shares	Dec. 31, 2019 CNY (¥) ¥ / shares shares
Numerator:
Net loss	¥ (309,623,944)	$ (48,586,753)	¥ (221,852,864)	¥ (52,929,508)
(Accretion) reversal of accretion and modification of Redeemable Convertible Preferred Shares to redemption value			244,080,678	(631,005,563)
Net income attributable to preferred shareholders			(6,706,551)
Net (loss) income allocated to Class A and Class B ordinary shareholders as reported in basic net loss (income) per Class A and Class B Ordinary Share	(309,623,944)		15,521,263	(683,935,071)
Earnings allocated to Series B, C, C-1, D convertible redeemable preferred shares			6,706,551
Reversal of accretion on Series B, C, C-1, D convertible redeemable preferred shares			(244,788,360)
Numerator for diluted net loss per share calculation	¥ (309,623,944)		¥ (222,560,546)	¥ (683,935,071)
Denominator:
Weighted average number of ordinary shares, basic | shares	19,352,595	19,352,595	11,974,046	5,614,840
Weighted Average Number of Shares Outstanding, Diluted | shares	19,352,595	19,352,595	15,208,426	5,614,840
Effect of dilutive securities | shares			3,234,380
Denominator for diluted net loss per share calculation | shares	19,352,595	19,352,595	15,208,426	5,614,840
Net loss per ordinary share
Basic | (per share)	¥ (16.00)	$ (2.51)	¥ 1.30	¥ (121.81)
Diluted | (per share)	¥ (16.00)	$ (2.51)	¥ (14.63)	¥ (121.81)

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NET (LOSS ) INCOME PER SHARE - Potentially dilutive securities (Details) - shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
Stock options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities that have not been included in the calculation of diluted net loss per share as they are anti-dilutive	561,765	762,167	1,084,545
Preferred shares
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive securities that have not been included in the calculation of diluted net loss per share as they are anti-dilutive			9,560,830

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RELATED PARTY TRANSACTIONS (Details) $ in Millions			12 Months Ended
	Apr. 03, 2020 CNY (¥)	Apr. 12, 2018 USD ($) shares	Dec. 31, 2021 CNY (¥) shares	Dec. 31, 2021 USD ($) shares	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)
Related Party Transaction [Line Items]
Issuance of interest free loans to a shareholder | ¥						¥ 8,000,000
Consideration | ¥					¥ 501,227,248
Repurchase of unvested share options from BlueCity Media Limited
Related Party Transaction [Line Items]
Shares repurchased (in shares) | shares		288,240
Shares repurchased consideration | $		$ 8.0
Share repurchase consideration paid						¥ 6,898,800	$ 1.0	$ 7.0
Mr. Baoli Ma
Related Party Transaction [Line Items]
Payment made on behalf of a related party | ¥	¥ 4,722,814
Number of ADS units issued | shares			312,500	312,500
Mr. Baoli Ma | Class A
Related Party Transaction [Line Items]
Issuance of ordinary shares upon initial public offering | shares			156,250	156,250
Consideration			¥ 35,103,500	$ 5.0

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REVENUE INFORMATION (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)
REVENUE INFORMATION
Revenues	¥ 1,076,591,430	$ 168,940,688	¥ 1,031,323,444	¥ 758,887,906
Service
REVENUE INFORMATION
Revenues	1,012,382,307		1,002,649,055	758,887,906
Live streaming
REVENUE INFORMATION
Revenues	820,825,553		868,946,403	671,410,681
Advertising
REVENUE INFORMATION
Revenues	53,881,336		45,452,681	35,383,571
Membership
REVENUE INFORMATION
Revenues	128,809,051		71,227,203	36,738,369
Others
REVENUE INFORMATION
Revenues	8,866,367		17,022,768	¥ 15,355,285
Merchandise sales
REVENUE INFORMATION
Revenues	¥ 64,209,123		¥ 28,674,389

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COMMITMENTS AND CONTINGENCIES (Details) - CNY (¥)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
COMMITMENTS AND CONTINGENCIES.
Rental expense	¥ 15,403,884	¥ 12,673,230	¥ 8,127,122
Future minimum lease commitments under office non-cancelable operating lease agreements
2022	13,315,511
2023	3,718,738
2024	486,426
2025	¥ 123,072

