EX-99.2 3 d640950dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

TANTAN LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In U.S. dollars, except shares data, or otherwise noted)

 

     As of
December 31,
     As of
March 31,
 
     2017      2018  

Assets

     

Current assets

     

Cash and cash equivalents

   $ 15,369,641      $ 11,133,685  

Term deposits

     4,610,915        1,594,235  

Accounts receivable net of allowance for doubtful accounts of $nil and $nil as of December 31, 2017 and March 31, 2018, respectively

     79,269        2,467,087  

Prepaid expenses and other current assets

     2,441,465        2,290,854  

Amounts due from related parties

     3,942        4,949  

Short-term investments

     9,375,528        5,898,670  
  

 

 

    

 

 

 

Total current assets

     31,880,760        23,389,480  
  

 

 

    

 

 

 

Property and equipment, net

     3,339,408        4,234,936  

Other non-current assets

     305,028        311,532  
  

 

 

    

 

 

 

Total assets

     35,525,196        27,935,948  
  

 

 

    

 

 

 

Liabilities

     

Current liabilities

     

Accounts payable (including accounts payable of the consolidated VIE without recourse to the Group of $nil and $697,625 as of December 31, 2017 and March 31, 2018, respectively)

     422,304        697,635  

Deferred revenue (including deferred revenue of the consolidated VIE without recourse to the Group of $97,280 and $4,010,877 as of December 31, 2017 and March 31, 2018, respectively)

     97,280        4,010,877  

Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIE without recourse to the Company of $660,564 and $9,852,464 as of December 31, 2017 and March 31, 2018, respectively)

     4,430,453        11,931,320  

Amounts due to related parties (including amounts due to related parties of the consolidated VIE without recourse to the Company of $nil and $nil as of December 31, 2017 and March 31, 2018, respectively)

     64,992        48,722  
  

 

 

    

 

 

 

Total current liabilities

     5,015,029        16,688,554  
  

 

 

    

 

 

 

Total liabilities

     5,015,029        16,688,554  
  

 

 

    

 

 

 


TANTAN LIMITED

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - continued

(In U.S. dollars, except shares data, or otherwise noted)

 

     As of
December 31,
    As of
March 31,
 
     2017     2018  

Commitments (Note 11)

    

Mezzanine equity

    

Redeemable ordinary shares ($0.001 par value, 2,550,000 shares issued and outstanding as of December 31, 2017 and March 31, 2018, respectively)

     2,779,500       2,779,500  

Series A convertible redeemable participating preferred shares ($0.001 par value; 2,250,000 shares authorized as of December 31, 2017 and March 31, 2018, respectively; 2,250,000 shares issued and outstanding as of December 31, 2017 and March 31, 2018, respectively; liquidation value of $4,500,000 as of December 31, 2017 and March 31, 2018, respectively)

     6,106,891       6,106,891  

Series B convertible redeemable participating preferred shares ($0.001 par value; 3,101,597 shares authorized as of December 31, 2017 and March 31, 2018, respectively; 3,101,597 shares issued and outstanding as of December 31, 2017 and March 31, 2018, respectively; liquidation value of $13,026,712 as of December 31, 2017 and March 31, 2018, respectively)

     18,870,795       18,870,795  

Series C convertible redeemable participating preferred shares ($0.001 par value; 3,744,172 shares authorized as of December 31, 2017 and March 31, 2018, respectively; 3,744,172 shares issued and outstanding as of December 31, 2017 and March 31, 2018, respectively; liquidation value of $34,293,524 as of December 31, 2017 and March 31, 2018, respectively)

     31,341,398       31,341,398  

Series D convertible redeemable participating preferred shares ($0.001 par value; 5,215,116 shares authorized as of December 31, 2017 and March 31, 2018, respectively; 5,215,116 shares issued and outstanding, as of December 31, 2017 and March 31, 2018, respectively; liquidation value of $70,000,000 as of December 31, 2017 and March 31, 2018, respectively)

     67,874,778       67,874,778  
  

 

 

   

 

 

 

Total mezzanine equity

     126,973,362       126,973,362  
  

 

 

   

 

 

 

Deficits

    

