6-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16 UNDER

THE SECURITIES EXCHANGE ACT OF 1934

For the month of December 2020

Commission File Number: 001-38665

COOTEK (CAYMAN) INC.

9F, T2 Building, NO.16, Lane 399, Xinlong Road

Shanghai, 201101

People’s Republic of China
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ⌧ Form 40-F ◻

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ◻

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ◻

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	COOTEK (CAYMAN) INC.
	By:	/s/ Karl Kan Zhang
		Name:	Karl Kan Zhang
		Title:	Chairman of the Board of Directors and Chief Technology Officer
Date : December 15, 2020

EXHIBIT INDEX

Exhibit Number	Description
99.1	Unaudited Condensed Consolidated Financial Statements for the Nine Months Ended September 30, 2020
99.2	Management’s Discussion and Analysis of Financial Condition and Results of Operations for the Nine Months Ended September 30, 2020
99.3	Risk Factors
99.4	Earnings Release
101.INS	Inline XBRL Instance Document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document

EX-99.1

Exhibit 99.1

INDEX TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Page
Unaudited Condensed Consolidated Balance Sheets as of December 31, 2019 and September 30, 2020	F-2
Unaudited Condensed Consolidated Statements of Operations for the nine months ended September 30, 2019 and 2020	F-3
Unaudited Condensed Consolidated Statements of Comprehensive Loss for the nine months ended September 30, 2019 and 2020	F-4
Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2019 and 2020	F-5
Unaudited Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2020	F-6
Notes to the Unaudited Condensed Consolidated Financial Statements	F-7

F-1

COOTEK (CAYMAN) INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

		As of December 31,	As of September 30,
	Note	2019	2020
		US$	US$
ASSETS
Current assets:
Cash and cash equivalents		59,905,827	58,478,376
Restricted cash		60,204	60,209
Short-term investments		571,508	550,025
Accounts receivable, net of allowance for doubtful accounts of US $1,774,192 and US $1,961,728 as of December 31, 2019 and September 30, 2020, respectively	3	27,254,634	29,083,216
Prepaid expenses and other current assets	4	7,847,794	10,764,181
Total current assets		95,639,967	98,936,007
Long term restricted cash		—	2,472,998
Property and equipment, net	5	5,669,849	5,597,148
Intangible assets, net		267,736	419,343
Long-term investments		—	146,841
Other non-current assets		259,108	756,507
TOTAL ASSETS		101,836,660	108,328,844
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities (including amounts of the consolidated VIEs without recourse to the Company. See Note 2(b)):
Accounts payable		37,877,800	64,805,107
Short-term bank borrowings	6	9,012,645	14,822,161
Accrued salary and benefits		5,598,425	7,747,460
Accrued expenses and other current liabilities	7	5,955,956	10,215,400
Deferred revenue		3,887,908	4,697,267
Total current liabilities		62,332,734	102,287,395
Other non-current liabilities		595,563	493,467
TOTAL LIABILITIES		62,928,297	102,780,862
Commitments and contingencies	13
Shareholders' equity:
Class A ordinary shares (US$0.00001 par value; 13,750,000,000 shares authorized as of December 31, 2019 and September 30, 2020; 2,880,056,332 and 2,844,418,332 shares issued as of December 31, 2019 and September 30, 2020, respectively; 2,870,119,332 and 2,818,991,432 shares outstanding as of December 31, 2019 and September 30, 2020, respectively)		28,800	28,444
Class B ordinary shares (US$0.00001 par value; 250,000,000 shares authorized； 246,224,465 shares issued and outstanding as of December 31, 2019 and September 30, 2020)		2,462	2,462
Treasury shares (9,937,000 and 25,426,900 shares as of December 31, 2019 and September 30, 2020, respectively)	10	(1,063,547)	(3,322,668)
Additional paid-in capital		194,971,827	192,375,859
Accumulated deficit		(153,598,346)	(182,181,327)
Accumulated other comprehensive loss		(1,432,833)	(1,354,788)
Total Shareholders' Equity		38,908,363	5,547,982
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		101,836,660	108,328,844