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BUSINESS COMBINATIONS (Details)	Dec. 01, 2020 CNY (¥)	Aug. 25, 2020 CNY (¥)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)
Net tangible assets:
Goodwill			¥ 81,751,864	$ 12,828,651	¥ 196,002,568
Lesdo
Net tangible assets:
Cash and cash equivalents		¥ 77
Total assets		3,980,077
Other current liabilities		(4,711,582)
Deferred income tax liabilities		(995,000)
Goodwill		3,054,923
Total consideration		1,328,418
Lesdo | User base
Net tangible assets:
Intangible assets		¥ 800,000
Estimated useful lives		3 years
Lesdo | Brand name
Net tangible assets:
Intangible assets		¥ 2,100,000
Estimated useful lives		10 years
Lesdo | Technology
Net tangible assets:
Intangible assets		¥ 1,080,000
Estimated useful lives		3 years
Finka
Net tangible assets:
Cash and cash equivalents	¥ 10,497,160
Accounts receivable	1,716,623
Other current assets	6,323,155
Total assets	64,246,938
Accounts payable	(208,984)
Other current liabilities	(8,331,044)
Deferred income tax liabilities	(11,427,500)
Goodwill	192,947,645
Total consideration	237,227,055
Finka | User base
Net tangible assets:
Intangible assets	¥ 6,930,000
Estimated useful lives	4 years
Finka | Brand name
Net tangible assets:
Intangible assets	¥ 36,400,000
Estimated useful lives	10 years
Finka | Technology
Net tangible assets:
Intangible assets	¥ 2,380,000
Estimated useful lives	3 years

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BUSINESS COMBINATIONS - Additional Information (Details)				1 Months Ended		4 Months Ended	12 Months Ended
	Dec. 01, 2020 CNY (¥)	Dec. 01, 2020 USD ($)	Aug. 25, 2020 CNY (¥)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2020 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)
Business Acquisition [Line Items]
Consideration paid							¥ 24,491,600	$ 3,843,266	¥ 203,081,831
Lesdo
Business Acquisition [Line Items]
Equity interest acquired			100.00%
Consideration			¥ 1,328,418
Consideration paid						¥ 805,418	523,000
Finka
Business Acquisition [Line Items]
Equity interest acquired	100.00%	100.00%
Consideration	¥ 237,227,055	$ 35,997,984
Consideration paid				¥ 212,773,650	$ 32,286,199		¥ 23,968,600	$ 3,711,785

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PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION - Condensed balance sheets (Details)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)	Nov. 20, 2019 CNY (¥)	Nov. 20, 2019 USD ($)	Dec. 31, 2018 CNY (¥)
Current assets
Cash	¥ 349,785,624	$ 54,888,997	¥ 439,492,788
Prepayments and other current assets	99,777,088	15,657,202	58,629,416
Total current assets	469,842,783	73,728,584	682,820,789
Non-current assets
Total non-current assets	140,319,805	22,019,239	262,008,756
Total assets	610,162,588	95,747,823	944,829,545
Current liabilities
Accrued expenses and other current liabilities	82,962,351	13,018,602	118,958,796
Total current liabilities	152,312,966	23,901,227	176,680,478
Non-current liabilities
Convertible debt					¥ 31,800,000	$ 4,500,000
Total non-current liabilities	11,903,096	1,867,855	10,954,883
Total liabilities	164,216,062	25,769,082	187,635,361
Shareholders' equity:
Additional paid-in capital	2,204,845,216	345,988,328	2,188,870,625
Accumulated other comprehensive loss	(125,113,629)	(19,633,059)	(107,514,737)
Accumulated deficit	(1,633,797,666)	(256,378,506)	(1,324,173,722)
Total shareholders' equity	445,946,526	69,978,741	757,194,184	¥ (1,387,500,033)			¥ (685,037,291)
Total liabilities and shareholders' equity	610,162,588	95,747,823	944,829,545
Parent Company | Reportable Legal Entities
Current assets
Cash	15,988,107		261,878,455
Prepayments and other current assets	4,285,975		1,483,169
Total current assets	20,274,082		263,361,624
Non-current assets
Investment in subsidiaries and consolidated VIE and VIE's subsidiaries	437,336,118		517,611,994
Total non-current assets	437,336,118		517,611,994
Total assets	457,610,200		780,973,618
Current liabilities
Accrued expenses and other current liabilities	11,663,674		23,779,434
Total current liabilities	11,663,674		23,779,434
Shareholders' equity:
Additional paid-in capital	2,204,845,216		2,188,870,625
Accumulated other comprehensive loss	(125,113,629)		(107,514,737)
Accumulated deficit	(1,633,797,666)		(1,324,173,722)
Total shareholders' equity	445,946,526		757,194,184
Total liabilities and shareholders' equity	457,610,200		780,973,618
Series A Convertible Preferred Shares
Mezzanine Equity
Total mezzanine equity				29,751,569
Series A-1 Redeemable Convertible Preferred Shares
Mezzanine Equity
Total mezzanine equity				17,959,327			16,359,651
Series B Redeemable Convertible Preferred Shares
Mezzanine Equity
Total mezzanine equity				483,612,008			239,225,246
Series C Redeemable Convertible Preferred Shares
Mezzanine Equity
Total mezzanine equity				327,278,389			178,003,498
Series C-1 Redeemable Convertible Preferred Shares
Mezzanine Equity
Total mezzanine equity				258,898,069			150,811,043
Series D Redeemable Convertible Preferred Shares
Mezzanine Equity
Total mezzanine equity				¥ 612,978,394			¥ 460,765,137
Class A
Shareholders' equity:
Ordinary Shares	9,487	1,489	8,572
Class A | Parent Company | Reportable Legal Entities
Shareholders' equity:
Ordinary Shares	9,487		8,572
Class B
Shareholders' equity:
Ordinary Shares	3,118	$ 489	3,446
Class B | Parent Company | Reportable Legal Entities
Shareholders' equity:
Ordinary Shares	¥ 3,118		¥ 3,446

