SEC Filing | Qutoutiao Inc.

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Form 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

☒	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2022

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

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

Date of event requiring this shell company report

For the transition period from to

Commission file

number

001-38644

Qutoutiao Inc.

(Exact name of Registrant as specified in its charter)

Cayman Islands

(Exact name of Registrant as specified in its charter)

Building No. 2, Shanghai Pudong Software Park

519 Yi De Road, Pudong New Area

Shanghai 200124

People’s Republic of China

(Address of principal executive offices)

Mr. Eric Siliang Tan, Chief Executive Officer and Interim Chief Financial Officer

Telephone:

+86-21-5889-0398

Email: ir@qutoutiao.net

At the address of the Company set forth above

(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
None	None	None

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

Class A Ordinary Shares, par value US$0.0001 per share

American Depositary Shares, every two representing five Class A ordinary shares

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None.

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

46,920,018 Class A ordinary shares were outstanding as of December 31, 2022

32,937,193 Class B ordinary shares were outstanding as of December 31, 2022

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 electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

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.

☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued fi nancial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentivebased compensation received by any of the registrant’s executive offi cers during the relevant recovery period pursuant to

§240.10D-1(b). ☐

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


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

If “Other” has been checked in response to the previous question, indicate by check mark which consolidated 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 Securities Exchange Act of 1934) ☐ Yes

☒

(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


			Page
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		72
	ITEM 4A.	UNRESOLVED STAFF COMMENTS		110
	ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS		110
	ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES		127
	ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS		136
	ITEM 8.	FINANCIAL INFORMATION		137
	ITEM 9.	THE OFFER AND LISTING		139
	ITEM 10.	ADDITIONAL INFORMATION		139
	ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		147
	ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES		147

PART II				149
	ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES		149
	ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS		149
	ITEM 15.	CONTROLS AND PROCEDURES		149
	ITEM 16.	[RESERVED]		151
	ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT		151
	ITEM 16B.	CODE OF ETHICS		151
	ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		151
	ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES		151
	ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS		151
	ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT		151
	ITEM 16G.	CORPORATE GOVERNANCE		152
	ITEM 16H.	MINE SAFETY DISCLOSURE		152
	ITEM 16I.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS		152
	ITEM 16J.	INSIDER TRADING POLICIES		153

PART III				153
	ITEM 17.	FINANCIAL STATEMENTS		153
	ITEM 18.	FINANCIAL STATEMENTS		153
	ITEM 19.	EXHIBITS		153

CONVENTIONS THAT APPLY TO THIS ANNUAL REPORT ON FORM 20-F

Except where the context otherwise requires, references in this annual report to:

•

“installed users” are to the aggregate number of unique mobile devices that have downloaded and launched the Group’s relevant mobile application at least once;

•

“ADSs” are to American depositary shares, with every four ADSs representing one Class A ordinary share, and “ADRs” are to American depositary receipts that evidence ADSs;

•

“CAGR” are to compound annual growth rate;

•

“China” and the “PRC” are to the People’s Republic of China, excluding, for the purposes of this annual report only, Taiwan, the Hong Kong Special Administrative Region and the Macao Special Administrative Region;

•

“DAUs” are to the number of unique mobile devices that accessed the Group’s relevant mobile application on a given day. “Combined average DAUs” for a particular period is the average of the DAUs for all of the Group’s mobile applications on each day during that period;

•

“the Group” are to Qutoutiao Inc., the Group VIEs and their respective subsidiaries;

•

“Group VIEs” are to the variable interest entities, or VIEs, that are controlled by us through contractual arrangements and are consolidated into the Group’s consolidated financial statements in accordance with U.S. GAAP;

•

“Key WFOEs” are to material wholly foreign-owned entities of Qutoutiao Inc., namely Shanghai Quyun Network Technology Co., Ltd. and Shanghai Zhicao Information Technology Co., Ltd.;

•

“Key VIEs” are to material variable interest entities of Qutoutiao Inc., namely Shanghai Jifen Culture Communications Co., Ltd., Shanghai Big Rhinoceros Horn Information Technology Co., Ltd. and Beijing Churun Technology Co., Ltd.;

•

“MAUs” are to the number of unique mobile devices that accessed the Group’s relevant mobile application in a given month. “Combined average MAUs” for a particular period is the average of the MAUs for all of the Group’s mobile applications in each month during that period;

•

“oCPC” are to optimized cost-per-click as basis for charging the Group’s advertising services;

•

“oCPM” are to optimized cost-per-thousand-impressions as basis for charging the Group’s advertising services;

•

“Qutoutiao,” “we,” “us,” “our company” and “our” are to Qutoutiao Inc., its subsidiaries, and, in the context of describing its operations and consolidated financial information, the Group VIEs;

•

“R&D” are to research and development;

•

“registered users” are to users that have registered accounts on the Group’s relevant mobile application;

•

“RMB” or “Renminbi” are to the legal currency of China;

•

“lower-tier cities” are to cities in China that are not tier-1 and tier-2 cities;

•

“tier-1 and tier-2 cities” refer to (i) tier-1 cities in China, which are Beijing, Shanghai, Guangzhou and Shenzhen and (ii) tier-2 cities in China, which are Hangzhou, Nanjing, Jinan, Chongqing, Qingdao, Dalian, Ningbo, Xiamen, Tianjin, Chengdu, Wuhan, Harbin, Shenyang, Xi’an, Changchun, Changsha, Fuzhou, Zhengzhou, Shijiazhuang, Suzhou, Foshan, Dongguan, Wuxi, Yantai, Taiyuan, Hefei, Kunming, Nanchang, Nanning, Tangshan, Wenzhou and Zibo; and

•

“US$,” “U.S. dollars,” or “dollars” are to the legal currency of the United States.

On December 10, 2021, we effected a change of the ratio of our ADSs to Class A ordinary shares from the then ADS ratio of four (4) ADSs to one (1) Class A ordinary share to a new ADS ratio of two (2) ADS representing five (5) Class A ordinary shares. Unless otherwise indicated, ADSs and per ADS amount in this annual report have been retroactively adjusted to reflect the change in ratio for all periods presented.

Unless specifically indicated otherwise or unless the context otherwise requires, all references to our ordinary shares exclude ordinary shares issuable upon the exercise of outstanding options with respect to our ordinary shares under our share incentive plan.

This annual report contains translations between Renminbi and U.S. dollars solely for the convenience of the reader. The translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this annual report were made at a rate of RMB6.8972 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 30, 2022. We make no representation that the 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.

Unless the context indicates otherwise, all share and per share data in this annual report have given effect to a share split in September 2017 in which each one of the previously issued ordinary shares was split into 10,000 ordinary shares.

This annual report on Form 20-F includes the Group’s audited consolidated financial statements for the years ended December 31, 2020, 2021 and 2022, and as of December 31, 2021 and December 31, 2022.

FORWARD-LOOKING INFORMATION

This annual report on Form 20-F contains statements of a forward-looking nature. All statements other than statements of historical facts are forward-looking statements. These forward-looking statements are made under the “safe harbor” provision under Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and as defined in the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties and other factors that may cause the Group’s actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “potential,” “continue,” “is/are likely to” or other similar expressions. These forward-looking statements relate to, among others:

•

the Group’s goal and strategies;

•

the Group’s ability to maintain and strengthen its position as a leader amongst mobile content platform companies in China’s mobile content industry;

•

the Group’s expansion plans;

•

the Group’s ability to monetize through advertising and other products and services that it plans to introduce;

•

the Group’s future business development, financial condition and results of operations;

•

PRC laws, regulations, and policies relating to the Internet and Internet content providers; and

•

general economic and business conditions.

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 the Group’s financial condition, results of operations, business strategy and financial needs.

You should read these statements in conjunction with the risks disclosed in “Item 3. Key Information—D. Risk Factors” of this annual report and other risks outlined in our other filings with the Securities and Exchange Commission, or the SEC. Moreover, the Group operates in an emerging and evolving environment. New risks may emerge from time to time, and it is not possible for our management to predict all risks, nor can we assess the impact of such risks on the Group’s business or the extent to which any risk, or combination of risks, may cause actual results to differ materially from those contained in any forward-looking statements. The forward-looking statements made in this annual report relate only to events or information as of the date on which the statements are made in this annual report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances 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 have referred to in this annual report, completely and with the understanding that the Group’s actual future results may be materially different from what we expect.

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 Corporate Structure and Contractual Arrangements

Qutoutiao Inc. is not a Chinese operating company but a holding company incorporated in the Cayman Islands as an exempted company with limited liability, with operations primarily conducted (i) through contractual arrangements with certain variable interest entities, or the Group VIEs, in China and (ii) by our subsidiaries in China. Qutoutiao Inc. does not own equity interests in the Group VIEs, and does not conduct business operations directly. PRC laws and regulations impose certain restrictions or prohibitions on foreign ownership of companies that engage in certain value-added telecommunication services, internet audio-video program services and certain other businesses. Therefore, we operate such businesses in China through the Group VIEs and their subsidiaries, and rely on contractual arrangements among our PRC subsidiaries, the Group VIEs and their respective shareholders to control the business operations of the Group VIEs. Investors in our ADSs do not hold equity interests in the Group’s operating entities in China, but instead hold equity interests in Qutoutiao Inc., a Cayman Islands holding company. See “Item 4. Information on the Company—D. Organizational Structure” for a diagram illustrating our corporate structure. As used in this annual report, “Qutoutiao,” “we,” “us,” “our company” or “our” refers to Qutoutiao Inc., its subsidiaries, and, in the context of describing its operations and consolidated financial information, the Group VIEs; “the Group” refers to Qutoutiao Inc., the Group VIEs and their respective subsidiaries; and “the Group VIEs” refer to the variable interest entities that conduct our business operations in China.

The contractual arrangements among our PRC subsidiaries, the Group VIEs and their respective shareholders collectively enable us to:

•

exercise effective control over the Group VIEs and their subsidiaries;

•

receive substantially all the economic benefits of the Group VIEs; and

•

have an exclusive option to purchase all or part of the equity interests and assets of the Group VIEs when and to the extent permitted by PRC law.