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

F-2

COOTEK (CAYMAN) INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

		For the nine months ended September 30,
	Note	2019	2020
		US$	US$
Net revenues		108,899,479	339,065,455
Cost of revenue (including share-based compensation of US$65,858 and US$198,402 in the nine months ended September 30, 2019 and 2020, respectively)		(11,435,005)	(17,056,483)
Gross profit		97,464,474	322,008,972
Operating expenses:
General and administrative expenses (including share-based compensation of US$434,790 and US$1,281,380 in the nine months ended September 30, 2019 and 2020, respectively)		(13,504,075)	(11,144,938)
Research and development expenses (including share-based compensation of US$2,564,606 and US$2,157,990 in the nine months ended September 30, 2019 and 2020, respectively)		(21,197,631)	(23,153,735)
Sales and marketing expenses (including share-based compensation of US$151,444 and US$168,727 in the nine months ended September 30, 2019 and 2020, respectively)		(93,533,363)	(316,276,383)
Other operating income (loss), net	8	228,302	(227,540)
Total operating expenses		(128,006,767)	(350,802,596)
Loss from operations		(30,542,293)	(28,793,624)
Interest income, net		708,370	227,348
Foreign exchange losses, net		(364,545)	(13,505)
Loss before income taxes		(30,198,468)	(28,579,781)
Income tax expense	9	(1,714)	(3,200)
Net Loss attributable to ordinary shareholders		(30,200,182)	(28,582,981)
Net Loss per ordinary share:	12
Basic		(0.01)	(0.01)
Diluted		(0.01)	(0.01)
Net Loss per ADS (each of ADS represents 50 Class A ordinary shares):
Basic		(0.48)	(0.46)
Diluted		(0.48)	(0.46)
Weighted average shares used in calculating net loss per ordinary share:
Basic		3,163,501,054	3,086,630,271
Diluted		3,163,501,054	3,086,630,271

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

F-3

COOTEK (CAYMAN) INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

	For the nine months ended September 30,
	2019	2020
	US$	US$
Net Loss	(30,200,182)	(28,582,981)
Other comprehensive (loss) income
Foreign currency translation adjustments, net of tax of nil	(220,513)	78,045
Comprehensive Loss	(30,420,695)	(28,504,936)

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

F-4

COOTEK (CAYMAN) INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

									Accumulated
							Additional		other	Total
	Class A		Class B				paid-in	Accumulated	comprehensive	shareholders'
	Ordinary shares		Ordinary shares		Treasury shares		capital	deficit	(loss) income	equity
	Shares	US$	Shares	US$	Shares	US$	US$	US$	US$	US$
Balance at January 1, 2019	2,949,757,236	29,498	246,224,465	2,462	15,550,500	(2,499,167)	204,701,187	(116,752,285)	(1,158,900)	84,322,795
Net Loss	—	—	—	—	—	—	—	(30,200,182)	—	(30,200,182)
Foreign currency translation adjustments	—	—	—	—	—	—	—	—	(220,513)	(220,513)
Share-based compensation	—	—	—	—	—	—	3,216,698	—	—	3,216,698
Repurchase of ordinary shares	—	—	—	—	56,461,100	(9,741,378)	—	—	—	(9,741,378)
Cancellation of treasury shares	(32,268,350)	(323)	—	—	(32,268,350)	5,737,950	(5,737,627)	—	—	—
Exercise of share options	8,330,150	84	—	—	—	—	277,838	—	—	277,922
Issuance of ordinary shares upon vesting of restricted shares	9,397,592	95	—	—	—	—	(95)	—	—	—
Balance at September 30, 2019	2,935,216,628	29,354	246,224,465	2,462	39,743,250	(6,502,595)	202,458,001	(146,952,467)	(1,379,413)	47,655,342
Balance at January 1, 2020	2,880,056,332	28,800	246,224,465	2,462	9,937,000	(1,063,547)	194,971,827	(153,598,346)	(1,432,833)	38,908,363
Net Loss	—	—	—	—	—	—	—	(28,582,981)	—	(28,582,981)
Foreign currency translation adjustments	—	—	—	—	—	—	—	—	78,045	78,045
Share-based compensation	—	—	—	—	—	—	3,806,499	—	—	3,806,499
Repurchase of ordinary shares	—	—	—	—	64,770,700	(8,130,513)	—	—	—	(8,130,513)
Cash settlement on vested share options and restricted shares	—	—	—	—	—	—	(823,226)	—	—	(823,226)
Cancellation of treasury shares	(49,280,800)	(492)	—	—	(49,280,800)	5,871,392	(5,870,900)	—	—	—
Exercise of share options	9,415,600	94	—	—	—	—	291,701	—	—	291,795
Issuance of ordinary shares upon vesting of restricted shares	4,227,200	42	—	—	—	—	(42)	—	—	—
Balance at September 30, 2020	2,844,418,332	28,444	246,224,465	2,462	25,426,900	(3,322,668)	192,375,859	(182,181,327)	(1,354,788)	5,547,982