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PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION - Condensed statements of results of operations (Details)			12 Months Ended
	Nov. 20, 2019 CNY (¥)	Nov. 20, 2019 USD ($)	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)
Condensed Balance Sheet Statements, Captions [Line Items]
Changes in fair value of a convertible debt					¥ 0	¥ (8,749,608)
Gain on extinguishment of a convertible debt	¥ 9,000,000.0	$ 1,300,000				8,986,048
Loss before income tax			¥ (308,802,938)	$ (48,457,919)	(223,294,678)	(51,998,954)
Income tax expense			821,006	128,834	(1,441,814)	930,554
Net loss			(309,623,944)	$ (48,586,753)	(221,852,864)	(52,929,508)
Reportable Legal Entities | Parent Company
Condensed Balance Sheet Statements, Captions [Line Items]
Total operating expenses			(14,378,165)		(5,209,656)	(883,243)
Changes in fair value of a convertible debt						(8,749,608)
Gain on extinguishment of a convertible debt						8,986,048
Share of losses from subsidiaries, VIE and VIE's subsidiaries			(295,245,779)		(216,643,208)	(52,282,705)
Loss before income tax			(309,623,944)		(221,852,864)	(52,929,508)
Net loss			¥ (309,623,944)		¥ (221,852,864)	¥ (52,929,508)

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PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION - Condensed statements of cash flows (Details)	12 Months Ended
	Dec. 31, 2021 CNY (¥)	Dec. 31, 2021 USD ($)	Dec. 31, 2020 CNY (¥)	Dec. 31, 2019 CNY (¥)
Condensed Balance Sheet Statements, Captions [Line Items]
Net cash (used in) provided by operating activities	¥ (210,901,538)	$ (33,095,053)	¥ (40,301,906)	¥ (31,641,810)
Net cash provided by (used in) investing activities	130,352,405	20,455,136	(288,737,892)	285,594,134
Net cash provided by (used in) financing activities	64,034	10,048	503,479,539	(22,252,291)
Effect of foreign currency exchange rate changes on cash	(9,222,065)	(1,447,143)	(32,220,775)	2,527,206
Net (decrease) increase in cash and cash equivalents	(89,707,164)	(14,077,012)	142,218,966	234,227,239
Cash and cash equivalents at the beginning of the year	439,492,788	68,966,009	297,273,822	63,046,583
Cash and cash equivalents at the end of the year	349,785,624	$ 54,888,997	439,492,788	297,273,822
Reportable Legal Entities | Parent Company
Condensed Balance Sheet Statements, Captions [Line Items]
Net cash (used in) provided by operating activities	(6,796,246)		1,961,394	(702,200)
Net cash provided by (used in) investing activities	(234,224,099)		(252,497,206)	2,015,462
Net cash provided by (used in) financing activities	64,034		532,995,338	(920,710)
Effect of foreign currency exchange rate changes on cash	(4,934,037)		(21,301,631)	76,203
Net (decrease) increase in cash and cash equivalents	(245,890,348)		261,157,895	468,755
Cash and cash equivalents at the beginning of the year	261,878,455		720,560	251,805
Cash and cash equivalents at the end of the year	¥ 15,988,107		¥ 261,878,455	¥ 720,560

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SUBSEQUENT EVENT (Details) - Subsequent Event. - $ / shares	Apr. 18, 2022	Jan. 02, 2022
Minimum
Subsequent Event [Line Items]
Share Price, Cash	$ 3.20
Maximum
Subsequent Event [Line Items]
Share Price, Cash	3.70	$ 3.7
American Depository shares
Subsequent Event [Line Items]
Number of ADS represents one share		1
American Depository shares | Minimum
Subsequent Event [Line Items]
Share Price, Cash	1.60
American Depository shares | Maximum
Subsequent Event [Line Items]
Share Price, Cash	$ 1.85	$ 1.85