As a result of the contractual arrangements, Qutoutiao Inc. and certain of its subsidiaries are considered the primary beneficiaries of the Group VIEs for accounting purposes, and we have consolidated the financial results of the Group VIEs in the Group’s consolidated financial statements. For more details on the contractual arrangements, see “Item 4. Information on the Company—D. Organizational Structure—Contractual Arrangements among Our Key WFOEs, the Key VIEs and Their Respective Shareholders.” Terms contained in each set of contractual arrangements with the Group VIEs are substantially similar.

We are subject to risks associated with our contractual arrangements with the Group VIEs and their shareholders. Our Cayman Islands holding company and its investors may never hold equity interests in the Group VIEs. The contractual arrangements may be less effective than equity ownership in providing us with control over the Group VIEs and we may incur substantial costs to enforce the terms of the arrangements. If the Group VIEs or their shareholders fail to perform their respective obligations under these contractual arrangements, our ability, as a Cayman Islands holding company, to enforce these contractual arrangements may be limited. The contractual arrangements have not been tested in a court of law in China. There are very few precedents and little formal guidance as to how contractual arrangements in the context of a variable interest entity should be interpreted or enforced under PRC law. 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 Group VIEs, and our ability to conduct the Group’s business and the Group’s results of operations and financial condition may be materially and adversely affected. See “—D. Risk Factors—Risks Relating to Our Corporate Structure—We rely on contractual arrangements with the Group VIEs and their respective shareholders to operate the Group’s business, which may be less effective than equity ownership in providing operational control and otherwise materially and adversely affect the Group’s business” and “—The shareholders of the Group VIEs may have potential conflicts of interest with us, which may materially and adversely affect the Group’s business, results of operations and financial condition.”

There are also substantial uncertainties regarding the interpretation and application of current and future PRC laws, regulations and rules with regard to our corporate structure and the contractual arrangements with the Group VIEs and their shareholders. If Chinese regulatory authorities disallow such structure and arrangements, it would have a material effect on our operations and cause the value of our ADSs to significantly decline or become worthless. See “—D. Risk Factors—Risks Relating to Our Corporate Structure—If the PRC government deems that the contractual arrangements in relation to the Group VIEs 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 in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. In addition, our ADSs may significantly decline in value or become worthless if we are unable to assert our contractual control over the assets of the Group VIEs” and “—Substantial uncertainties exist with respect to whether the controlling of PRC onshore variable interest entities by foreign investors via contractual arrangements will be recognized as ‘foreign investment’ and how it may impact the viability of the Group’s current corporate structure and operations.”

The Group also faces various legal and operational risks and uncertainties associated with being based in or having its operations primarily in China and the country’s complex and evolving laws and regulations. For example, the Group faces risks associated with regulatory approvals on offerings conducted overseas by and foreign investment in China-based issuers, the use of the Group VIEs, anti-monopoly regulatory actions, and oversight on cybersecurity and data privacy, which may impact the Group’s ability to conduct certain businesses, accept foreign investments, or list on a U.S. or other foreign exchange outside of China. These risks could result in a material adverse change in the Group’s operations and the value of our ADSs, significantly limit or completely hinder our ability to offer or continue to offer securities to investors, or cause the value of such securities to significantly decline or become worthless. See “—D. Risks Factors—Risks Relating to Doing Business in China.”

Holding Foreign Companies Accountable Act

The Holding Foreign Companies Accountable Act, or the HFCAA, was enacted in December 2020 and amended pursuant to the Consolidated Appropriations Act, 2023 on December 29, 2022, and may affect the trading of our ADSs in the over-the-counter, or OTC, trading market in the United States. Pursuant to the HFCAA, if the SEC determines that we are an issuer, or a covered issuer, that has filed audit reports issued by a registered public accounting firm that has not been subject to inspection for the U.S. Public Company Accounting Oversight Board, or the PCAOB, for two consecutive years, the SEC shall prohibit our ADSs from being traded on a national securities exchange or in the OTC trading market in the United States. In December 2021, the PCAOB determined that it is unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong, including our auditor as an independent registered public accounting firm. On December 15, 2022, the PCAOB announced that it was able to secure complete access to inspect and investigate PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong completely in 2022. The PCAOB Board vacated its previous 2021 determinations that the PCAOB was unable to inspect or investigate completely registered public accounting firms headquartered in mainland China and Hong Kong. However, whether the PCAOB will continue to be able to satisfactorily conduct inspections of PCAOB-registered public accounting firms headquartered in mainland China and Hong Kong is subject to uncertainties and depends on a number of factors out of our and our auditor’s control. The PCAOB continues to demand complete access in mainland China and Hong Kong moving forward and is making plans to resume regular inspections in early 2023 and beyond, as well as to continue pursuing ongoing investigations and initiate new investigations as needed. The PCAOB has also indicated that it will act immediately to consider the need to issue new determinations with the HFCAA if needed. If the PCAOB is unable to inspect and investigate completely registered public accounting firms located in China and we fail to retain another registered public accounting firm that the PCAOB is able to inspect and investigate completely in 2023 and beyond, or if we otherwise fail to meet the PCAOB’s requirements, our ADSs may be prohibited from trading on the OTC under the HFCAA.

Permissions and Approvals

As of the date of this annual report, the Group has obtained all material permissions and approvals that are, or may be, required for the Group’s main operations in China, except as disclosed in “—D. Risk Factors—Risk Relating to Our Business and Industry—The Group’s inability to fully comply with Audio-visual Program Provisions may expose it to administrative sanctions, which would materially and adversely affect the Group’s business, results of operations and financial condition” and “—The Group may be adversely affected by the complexity, uncertainties and changes in PRC regulation of Internet businesses and companies, including limitations on its ability to own key assets such as its mobile applications.” No material permission or approval for the Group has been denied by relevant authorities in China. See “Item 4. Information on the Company—C. Regulations—Permissions and Licenses Requirements” for more details.

In addition, we, our PRC subsidiaries and the Group VIEs may be required to obtain permissions from the China Securities Regulatory Commission, or the CSRC, and may be required to go through cybersecurity review by the Cyberspace Administration of China, or the CAC, in connection with any future offering and listing in an overseas market. As of the date of this annual report, we have not been subject to any cybersecurity review made by the CAC. See “—D. Risks Factors—Risks Relating to Doing Business in China—The approval of and the filing with the China Securities Regulatory Commission, or the CSRC, or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, which may hinder our ability to continue to offer securities to investors offshore; in addition, the regulation of the CSRC or other PRC regulatory agencies establish complex procedures for acquisitions conducted by foreign investors that could make it more difficult for us to grow through acquisitions” and “—Risks Relating to Our Industry and Business—We may be subject to cybersecurity review by regulatory authorities of the PRC in the future.”

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, and may not be able to maintain or renew our current licenses, permits, filings or approvals. In addition, rules and regulations in China can change quickly with little advance notice. Uncertainties due to evolving laws and regulations could impede the ability of a China-based issuer, such as us, to obtain or maintain permits or licenses required to conduct business in China. In the absence of required permits or licenses, governmental authorities could impose material sanctions or penalties on us. See “—D. Risks Factors—Risks Relating to Doing Business in China—Changes in the political and economic policies of the PRC government may materially and adversely affect the Group’s business, results of operations and financial condition and may result in the Group’s inability to sustain our growth and expansion strategies. The PRC government may intervene or influence our operations at any time, which could result in a material change in the Group’s operations and/or the value of our ADSs. Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder the Group’s ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless” and “—There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations. In addition, rules and regulations in China can change quickly with little advance notice.”

Cash Transfers Through Our Organization

Qutoutiao Inc. is a holding company with no material operations of its own. We conduct our operations primarily (i) through contractual arrangements with the Group VIEs in China and (ii) by our subsidiaries in China. As a result, Qutoutiao Inc.’s ability to pay dividends depends upon dividends paid by our PRC subsidiaries and remittances from the Group VIEs. If our PRC subsidiaries or the Group VIEs incur debt on their own in the future, the instruments governing their debt may restrict their ability to pay dividends or make other distributions or remittances to us. In addition, current PRC regulations permit our PRC subsidiaries to pay dividends to their respective shareholders only out of their retained earnings, if any, determined in accordance with PRC accounting standards and regulations. Furthermore, each of our PRC subsidiaries and the Group VIEs is required to set aside at least 10% of its net income each year to fund certain statutory reserves until the cumulative amount of such reserves reaches 50% of its registered capital. These reserves, together with the registered capital, are not distributable as cash dividends. For more details, see “—D. Risks Factors—Risks Relating to Doing Business in China—We rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries and the Group VIEs to fund offshore cash and financing requirements. Any limitation on the ability of our PRC operating subsidiaries or the Group VIEs to make payments to us could materially and adversely affect our ability to conduct the Group’s business.”

Set forth in the table below is a summary of cash transfers that have occurred between our subsidiaries and the Group VIEs for the years ended December 31, 2020, 2021 and 2022, respectively.


	Year Ended December 31,
	2020			2021			2022

	(RMB in thousands)
Cash paid by the Group VIEs to our subsidiaries under service agreements		(297,510	)		(756,962	)		(376,184	)
Cash received by the Group VIEs from our subsidiaries under service agreements		—			188,798			236,903
Cash received by the Group VIEs from our subsidiaries for intra-Group financing		462,233			137,515			606,146

For the years ended December 31, 2020, 2021 and 2022, no subsidiaries or Group VIEs paid dividends or made other distributions to the Cayman Islands holding company, and no dividends or distributions were paid or made to U.S. investors. For the years ended December 31, 2020, 2021 and 2022, no assets were transferred between our subsidiaries and the Group VIEs other than the cash transfers set forth in the table above. We do not have any present plan to pay any dividends on our shares in the foreseeable future. We 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.” However, if our PRC subsidiaries or Group VIEs declare and distribute profits to us, such payments will be subject to withholding tax, which will increase our tax liability and reduce the amount of cash available to us. For PRC and United States federal income tax considerations in connection with an investment in our ADSs, see “Item 10. Additional Information—E. Taxation.” We plan to continue to determine the amount of service fee and payment method with the Group VIEs and their shareholders through bona fide negotiation, and settle fees under the contractual arrangements accordingly in the future.