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

F-5

COOTEK (CAYMAN) INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the nine months ended September 30,
	2019	2020
	US$	US$
Cash flows from operating activities:
Net Loss	(30,200,182)	(28,582,981)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	2,096,190	2,738,487
Provision for allowance of doubtful accounts	4,665,322	322,361
Share-based compensation	3,216,698	3,806,499
Loss on disposal of property and equipment	91	15,124
Changes in assets and liabilities:
Accounts receivable	(370,877)	(1,404,021)
Prepaid expenses and other current assets	(1,612,532)	(3,421,313)
Other non-current assets	238,762	(506,082)
Accounts payable	3,146,856	24,826,554
Accrued salary and benefits	(544,028)	1,578,215
Accrued expenses and other current liabilities	507,323	4,592,654
Deferred revenue	242,373	2,105,852
Other non-current liabilities	(285,690)	(102,097)
Net cash (used in) provided by operating activities	(18,899,694)	5,969,252
Cash flows from investing activities:
Purchases of property, equipment and intangible assets	(4,097,269)	(2,237,794)
Purchases of short-term investments	—	(13,000,000)
Maturity of short-term investments	—	13,022,268
Purchases of long-term investments	—	(146,841)
Net cash (used in) investing activities	(4,097,269)	(2,362,367)
Cash flows from financing activities:
Proceeds from short-term bank borrowings	5,040,813	15,240,004
Repayment of short-term bank borrowings	—	(9,515,198)
Proceeds from issuance of ordinary shares upon exercise of share options	277,922	291,795
Cash paid to settle vested share options and restricted shares	—	(823,226)
Cash paid for deferred issuance costs	(809,952)	—
Payments of share repurchases	(9,741,378)	(8,130,513)
Net cash (used in) financing activities	(5,232,595)	(2,937,138)
Net (decrease) increase in cash, cash equivalents, and restricted cash	(28,229,558)	669,747
Cash, cash equivalents, and restricted cash at beginning of period	84,859,915	59,966,031
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(360,608)	375,805
Cash, cash equivalents, and restricted cash at end of period	56,269,749	61,011,583
Supplemental disclosure of cash flow information:
Income taxes paid	1,714	3,200
Interest paid	42,691	417,882
Supplemental disclosure of noncash investing and financing activities:
Purchases of property and equipment included in payables	54,814	224,410
Reconciliation in amounts on consolidated balance sheets:
Cash and cash equivalents	56,269,749	58,478,376
Restricted cash	—	2,533,207
Total cash, cash equivalents, and restricted cash	56,269,749	61,011,583

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

F-6

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Principal Activities

CooTek (Cayman) Inc. (the "Company") was incorporated in the Cayman Islands on March 5, 2012. The Company, its subsidiaries, its consolidated Variable Interest Entities ("VIEs") and VIEs’ subsidiaries (collectively referred to as the "Group") are a fast-growing mobile internet company with a global vision, offering mobile applications including a portfolio of content-rich mobile applications.