Ordinary shares ($0.001 par value; 35,689,115 shares authorized as of December 31, 2017 and March 31, 2018; 4,244,703 and 5,186,005 shares issued and outstanding as of December 31, 2017 and March 31, 2018, respectively)

     4,245       5,186  

Subscription receivable from ordinary shareholders

     (4,200     (773,335

Additional paid in capital

     1,739,231       28,177,928  

Accumulated deficits

     (98,743,567     (144,324,380

Accumulated other comprehensive income

     541,096       1,188,633  
  

 

 

   

 

 

 

Total Tantan Limited shareholders’ deficits

     (96,463,195     (115,725,968
  

 

 

   

 

 

 

Total liabilities, mezzanine equity and deficits

   $ 35,525,196     $ 27,935,948  
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


TANTAN LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In U.S. dollars, except shares data, or otherwise noted)

 

     For the three-month periods
ended March 31,
 
     2017     2018  

Net revenues

   $ —       $ 7,006,658  

Cost and expenses

    

Cost of revenue (including share-based compensation of $nil and $170,852 in the three-month periods ended March 31, 2017 and 2018, respectively)

     —         (3,867,520

Selling and marketing (including share-based compensation of $8,266 and $313,913 in the three-month periods ended March 31, 2017 and 2018, respectively)

     (6,690,606     (19,409,896

General and administrative (including share-based compensation of $88,021 and $23,729,791 in the three-month periods ended March 31, 2017 and 2018, respectively)

     (1,804,759     (24,844,857

Research and development (including share-based compensation of $65,600 and $1,455,947 in the three-month periods ended March 31, 2017 and 2018, respectively)

     (893,439     (4,603,384
  

 

 

   

 

 

 

Total cost and expenses

     (9,388,804     (52,725,657
  

 

 

   

 

 

 

Loss from operations

     (9,388,804     (45,718,999
  

 

 

   

 

 

 

Interest income

     28,784       138,186  
  

 

 

   

 

 

 

Loss before income tax

     (9,360,020     (45,580,813
  

 

 

   

 

 

 

Income tax expense

     —         —    
  

 

 

   

 

 

 

Net loss

     (9,360,020     (45,580,813
  

 

 

   

 

 

 

Net loss attributable to Tantan Limited

     (9,360,020     (45,580,813
  

 

 

   

 

 

 

Net loss attributable to holders of ordinary shares of Tantan Limited

   $ (9,360,020   $ (45,580,813
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


TANTAN LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In U.S. dollars, except shares data, or otherwise noted)

 

     For the three-month periods
ended March 31,
 
     2017     2018  

Net loss

   $ (9,360,020   $ (45,580,813

Other comprehensive income, net of tax

    

Foreign currency translation adjustment

     43,430       647,537  
  

 

 

   

 

 

 

Comprehensive loss attributable to Tantan Limited

   $ (9,316,590   $ (44,933,276
  

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


TANTAN LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN DEFICIT

(In U.S. dollars, except shares data, or otherwise noted)

 

     Ordinary
Shares
     Ordinary
amount
     Share Subscription
Receivable
    Additional
paid-in
capital
     Accumulated
deficit
    Accumulated
comprehensive
(loss)/income
    Total
shareholders’
deficit
 

Balance as of January 1, 2017

     4,200,000      $ 4,200      $ (4,200   $ 556,873      $ (38,248,784   $ (564,988   $ (38,256,899

Net loss

     —          —          —         —          (9,360,020     —         (9,360,020

Share-based compensation

     —          —          —         161,887        —         —         161,887  

Foreign currency translation adjustments

     —          —          —         —          —         43,430       43,430  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2017

     4,200,000      $ 4,200      $ (4,200   $ 718,760      $ (47,608,804   $ (521,558   $ (47,411,602
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balance as of January 1, 2018

     4,244,703      $ 4,245      $ (4,200   $ 1,739,231      $ (98,743,567   $ 541,096     $ (96,463,195

Net loss

     —          —          —         —          (45,580,813     —         (45,580,813

Issuance of ordinary shares (see note 8)

     941,302        941        (769,135     768,194        —         —         —    

Share-based compensation

     —          —          —         25,670,503        —         —         25,670,503  

Foreign currency translation adjustments

     —          —          —         —          —         647,537       647,537  
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