In addition, our PRC subsidiaries, the Group VIEs and their subsidiaries generate their revenue primarily in Renminbi, which is not freely convertible into other currencies. As a result, any restriction on currency exchange may limit the ability of our PRC subsidiaries to pay dividends to us or our ability to pay dividends in foreign currencies to our investors. For more details, see “Item 3. Key Information—D. Risk Factors—Risks Relating to Doing Business in China—We are subject to restrictions on currency exchange.”

Financial Information Related to the Group VIEs

We do not own any equity interest in the Group VIEs that are consolidated in the Group’s financial statements. The Group consolidates the results of the Group VIEs and their subsidiaries under U.S. GAAP through our contractual arrangements with the Group VIEs and their respective shareholders. For more details on such contractual arrangements, see “Item 4.—Information on the Company—D. Organizational Structure—Contractual Arrangements among Our Key WFOEs, the Key VIEs and Their Respective Shareholders.”

Condensed Consolidated Schedule of Results of Operation

The following table presents the Group’s condensed consolidated schedules of results of operations for our holding company, Qutoutiao Inc., our wholly foreign-owned entities that are the primary beneficiaries of the Group VIEs under U.S. GAAP, or the Primary Beneficiaries of the Group VIEs, our other subsidiaries that are not the Primary Beneficiaries of the Group VIEs, or Other Subsidiaries, and the Group VIEs and their subsidiaries that the Group consolidates for the periods presented:


	For the Year Ended December 31, 2020
	Qutoutiao Inc.			Other subsidiaries			Primary Beneficiaries of the Group VIEs			Group VIEs and their subsidiaries			Eliminating adjustments			Consolidated totals

	(RMB in thousands)
Revenues:
Third-party revenues		—			—			1,513			5,283,682			—			5,285,195
Intra-Group revenues (2)		—			—			560,789			—			(560,789	)		—

Total revenues		—			—			562,302			5,283,682			(560,789	)		5,285,195
Cost of revenues:
Third-party cost of revenues		—			(189	)		(198,011	)		(1,476,216	)		—			(1,674,416	)
Intra-Group cost of revenues (2)		—			—			—			(15,462	)		15,462			—

Total cost of revenues		—			(189	)		(198,011	)		(1,491,678	)		15,462			(1,674,416	)

Gross profit		—			(189	)		364,291			3,792,004			(545,327	)		3,610,779

Operating expenses:
Third-party operating expenses (1)		(471,730	)		(9,706	)		(346,422	)		(4,357,603	)		463,214			(4,722,247	)
Intra-Group operating expenses (2)		—			—			—			(545,327	)		545,327			—

Total operating expenses		(471,730	)		(9,706	)		(346,422	)		(4,902,930	)		1,008,541			(4,722,247	)

Other operating income/(expense)		—			—			56,300			22,999			—			79,299
Loss from Operations		(471,730	)		(9,895	)		74,169			(1,087,927	)		463,214			(1,032,169	)
Non-operating income/(expense)		(34,003	)		(31,889	)		168			(8,281	)		—			(74,005	)

Loss before income tax expense		(505,733	)		(41,784	)		74,337			(1,096,208	)		463,214			(1,106,174	)
Income tax benefits/expense		—			—			1,008			—			—			1,008
Loss from subsidiaries and VIEs (1)		(598,706	)		(1,020,863	)		(1,096,208	)		—			2,715,777			—

Net Loss		(1,104,439	)		(1,062,647	)		(1,020,863	)		(1,096,208	)		3,178,991			(1,105,166	)
Less: Net loss attributable to the noncontrolling interest shareholders		—			727			—			—			—			727
Net loss attributable to Qutoutiao Inc.		(1,104,439	)		(1,061,920	)		(1,020,863	)		(1,096,208	)		3,178,991			(1,104,439	)

Accretion to convertible redeemable preferred shares redemption value		(48,277	)		—			—			—			—			(48,277	)
Gain on repurchase of Shares B Convertible Preferred		14,842			—			—			—			—			14,842

Net loss attributable to Qutoutiao Inc.’s ordinary shareholders		(1,137,874	)		(1,061,920	)		(1,020,863	)		(1,096,208	)		3,178,991			(1,137,874	)


	For the Year Ended December 31, 2021
	Qutoutiao Inc.			Other subsidiaries			Primary Beneficiaries of the Group VIEs			Group VIEs and their subsidiaries			Eliminating adjustments			Consolidated totals

	(RMB in thousands)
Revenues:
Third-party revenues		—			225			2,990			4,336,388			—			4,339,603
Intra-Group revenues (2)		—			—			970,661			188,298			(1,158,959	)		—

Total revenues		—			225			973,651			4,524,686			(1,158,959	)		4,339,603
Cost of revenues:
Third-party cost of revenues		—			(325	)		(303,600	)		(867,701	)		—			(1,171,626	)

Intra-Group cost of revenues (2)		—			—			—			(18,959	)		18,959			—

Total cost of revenues		—			(325	)		(303,600	)		(886,660	)		18,959			(1,171,626	)
Gross profit		—			(100	)		670,051			3,638,026			(1,140,000	)		3,167,977
Operating expenses:
Third-party operating expenses		(208,594	)		(12,210	)		(379,130	)		(4,067,548	)		200,184			(4,467,298	)
Intra-Group operating expenses (2)		—			—			(188,298	)		(951,702	)		1,140,000			—

Total operating expenses		(208,594	)		(12,210	)		(567,428	)		(5,019,250	)		1,340,184			(4,467,298	)

Other operating income/(expense)		—			—			87,439			18,659			—			106,098
Loss from Operations		(208,594	)		(12,310	)		190,062			(1,362,565	)		200,184			(1,193,223	)
Non-operating income/(expense)		(58,313	)		(16,944	)		12,267			22,282			—			(40,708	)

Loss before income tax expense		(266,907	)		(29,254	)		202,329			(1,340,283	)		200,184			(1,233,931	)
Income tax benefits/expense		—			(1	)		(2,918	)		(131	)		—			(3,050	)
Loss from subsidiaries and VIEs (1)		(972,710	)		(1,144,198	)		(1,343,609	)		—			3,460,517			—
Equity in loss of affiliate companies		—			—			—			(3,195	)		—			(3,195	)
Net Loss		(1,239,617	)		(1,173,453	)		(1,144,198	)		(1,343,609	)		3,660,701			(1,240,176	)

Less: Net loss attributable to the noncontrolling interest shareholders		—			559			—			—			—			559
Net loss attributable to Qutoutiao Inc.		(1,239,617	)		(1,172,894	)		(1,144,198	)		(1,343,609	)		3,660,701			(1,239,617	)

Accretion to convertible redeemable preferred shares redemption value		(108,896	)		—			—			—			—			(108,896	)

Net loss attributable to Qutoutiao Inc.’s ordinary shareholders		(1,348,513	)		(1,172,894	)		(1,144,198	)		(1,343,609	)		3,660,701			(1,348,513	)


	For the Year Ended December 31, 2022
	Qutoutiao Inc.			Other subsidiaries			Primary Beneficiaries of the Group VIEs			Group VIEs and their subsidiaries			Eliminating adjustments			Consolidated totals

	(RMB in thousands)
Revenues:
Third-party revenues		—			297			254,407			828,341			—			1,083,045
Intra-Group revenues (2)		—			—			750,372			579,967			(1,330,339	)		—

Total revenues		—			297			1,004,779			1,408,308			(1,330,339	)		1,083,045
Cost of revenues:
Third-party cost of revenues		—			(14	)		(115,170	)		(446,189	)		(1,234	)		(562,607	)

Intra-Group cost of revenues (2)		—			—			(523,625	)		(376,184	)		899,809			—

Total cost of revenues		—			(14	)		(638,795	)		(822,373	)		898,575			(562,607	)
Gross profit		—			283			365,984			585,935			(431,764	)		520,438
Operating expenses:
Third-party operating expenses		(77,185	)		2,277			(301,059	)		(572,365	)		47,567			(900,765	)
Intra-Group operating expenses (2)		—			—			—			(384,197	)		384,197			—

Total operating expenses		(77,185	)		2,277			(301,059	)		(956,562	)		431,764			(900,765	)

Other operating income/(expense)		—			—			52,676			9,153			—			61,829
Loss from Operations		(77,185	)		2,560			117,601			(361,474	)		—			(318,498	)
Non-operating income/(expense)		(468,035	)		(49,754	)		(68,801	)		(9,311	)		—			(595,901	)

Loss before income tax expense		(545,220	)		(47,194	)		48,800			(370,785	)		—			(914,399	)
Income tax benefits/expense		—			(15	)		1,117			(54	)		—			1,048
Loss from subsidiaries and VIEs (1)		(369,547	)		(322,338	)		(372,255	)		—			1,064,140			—
Equity in loss of affiliate companies		—			—			—			(1,416	)		—			(1,416	)
Net Loss		(914,767	)		(369,547	)		(322,338	)		(372,255	)		1,064,140			(914,767	)

Less: Net loss attributable to the noncontrolling interest shareholders		—			—			—			—			—			—
Net loss attributable to Qutoutiao Inc.		(914,767	)		(369,547	)		(322,338	)		(372,255	)		1,064,140			(914,767	)

Accretion to convertible redeemable preferred shares redemption value		—			(124,677	)		—			—			—			(124,677	)

Net loss attributable to Qutoutiao Inc.’s ordinary shareholders		(914,767	)		(494,224	)		(322,338	)		(372,255	)		1,064,140			(1,039,444	)

Notes:

(1)

Represents the elimination of investments among Qutoutiao Inc., the Primary Beneficiaries of the Group VIEs, the Other Subsidiaries, and the Group VIEs and their subsidiaries that the Group consolidates. The deficit of investment in subsidiaries and the Group VIEs of Qutoutiao Inc. as of December 31, 2020 have been revised from amounts previously disclosed in the audit report. Share-based compensation expenses are recorded in Qutoutiao Inc., which issued these equity awards, and are also pushed down to the VIEs and subsidiaries. The expenses pushed down to the VIEs and subsidiaries are eliminated upon consolidation to avoid duplication.

(2)	Represents the elimination of the intercompany service charge at the consolidation level.