History of the Group and reorganization

The Group’s history began in August 2008 with the commencement of operations of Shanghai Han Xiang (CooTek) Information Technology Co., Ltd ("Han Xiang"), a limited liability company incorporated in the People’s Republic of China ("PRC") by certain individuals. In October 2010, three outside investors acquired an aggregate of 24.24% equity interest of Han Xiang. In 2012, Han Xiang and its shareholders undertook a reorganization which was conducted to establish a Cayman holding company for the existing business to obtain investment from outside investors and in preparation of an overseas initial public offering. The Group has recognized the net assets of Han Xiang on a historical cost with no change in basis in the consolidated financial statements upon the completion of the reorganization. The shareholders’ rights and obligations remained the same after the reorganization.

On October 2, 2018 the Group completed its initial public offering ("IPO") and issued 4,350,000 American depositary shares representing 217,500,000 of the Group’s ordinary shares. Net proceeds from the IPO after deducting underwriting discount and offering costs were US$45.1 million.

2. Summary of Significant Accounting Policies

(a)   Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC"), regarding interim financial reporting, and include all normal and recurring adjustments that management of the Group considers necessary for a fair presentation of its financial position and operating results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these financial statements should be read in conjunction with the Group’s annual consolidated financial statements and notes thereto, included in the Company’s 2019 Annual Report on Form 20-F filed with the SEC on April 20, 2020, referred to as the Company’s 2019 Annual Report.

(b)   Principles of Consolidation

The consolidated financial statements include the financial information of the Company, its wholly owned subsidiaries, its consolidated VIEs and VIEs’ subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Applicable PRC laws and regulations currently limit foreign ownership of companies that provide internet content distribution services and any other restrictions. The Company is deemed a foreign legal person under PRC laws and accordingly subsidiaries owned by the Company are not eligible to engage in provisions of internet content or online services. The Group therefore conducts its online business through the following major consolidated VIEs:

● Shanghai Chu Bao (CooTek) Information Technology Co., Ltd. ("Chu Bao")

● Yingsun Information Technology (Ningbo) Co., Ltd. ("Yingsun")

● Shanghai Qiaohan Technology Co., Ltd. ("Qiaohan")

● Molihong (Shenzhen) Internet Technology Co., Ltd. ("Molihong")

● Shanghai Dengyong Information Technology Co., Ltd. ("Dengyong")

F-7

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

(b)   Principles of Consolidation (Continued)

The following consolidated financial statement balances and amounts of the Group’s VIEs were included in the accompanying unaudited condensed consolidated financial statements after the elimination of intercompany balances and transactions among the Company, its subsidiaries and its VIEs.

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
ASSETS
Cash and cash equivalents	13,714,304	23,294,883
Restricted cash	203	209
Short-term investments	21,502	—
Accounts receivable, net	21,582,641	23,473,397
Prepaid expense and other assets	3,643,649	8,569,904
Long term restricted cash	—	2,472,998
Long-term investments	—	146,841
Property and equipment, net	496	9,231
Intangible assets, net	47,122	61,020
Other non-current assets	—	2,131
Total Assets	39,009,917	58,030,614
LIABILITIES
Accounts payable	35,002,827	57,304,063
Short-term bank borrowings	408,264	256,697
Accrued salary and benefits	275,091	604,020
Accrued expenses and other current liabilities	1,385,303	3,696,308
Deferred revenue	3,658,808	1,928,241
Total Liabilities	40,730,293	63,789,329

	For the nine months ended September 30,
	2019	2020
	US$	US$
Net revenues	38,276,479	299,205,121
Loss from operations	(18,841,315)	(94,447)
Net (loss) income	(18,823,768)	150,325
Net cash (used in) provide by operating activities	(6,560,184)	18,000,288
Net cash used in investing activities	—	(201,320)
Net cash provided by (used in) financing activities	44,315	(179,412)

The VIEs’ assets are comprised of recognized and unrecognized revenue-producing assets. The recognized revenue producing assets mainly include purchased servers and software, which are presented in the account of "Property and equipment, net" and "Intangible assets, net". The unrecognized revenue-producing assets mainly consist of the Internet Content Provider license ("ICP" license), trademarks, copyrights and registered patents, which are not recognized in the consolidated balance sheets.