Balance as of March 31, 2018

     5,186,005      $ 5,186      $ (773,335   $ 28,177,928      $ (144,324,380   $ 1,188,633     $ (115,725,968
  

 

 

    

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


TANTAN LIMITED

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In U.S. dollars, except shares data, or otherwise noted)

 

     For the three-month periods
ended March 31,
 
     2017     2018  

Cash flows from operating activities:

    

Net loss

   $ (9,360,020   $ (45,580,813

Adjustments to reconcile net loss to net cash used in operating activities:

    

Depreciation of property and equipment

     222,643       480,743  

Share-based compensation

     161,887       25,670,503  

Changes in operating assets and liabilities

    

Account receivables

     —         (2,354,684

Prepaid expenses and other current assets

     (494,459     232,569  

Other non-current assets

     —         4,557  

Amounts due from related parties

     1,997       (950

Accounts payable

     (424     256,313  

Accrued expenses and other current liabilities

     721,204       7,243,573  

Deferred revenue

     —         3,860,491  

Amounts due to related parties

     4,372       (16,270
  

 

 

   

 

 

 

Net cash used in operating activities

     (8,742,800     (10,203,968
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchase of property and equipment

     (196,989     (1,246,038

Payment for short-term investment

     —         (28,647,883

Purchase of term deposits

     —         (8,148,119

Cash received upon maturity of term deposits

     4,533,898       11,296,238  

Cash received from sales of short-term investments

     —         32,425,626  
  

 

 

   

 

 

 

Net cash provided by in investing activities

     4,336,909       5,679,824  
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of Series D convertible redeemable participating preferred shares

     29,950,000       —    
  

 

 

   

 

 

 

Net cash provided by financing activities

     29,950,000       —    
  

 

 

   

 

 

 

Effect of foreign exchange rate on cash and cash equivalents

     28,358       288,188  
  

 

 

   

 

 

 

Net increase in/(decrease by) cash and cash equivalents

     25,572,467       (4,235,956

Cash and cash equivalents at the beginning of period

     6,627,581       15,369,641  
  

 

 

   

 

 

 

Cash and cash equivalents at the end of period

   $ 32,200,048     $ 11,133,685  
  

 

 

   

 

 

 

Non-cash investing and financing activities

    

Payable for purchase of property and equipment

     —         —    

Receivable from Series D convertible redeemable participating preferred shareholders

     25,000,000       —    

Receivable of exercised warrant consideration

     36       —    

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.


TANTAN LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2018

(In U.S. dollars, except shares data, or otherwise noted)

 

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

The following financial statements amounts and balances of the variable interest entity (“VIE”) were included in the accompanying unaudited condensed consolidated financial statements after the elimination of intercompany balances and transactions:

 

     As of
December 31,
     As of
March 31,
 
     2017      2018  

Cash and cash equivalents

   $ 3,278,764      $ 4,838,840  

Accounts receivables, net of allowance for doubtful accounts of $nil and $nil as of December 31, 2017 and March 31, 2018, respectively

     79,269        2,467,087  

Prepaid expenses and other current assets

     132,085        1,134,905  

Short-term investments

     9,375,528        5,898,670  

Total current assets

     12,865,646        14,339,502  

Total assets

     13,063,389        15,658,062  

Total current liabilities

     757,844        14,560,966  

Total liabilities

   $ 757,844      $ 14,560,966  

 

     For the three-month periods
ended March 31,
 
     2017      2018  

Net revenues

   $ —        $ 7,006,658  

Net loss

   $ (24,932    $ (13,009,035

Net cash used in operating activities

   $ (16,789    $ (2,689,903

Net cash (used in)/provided by investing activities

   $ (477    $ 2,619,870  

Net cash provided by financing activities

   $ —        $ —    

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation and use of estimates

The unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in conformity with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these statements should be read in conjunction with the Group’s audited consolidated financial statements for the years ended December 31, 2016 and 2017.

