falseFY00017332982131715true2020-012020-01Cayman IslandsBritish Virgin Islands (“BVI”)For the year ended December 31, 2019, 2020 and 2021, the service fee of RMB473.2 million, RMB250.9 million and RMB39.8 million charged to related parties represents advertising and marketing services provided to companies under the common control of the founder, to help promote these companies’ online applications, which were developed in late 2018. As of December 31, 2020 and 2021, the amounts due from related parties that pertains to accounts receivable from related party revenues generated was RMB368.5 million and RMB246.5 million respectively. Out of the accounts receivable from related parties of RMB259.9 million as of December 31, 2021, a total of RMB204.0 million of the balance is overdue. A majority amount of RMB185.9 million of the overdue balance was collected as of this report date. Although the overdue receivables were settled after the due date, and the settlement of the remaining receivables may still be after the due date, as these companies are under the common control of the founder and they have demonstrated an ability to continuously pay off their balances, the Company did not view this delay in payment as a sign of collectability risk. For the revenue recognized in 2021, payments have not been received as the balances as of December 31, 2021 are still within the nine to twelve months payment terms and expect to be settled within the payment terms. As of December 31, 2020, in addition to accounts receivable from revenues generated there was also RMB15.1 million which was a fee that the Company prepaid to a related party to place advertisements on behalf of their customers on the related party platform. The balances are settled and recorded as cost of revenues as the advertisement services are provided, and the prepayment was fully utilized during 2021.In 2019 the Group entered into CPM (cost per impression) arrangements with media platforms under the common control of the founder for the Group’s customer’s advertisement placement. The total service fee charged from related parties amounted to RMB35.6 million, RMB29.2 million and RMB103.3 million for the years ended December 31, 2019, 2021 and 2021, respectively.In July 2019, the Company invested RMB3.0 million in a game developing company which the founder’s controlled entity has significant influence in. The investment was measured using the measurement alternative recorded at cost less any impairment since it does not have a readily determinable fair value. The investment was fully impaired as of December 31, 2021 (Note 6). In 2019 the Group entered into a game cooperation agreement with this company and the Group is the principal in the arrangement. The total service fee represents the amount paid to this company in relation to the arrangement.For the years ended December 31, 2019, 2020 and 2021, the service fee charged from related parties represented the expense charged from companies under common control of the founder which provided the Group advertising and marketing related promotion services.The Company borrowed an interest free loan of RMB13.0 million from an entity under common control of the founder in December 2020. The loan was repaid in the first quarter of 2021.The Company’s investments in non-marketable equity securities primarily consist of an investment in an equity fund (see below) and small, non-controlling investments in companies for which the Company has equity ownership with preferential rights but cannot exert significant influence. During 2021, equity securities of RMB8.0 million without readily determinable fair value were either disposed or impaired and had nil carrying value as of December 31, 2021. During the first quarter of 2020, the Company subscribed to shares of an equity fund as a limited partner, with an initial cost of RMB106.0 million. The investment in the fund is nonredeemable for two years after the subscription date and the directors of the fund can extend the non-redemption period for another two years. The investment is measured under the NAV practical expedient. Unrealized losses of RMB54.4 million and RMB1.2 million was recorded in investment income (loss) in the consolidated statements of comprehensive loss for the years ended December 31, 2020 and 2021, respectively. 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Table of Contents
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
 
FORM 20-F
 
 
(Mark One)
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
 
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021
OR
 
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
 
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of event requiring this shell company report
                            
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. 8, Shanghai Pudong Software Park
519 Yi De Road, Pudong New Area
Shanghai 200124
People’s Republic of China
(Address of principal executive offices)
Mr. Xiaolu Zhu, 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
American Depositary Shares, every two representing five Class A ordinary shares
 
QTT
 
NASDAQ Global Select Market
Class A Ordinary Shares, par value US$0.0001 per share*
 
N/A
 
NASDAQ Global Select Market
 
*
Not for trading, but only in connection with the listing on the NASDAQ Global Select Market of American depositary shares.
Securities registered or to be registered pursuant to Section 12(g)
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report
.
43,920,018 Class A ordinary shares were outstanding as of December 31, 2021
32,937,193 Class B ordinary shares were outstanding as of December 31, 2021
 
 
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.  
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      No
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court    ☐  Yes    ☐  No
 
 
 

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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., Anhui Zhangduan Internet Technology Co., Ltd., Beijing Churun Technology Co., Ltd., Hubei Rapid Information Technology Co., Ltd., and Huaian Beixia Information 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 RMB6.3726 to US$1.00, the exchange rate set forth in the H.10 statistical release of the Federal Reserve Board on December 30, 2021. 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.
 