Revenues of VIEs included in the consolidated financial statements mainly include revenue of advertising services. The VIEs contributed 35% and 88% of the Group’s consolidated net revenues for the nine months ended September 30, 2019 and 2020, respectively. As of December 31, 2019 and September 30, 2020, the VIEs accounted for an aggregate of 38% and 54% respectively, of the consolidated total assets, and 65% and 62% respectively, of the consolidated total liabilities.

F-8

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

(b)   Principles of Consolidation (Continued)

There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs were ever to need financial support, the Group may, at its option and subject to statutory limits and restrictions, provide financial support to its VIE through loans to the shareholders of the VIEs.

The Group believes that there are no assets held in the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and the PRC statutory reserves. As the VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs. Relevant PRC laws and regulations restrict the VIEs from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends.

(c)   Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group's financial statements including but not limited to allowance for doubtful accounts, valuation allowances of deferred tax assets, and valuation of share-based compensation. Actual results may differ materially from those estimates.

(d)   Fair Value

Fair value reflects the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the assets or liabilities.

The Group applies a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This guidance specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:

● Level 1— Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.

● Level 2— Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques.

● Level 3— Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Group’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair value guidance describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

F-9

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

(d)   Fair Value (Continued)

When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates.

Beginning January 1, 2019, the Group’s equity investments without readily determinable fair values, which do not qualify for NAV practical expedient and over which the Group does not have the ability to exercise significant influence through the investments in common stock or in substance common stock, are accounted for under the measurement alternative upon the adoption of Accounting Standards Update ("ASU") 2016-01 Recognition and Measurement of Financial Assets and Liabilities (the "Measurement Alternative"). Under the Measurement Alternative, the carrying value is measured at cost, less any impairment, plus and minus changes resulting from observable price changes in orderly transactions for identical or similar investments. After management’s assessment of each of the long-term investments, management concluded that investments do not have readily determinable fair values, and elects the measurement alternative.

Financial instruments not reported at fair value include cash and cash equivalents, restricted cash, short-term investments, accounts receivable, accounts payable, other current liabilities and short-term bank borrowings. The carrying amounts of these financial instruments as of December 31, 2019 and September 30, 2020 were considered representative of their fair values due to their short-term nature.

(e)   Foreign Currency Translation

The functional currency of the Group is the United States Dollar ("US$"). The functional currency of the subsidiaries and the VIEs in the PRC is Renminbi ("RMB"). The functional currency of all the other subsidiaries is US$.

Foreign currency transactions have been translated into the functional currency at the exchange rates prevailing on the date of transactions. Foreign currency denominated monetary assets and liabilities are re-measured into the functional currency at exchange rates prevailing on the balance sheet date. Exchange gains and losses have been included in the determination of net income.

The Group has chosen the US$ as its reporting currency. Assets and liabilities have been translated using exchange rates prevailing on the balance sheet date. Equity accounts are translated at historical exchange rates. Income statement items have been translated using the average exchange rate for the year. Translation adjustments have been reported as cumulative translation adjustments and are shown as a component of other comprehensive income/loss in the consolidated statements of comprehensive (loss) income and consolidated statements of changes in shareholders’ equity.

(f)   Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash on hand, demand deposits and floating rate financial instruments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased.

The Group's current-portion restrict cash represents amounts held in Group's bank account as guarantee deposit for payments processing services provided by the bank.

Certain bank accounts were frozen by the PRC local authority in connection with an ongoing investigation of alleged misconducts of third-party advertisers perpetrated on the Group's advertising platform. As of September 30, 2020, cash held in these frozen bank accounts amounted to US$2,472,998. These funds are presented as long-term restricted cash on the consolidated balance sheet as of September 30, 2020 as the Group cannot control the timing of its release. In October 2020, an additional US$18.4 million was deposited into these frozen bank accounts. The Group is still in the process of cooperating with the relevant authority on such investigation and expect the funds to be released upon the completion of such investigation.

(g)   Short-term Investments

Short-term investments primarily comprises of the time deposits with banks maturities between three months and one year. The Group states the short-term investments at amortized cost.