Condensed Consolidated Schedule of Balance Sheets

The following table presents the Group’s condensed consolidated schedule of financial position for Qutoutiao Inc., the Primary Beneficiaries of the Group VIEs, our Other Subsidiaries, and the Group VIEs and their subsidiaries that the Group consolidates as of the dates presented:


	As of December 31, 2021
	Qutoutiao Inc.			Other subsidiaries			Primary Beneficiaries of the Group VIEs			Group VIEs and their subsidiaries			Eliminating adjustments			Consolidated totals

	(RMB in thousands)
ASSETS
Current assets:
Cash and cash equivalents		19,633			99,871			101,064			19,783			—			240,351
Restricted cash		—			—			62,322			13,160			—			75,482
Short-term investments		—			150,117			159,300			33,600			—			343,017
Accounts receivable, net		—			122			—			770,797			—			770,919
Amount due from related parties		—			—			—			259,863			—			259,863
Prepaid and other current assets		4,605			313			53,642			114,317			—			172,877
Intra-Group receivables due from the Company’s subsidiaries (1)		3,521,857			670,178			5,996,426			937,831			(11,126,292	)		—

Total current assets		3,546,095			920,601			6,372,754			2,149,351			(11,126,292	)		1,862,509

Noncurrent assets:		—			—			—			—			—			—
Account receivables, non-current		—			—			—			—			—			—
Property and equipment, net		—			—			33			12,828			—			12,861
Right-of-use assets, net		—			—			222			26,120			—			26,342
Intangible assets		—			—			65,688			99,582			—			165,270
Goodwill		—			—			7,268			—			—			7,268
Long-term Investments		—			—			—			1,416			—			1,416
Other non-current assets		2,645			—			—			2,164			—			4,809
Total noncurrent assets		2,645			—			73,211			142,110			—			217,966

Total assets		3,548,740			920,601			6,445,965			2,291,461			(11,126,292	)		2,080,475
LIABILITIES
Current liabilities:
Short-term borrowings		—			—			20,000			—			—			20,000
Accounts payable		—			—			58,586			255,182			—			313,768
Amount due to related parties		—			—			5,433			1,495			—			6,928
Registered users’ loyalty payable		—			6,299			—			55,392			—			61,691
Advance from advertising customers and deferred revenue		—			—			3			122,594			—			122,597
Salary and welfare payable		—			74			23,676			42,237			—			65,987
Tax payable		—			—			28,591			15,288			—			43,879
Lease liabilities, current		—			—			222			11,675			—			11,897
Accrued liabilities related to users’ loyalty program		—			—			—			99,360			—			99,360
Accrued liabilities and other current liabilities		3,312			687			31,547			1,299,057			—			1,334,603
Convertible Loan—current		1,182,963			—			—			—			—			1,182,963
Intra-Group payables due to the Company’s subsidiaries (1)		281,201			3,552,395			1,787,252			5,505,444			(11,126,292	)		—

Total current liabilities		1,467,476			3,559,455			1,955,310			7,407,724			(11,126,292	)		3,263,673

Lease liabilities, non-current		—			—			—			15,985			—			15,985
Other non current liabilities		1,733			—			—			—			—			1,733
Deferred tax liabilities		—			—			16,422			—			—			16,422
Deficit of investment in subsidiaries and VIEs (2)		4,469,087			658,015			5,132,248			—			(10,259,350	)		—

Total long-term liabilities		4,470,820			658,015			5,148,670			15,985			(10,259,350	)		34,140

Total liabilities		5,938,296			4,217,470			7,103,980			7,423,709			(21,385,642	)		3,297,813

Commitments and contingencies
Mezzanine equity
Redeemable non-controlling interests		—			1,172,218			—			—			—			1,172,218
SHAREHOLDERS’ deficit
Total Qutoutiao Inc. shareholders’ deficit		(2,389,556	)		(4,469,087	)		(658,015	)		(5,132,248	)		10,259,350			(2,389,556	)
Noncontrolling interest		—			—			—			—			—			—

Total shareholders’ deficit (2)		(2,389,556	)		(4,469,087	)		(658,015	)		(5,132,248	)		10,259,350			(2,389,556	)

Total liabilities and shareholders’ deficit		3,548,740			920,601			6,445,965			2,291,461			(11,126,292	)		2,080,475


	As of December 31, 2022
	Qutoutiao Inc.			Other subsidiaries			Primary Beneficiaries of the Group VIEs			Group VIEs and their subsidiaries			Eliminating adjustments			Consolidated totals

	(RMB in thousands)
ASSETS
Current assets:
Cash and cash equivalents		50,989			34,984			4,681			32,147			—			122,801
Restricted cash		—			—			216			7,384			—			7,600
Short-term investments		—			—			20,000			6,402			—			26,402
Accounts receivable, net		—			133			6,753			110,523			—			117,409
Amount due from related parties		—			—			788			48,284			(270	)		48,802
Prepaid and other current assets		2,935			2,005			58,303			95,568			—			158,811
Intra-Group receivables due from the Company’s subsidiaries (1)		3,698,706			426,911			5,752,591			470,966			(10,349,174	)		—

Total current assets		3,752,630			464,033			5,843,332			771,274			(10,349,444	)		481,825

Noncurrent assets:
Property and equipment, net		—			—			11			5,002			—			5,013
Right-of-use assets, net		—			—			—			21,879			—			21,879
Intangible assets		—			—			56,075			6,574			—			62,649
Goodwill		—			—			7,268			—			—			7,268
Long-term Investments		—			—			—			—			—			—
Other non-current assets		1,476			—			—			1,426			—			2,902
Total noncurrent assets		1,476			—			63,354			34,881			—			99,711

Total assets		3,754,106			464,033			5,906,686			806,155			(10,349,444	)		581,536
LIABILITIES
Current liabilities:
Accounts payable		—			—			64,444			330,550			—			394,994
Amount due to related parties		—			—			862			—			(270	)		592
Registered users’ loyalty payable		—			—			—			29,773			—			29,773
Advance from advertising customers and deferred revenue		—			—			36,743			11,963			—			48,706
Salary and welfare payable		—			82			31,431			28,048			—			59,561
Tax payable		—			—			10,890			29,584			—			40,474
Lease liabilities, current		—			—			—			15,083			—			15,083
Accrued liabilities related to users’ loyalty program		—			—			—			64,589			—			64,589
Accrued liabilities and other current liabilities		978			2,313			31,033			301,713			225			336,262
Convertible Loan—current		1,746,188			—			—			—			—			1,746,188
Intra-Group payables due to the Company’s subsidiaries (1)		181,598			3,710,864			928,758			5,644,725			(10,465,945	)		—

Total current liabilities		1,928,764			3,713,259			1,104,161			6,456,028			(10,465,990	)		2,736,222

Lease liabilities, non-current		—			—			—			7,599			—			7,599
Deferred tax liabilities		—			—			14,019			—			—			14,019
Deficit of investment in subsidiaries and VIEs (2)		5,416,081			868,966			5,657,472			—			(11,942,519	)		—

Total long-term liabilities		5,416,081			868,966			5,671,491			7,599			(11,942,519	)		21,618

Total liabilities		7,344,845			4,582,225			6,775,652			6,463,627			(22,408,509	)		2,757,840

Commitments and contingencies		—			—			—			—			—			—
Mezzanine equity
Redeemable non-controlling interests		—			1,414,435			—			—			—			1,414,435
SHAREHOLDERS’ deficit
Total Qutoutiao Inc. shareholders’ deficit		(3,590,739	)		(5,532,627	)		(868,966	)		(5,657,472	)		12,059,065			(3,590,739	)
Noncontrolling interest		—			—			—			—			—			—

Total shareholders’ deficit (2)		(3,590,739	)		(5,532,627	)		(868,966	)		(5,657,472	)		12,059,065			(3,590,739	)

Total liabilities and shareholders’ deficit		3,754,106			464,033			5,906,686			806,155			(10,349,444	)		581,536

Notes:

(1)

Represents the elimination of intercompany balances among Qutoutiao Inc., the Primary Beneficiaries of the Group VIEs, the Other Subsidiaries, and the Group VIEs and their subsidiaries that we consolidate. The intra-Group receivables and payables of Qutoutiao Inc. as of December 31, 2020 have been revised from amounts previously disclosed in the audit report included in this annual report.

(2)

Condensed Consolidated Schedule of Cash Flows

The following table presents our condensed consolidated schedules of cash flows for Qutoutiao Inc., the Primary Beneficiaries of the Group VIEs, our Other Subsidiaries, and the Group VIEs and their subsidiaries that the Group consolidates for the periods presented:


	For the Year Ended December 31, 2020
	Qutoutiao Inc.			Other subsidiaries			Primary Beneficiaries of the Group VIEs			Group VIEs and their subsidiaries			Eliminating adjustments			Consolidated totals

	(RMB in thousands)
Cash flows from operating activities:
Net cash provided by/(used in) transactions with external parties		(354	)		956			(770,879	)		(93,497	)		—			(863,774	)
Net cash provided by/(used in) transactions with intra-Group entities		—			—			297,510			(297,510	)		—			—

Net cash provided by/(used in) operating activities		(354	)		956			(473,369	)		(391,007	)		—			(863,774	)
Cash flows from investing activities:
Net cash provided by/(used in) transactions with external parties		594,486			241,302			27,263			(80,506	)		—			782,545
Cash used in capital contribution to intra-Group entities		—			(924,020	)		—			—			924,020			—
Cash used in providing borrowings to intra-Group entities		(604,494	)		—			(462,233	)		—			1,066,727			—

Net cash provided by/(used in) investing activities		(10,008	)		(682,718	)		(434,970	)		(80,506	)		1,990,747			782,545
Cash flows from financing activities:
Net cash provided by/(used in) transactions with external parties		(135,744	)		373,490			20,000			50,000			—			307,746
Cash provided by capital contribution from intra-Group entities		—			—			924,020			—			(924,020	)		—
Cash provided by borrowings from intra-Group entities		—			604,494			—			462,233			(1,066,727	)		—

Net cash provided by/(used in) financing activities		(135,744	)		977,984			944,020			512,233			(1,990,747	)		307,746


	For the Year Ended December 31, 2021
	Qutoutiao Inc.			Other subsidiaries			Primary Beneficiaries of the Group VIEs			Group VIEs and their subsidiaries			Eliminating adjustments			Consolidated totals