1

Table of Contents
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, 2019, 2020 and 2021, and as of December 31, 2020 and December 31, 2021.
Our ADSs are listed on the NASDAQ Global Select Market under the symbol “QTT.”
 
2

Table of Contents
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, including its expectations regarding the impact of the
COVID-19
pandemic on the Group’s business, 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.
 
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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 Cayman Islands holding company 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 of 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.
 
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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 may affect our ability to maintain our listing on NASDAQ. 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 three consecutive years beginning in 2021, the SEC shall prohibit our ADSs from being traded on a national securities exchange or in the over-the-counter trading market in the United States. As stated in its report dated December 16, 2021, the PCAOB has 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. As a result, our ADSs may be prohibited from trading or delisted under the HFCAA. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment. See “—D. Risks Factors—Risks Relating to Doing Business in China—Our ADSs will be prohibited from trading in the United States under the Holding Foreign Companies Accountable Act, or the HFCAA, in 2024 if the PCAOB is unable to inspect or fully investigate auditors located in China, or 2023 if proposed changes to the law are enacted. The delisting of our ADSs, or the threat of their being delisted, may materially and adversely affect the value of your investment.”
 
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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.”
 
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Table of Contents
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, 2019, 2020 and 2021, respectively.
 
    
Year ended December 31,
 
    
2019
    
2020
    
2021
 
    
(RMB in thousands)
 
Cash paid by the Group VIEs to our subsidiaries under service agreements
     —          (297,510      (756,962
Cash received by the Group VIEs from our subsidiaries under service agreements
     67,419        —          188,798  
Cash received by the Group VIEs from our subsidiaries for intra-Group financing
     2,859,506        462,233        137,515  
For the years ended December 31, 2019, 2020 and 2021, 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, 2019, 2020 and 2021, 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 of 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.”
 
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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, 2019
 
    
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       10,126       5,559,954       —         5,570,081  
Intra-Group revenues (2)
     —         —         35,648       67,419       (103,067     —    
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total revenues
     —         1       45,774       5,627,373       (103,067     5,570,081  
Cost of revenues:
            
Third-party cost of revenues
     —         (561     (124,439     (1,515,632     —         (1,640,632
Intra-Group cost of revenues (2)
     —         —         (67,419     (35,648     103,067       —    
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total cost of revenues
     —         (561     (191,858     (1,551,280     103,067       (1,640,632
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Gross profit
     —         (560     (146,084     4,076,093       —         3,929,449  
Operating expenses:
            
Third-party operating expenses (1)
     (287,027     (15,412     (91,299     (6,561,213     271,978       (6,682,973
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total operating expenses
     (287,027     (15,412     (91,299     (6,561,213     271,978       (6,682,973
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Other operating income/(expense)
     —         —         19,211       11,081       —         30,292  
Loss from Operations
     (287,027     (15,972     (218,172     (2,474,039     271,978       (2,723,232
Non-operating
income/(expense)
     17,393       3,796       7,831       9,787       —         38,807  
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Loss before income tax expense
     (269,634     (12,176     (210,341     (2,464,252     271,978       (2,684,425
Income tax benefits/expense
     —         —         (32     (4,811     —         (4,843
Loss from subsidiaries and VIEs (1)
     (2,419,047     (2,679,436     (2,469,063     —         7,567,546       —    
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net Loss
     (2,688,681     (2,691,612     (2,679,436     (2,469,063     7,839,524       (2,689,268
Less: Net loss attributable to the noncontrolling interest shareholders
     —         587       —         —         —         587  
Net loss attributable to Qutoutiao Inc.
     (2,688,681     (2,691,025     (2,679,436     (2,469,063     7,839,524       (2,688,681
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Accretion to convertible redeemable preferred shares redemption value
     (20,548     —         —         —         —         (20,548
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net loss attributable to Qutoutiao Inc.’s ordinary shareholders
     (2,709,229     (2,691,025     (2,679,436     (2,469,063     7,839,524       (2,709,229
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
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Table of Contents
    
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       1,105,116  
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
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
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Table of Contents
    
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
  
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
Note:
 
(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:
 
10

Table of Contents
    
As of 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)
 
ASSETS
                                                
Current assets:
                                                
