REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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 |
Title of each class |
Trading Symbol |
Name of each exchange on which registered | ||
N/A |
* | |
Large Accelerated Filer |
☐ |
☒ |
Non-accelerated Filer |
☐ | ||||||
Emerging growth company |
International Financial Reporting Standards as issued by the International Accounting Standards Board |
☐ | Other ☐ |
† | 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. |
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• | “ACG” refers to animation, comics and games; |
• | “AI” refers to artificial intelligence; |
• | “active users” or “users” is used interchangeably in this annual report and refers to users who visited our platforms at least once in a given period, measured by the number of mobile devices that launched our mobile apps in a given period. The number of active users is calculated by treating each distinguishable mobile device as a separate user even though some individuals may access our platforms using more than one mobile device and multiple individuals may access our services using the same mobile device. An active user is not necessarily a registered user, since one does not have to register with our apps in order to access our audio content; |
• | “ADSs” refers to the American depositary shares, each representing 20 of our Class A ordinary shares, par value US$0.0001 per share; |
• | “average monthly active hosts” refers to the monthly average number of active hosts in a given period, calculated by dividing (i) the total number of users who accessed our LIZHI App as a host in a given month, or who historically accessed our LIZHI App as a host and remained an active user in a given month, in each month of such period by (ii) the number of months in the same period |
• | “audio entertainment mobile MAUs” refers to the number of active users who have accessed our audio entertainment products in a given month on our apps; |
• | “audio entertainment paying user” refers to a paying user that has purchased virtual items for our audio entertainment products at least once during the relevant period on our apps; |
• | “average audio entertainment paying users” refers to the monthly average number of audio entertainment paying users in a given period on our apps, calculated by dividing (i) the total number of audio entertainment paying users in each month of such period by (ii) the number of months in the same period; |
• | “average paying users” refers to the monthly average number of paying users in a given period across our platforms and apps, calculated by dividing (i) the total number of paying users in each month of such period by (ii) the number of months in the same period; |
• | “China” or “PRC” refer to the People’s Republic of China, excluding, for the purpose of this annual report only, Taiwan, Hong Kong and Macau; |
• | “Class A ordinary shares” refers to our Class A ordinary shares, par value US$0.0001 per share; |
• | “Class B ordinary shares” refers to our Class B ordinary shares, par value US$0.0001 per share; |
• | “Founders” refers to Mr. Jinnan (Marco) Lai, Mr. Ning Ding and the entities that hold shares on behalf of and are controlled by Mr. Jinnan (Marco) Lai and Mr. Ning Ding, as Mr. Jinnan (Marco) Lai and Mr. Ning Ding so designate; |
• | “guild” refers to an organized group of hosts that recruit, manage, train and support its member hosts; |
• | “host” and “content creator” refer to a user who has posted a podcast or hosted an audio entertainment program on our apps; |
• | “MAUs” refers to the number of active users in a given month across our platforms and apps; |
• | “MENA” refers to the Middle East and North Africa; |
• | “ordinary shares” refers to our Class A ordinary shares and Class B ordinary shares, par value US$0.0001 per share; |
• | “paying user” refers to an user that has purchased virtual items or subscribed for paid podcasts at least once during the relevant period. A paying user is not necessarily a unique user, however, as a unique user may set up multiple user accounts on our platforms. The number of paying users we present in this annual report may not be equal to the number of unique individuals who actually purchase or consume virtual items or subscribe for paid podcasts on our platforms for any given period; |
• | “RMB” or “Renminbi” refers to the legal currency of the PRC; |
• | “Second Amended and Restated Memorandum and Articles of Association” refers to the second amended and restated memorandum and articles of association of our company adopted on October 23, 2019 which has become effective upon our initial public offering; |
• | “total mobile MAUs” refers to the number of active users across our platforms and apps in a given month; |
• | “UGC” refers to user-generated content; |