In the opinion of the management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments, which are necessary for a fair presentation of financial results for the interim periods presented. The Group believes that the disclosures are adequate to make the information presented not misleading. The accompanying unaudited condensed consolidated financial statements have been prepared using the same accounting policies as used in the preparation of the Group’s consolidated financial statements for the years ended December 31, 2016 and 2017. The results of operations for the three months ended March 31, 2017 and 2018 are not necessarily indicative of the results for the full years.

The financial information as of December 31, 2017 presented in the unaudited condensed consolidated financial statements is derived from the audited consolidated financial statements for the year ended December 31, 2017.

Foreign currency risk

The Renminbi is not a freely convertible currency. The State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of RMB into foreign currencies. The value of the (“RMB”) is subject to changes in central government policies and to international economic and political


TANTAN LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2018

(In U.S. dollars, except shares data, or otherwise noted)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Foreign currency risk - continued

 

developments affecting supply and demand in the China Foreign Exchange Trading System market. Cash and cash equivalents of the Group included aggregate amounts of $5,152,650 and $7,473,510 as of December 31, 2017 and March 31, 2018, respectively, which were denominated in RMB.

Concentration of revenue

No user or customer accounted for 10% or more of net revenues for the three months ended March 31, 2017 and 2018, respectively. Third-party application stores and other payment channels accounting for 10% or more of accounts receivables are as follows:

 

     As of
December 31,
    As of
March 31,
 
     2017     2018  

A

     69 %     87

Revenue recognition

The Group recognizes revenue when a persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. The Group derives its revenue from value-added service.

Value-added services revenues include membership subscription revenue and super-like service revenue. Membership subscription is a service package which enables members to enjoy additional functions and privileges. The contract period for the membership subscription ranges from one month to one year. All membership subscription is nonrefundable. The Group collects membership subscription in advance and records it as deferred revenue. Revenue is recognized ratably over the contract period for the membership subscription services. Revenue from super-like services is insignificant for the periods presented.

Super-like services is a service whereby users can enjoy purchase of virtual items from the Group and present them to other users. All virtual items are nonrefundable and the Group collects the cash from the purchase of virtual goods in advance and records it as deferred revenue until the users chose to display the virtual gift purchased. Revenue derived from the sale of virtual gifts are recorded on a gross basis as the Group has determined that it is the principal in providing the services.

Marketing expenses

The Group expenses marketing expenses as incurred, including advertising expenses and promotional video production fees. Total advertising expenses incurred were $6,330,720 and $17,960,991 for the three-month periods ended March 31, 2017 and 2018, respectively, and have been included in sales and marketing expenses in the unaudited condensed consolidated statement of operations.

Recent accounting pronouncements not yet adopted

In May 2014, Financial Accounting Standards Board, or FASB, issued Accounting Standards Updates, or ASU, 2014-09, Revenue from Contracts with Customers (Topic 606), to clarify the principles of recognizing revenue and create common revenue recognition guidance between U.S. GAAP and International Financial Reporting Standards. An entity has the option to apply the provisions of ASU 2014-09 either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying this standard recognized at the date of initial application. ASU2014-09 is effective for fiscal years and interim periods within those years beginning after December 15, 2016, and early adoption is not permitted.


TANTAN LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2018

(In U.S. dollars, except shares data, or otherwise noted)

 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued

Recent accounting pronouncements not yet adopted - continued

 

In August 2015, FASB issued ASU 2015-14 to defer the effective date of ASU 2014-09, for non-public entities to annual reporting periods beginning after December 15, 2018. Earlier adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

In May 2016, FASB issued ASU 2016-12 Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients. The amendments in this ASU do not change the core principle of the guidance in Topic 606. Rather, the amendments in this ASU affect only the narrow aspects of Topic 606. The areas improved include: (1) Assessing the Collectability Criterion in Paragraph 606-10-25-1(e) and Accounting for Contracts That Do Not Meet the Criteria for Step 1; (2) Presentation of Sales Taxes and Other Similar Taxes Collected from Customers; (3) Noncash Consideration; (4) Contract Modifications at Transition; (5) Completed Contracts at Transition; and (6) Technical Correction. The effective date and transition requirements for the amendments in this Update are the same as the effective date and transition requirements for Topic 606 (and any other Topic amended by Update 2014-09). The Group has completed its preliminary assessment of the new revenue standard and does not believe that the impact will be material to its consolidated financial statements. The Group expects to adopt the new standard using the modified retrospective method.