Cash and cash equivalents
     1,933       360,232       120,226       12,084       —         494,475  
Restricted cash
     —         —         36,000       64,316       —         100,316  
Short-term investments
     —         36,186       256,497       98,350       —         391,033  
Accounts receivable, net
     —         —         —         737,789       —         737,789  
Amount due from related parties
     —         —         15,129       368,465       —         383,594  
Prepaid and other current assets
     3,619       737       29,866       330,887       —         365,109  
Intra-Group receivables due from the Company’s
subsidiaries (1)
     3,612,625       428,696       5,160,614       1,173,053       (10,374,988     —    
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total current assets
     3,618,177       825,851       5,618,332       2,784,944       (10,374,988     2,472,316  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Noncurrent assets:
                                                
Account receivables,
non-current
     —         —         —         54,639       —         54,639  
Property and equipment, net
     —         —         252       16,961       —         17,213  
Right-of-use
assets, net
     —         —         2,210       48,109       —         50,319  
Intangible assets
     —         —         75,302       7,821       —         83,123  
Goodwill
     —         —         7,268       —         —         7,268  
Long-term Investments
     27,589       47,300       —         8,000       —         82,889  
Other non-current
assets
     4,266       —         —         143,825       —         148,091  
Investment in subsidiaries and VIEs (2)
     —         87,915       —         —         (87,915     —    
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total noncurrent assets
     31,855       135,215       85,032       279,355       (87,915     443,542  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total assets
     3,650,032       961,066       5,703,364       3,064,299       (10,462,903     2,915,858  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
LIABILITIES
                                                
Current liabilities:
                                                
Short-term borrowings
     —         —         20,000       50,000       —         70,000  
Loan from a related party
     —         13,050       —         —         —         13,050  
Accounts payable
     —         —         49,123       399,858       —         448,981  
Amount due to related parties
     —         —         5,132       4,295       —         9,427  
Registered users’ loyalty payable
     —         6,447       —         66,180       —         72,627  
Advance from advertising customers and deferred revenue
     —         —         —         140,776       —         140,776  
Salary and welfare payable
     —         221       34,176       115,307       —         149,704  
Tax payable
     —         —         (1,653     98,797       —         97,144  
Lease liabilities, current
     —         —         730       20,030       —         20,760  
Accrued liabilities related to users’ loyalty program
     —         —         —         100,088       —         100,088  
Accrued liabilities and other current liabilities
     2,512       3,158       150,307       607,456       —         763,433  
Convertible Loan—current
     —         —         —         —         —         —    
Intra-Group payables due to the Company’s subsidiaries (1)
     153,504       3,444,919       1,349,764       5,426,801       (10,374,988     —    
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total current liabilities
     156,016       3,467,795       1,607,579       7,029,588       (10,374,988     1,885,990  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Lease liabilities,
non-current
     —         —         222       23,534       —         23,756  
Convertible Loan
     1,174,868       —         —         —         —         1,174,868  
Other non current liabilities
     4,256       —         —         —         —         4,256  
Deferred tax liabilities
     —         —         18,825       —         —         18,825  
Deficit of investment in subsidiaries and VIEs (2)
     3,595,666       —         3,988,823       —         (7,584,489     —    
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total long-term liabilities
     4,774,790       —         4,007,870       23,534       (7,584,489     1,221,705  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities
     4,930,806       3,467,795       5,615,449       7,053,122       (17,959,477     3,107,695  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Commitments and contingencies
                                                
Mezzanine equity
                                                
Redeemable
non-controlling
interests
     —         1,093,526       —         —         —         1,093,526  
SHAREHOLDERS’ deficit
                                                
Total Qutoutiao Inc. shareholders’ deficit
     (1,280,774     (3,595,666     87,915       (3,988,823     7,496,574       (1,280,774
Noncontrolling interest
     —         (4,589     —         —         —         (4,589
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total shareholders’ deficit (2)
     (1,280,774     (3,600,255     87,915       (3,988,823     7,496,574       (1,285,363
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Total liabilities and shareholders’ deficit
     3,650,032       961,066       5,703,364       3,064,299       (10,462,903     2,915,858  
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
11

Table of Contents
   
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  
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
 
Note:
 
(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.
 
12

Table of Contents
(2)
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.
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, 2019
 
    
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
     39,183       (14,695     458,381       (2,850,164     —         (2,367,295
Net cash provided by/(used in) transactions with intra-Group entities
     —         —         (67,419     67,419       —         —    
    
 
 
   
 
 
   
 
 
   
 
 
   
 
 
   
 
 
 
Net cash provided by/(used in) operating activities
  
 
39,183
 
 
 
(14,695
 
 
390,962
 
 
 
(2,782,745
    —      
 
(2,367,295
Cash flows from investing activities:
                                                
Net cash provided by/(used in) transactions with external parties
     (526,853     (463,917     (172,836     (60,546     —         (1,224,152
Cash used in capital contribution to intra-Group entities
     —         (348,818