• | “US$,” “dollars” or “U.S. dollars” refers to the legal currency of the United States; |
• | “VIEs” refers to variable interest entities; and |
• | “We,” “us,” “our company,” and “our,” refer to LIZHI INC., a Cayman Islands incorporated exempted company with limited liability, its subsidiaries, VIEs and the subsidiaries of its VIEs. |
• | our goals and growth strategies; |
• | our future business development, results of operations and financial condition; |
• | relevant government policies and regulations relating to our business and industry; |
• | our expectation regarding the use of proceeds from our initial public offering in January 2020; |
• | general economic and business condition in China and overseas countries and regions where we operate; |
• | assumptions underlying or related to any of the foregoing; |
• | the length and severity of the recent COVID-19 outbreak and its impact on our business and industry; |
• | other factors that may affect our financial condition, liquidity and results of operations; and |
• | other risk factors discussed under “Item 3. Key Information—3.D. Risk Factors.” |
ITEM 1. |
IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS |
ITEM 2. |
OFFER STATISTICS AND EXPECTED TIMETABLE |
ITEM 3. |
KEY INFORMATION |
For the Year Ended December 31, |
||||||||||||||||||||
2017 |
2018 |
2019 |
2020 |
|||||||||||||||||
RMB |
RMB |
RMB |
RMB |
US$ |
||||||||||||||||
(in thousands, except for share and per share data) |
||||||||||||||||||||
Net revenues |
453,529 | 798,561 | 1,180,597 | 1,502,908 | 230,331 | |||||||||||||||
Cost of revenues |
(330,822 | ) | (565,634 | ) | (910,155 | ) | (1,134,678 | ) | (173,897 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Gross profit |
122,707 |
232,927 |
270,442 |
368,230 |
56,434 |
|||||||||||||||
Operating expenses: |
||||||||||||||||||||
Selling and marketing expenses |
(206,795 | ) | (135,014 | ) | (208,550 | ) | (142,734 | ) | (21,875 | ) | ||||||||||
General and administrative expenses |
(22,645 | ) | (26,702 | ) | (45,714 | ) | (88,856 | ) | (13,618 | ) | ||||||||||
Research and development expenses |
(43,189 | ) | (83,209 | ) | (158,015 | ) | (225,329 | ) | (34,533 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total operating expenses |
(272,629 |
) |
(244,925 |
) |
(412,279 |
) |
(456,919 |
) |
(70,026 |
) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Operating loss |
(149,922 |
) |
(11,998 |
) |
(141,837 |
) |
(88,689 |
) |
(13,592 |
) | ||||||||||
Other income: |
||||||||||||||||||||
Interest (expenses)/income, net |
(2,008 | ) | 211 | 300 | (1,796 | ) | (275 | ) | ||||||||||||
Foreign exchange (losses)/gains |
(3,563 | ) | (58 | ) | 1,178 | (836 | ) | (128 | ) | |||||||||||
Investment (losses)/income |
— | (458 | ) | — | 1,241 | 190 | ||||||||||||||
Government grants |
2,033 | 3,626 | 9,452 | 12,870 | 1,972 | |||||||||||||||
Others, net |
(205 | ) | (675 | ) | (2,050 | ) | (3,975 | ) | (609 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Loss before income taxes |
(153,665 |
) |
(9,342 |
) |
(132,957 |
) |
(81,185 |
) |
(12,442 |
) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Income tax expense |
— | — | — | (999 | ) | (153 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss |
(153,665 |
) |
(9,342 |
) |
(132,957 |
) |
(82,184 |
) |
(12,595 |
) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Accretions to preferred shares redemption value |
(291,275 | ) | (216,185 | ) | (940,186 | ) | (154,066 | ) | (23,612 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss attributable to our Company’s ordinary shareholders |
(444,940 |
) |
(225,527 |
) |
(1,073,143 |
) |
(236,250 |
) |
(36,207 |
) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss |
(153,665 |
) |
(9,342 |
) |
(132,957 |
) |
(82,184 |
) |
(12,595 |
) | ||||||||||
Other comprehensive (loss)/income: |
||||||||||||||||||||
Foreign currency translation adjustments |
(876 | ) | 2,649 | 671 | (6,338 | ) | (971 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total other comprehensive (loss)/income |
(876 |
) |
2,649 |
671 |
(6,338 |
) |
(971 |
) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total comprehensive loss |
(154,541 |
) |
(6,693 |
) |
(132,286 |
) |
(88,522 |
) |
(13,566 |
) | ||||||||||
Accretions to preferred shares redemption value |
(291,275 | ) | (216,185 | ) | (940,186 | ) | (154,066 | ) | (23,612 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Comprehensive loss attributable to our Company’s ordinary shareholders |
(445,816 |
) |
(222,878 |
) |
(1,072,472 |
) |
(242,588 |
) |
(37,178 |
) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net loss attributable to our Company’s ordinary shareholders per share |
||||||||||||||||||||
Basic |
(1.73 | ) | (0.87 | ) | (4.13 | ) | (0.27 | ) | (0.04 | ) | ||||||||||
Diluted |
(1.73 | ) | (0.87 | ) | (4.13 | ) | (0.27 | ) | (0.04 | ) | ||||||||||