F-10

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

(h)   Revenue Recognition

Mobile Advertising

The Group generates substantially all of its revenue through mobile advertising. As of January 1, 2019, the Group adopted ASU 2014-09 Revenue from Contracts with Customers - Topic 606 and all subsequent ASUs that modified ASC 606. The Group has elected to apply the ASU and all related ASUs under the modified retrospective method to all contracts that were not completed as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Group did not note any effects of applying the new revenue standard as an adjustment to the opening balance of retained earnings at the beginning of 2019.

In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

The Group provides advertising services to customers for promotion of their brands and products through its mobile applications, including a portfolio of content-rich mobile applications. The Group has two general pricing models for its advertising products: cost over a time period and cost for performance basis including per impression basis. For advertising contracts over a time period, the Group generally recognizes revenue ratably over time, because the customer simultaneously receives and consumes the benefits as the Group performs throughout a fixed contract term. For contracts that are charged on the cost for performance basis, the Group charges an agreed-upon fee to its customers determined based on the effectiveness of advertising links, which is typically measured by clicks, transactions, installations, user registrations, and other actions originating from the Group’s mobile applications. Revenue is recognized at a point in time when there is an effective click, transaction, installations, user registrations, and other actions originating from the Group’s mobile applications. For contracts that are charged on the cost per impression basis, the Group recognizes the revenue at a point in time when the impressions are delivered. Revenue for performance-based advertising services is recognized at a point in time when all the revenue recognition criteria are met.

The Group launched in-house developed advertising platform, CooTek Ads, to provide tailored advertising services from late 2019. Customers engaged through CooTek Ads are required to pay a deposit before using Group's services. The deposits received are recorded as deferred revenue on the consolidated balance sheets. The amounts due to the Group are deducted from the deposited amounts when performance criteria have been satisfied.

Others

The Group also generates other revenues through cloud call business, licensing of its Smart Inputs products and membership fee from the users. The revenue is recognized when service is rendered.

F-11

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

(h) Revenue Recognition (Continued)

Sales Incentives

The Group provides sales incentives to certain customers on the CooTek Ads in the form of sales rebates which entitle them to receive reductions in the price by meeting certain cumulative consumption requirement or replenishing required amount of deposit. The Group accounts for these incentives granted to customers as variable consideration and records it as reduction of revenue. The amount of variable consideration is measured based on the most likely amount of incentives to be. For the nine months ended September 30, 2019 and 2020, the rebates recorded by the Group were nil and US$48,491,685, respectively.

Disaggregation of Revenue

In the following table, revenue is disaggregated by revenue streams and geographic location of customers’ headquarters.

	For the nine months ended September 30,
	2019	2020
	US$	US$
Revenue:
Advertising revenue	106,575,374	337,037,822
Other revenue	2,324,105	2,027,633
Total	108,899,479	339,065,455

	For the nine months ended September 30,
	2019	2020
	US$	US$
USA	51,314,113	11,161,631
PRC	55,423,779	325,246,386
Others	2,161,587	2,657,438
Total	108,899,479	339,065,455

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced, and revenue recognized prior to invoicing when the Group has satisfied its performance obligations and has the unconditional right to payment.

F-12

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

(h) Revenue Recognition (Continued)

Contract liabilities include payments received in advance of performance under the contract or for differences between the amount billed to a customer and the revenue recognized for the completed performance obligation which is presented as deferred revenue on the consolidated balance sheets. Due to the generally short-term duration of the Group’s contracts, the majority of the performance obligations are satisfied in one year. The movements of the Group’s accounts receivable and deferred revenue are as follows:

	Accounts Receivable	Deferred Revenue
	US$	US$
Opening Balance at January 1, 2019	23,373,969	344,361
(Decrease) Increase, net	(3,966,005)	239,404
Ending Balance at September 30, 2019	19,407,964	583,765
Opening Balance at January 1, 2020	27,254,634	3,887,908
Increase, net	1,828,582	809,359
Ending Balance at September 30, 2020	29,083,216	4,697,267

The Group recognized revenue of US$263,383 and US$3,637,328 by the reducing the balance of deferred revenue in the nine months ended September 30, 2019 and 2020, respectively, which were included in the balance of deferred revenue at the beginning of the each period.