	(RMB in thousands)
Cash flows from operating activities:
Net cash provided by/(used in) transactions with external parties		(14,807	)		67,637			(709,141	)		377,189			—			(279,122	)
Net cash provided by/(used in) transactions with intra-Group entities		—			—			568,164			(568,164	)		—			—

Net cash provided by/(used in) operating activities		(14,807	)		67,637			(140,977	)		(190,975	)		—			(279,122	)
Cash flows from investing activities:
Net cash provided by/(used in) transactions with external parties		—			(84,723	)		97,197			63,047			—			75,521
Cash used in capital contribution to intra-Group entities		—			(198,086	)		—			—			198,086			—
Cash used in providing borrowings to intra-Group entities		—			—			(137,515	)		—			137,515			—
Cash provided by repayment of borrowings from intra-Group entities		32,506			—			—			—			(32,506	)		—

Net cash provided by/(used in) investing activities		32,506			(282,809	)		(40,318	)		63,047			303,095			75,521
Cash flows from financing activities:
Net cash provided by/(used in) transactions with external parties		—			(13,050	)		—			(53,044	)		—			(66,094	)
Cash provided by capital contribution from intra-Group entities		—			—			198,086			—			(198,086	)		—
Cash provided by borrowings from intra-Group entities		—			—			—			137,515			(137,515	)		—
Cash used in repayment of borrowings to intra-Group entities		—			(32,506	)		—			—			32,506			—

Net cash provided by/(used in) financing activities		—			(45,556	)		198,086			84,471			(303,095	)		(66,094	)


	For the Year Ended December 31, 2022
	Qutoutiao Inc.			Other subsidiaries			Primary Beneficiaries of the Group VIEs			Group VIEs and their subsidiaries			Eliminating adjustments			Consolidated totals

	(RMB in thousands)
Cash flows from operating activities:
Net cash provided by/(used in) transactions with external parties		(39,578	)		(3,089	)		227,053			(628,183	)		—			(443,797	)
Net cash provided by/(used in) transactions with intra-Group entities		—			—			(606,146	)		606,146			—			—

Net cash provided by/(used in) operating activities		(39,578	)		(3,089	)		(379,093	)		(22,037	)		—			(443,797	)
Cash flows from investing activities:
Net cash provided by/(used in) transactions with external parties		—			99,630			139,300			28,625			—			267,555
Cash used in capital contribution to intra-Group entities		68,089			(101,304	)		—			—			33,215			—
Cash used in providing borrowings to intra-Group entities		—			—			—			—			—			—

Net cash provided by/(used in) investing activities		68,089			(1,674	)		139,300			28,625			33,215			267,555
Cash flows from financing activities:
Net cash provided by/(used in) transactions with external parties		—			—			(20,000	)		—			—			(20,000	)
Cash provided by capital contribution from intra-Group entities		—			(68,089	)		101,304			—			(33,215	)		—
Cash provided by borrowings from intra-Group entities		—			—			—			—			—			—

Net cash provided by/(used in) financing activities		—			(68,089	)		81,304			—			(33,215	)		(20,000	)

A.	[Reserved]

B.	Capitalization and Indebtedness

Not Applicable.

C.	Reasons for the Offer and Use of Proceeds

Not Applicable.

D.	Risk Factors

Summary of Risk Factors

An investment in our ADSs is subject to a number of risks, including risks relating to our industry and business, risks relating to the Group’s corporate structure, risks relating to doing business in China and risks relating to the ADSs. The following summarizes some, but not all, of these risks. Please carefully consider all of the information discussed in “Item 3. Key Information— D. Risk Factors” in this annual report for a more thorough description of these and other risks.

Risks Relating to Our Industry and Business

•

The Group has a limited operating history, which makes it difficult to evaluate its business.

•

If the Group fails to acquire new users or retain existing users, or if user engagement on the Group’s platform declines, its business, results of operations and financial condition may be materially and adversely affected.

•

There is substantial doubt as to our ability to continue as a going concern.

•

We require a significant amount of cash to fund our operations as well as to meet our Convertible Loan obligations. If we cannot obtain additional financing and liquidity, our business, financial condition and results of operation will be materially and adversely affected.

•

The Group has incurred net losses in the past and may continue to incur losses in the future.

•

The Group’s inability to fully comply with Audio-visual Program Provisions may expose it to administrative sanctions, which would materially and adversely affect the Group’s business, results of operations and financial condition.

•

If the Group does not continue to increase the strength of its brand, the Group may not be able to maintain current or attract new users and customers for its products and services.

•

Any catastrophe, including natural catastrophes and outbreaks of health pandemics and other extraordinary events, could disrupt the Group’s business operation. For example, the COVID-19 pandemic may have a material adverse effect on the Group’s business, results of operations and financial condition, as well as the trading price of the ADSs.

•

If the Group is unable to compete effectively in the industry it operates, the Group’s business, results of operations and financial condition may be materially and adversely affected.

•

The Group generates a substantial majority of its revenues from advertising and marketing. A decline in the Group’s advertising and marketing revenues could harm its business.

•

The Group may be adversely affected by the complexity, uncertainties and changes in PRC regulation of Internet businesses and companies, including limitations on its ability to own key assets such as its mobile applications.

•

Privacy concerns relating to the Group’s products and services and the use of user information could damage its reputation, deter current and potential users and customers from using the Group’s mobile applications and negatively impact its business.

•

We may be subject to cybersecurity review by regulatory authorities of the PRC in the future.

Risks Relating to Our Corporate Structure

•

We rely on contractual arrangements with the Group VIEs and their respective shareholders to operate the Group’s business, which may be less effective than equity ownership in providing operational control and otherwise materially and adversely affect the Group’s business.

•

The shareholders of the Group VIEs may have potential conflicts of interest with us, which may materially and adversely affect the Group’s business, results of operations and financial condition.

•

If the PRC government deems that the contractual arrangements in relation to the Group VIEs 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 in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. In addition, our ADSs may significantly decline in value or become worthless if we are unable to assert our contractual control over the assets of the Group VIEs.

•

Substantial uncertainties exist with respect to whether the controlling of PRC onshore variable interest entities by foreign investors via contractual arrangements will be recognized as “foreign investment” and how it may impact the viability of the Group’s current corporate structure and operations.

Risks Relating to Doing Business in China

•

Changes in the political and economic policies of the PRC government may materially and adversely affect the Group’s business, results of operations and financial condition and may result in the Group’s inability to sustain our growth and expansion strategies. The PRC government may intervene or influence our operations at any time, which could result in a material change in the Group’s operations and/or the value of our ADSs. Any actions by the Chinese government to exert more oversight and control over offerings that are conducted overseas and/or foreign investment in China-based issuers could significantly limit or completely hinder the Group’s ability to offer or continue to offer securities to investors and cause the value of such securities to significantly decline or become worthless.

•

There are uncertainties regarding the interpretation and enforcement of PRC laws, rules and regulations. In addition, rules and regulations in China can change quickly with little advance notice.

•

The approval of and the filing with the China Securities Regulatory Commission, or the CSRC, or other PRC government authorities may be required in connection with our future offshore offerings under PRC law, which may hinder our ability to continue to offer securities to investors offshore; in addition, the regulation of the CSRC or other PRC regulatory agencies establish complex procedures for acquisitions conducted by foreign investors that could make it more difficult for us to grow through acquisitions.

•

PRC regulations relating to investments in offshore companies by PRC residents may subject our PRC-resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries or limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits.

•

We rely to a significant extent on dividends and other distributions on equity paid by our principal operating subsidiaries and the Group VIEs to fund offshore cash and financing requirements. Any limitation on the ability of our PRC operating subsidiaries or the Group VIEs to make payments to us could materially and adversely affect our ability to conduct the Group’s business.

•

We are subject to restrictions on currency exchange.

•

The audit report included in this annual report is prepared by an auditor which the U.S. Public Company Accounting Oversight Board was unable to inspect and investigate completely before 2022 and, as such, our investors have been deprived of the benefits of such inspections in the past, and may be deprived of the benefits of such inspections in the future.

•

Our ADSs will be prohibited from trading on the OTC in the United States under the Holding Foreign Companies Accountable Act, as amended, or the HFCAA if the PCAOB is unable to inspect or fully investigate auditors located in China at any point in the future.

Risks Relating to the ADSs

•

The trading price of the ADSs may be volatile, which could result in substantial losses to you.

•

The delisting of our ADSs from Nasdaq may continue to have a material adverse effect on the trading and price of our ADSs, and we cannot assure you that our ADSs will be relisted, or that once relisted, they will remain listed.

•

There are no independent directors on our board, which may create a potential conflict of interest.

•

Because we do not expect to pay cash dividends in the foreseeable future, you may not receive any return on your investment unless you sell your Class A ordinary shares or ADSs for a price greater than that which you paid for them.

•

Your right to participate in any future rights offerings may be limited, which may cause dilution to your holdings.

•

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

•

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 emerging growth company and may take advantage of certain reduced reporting requirements.

Risks Relating to Our Industry and Business

The Group has a limited operating history, which makes it difficult to evaluate its business.

The Group launched Qutoutiao in June 2016 and Midu Novels in May 2018, and further introduced Midu Lite in May 2019. The Group has experienced rapid growth in terms of installed users, MAUs, DAUs and revenues from 2016 to 2020, but declines in terms of these operating metrics and revenues in 2021 and 2022. As our operating history has suggested, the Group’s historical development trend may not be indicative of its future performance, and we cannot assure you that the level of growth we had prior to 2020 will be sustainable or achievable at all in the future. The Group’s growth prospects should be considered in light of the risks and uncertainties that companies with a limited operating history in our industry may encounter, including, among others, risks and uncertainties regarding our ability to:

•

retain existing users on, and attract new users to, the Group’s platform;

•

present real-time customized feeds to users based on their profiles, behaviors and social relationships;

•

maintain the effectiveness of the Group’s user loyalty programs;

•

maintain stable relationships with the Group’s content providers;

•

develop and implement successful monetization measures;

•

convince advertising customers of the benefits of the Group’s advertising and marketing services compared to alternative forms of marketing;

•

increase brand awareness through marketing and promotional activities;

•

upgrade existing technology and infrastructure and develop new technologies to support increasing user traffic, improve user experience, expand functionality and ensure system stability;

•

successfully compete with other companies that are currently in, or may in the future enter, our industry;

•

attract, retain and motivate talented employees;

•

adapt to the evolving regulatory environment; and

•

defend the Group against litigation, regulatory, intellectual property, privacy or other claims.