In February 2016, FASB issued ASU 2016-02 related to Leases. Under the new guidance, lessees will be required to recognize all leases (with the exception of short-term leases) at the commencement date including a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. Lessees (for capital and operating leases) and lessors must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. Lessees may not apply a full retrospective transition approach. Non-public business entities should apply the amendments in ASU 2016-02 for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years (i.e., January 1, 2019, for a calendar year entity). Early application is permitted. The Group is in the process of evaluating the impact of the standard on the consolidated financial statements.

In May, 2017, FASB issued a new pronouncement, ASU 2017-09, which amends the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions, and classification of the awards are the same immediately before and after the modification. The new accounting guidance is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The Group is in the process of assessing the impact on its consolidated financial statements from the adoption of the new guidance.


TANTAN LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2018

(In U.S. dollars, except shares data, or otherwise noted)

 

3. PREPAID EXPENSE AND OTHER CURRENT ASSETS

 

     As of
December 31,
     As of
March 31,
 
     2017      2018  

Advance to advertisement suppliers

   $ 1,984,846      $ 1,006,295  

Deferred platform commission cost

     —          484,163  

Prepaid rental expenses

     330,643        288,456  

Input VAT

     —          286,721  

Others

     125,976        225,219  
  

 

 

    

 

 

 

Total prepaid expenses and other current assets

   $ 2,441,465      $ 2,290,854  
  

 

 

    

 

 

 

 

4. PROPERTY AND EQUIPMENT, NET

 

     As of
December 31,
     As of
March 31,
 
     2017      2018  

Computer Equipment

   $ 4,583,912      $ 5,913,924  

Leasehold Improvement

     314,430        406,255  

Office equipment

     196,182        218,576  

Total

     5,094,524        6,538,755  
  

 

 

    

 

 

 

Less: accumulated depreciation

     (1,755,116      (2,303,819
  

 

 

    

 

 

 

Property and equipment, net

   $ 3,339,408      $ 4,234,936  
  

 

 

    

 

 

 

Depreciation expenses charged to the consolidated statements of operations for the three-month periods ended March 31, 2017 and 2018 were $222,643 and $480,743, respectively.

 

5. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

     As of
December 31,
     As of
March 31,
 
     2017      2018  

Payable for advertisement

   $ 3,550,560      $ 10,596,649  

Accrued payroll and welfare

     732,281        1,240,531  

Other tax payable

     38,554        —    

Others

     109,058        94,140  
  

 

 

    

 

 

 

Total accrued expenses and other current liabilities

   $ 4,430,453      $ 11,931,320  
  

 

 

    

 

 

 

 

6. FAIR VALUE

Measured on recurring basis

The Group measured its financial assets and liabilities including the cash and cash equivalents at fair value on a recurring basis as of December 31, 2017 and March 31, 2018. Cash and cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued based on the quoted market price in an active market.


TANTAN LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2018

(In U.S. dollars, except shares data, or otherwise noted)

 

6. FAIR VALUE - continued

Measured on recurring basis - continued

 

As of December 31, 2017 and March 31, 2018, information about inputs for the fair value measurements of the Group’s assets that are measured at fair value on a recurring basis in periods subsequent to their initial recognition is as follows:

 

       Fair Value Measurement as of December 31,  

Description

     2017       


Quoted

Prices in Active

Market for
Identical Assets


 
 

    


Significant
Other
Observable
Inputs
 
 
 
 
    

Significant
Unobservable
Inputs
 
 
 
        (Level 1)        (Level 2)        (Level 3)  

Cash and cash equivalents

   $ 15,369,641      $ 15,369,641      $ —        $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 15,369,641      $ 15,369,641      $ —        $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     Fair Value Measurement as of March 31,  

Description

   2018      Quoted
Prices in Active
Market for
Identical Assets
     Significant
Other
Observable
Inputs
     Significant
Unobservable
Inputs
 
            (Level 1)      (Level 2)      (Level 3)  

Cash and cash equivalents

   $ 11,133,685      $ 11,133,685      $ —        $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 11,133,685      $ 11,133,685      $ —        $ —    
  

 

 

    

 

 

    

 

 

    

 

 

 

The Group did not have Level 2 and Level 3 investments as of December 31, 2017 and March 31, 2018.