Weighted average number of ordinary shares |
||||||||||||||||||||
Basic |
260,000,000 | 260,000,000 | 260,000,000 | 883,202,412 | 883,202,412 | |||||||||||||||
Diluted |
260,000,000 | 260,000,000 | 260,000,000 | 883,202,412 | 883,202,412 | |||||||||||||||
Net loss attributable to our Company’s ordinary shareholders per ADSs |
||||||||||||||||||||
Basic |
(34.23 | ) | (17.35 | ) | (82.55 | ) | (5.35 | ) | (0.82 | ) | ||||||||||
Diluted |
(34.23 | ) | (17.35 | ) | (82.55 | ) | (5.35 | ) | (0.82 | ) | ||||||||||
Weighted average number of ADSs |
||||||||||||||||||||
Basic |
13,000,000 | 13,000,000 | 13,000,000 | 44,160,121 | 44,160,121 | |||||||||||||||
Diluted |
13,000,000 | 13,000,000 | 13,000,000 | 44,160,121 | 44,160,121 |
As of December 31, |
||||||||||||||||||||
2017 |
2018 |
2019 |
2020 |
|||||||||||||||||
RMB |
RMB |
RMB |
RMB |
US$ |
||||||||||||||||
(in thousands) |
||||||||||||||||||||
Summary Consolidated Balance Sheet Data: |
||||||||||||||||||||
Cash and cash equivalents |
206,509 | 205,604 | 82,709 | 315,459 | 48,346 | |||||||||||||||
Total current assets |
231,056 | 218,013 | 104,462 | 419,908 | 64,353 | |||||||||||||||
Total assets |
242,547 |
236,659 |
140,683 |
463,818 |
71,082 |
|||||||||||||||
Deferred revenue |
5,878 | 10,668 | 14,530 | 17,001 | 2,606 | |||||||||||||||
Accrued expenses and other current liabilities |
71,147 | 24,026 | 33,729 | 51,047 | 7,823 | |||||||||||||||
Total current liabilities |
155,009 |
155,814 |
192,124 |
288,629 |
44,234 |
|||||||||||||||
Total liabilities |
155,009 |
155,814 |
192,124 |
294,627 |
45,153 |
|||||||||||||||
Total mezzanine equity: |
790,619 |
1,006,804 |
1,946,990 |
— |
— |
|||||||||||||||
Ordinary shares (US$0.0001 par value, 930,963,910 shares authorized as of December 31, 2017, 2018 and 2019 and 1,500,000,000 shares authorized as of December 31, 2020 respectively, 260,000,000 shares issued and outstanding as of December 31, 2017 and 2018, 285,428,430 shares issued and 260,000,000 shares outstanding as of December 31, 2019, and 941,464,520 shares issued and 924,318,450 shares outstanding as of December 31, 2020, respectively) |
171 | 171 | 189 | 640 | 98 | |||||||||||||||
Treasury stock |
— | — | (18 | ) | (12 | ) | (2 | ) | ||||||||||||
Additional paid in capital |
— | — | — | 2,409,753 | 369,311 | |||||||||||||||
Accumulated deficit |
(704,361 | ) | (929,888 | ) | (2,003,031 | ) | (2,239,281 | ) | (343,185 | ) | ||||||||||
Accumulated other comprehensive income/(loss) |
1,109 | 3,758 | 4,429 | (1,909 | ) | (293 | ) | |||||||||||||
Total shareholders’ (deficit)/equity: |
(703,081 |
) |
(925,959 |
) |
(1,998,431 |
) |
169,191 |
25,929 |
||||||||||||
Total liabilities, mezzanine equity and shareholders’ (deficit)/equity |
242,547 |
236,659 |
140,683 |
463,818 |
71,082 |
For the Year Ended December 31, |
||||||||||||||||||||
2017 |
2018 |
2019 |
2020 |
|||||||||||||||||
RMB |
RMB |
RMB |
RMB |
US$ |
||||||||||||||||
(in thousands) |
||||||||||||||||||||
Net cash (used in)/generated from operating activities |
(31,334 | ) | 13,962 | (95,753 | ) | 39,996 | 6,130 | |||||||||||||
Net cash used in investing activities |
(13,195 | ) | (17,375 | ) | (29,370 | ) | (94,559 | ) | (14,492 | ) | ||||||||||
Net cash generated from financing activities |
237,787 | — | — | 298,046 | 45,677 | |||||||||||||||
Effect of foreign exchange rate changes on cash, cash equivalents, and restricted cash |
(5,152 | ) | 2,508 | 2,228 | (7,038 | ) | (1,079 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Net increase/(decrease) in cash, cash equivalents and restricted cash |
188,106 |
(905 |
) |
(122,895 |
) |
236,445 |
36,236 |
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash, cash equivalents at the beginning of the year |
18,403 |
206,509 |
205,604 |
82,709 |
12,676 |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Cash, cash equivalents, and restricted cash at the end of the year |
206,509 |
205,604 |
82,709 |
319,154 |
48,912 |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|
• | If we fail to retain our existing users, to keep them engaged, to further grow our user base or to increase paying ratio, our business, operation, profitability and prospects may be materially and adversely affected. |
• | The PRC government may further tighten the regulation on online audio and entertainment platforms, which may materially and negatively affect our reputation, business, financial condition and results of operations. |
• | We may fail to attract, cultivate and retain talented and popular hosts, which may materially and negatively affect our user retention and thus our business and operations. |
• | Our content monitoring system may not be effective in preventing misconduct by our platforms’ users and misuse of our platforms and such misconduct or misuse may materially and adversely impact our business, financial condition and results of operations. |