All of these endeavors involve risks and will require significant capital expenditures and allocation of valuable management and employee resources. We cannot assure you that we will be able to effectively manage the Group’s growth or implement our business strategies effectively. If the market for the Group’s platform does not develop as we expect or if we fail to address the needs of this dynamic market, the Group’s business, results of operations and financial condition will be materially and adversely affected.

The size of the Group’s user base and the level of user engagement are critical to its success. The Group’s mobile applications had approximately 31.4 million combined average MAUs, approximately 9.9 million combined average DAUs and average daily time spent per DAU of approximately 40.9 minutes in the three months ended December 31, 2022. The Group’s business has been and will continue to be significantly affected by its ability in growing the number of active users and increasing their overall level of engagement on the Group’s platform. The size of the Group’s user base and the level of user engagement faced downward pressures in 2021 and 2022 due to the change of the operating strategies we adopted as we faced uncertainties in the advertising market, the tightening regulatory environment in internet and technology sector in China and the negative impacts of the COVID-19 pandemic on China’s macro-economic environment. We could also see user base decreases for certain future periods of time if we further adjust or change our strategy. To the extent the Group’s user growth rate slows or its user base decreases, the Group’s success will become increasingly dependent on our ability to increase user engagement with the Group’s platform. The Group has implemented user account systems and loyalty programs to, among other things, help it cost-effectively acquire new users and develop an engaged and loyal user base. However, although such user account systems and loyalty programs have contributed significantly to the growth in the Group’s installed users and high user engagement in the past, there can be no assurance that such systems and programs will continue to function effectively. Additionally, the Group’s acquisition cost per user may increase as it implements new marketing initiatives, such as placing advertisements in app stores. The Group’s user engagement efforts, including by increasing the number of content providers, expanding the breadth and quality of content, including video and user generated content, on its platform, diversifying into new content formats and strengthening its content recommendation capabilities, may also not achieve expected results. Users may no longer perceive content and other products and services on the Group’s platform to be entertaining and relevant, and it may not be able to attract users or increase their usage frequency of its platform. If we fail to execute any such new initiatives successfully or in a cost-effective manner, the Group’s business, results of operations and financial condition would be materially and adversely affected. If the Group is unable to grow its user base or the level of user engagement, or if the number of users or their level of engagement declines, this could result in its platform being less attractive to potential new users and thus advertising customers, which would have a material and adverse impact on the Group’s business, results of operations and financial condition.

The Chinese government may prevent the Group from distributing content that it believes is noncompliant and the Group may be subject to penalties for such content or the Group may have to interrupt or suspend the operation of the Group’s platform to comply with these regulatory requirements from time to time, which may materially and adversely affect the Group’s results of operation.

China has enacted regulations governing Internet access and the distribution of news and other information. In the past, the Chinese government has stopped the distribution of information over the Internet or through mobile Internet devices that it believes violates Chinese law, including content that it believes is obscene, defamatory, misleading or inappropriately satirical, incites violence, endangers the national security, concerns politically sensitive topics, or contravenes the national interest. In the past, new downloads of certain mobile content aggregator applications and mobile news applications were temporarily blocked and suspended for different lengths of time, ranging from a few days to weeks, following the publication of content considered to be noncompliant. In July 2018, PRC governmental and regulatory authorities responsible for “eradicating pornography and illegal publications” announced new coordinated efforts to regulate and control the nascent online short video sector, including citations against 19 online short video platforms which allegedly had disregarded repeated warnings not to distribute content deemed by the authorities as obscene, misleading, pornographic, violent, infringing, sensationalist, deviant from socialist core values, harmful to younger viewers, or otherwise unlawful or detrimental.

Of these 19 platforms, 15 had their applications removed from app stores and new downloads blocked; among these 15 platforms, three also had their operations suspended by relevant authorities. Any such future suspension in operations or downloads of the Group’s mobile applications for this or other reasons may negatively affect the Group’s relationships with users and advertisers, and adversely affect the Group’s business and results of operations.

While we strive to comply with applicable regulatory requirements and other obligations we may have with respect to the Group’s operation, the failure or perceived failure to comply may result, and in some cases has resulted, in inquiries and other proceedings or actions against us by government agencies or others, as well as negative publicity and damage to our reputation and brand, any of which could cause the Group to lose users and customers and may materially and adversely affect the Group’s business, results of operations and financial condition. For example, in order to comply with regulatory requirements, the Group undertook product upgrades and temporarily suspended content updates and certain commercial activities on Midu Novels from July 16 to October 15, 2019. Midu Novels has resumed regular content updates and commercial activities since October 16, 2019. We have endeavored to use the Group’s technologies, employees and other resources in a manner that complies with applicable regulatory requirements, and as such, we believe that the likelihood of us receiving material administrative penalties is low. However, there can be no assurance that similar suspensions relating to the Group’s mobile applications will not recur in the future, or that such incidents will not result in loss of users or advertisers, decrease in revenues or reputational damage to us, or have an adverse effect on the Group’s business and results of operations.

The Chinese government may continue to implement stricter standards for compliant content, and increase enforcement against content considered to be noncompliant. In addition, certain news items, such as news relating to national security, may not be published without permission from the Chinese government. If the Chinese government were to take any action to limit or prohibit the distribution of information through the Group’s mobile applications, or to limit or regulate any current or future content or services available to users on the Group’s platform, the Group’s business could be significantly harmed. Although we have adopted internal procedures to monitor the content displayed on the Group’s platform, due to the significant amount of content, including user generated content, we may not be able to identify all the content that may violate relevant laws and regulations, whether or not due to our fault or oversight in content monitoring. Failure to identify and prevent inappropriate or illegal content from being displayed on the Group’s platform may subject us to penalties, including suspension of operations.

Moreover, as the interpretation of noncompliant content is vague and subjective in many cases, and the definition of noncompliant content may be subject to constant changes, it is not always possible to determine or predict what content might be considered noncompliant under existing restrictions, or what restrictions might be imposed in the future. Chinese government authorities may also prohibit the marketing of other types of wireless value-added services and contents through mobile applications, which could materially and adversely affect the Group’s business, results of operations and financial condition.

There is substantial doubt as to our ability to continue as a going concern.

The following factors raise substantial doubt about our ability to continue as a going concern:

•

For the years ended December 31, 2020, 2021 and 2022, we incurred net losses of RMB1,105.2 million, RMB1,240.2 million and RMB914.8 million (US$132.6 million), respectively.

•

For the years ended December 31, 2020, 2021 and 2022, we had net cash used in operating activities of RMB863.8 million, RMB279.1 million and RMB443.8 million (US$64.3 million), respectively.

•

As of December 31, 2022, we had an accumulated deficit of RMB8,395.2 million (US$1,217.2 million) and a deficit in working capital of RMB2,254.4 million (US$326.9 million).

•

As of December 31, 2022, as discussed in Note 14 and Note 26 to the consolidated financial statements, the Group has a convertible loan from Alibaba, or the Convertible Loan, of approximately RMB1.74 billion (US$253.2 million), including principal of US$171.1 million and unpaid interest that was expected to be matured within one year from the date of the issuance of the consolidated financial statements.

Our ability to continue as a going concern is dependent upon our continued operations, which in turn is dependent on our ability to adjust the pace of the operation expansion, control operating costs and expenses to reduce the cash used in operating cash flows, pursue financing arrangements, including the renewal of the Convertible Loan with the creditor, and obtain additional funds from sale of our assets, which in turn, are subject to various risks discussed herein including, among others, risks relating to our ability to maintain and improve our liquidity and financial position. See “— We require a significant amount of cash to fund our operations as well as to meet our Convertible Loan obligations. If we cannot obtain additional financing and liquidity, our business, financial condition and results of operation will be materially and adversely affected.”

The audited consolidated financial statements included in this annual report on Form 20-F were prepared on the basis of our continuing as a going concern. Facts and circumstances including accumulated and recurring losses from operations, net cash used in operating activities, negative working capital and uncertainties on the repayment of the Convertible Loan raise substantial doubt about our ability to continue as a going concern. Likewise, the report of our independent registered public accounting firm includes a qualification that there is substantial doubt about our ability to continue as a going concern. The audited financial statements do not include any adjustments that might result from the outcome of these uncertainties. If we become unable to continue as a going concern, we may have to liquidate our assets, and the value we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our audited consolidated financial statements. Our lack of cash resources and our potential inability to continue as a going concern may materially and adversely affect the price of our ADSs and our ability to continue our operations.

We require a significant amount of cash to fund our operations. The Group had negative cash flow from operating activities of RMB863.8 million, RMB279.1 million and RMB443.8 million (US$64.3 million) for the years ended December 31, 2020, 2021 and 2022, respectively. Our ability to increase or maintain our user base, net revenues and gross profit will depend to a significant degree on our ability to obtain a sufficient amount of additional cash and liquidity to fund our operations.

We also require a significant amount of cash to meet our Convertible Loan obligations. We have a Convertible Loan of US$171.1 million advanced by Alibaba with an original maturity date of April 4, 2022. We and Alibaba entered into several supplemental agreements to the original convertible loan agreement, pursuant to which the maturity date of the Convertible Loan has been extended to September 30, 2023. The interest rate of the Convertible Loan has also been amended from an original compound rate of 3% per annum to a compound rate of 9% per annum plus a simple rate of 3% per annum, calculated from the original loan drawdown date of April 4, 2019. The total amount of the principal and accumulated interest payable of the Convertible Loan, including the incremental interest related to the increase in interest rate under the supplemental agreements, will amount to approximately US$270.3 million (RMB1,882.4 million) as of September 30, 2023. See “Item 5. Operating and Financial Review and Prospects—B. Liquidity and Capital Resources” for further details. We cannot assure you that we will be able to further extend the maturity date of the principal and accrued and unpaid interest of the Convertible Loan or repay the principal and accrued and unpaid interest of the Convertible Loan as they become due. Given the significance of the amount repayable upon maturity, the maturity of the Convertible Loan will have a significant impact on our liquidity.