Measured or disclosed at fair value on a non-recurring basis

The Group did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of December 31, 2017 and March 31, 2018.

 

7. INCOME TAXES

The following table presents details of the provision for income taxes and the effective tax rates:

 

     For the three-month periods
ended March 31
 
     2017      2018  

Provision for income tax

   $  —        $ —    
  

 

 

    

 

 

 

Effective tax rates

   $ —        $ —    
  

 

 

    

 

 

 

The current and deferred components of the income tax expense appearing in the unaudited condensed consolidated statements of operations are as follows:

 

     For the three-month periods
ended March 31
 
     2017      2018  

Current tax expense

   $  —        $ —    

Deferred tax expense

   $ —        $ —    
  

 

 

    

 

 

 

Provision for income tax

   $ —        $ —    
  

 

 

    

 

 

 

The Group does not have any present plan to pay any cash dividends on its ordinary shares in the foreseeable future. It intends to retain most of its available funds and any future earnings for use in the operation and expansion of its business. As of March 31, 2018, the Group has not declared any dividends.


TANTAN LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2018

(In U.S. dollars, except shares data, or otherwise noted)

 

7. INCOME TAXES - continued

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Group’s deferred tax assets and liabilities are as follows:

 

     As of
December 31,
     As of
March 31,
 
     2017      2018  

Non-current deferred tax assets:

     

Advertising expense

   $ 15,080,606      $ 19,857,399  

Net operating tax losses carry-forward

     6,338,523        7,846,459  

Less: valuation allowance

     (21,419,129      (27,703,858
  

 

 

    

 

 

 

Non-current deferred tax assets, net

   $ —        $ —    
  

 

 

    

 

 

 

The Group considers the following factors, among other matters, when determining whether some portion or all of the deferred tax assets will more likely than not be realized: the nature, frequency and severity of losses, forecasts of future profitability, the duration of statutory carry-forward periods, the Group’s experience with tax attributes expiring unused and tax planning alternatives. The Group’s ability to realize deferred tax assets depends on its ability to generate sufficient taxable income within the carry-forward periods provided for in the tax law.

As of March 31, 2018, the tax loss carry-forward for WFOE and VIE amounted to $28,151,924 and will expire on various dates between December 31, 2019 and March 31, 2023. As of March 31, 2018, the tax loss carry-forward for Tantan HK amounted to $4,880,297, which would be carried forward indefinitely and set off against its future taxable profits. As of March 31, 2018, the tax loss carry-forward for Tantan US amounted to $11,532, which would be carried forward indefinitely and set off against its future taxable profits. The Group does not file combined or consolidated tax returns, therefore, losses from individual subsidiaries or the VIE may not be used to offset other subsidiaries’ or VIE’s earnings within the Group. A valuation allowance is considered on each individual subsidiary and legal entity basis. Valuation allowances have been established with respect to all deferred tax assets as it is considered more likely than not that the relevant deferred tax assets will not be realized in the foreseeable future.

The Group did not identify any significant unrecognized tax benefits as of December 31, 2017 and March 31, 2018. The Group did not incur any interest or penalties related to potential underpaid income tax expenses and also believes that uncertainty in income taxes does have a significant impact on the unrecognized tax benefits within next twelve months.

 

8. ORDINARY SHARES

In February 2018, the Company issued 941,302 ordinary shares to CBNC Investment Limited, a Company controlled by the Company’s chief executive officer (“CEO”) for a cash consideration of $769,135. As of March 31, 2018, the cash payment for the shares was not received and the Company recorded the receivable as subscription receivable in its unaudited condensed consolidated balance sheet. Additionally, the Company recorded the excess of the fair value of the shares issued over the cash consideration, amounting to $23,121,110, as share-based compensation as it represented compensation to the Company’s CEO for prior services rendered.