• | We may fail to offer attractive audio content on our platforms. |
• | We have limited experience in international markets. If we fail to meet the challenges presented by our expansion overseas, our business, financial condition and results of operations may be materially and adversely affected. |
• | If the PRC government finds that the agreements that establish the structure for operating our businesses in China do not comply with PRC regulations on foreign investment in internet and other related businesses, or if these regulations or their interpretation change in the future, we could be subject to severe penalties or be forced to relinquish our interests in those operations. |
• | We rely on contractual arrangements with our VIEs and their shareholders for our operations in China, which may not be as effective in providing operational control as direct ownership. |
• | We may lose the ability to use and enjoy assets held by our VIEs and their subsidiaries that are important to our business if our VIEs and their subsidiaries declare bankruptcy or become subject to a dissolution or liquidation proceeding. |
• | Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us. |
• | Adverse changes in global or China’s economic, political or social conditions or government policies could have a material adverse effect on our business, financial condition and results of operations. |
• | Our auditor, like other independent registered public accounting firms operating in China, is not permitted to be subject to inspection by Public Company Accounting Oversight Board (“PCAOB”), and consequently investors may be deprived of the benefits of such inspection. As a result of recent legislation, if such a PCAOB inspection of our auditor cannot be completed within the next three years, we will be required to remove our listing and cease all trading of our securities in the U.S. capital markets. During the intervening period, this and other recent legislative and regulatory developments related to U.S.-listed China-based companies due to lack of PCAOB inspection may have a material adverse impact on our listing and trading in the U.S. and the trading prices of our ADSs and/or ordinary shares. |
• | Our ADSs have experienced and may continue to experience price and volume fluctuations, which could lead to costly litigation for us and make an investment in us less appealing. |
• | Under our dual-class share structure with different voting rights, holders of Class B ordinary shares have complete control of the outcome of matters put to a vote of shareholders, which may limit ability of holders of our Class A ordinary shares and the ADSs to influence corporate matters and could discourage others from pursuing any change of control transactions that holders of our Class A ordinary shares and the ADSs may view as beneficial. |
• | The dual-class structure of our ordinary shares may adversely affect the trading market for our ADSs. |
• | The voting rights of holders of ADSs are limited by the terms of the deposit agreement, and you may not be able to exercise your right to direct the voting of the underlying Class A ordinary shares which are represented by your ADSs. |
• | we fail to provide sufficient, high-quality user-generated audio content that keep our users interested and draw them to our platforms; |
• | we are unable to provide user-friendly experience to our hosts or users or continue innovating our products to improve user experience; |
• | we fail to identify key changes in user preferences in a timely manner or effectively respond to the changing user preferences; |
• | we fail to keep pace with changes in technologies; |
• | technical or other problems prevent us from delivering our services in a rapid and reliable manner or otherwise adversely affect the user experience; |
• | we fail to comply with applicable laws and regulations, including those related to illegal or inappropriate content; |
• | our hosts fail to keep our users engaged with our services or platforms; |
• | we suffer from negative publicity, fail to maintain our brand or if our reputation is damaged; |
• | we fail to address user concerns related to privacy and communication, safety, security or other factors; and |
• | there are adverse changes in our services that are mandated by, or that we elect to make to address, legislation, regulations, government mandates or app store policies. |
• | develop new monetization methods; |
• | provide new content that is appealing to our users; |
• | adapt to and comply with the evolving regulatory framework on online audio and entertainment; |
• | compete with other innovative forms of entertainment for our users’ time; |
• | maintain stable relationships with popular hosts; |
• | expand to new geographic markets with high growth potential; and |