In addition, the investors of Fun Literature Limited, our subsidiary that is the holding company of the entities that operate Midu Novels, have the right to require Fun Literature Limited to repurchase all of their preferred shares and the right to sell all of their preferred shares to Qutoutiao Inc. upon occurrence of certain triggering events, including, among others, failure of Fun Literature Limited to complete a qualified IPO by the end of 2024, material breach of representations, warranties and covenants under the transactions documents, and willful or fraudulent misconduct of any entity within the Group that results in a material adverse effect of the Group’s business. In addition, the investors of Fun Literature Limited may also require us to purchase their shares upon a sale of the shares of Fun Literature Limited that we hold or upon change of control resulting from such sale. If such right to repurchase or sell is triggered, we cannot assure you that we will have sufficient funds to pay the purchase price of the preferred shares. The obligation to make such payment will place additional significant burden on our liquidity and cash position, and we may not have sufficient cash to fund our operations.

There can also be no assurance that new financings, additional funds from sale of our assets or other transactions will be available to us on commercially acceptable terms, or at all. In addition, the potential worsening global economic conditions may adversely impact our ability to secure additional financing. If we are unable to generate sufficient cash in the future or obtain sufficient financing in a timely manner or on commercially acceptable terms or at all, our business, financial condition and results of operations will be materially and adversely affected and you may lose the entire value of your investment in our ADSs.

The Group has incurred net losses in the past and may continue to incur losses in the future.

The Group incurred net losses of RMB1,105.2 million, RMB1,240.2 million and RMB914.8 million (US$132.6 million) for the years ended December 31, 2020, 2021 and 2022, respectively. If we are unable to generate adequate revenues and to manage our cost and expenses, we may continue to incur significant losses in the future and may not be able to achieve profitability. In addition, we may continue to incur losses in the future due to a number of reasons, many of which are beyond our control, including tightening advertising budget of the Group’s advertising customers, declining demand for the Group’s products and services, increasing competition, emergence of alternative business models, changes in regulations and government policies, changes in general economic conditions, COVID-19 as well as other risks described in this annual report.

Pursuant to the Administrative Provisions on Internet Audio-visual Program Service, or the Audio-visual Program Provisions, which was issued by the National Radio and Television Administration of the PRC, or the NRTA (previously known as the State Administration of Radio and Television, or the SART, the General Administration of Press and Publication, or the GAPPRFT and the State Administration of Radio, Film and Television, or the SARFT) and MIIT on December 20, 2007 and came into effect on January 31, 2008 and was amended on August 28, 2015, online transmission of audio and video programs requires an Internet audio-visual program transmission license and online audio-visual service providers must be either wholly state-owned or state-controlled. In a press conference jointly held by NRTA and MIIT to answer questions with respect to the Audio-visual Program Provisions in February 2008, NRTA and MIIT clarified that online audio-visual service providers that had already been operating lawfully prior to the issuance of the Audio-visual Program Provisions may re-register and continue to operate without becoming state-owned or controlled, provided that such providers have not engaged in any unlawful activities. This exemption will not be granted to online audio/video service providers established after the Audio-visual Program Provisions were issued. See “Item 4. Information on the Company—C. Regulations—Regulation on Online Transmission of Audio-visual Programs.”

Although the Group has been taking measures to ensure compliance, it may not be able to fully comply with Audio-visual Program Provisions. As a result, the Group may face, according to Audio-visual Program Provisions, administrative sanctions, including receiving a warning and being ordered to pay a fine of not more than RMB30,000. In the case of severe contravention, the Group may be ordered to cease transmission of audio and video programs, be subject to a penalty equal to one to two times the Group’s total investment in the affected business and the devices it used for such operation may be confiscated. Furthermore, according to the Audio-visual Program Provisions, the telecommunications administrative authorities may, based on written opinions of the competent department of radio, film and television, and in accordance with the relevant laws and regulations on supervision of telecommunications and Internet, close the Group’s platform, revoke its permit(s) or cancel its record-filing, and order the relevant network operation entity which provides us signal access services to stop such provision of services. Such penalties would materially and adversely affect the Group’s business, results of operations and financial condition.

If the Group fails to maintain its Internet news information services license, it may be exposed to administrative sanctions, including an order to cease its Internet information services that provide news or to cease the Internet access services provided by third parties to the Group.

The PRC government regulates the Internet industry extensively, including foreign ownership of, and the licensing requirements pertaining to, companies in the Internet industry. A number of regulatory agencies, including the Ministry of Culture, or the MOC, the Ministry of Industry and Information Technology, or MIIT, the Cyberspace Administration of China, or the CAC, the NRTA (previously known as the SART, GAPPRFT and SARFT), the State Council Information Office, or the SCIO, and other governmental authorities, jointly regulate all major aspects of the Internet industry. Operators are required to obtain various government approvals and licenses prior to providing the relevant Internet information services.

The Group’s platform primarily focuses on light entertainment content. Nonetheless, certain content related to current affairs, finance, society and economy provided on the Group’s Qutoutiao mobile application may be deemed to be news content. According to the Provisions for the Administration of Internet News Information Services issued by the CAC on May 2, 2017 that became effective on June 1, 2017, an Internet news information services license shall be obtained for a provider of Internet news information services to the public in a variety of ways, including through the offering of platforms for the dissemination of Internet news.

Shanghai Jifen Culture Communications Co., Ltd., or Shanghai Jifen, one of the Group VIEs, obtained an Internet news information services license from the CAC in July 2019 and had it renewed in July 2022. However, if the Group fails to maintain such license, it may be ordered to cease disseminating news and impose a fine on the Group of not less than RMB10,000 but not more than RMB30,000. In the event the Group was ordered to cease disseminating news, its business, results of operations and financial condition could be materially and adversely affected.

If the Group does not continue to increase the strength of its brand, the Group may not be able to maintain current or attract new users and customers for its products and services.

The Group’s operational and financial performance is highly dependent on the strength of our brand. We believe the Group enjoys lower user acquisition cost compared to acquiring users through other means. The Group’s platform’s innovative user account systems and gamified loyalty programs enable it to focus its resources on directly connecting with new users. In order to further expand the Group’s user base, it may need to substantially increase its marketing expenditures to enhance brand awareness.

In addition, negative coverage in the media of our company could threaten the perception of our brand, and we cannot assure you that we will be able to defuse negative press coverage about our company to the satisfaction of our investors, users, advertising customers and content providers. If we are unable to defuse negative press coverage about our company, our brand may suffer in the marketplace, the Group’s operational and financial performance may be negatively impacted and the price of the ADSs may decline.

Negative publicity about the Group, the Group’s services, operations and our management has adversely affected and may adversely affect our reputation and business in the future.

We have from time to time received negative publicity, including negative Internet and blog postings about us, the Group’s services, operations and our management. For example, a short seller published a report on December 10, 2019 with certain negative opinions on the Group, such as the Group’s related party transactions, the Group’s products, the Group’s financial conditions and the Group’s acquisition decision, which could have a negative impact on our reputation, despite the fact that the short seller’s claims were based on factual errors and misunderstanding of business and accounting rules, which we subsequently explained in a detailed public response. On January 18, 2020, the same short seller published another report on us, containing mostly the same negative opinions regarding us, and we reported in detail the unfounded allegations in this report to the then audit committee of our board of directors. On July 16, 2020, China Central Television, or CCTV, reported in its Annual Consumer Rights Show that certain advertisements placed by third-party advertising agents on Qutoutiao exaggerated the health benefits of certain food and diet products and promoted activities that may involve online-gambling, which led to negative media publicity on us.

Negative publicity could be the result of malicious intentions, direct or indirect anti-competitive behaviors, agendas of short sellers or advertisements placed on the Group’s platform. We may even be subject to government or regulatory investigation as a result of such third-party conduct or misconduct and may be required to spend significant time and incur substantial costs to defend ourselves against such third-party conduct or misconduct, and we may not be able to conclusively refute each of the allegations within a reasonable period of time, or at all. Our brand and reputation may be materially and adversely affected as a result of any negative publicity, which in turn may cause us to lose market share, users, advertising customers and other third parties the Group conducts business with. As a result, the Group’s financial position or operating results may be adversely affected and the price of the ADSs may decline.

The Group has implemented user loyalty programs to gamify user experience and tap into the competitive reward psyche of users. However, some users have taken an interest in utilizing aggressive tactics to extract maximum monetary reward from the applications. Although the Group has put in mechanisms to detect and prevent such behaviors and the absolute amount of monetary reward so earned is never more than paltry, this feature of the Group’s applications has in some cases given rise to criticisms from the very same users who take it to be a case of the Group not adequately rewarding or in fact overpromising reward to users in general. Such negative reviews could appear in open blogs on the Internet, and, however unmerited, may twist the perception of those unfamiliar with or have no prior experience with the Group’s applications, hence adversely impacting its ability to acquire new users.

Techniques employed by short sellers may drive down the market price of the ADSs.

Short-selling is the practice of selling securities that the seller does not own but rather has borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale. As it is in the short seller’s interest for the price of the security to decline, many short sellers publish, or arrange for the publication of, negative opinions, justified or not, regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a security short. These short attacks have, in the past, led to selling of shares in the market.

Public companies that have substantially all of their operations in China have been the subject of short-selling. Much of the scrutiny and negative publicity has centered on allegations of a lack of effective internal control over financial reporting resulting in financial and accounting irregularities and mistakes, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result, many of these companies are now conducting internal and external investigations into the allegations and, in the interim, are subject to shareholder lawsuits and/or SEC enforcement actions.

A short seller published reports with certain negative opinions regarding us on December 10, 2019 and January 18, 2020, which negatively affected our reputation. However, it is not clear what effect such negative publicity could continue to have on us. If we were to become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we might have to expend a significant amount of resources to investigate such allegations and/or defend ourselves. While we would strongly defend against any such short seller attacks, we may be constrained in the manner in which we can proceed against the relevant short seller by principles of freedom of speech, applicable state law or issues of commercial confidentiality. Such a situation could be costly and time-consuming, and could distract our management from growing the Group’s business. Even if such allegations are ultimately proven to be groundless, allegations against us could severely impact the Group’s business operations and the trading price of the ADSs, and any investment in the ADSs could be greatly reduced or even rendered worthless.