As of December 31, 2017 and March 31, 2018, 6,794,703 and 7,736,005 ordinary shares were issued and outstanding, respectively, of which 2,550,000 were classified as redeemable ordinary shares due to the redemption option available to those ordinary shareholders upon certain contingent events. As the redemption feature was remote, no accretion was recorded during the three months ended March 31, 2017 and 2018.


TANTAN LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2018

(In U.S. dollars, except shares data, or otherwise noted)

 

9. CONVERTIBLE REDEEMABLE PARTICIPATING PREFERRED SHARES

As of December 31, 2017 and March 31, 2018, the liquidation value of the preferred shares was $121,820,236.

 

10. SHARE-BASED COMPENSATION

Share options

The following table summarizes the option activity for the three-month period ended March 31, 2018:

 

     Number of
options
    Weighted
average
exercise price
per option
     Weighted average
remaining
contractual life
(years)
     Aggregated intrinsic
value
 

Outstanding as of January 1, 2018

     1,085,602     $ 0.9716        7.54      $ 26,497,789  
  

 

 

   

 

 

    

 

 

    

 

 

 

Granted

     1,181,721     $ 1.0297        

Exercised

     —         —          

Forfeited

     (6,924   $ 1.3992        

Cancelled

     (826,000   $ 0.9031        
  

 

 

   

 

 

    

 

 

    

 

 

 

Outstanding as of March 31, 2018

     1,434,399     $ 1.0569        9.84      $ 28,671,177  
  

 

 

   

 

 

    

 

 

    

 

 

 

Exercisable as of March 31, 2018

     73,393     $ 0.8799        7.19      $ 1,745,284  

There were 73,393 vested options, and 1,030,472 options expected to vest as of March 31, 2018. For options expected to vest, the weighted-average exercise price was $1.02 as of March 31, 2018 and the aggregate intrinsic value amounted to $6,353,172 and $27,289,235 as of December 31, 2017 and March 31, 2018, respectively.

In February, 2018, the Company cancelled 448,000 share options granted to the employees and executives and newly granted 244,542 share options with new vesting terms under the 2015 Plan. The Company treated the cancellation and reissuance as a modification. The total incremental cost resulting from the modification was insignificant.

In February, 2018, the Company cancelled 378,000 outstanding share options previously granted to employees and executives under the 2015 Plan. As a result, the Company immediately recognized the unvested compensation cost attributable to the cancellation which was insignificant.

The weighted-average grant-date fair value of the share options granted during the three-month periods ended March 31, 2017 and 2018 was $nil and $24.18, respectively. Total intrinsic value of options exercised for the three-month periods ended March 31, 2017 and 2018 was $nil and $nil, respectively. The total fair value of options vested during the three-month periods ended March 31, 2017 and 2018 was $177,913 and $1,529,679, respectively.

The fair value of each option granted was estimated on the date of grant using the binomial tree pricing model with the following assumptions used for grants during the applicable periods:

 

     Risk-free interest
rate of return
     Contractual
term
     Volatility     Dividend yield      Exercise Price  

2018

     3.26%-3.48%        10 years        55.20     —        $ 0.001-$1.600  

 

  (1) Risk-free interest rate

Risk-free interest rate was estimated based on the yield to maturity of China international government bonds with a maturity period close to the expected term of the options.

 

  (2) Contractual term

The Company used the original contractual term.


TANTAN LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2018

(In U.S. dollars, except shares data, or otherwise noted)

 

10. SHARE-BASED COMPENSATION - continued

Share options - continued

 

  (3) Volatility

The volatility of the underlying ordinary shares during the life of the options was estimated based on the historical stock price volatility of comparable listed companies over a period comparable to the expected term of the options.

 

  (4) Dividend yield

The dividend yield was estimated by the Group based on its expected dividend policy over the expected term of the options.

 

  (5) Exercise price

The exercise price of the options was determined by the Group’s board of directors.

 

  (6) Fair value of underlying ordinary shares

The estimated fair value of the ordinary shares underlying the options as of the respective grant dates was determined based on a retrospective valuation, which used management’s best estimate for projected cash flows as of each valuation date.

For employee share options, the Group recorded share-based compensation of $161,887 and $2,549,393 during the three-month periods ended March 31, 2017 and 2018, respectively, based on the fair value on the grant dates over the requisite service period of award according to the vesting schedule for employee share option.