• | cope with the COVID-19 and its impact on our business, operation and financial condition. |
• | the popularity, usefulness, ease of use, performance and reliability of our services compared to those of our competitors, and the research and development abilities of us and our competitors; |
• | the unique content, services, products and interactive community we offer on our platforms that distinguish ourselves from other competing platforms; |
• | changes mandated by, or that we elect to make to address, legislation, regulations or government policies, some of which may have a disproportionate effect on us; |
• | acquisitions or consolidation within our industry, which may result in more formidable competitors; and |
• | our reputation and brand strength relative to our competitors. |
• | compliance with applicable foreign laws and regulations, including but not limited to internet content provider licenses, internet content requirements, foreign exchange controls, cash repatriation restrictions, intellectual property protection rules and data privacy requirements; |
• | tensions between China and the United States or among other government authorities in countries or regions where we operate; |
• | challenges in identifying appropriate local business partners and establishing and maintaining good working relationships with them. Our business partners primarily include popular hosts and their agencies, third parties that promote our platforms and applications and third parties that provide us technology support; |
• | challenges in formulating effective marketing strategies targeting users from various jurisdictions and cultures, who have a diverse range of preferences and demands; |
• | challenges in attracting users to generate appealing content on our overseas platforms; |
• | challenges associated with internet infrastructure and telecommunication network services overseas and risks of system security breaches; |
• | local competition; |
• | local employment laws and practices; |
• | fluctuations in currency exchange rates; |
• | exposure to different tax jurisdictions that may subject us to greater fluctuations in our effective tax rate and assessments in multiple jurisdictions on various tax-related assertions, including transfer pricing adjustments and permanent establishment risks; |
• | increased costs associated with doing business in foreign jurisdictions; and |
• | COVID-19 outbreaks in various overseas locations. |
• | revoking the business licenses and/or operating licenses of such entities; |
• | imposing fines on us; |
• | confiscating any of our income that they deem to be obtained through illegal operations; |
• | discontinuing or placing restrictions or onerous conditions on our operations; |
• | placing restrictions on our right to collect revenues; |
• | shutting down our servers or blocking our apps/websites; |
• | requiring us to restructure the operations in such a way as to compel us to establish a new enterprise, re-apply for the necessary licenses or relocate our businesses, staff and assets; |
• | imposing additional conditions or requirements with which we may not be able to comply; or |
• | taking other regulatory or enforcement actions against us that could be harmful to our business. |
• | variations in our revenues, earnings, cash flow and data related to our user base or user engagement; |
• | announcements of new investments, acquisitions, strategic partnerships or joint ventures by us or our competitors; |
• | announcements of new product and service offerings, solutions and expansions by us or our competitors; |
• | changes in financial estimates by securities analysts; |
• | detrimental adverse publicity about us, our products and services or our industry; |
• | additions or departures of key personnel; |
• | release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities; and |
• | potential litigation or regulatory investigations. |
• | we have failed to timely provide the depositary with notice of meeting and related voting materials; |
• | we have instructed the depositary that we do not wish a discretionary proxy to be given; |
• | we have informed the depositary that there is substantial opposition as to a matter to be voted on at the meeting; |
• | a matter to be voted on at the meeting would have a material adverse impact on shareholders; or |
• | the voting at the meeting is to be made on a show of hands. |
• | the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K; |
• | the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act; |
• | the sections of the Exchange Act requiring insiders to file public reports of their stock ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and |
• | the selective disclosure rules by issuers of material nonpublic information under Regulation FD. |