The Group is vulnerable to natural disasters and other calamities. Fire, floods, typhoons, earthquakes, power loss, telecommunications failures, break-ins, war, riots, terrorist attacks or similar events may give rise to server interruptions, breakdowns, system failures or Internet failures, which could cause loss or corruption of data or malfunctions of software or hardware as well as adversely affect the Group’s ability to provide its products or services. The Group’s business could also be adversely affected by the effects of Ebola virus disease, H1N1 flu, H7N9 flu, avian flu, Severe Acute Respiratory Syndrome, or SARS, COVID-19, or other epidemics.

In particular, the COVID-19 pandemic has negatively affected the global and Chinese economy as well as the advertising market in China since the beginning of 2020, and put constraints on the advertising budget of the Group’s advertising customers, which might negatively affect its business, results of operations and financial condition, as well as the trading price of the ADSs.

The Group’s operations have been impacted by measures taken by national and regional Chinese governments to contain COVID-19, including lockdowns, travel restrictions, closures and quarantines. For example, a wave of infections caused by the Omicron variant emerged in Shanghai, where the majority of the Group’s workforce is based, in early 2022, and a series of restrictions and quarantines were implemented to contain the spread. From March to June 2022, residents in Shanghai were placed under a strict COVID-19-related city-wide lockdown. As a result of the lockdown, our employees in Shanghai were not able to work in the office and we were not able to conduct our business operations as usual, which had significant adverse impact on the Group’s business and results of operations. China began to modify its zero-COVID policy at the end of 2022, and most of the travel restrictions and quarantine requirements were lifted in December 2022. There were surges of cases in many cities during this time, and there remains uncertainty as to the future impact of the virus, especially in light of this change in policy. We cannot be assured that more lockdowns and other restrictive measures will not be implemented in the future, and the Group’s business, results of operations and financial condition may be adversely affected by such measures.

The Group’s business operations could also be disrupted if any of its employees is suspected of being infected with COVID-19, since it could require the Group’s employees to be quarantined and/or the Group’s offices to be shut down for disinfection. The Group may be short on workforce if a large number of the Group’s employees are diagnosed with COVID-19 or are required to be self-isolated. The Group’s business could also be impacted if any of its advertising customers or suppliers is affected by COVID-19, which may result in suspension of the Group’s services, reduction in its advertising and marketing revenues, delay in collection of account receivables and additional allowances for doubtful accounts.

In addition, COVID-19 may continue to adversely affect national and regional economy in China as well as global economy and financial markets, which could cause economic downturn or financial crisis. The Group’s business, results of operations and financial condition could be adversely affected to the extent that COVID-19 harms the Chinese and global economy in general, and the trading price of the ADSs may decline significantly.

We have been closely monitoring the impact of COVID-19 on macro economy and advertising market in general, as well as the impact on the Group’s business, results of operations and financial condition. The extent to which COVID-19 may continue to impact the Group’s results is uncertain and difficult to predict and will depend on future developments, including the duration, severity and reach of the COVID-19 pandemic, and actions taken to contain the outbreak or treat its impacts.

New content formats and other products and services and changes to existing content formats and products and services could fail to attract users or generate revenues.

The Group’s ability to increase the size and engagement level of its user base, attract advertising customers and generate revenues will depend in part on its ability to create and offer successful new content formats and other products and services. Such new content formats and other products and services may involve new distribution capabilities or technologies with which we have little or no prior development or operating experience, such as literature, online games and live-streaming. We may also continuously refine the Group’s existing content formats and other products and services as part of the Group’s efforts to further enhance user engagement. However, if such efforts or the Group’s efforts in launching new content formats and other products and services fail to engage users, the Group may fail to attract or retain users or to generate sufficient revenues to justify our investments, and the Group’s business, results of operations and financial condition could be adversely affected.

If the Group is unable to compete effectively in the industry it operates, the Group’s business, results of operations and financial condition may be materially and adversely affected.

Competition for user traffic and user engagement, as well as advertising and marketing spending, is intense and we face strong competition in the Group’s business. The Group’s primary competitors include content aggregators such as Jinritoutiao (operated by Bytedance), Kuaibao (operated by Tencent) and Yidianzixun (an affiliate of Phoenix News). To a lesser extent, we also compete with mobile news portals such as Tencent News, SINA News, Sohu News, NetEase News and Phoenix News. We also compete with other mobile literature applications, such as iReader, QQ Reading, Qimao Free Novels and Fanqie Novels, as well as other mobile literature applications that have a business model similar to ours. To a lesser extent, we compete with traditional PC-based online literature platforms. Many of the Group’s competitors have more resources and longer operating histories than us. New players may emerge and seek to imitate the Group’s business strategies, thereby directly competing with us for users. Furthermore, we may face potential competition from global online content delivery platforms that seek to enter the China market, whether independently or through the formation of strategic alliances with, or acquisition of, PRC Internet companies. If we are not able to effectively compete with the Group’s competitors, the Group’s overall user base and level of user engagement may decrease. We may be required to spend additional resources to further enhance the Group’s brand recognition and promote the Group’s products and services, and such additional spending could adversely affect the Group’s profitability. Furthermore, if we are involved in disputes with any of the Group’s competitors that result in negative publicity to us, such disputes, regardless of their veracity or outcome, may harm the Group’s reputation or brand image and in turn lead to reduced number of users and advertising customers. The Group’s competitors may unilaterally decide to adopt a wide range of measures targeted at us, including possibly designing their products to negatively impact the Group’s operations. Any legal proceedings or measures we take in response to competition and disputes with the Group’s competitors may be expensive, time-consuming and disruptive to the Group’s operations and divert our management’s attention.

In addition, the Group’s users face a vast array of entertainment choices. Other forms of entertainment, including other Internet-based activities such as social networking, online video or games, live-streaming, as well as offline games and activities such as television, movies and sports, are much larger and more well-established markets and may be perceived by the Group’s users to offer greater variety, affordability, interactivity and enjoyment. The Group’s platform competes against these other forms of entertainment for the discretionary time and spending of the Group’s users. If we are unable to sustain sufficient interest in the Group’s platform in comparison to other forms of entertainment, including new forms of entertainment that may emerge in the future, the Group’s business model may no longer be viable.

The Group generates a substantial majority of its revenues from advertising and marketing. A decline in the Group’s advertising and marketing revenues could harm its business.

The Group generated a substantial majority of its revenues from advertising and marketing services in 2020, 2021 and 2022. Given the Group’s short history, it has limited experience in operating the programmatic advertising system and in acquiring its own advertising agents and advertising customers. The Group may not be able to recruit sufficient sales personnel to effectively and efficiently acquire and retain advertising agents and advertising customers. The effectiveness of the Group’s programmatic advertising system may not perform as expected and achieve widespread acceptance by advertising customers.

The Group’s advertising customers for its programmatic advertising system are comprised of advertising agents and end advertisers. There can be no assurance that these advertising agents will continue to attract advertising customers to the Group’s platform. Furthermore, as is common in the industry, the Group does not enter into long-term agreements with advertising agents or advertising customers. Advertising agents and advertising customers are not obligated to use the Group’s advertising and marketing solutions on an exclusive basis and they generally use multiple channels to manage their advertising and marketing needs. Accordingly, we or advertising agents must convince advertising customers to use the Group’s programmatic advertising system, increase their usage and spend a larger share of their online advertising and marketing budgets with the Group, and to do so on an ongoing basis. Advertising customers may not continue to utilize the Group’s platform or may only be willing to advertise with the Group at reduced prices if it does not deliver advertising and marketing services in an effective manner, including persuading the Group’s advertising customers as to the relevancy of the Group’s user base for their products or services, or if they do not believe that their investment in advertising and marketing with the Group’s will generate a competitive return relative to alternative advertising platforms. If the Group fails to retain existing advertising customers or ensure that their advertising spends with the Group remains at similar or increased levels or attract new advertising customers to advertise on the Group’s platform, the Group’s business, results of operations and financial condition may be materially and adversely affected.

Our efforts to expand the monetization of the Group’s products and services in addition to advertising may not be successful.

In order to sustain the Group’s operation and revenue, we must effectively monetize the Group’s user base and expand the monetization of the Group’s products and services in addition to advertising. We plan to leverage the Group’s user account systems and loyalty programs to induce users not only to spend the cash credits in their accounts from using the Group’s platform but also to supplement their spending on the Group’s platform with additional funds. These measures include introducing paid content such as literature, online games, short videos, as well as live-streaming products. There can be no assurance that we can successfully capture such monetization opportunities. For example, users may prefer to purchase merchandise from “pure play” e-commerce platforms, which tend to offer wider selections and may provide better services due to their deeper industry experience. In addition, the Group has primarily offered free content to users, and the Group’s paid content may not gain significant user acceptance. If we were unable to successfully execute the Group’s monetization strategies, the Group’s business, results of operations and financial condition would be materially and adversely affected.

If we fail to continue to anticipate user preferences and interests, the Group may not be able to generate sufficient user traffic to remain competitive.

The Group’s success depends on its ability to intelligently deliver personalized light entertainment content to users. Through an automated process, the Group develops interest and social graphs for each user based on such person’s profile, behavior and social relationships. The user’s behavior also provides the Group with a granular view of the topics and content characteristics that likely are of interest to the user. In addition, the interest and social graphs take into account the user’s social relationships with other users and such other users’ interests, including their behaviors. The Group’s content recommendation engine analyzes content and the interest and social graphs of each user to identify content that is most likely to interest such person. Such recommendation is based on analysis the Group has made as to user preferences and interests, and any errors in such analysis may lead the Group’s system to recommend content that fails to attract users. Furthermore, the Group’s future success will depend on its ability to anticipate and adapt new technologies. If the Group fails to continuously improve user experience through better recommendation results, we may not be able to compete effectively with the Group’s competitors, and the Group’s business, results of operations and financial condition may be materially and adversely affected.

If content providers on the Group’s platform do not continue to contribute content, decrease the amount of content contributed or the quality of their contribution declines, the Group may experience a decrease in the number of users and level of user engagement.

The Group’s success depends on its ability to generate sufficient user traffic through the inte

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