As of March 31, 2018, total unrecognized compensation expense relating to unvested share options was $26,068,663, which will be recognized over 3.84 years. The weighted-average remaining contractual term of options outstanding is 9.84 years.

 

11. COMMITMENTS

Lease commitment

The Group leases certain office premises under non-cancelable leases. Rental expense under operating leases for the three-month periods ended March 31, 2017 and 2018 was $83,020 and $312,956, respectively.

Future minimum lease payments under non-cancelable operating leases agreements are as follows:

 

April to December 2018

   $ 1,047,025  

2019

     1,194,827  

2020

     810,827  

2021

     129,616  
  

 

 

 

Total

   $ 3,182,295  
  

 

 

 

 

12. RELATED PARTY BALANCES AND TRANSACTIONS

The table below sets forth major related parties and their relationships with the Group:

 

Company name

  

Relationship with the Group

P1’s holding in Tantan Limited

   Ordinary shareholder

P1 Capital Limited

   Under control of the Company’s CEO

CBNB Investment Limited

   Under control of the Company’s CEO

Singularity Capital Investment Co. Ltd. (“Singularity”)

   One of Singularity’s board of director has significant influence over the Company.


TANTAN LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2018

(In U.S. dollars, except shares data, or otherwise noted)

 

12. RELATED PARTY BALANCES AND TRANSACTIONS - continued

 

Details of related party balances and transactions as of December 31, 2017 and March 31, 2018 are as follows:

 

  (i) Amounts due from related parties

 

     As of
December 31,
     As of
March 31,
 
     2017      2018  

CBNB Investment Limited

   $ 3,942      $ 4,949  
  

 

 

    

 

 

 

Total

   $ 3,942      $ 4,949  
  

 

 

    

 

 

 

 

  (ii) Amounts due to related parties

 

     As of
December 31,
     As of
March 31,
 
     2017      2018  

P1 Capital Limited (Note 1)

   $ 64,992      $ 48,722  
  

 

 

    

 

 

 

Total

   $ 64,992      $ 48,722  
  

 

 

    

 

 

 

 

Note 1: The balance as of December 31, 2017 and March 31, 2018 represents payable for technical consulting services and marketing services provided by P1 Capital Limited.

 

  (iii) Purchase from related parties

 

     For the Three-month periods
Ended March 31,
 
     2017      2018  

P1 Capital Limited (Note 1)

   $ 197,654      $ 145,301  

Singularity Capital Investment Co. Ltd.

     1,089        —    
  

 

 

    

 

 

 

Total

   $ 198,743      $ 145,301  
  

 

 

    

 

 

 

 

Note 1:   The purchase from P1 Capital Limited is mainly related to consulting services.

 

13. EMPLOYEE BENEFIT PLAN

Full time employees of the Company in the PRC participate in a government-mandated defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. The Company accrues for these benefits based on certain percentages of the employees’ salaries. The total contribution for such employee benefits was $239,784 and $685,259 for the three-month periods ended March 31, 2017 and 2018, respectively.

 

14. SUBSEQUENT EVENT

The Company has evaluated all events subsequent to the balance sheet date of March 31, 2018 through June 25, 2018, the issuance date of these unaudited condensed consolidated financial statements.

Newly issued share options

In April, 2018, the Company granted 198,867 share options to its employees and executives with an exercise price ranging from $0.01 to $1.6 per share and with the vesting period of 4 years. The Company is in the process of completing its valuation related to those options granted.


TANTAN LIMITED

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - continued

FOR THE THREE-MONTH PERIODS ENDED MARCH 31, 2017 AND 2018

(In U.S. dollars, except shares data, or otherwise noted)

 

14. SUBSEQUENT EVENT - continued

 

Claim with Match Group, LLC (“Match”)

In May 2018, the Group settled a claim brought by Match in the Western District of Texas alleging various breaches by the Group of Match’s intellectual property relating to its mobile-dating apps. Pursuant to the settlement, the Group agreed to make certain royalty payments linked to the size of the Group’s average annual monthly activer users and redesign its application used in the United States. The total royalty payments is estimated to be immaterial.