(i)   Sales and Marketing Expenses

Sales and marketing expenses primarily consist of advertising expenses, salaries and benefits of sales and marketing personnel and fees paid to mobile device manufacturers to pre-install the Group’s Smart Input products. Advertising expenses represent payment to the third parties for online user acquisition of the Group’s products via social media and demand-side platforms. Advertising expenses are expensed as sales and marketing expenses when the services are received. Such expenses amounted to US$86,189,395 and US$310,602,100 for the nine months ended September 30, 2019 and 2020, respectively.

(j)   Concentration and Risks

Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, short-term investments, accounts receivable and prepayments. The Group places its cash and cash equivalents and short-term investments with financial institutions with high-credit ratings and quality. The Group conducts credit evaluations of customers, and generally does not require collateral or other security from its customers. The Group establishes an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. With respect to prepayments, the Group performs on-going credit evaluations of the financial condition of these suppliers and has noted no significant credit risk.

F-13

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

(j)   Concentration and Risks (Continued)

Concentration of Customers

The following customers accounted for 10% or more of revenue:

	For the nine months ended September 30,
	2019			2020
	US$	%		US$	%
Company A	21,335,698	20	%	*	*
Company B	21,731,172	20	%	*	*
Company C	11,088,217	10	%	*	*
Company D	16,873,890	16	%	*	*
Company E	*	*		91,588,390	27	%

The following customers accounted for 10% or more of accounts receivable:

	As of December 31,			As of September 30,
	2019			2020
	US$	%		US$	%
Company B	17,944,840	62	%	*	*
Company C	4,142,638	14	%	*	*
Company D	3,840,005	13	%	*	*
Company E	*	*		12,354,156	40	%
Company F	*	*		9,824,384	32	%

Concentration of Vendors

The Group uses certain vendors to acquire users and those cost are recorded as sales and marketing expenses. Vendors accounted for 10% or more are listed as below:

	For the nine months ended September 30,
	2019			2020
	US$	%		US$	%
Company G	11,080,305	12	%	*	*
Company H	10,853,930	12	%	*	*
Company I	*	*		41,804,056	13	%

The following vendors accounted for 10% or more of accounts payable:

	As of December 31,		As of September 30,
	2019		2020
	US$	%	US$	%
Company H	*	*	8,433,642	13	%
Company J	*	*	7,378,433	11	%

* Less than 10%.

F-14

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

(j)   Concentration and Risks (Continued)

Business and Economic Risks

The Group participates in the dynamic and competitive high technology industry and believes that changes in any of the following areas could have a material adverse effect on the Group's future financial position, results of operations and cash flows: changes in the overall demand for services and products; competitive pressures due to existing and new entrants; advances and new trends in new technologies and industry standards; changes in certain strategic relationships or customer relationships; regulatory considerations; copyright regulations; brand maintenance and enhancement; and risks associated with the Company's ability to attract and retain employees necessary to support its growth.

The Group's operations could be adversely affected by significant political, economic and social uncertainties in the PRC.

Foreign Currency Risk

The RMB is not a freely convertible currency. The State Administration for Foreign Exchange in the PRC, under the authority of the Peoples Bank of China, controls the conversion of RMB into other currencies. The value of the RMB is subject to changes in central government policies, international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. The Group's cash and cash equivalents and restricted cash denominated in RMB amounted to RMB139,905,845 (amounted to US$20,054,735) and RMB292,519,950 (amounted to US$42,953,841) as of December 31, 2019 and September 30, 2020, respectively.

(k)  Recent Accounting Pronouncements

New accounting pronouncements recently adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which changes certain disclosure requirements, including those related to Level 3 fair value measurements. The provisions of ASU 2018-13 relating to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The remaining provisions should be applied retrospectively to all periods presented upon their effective date. The Group has adopted this ASU on January 1, 2020, which did not have a material impact on its unaudited condensed consolidated financial statements and related disclosures.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. Under the new guidance, to determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportionate basis, rather than in their entirety. ASU 2018-17 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted in any interim period. ASU 2018-17 is required to be applied retrospectively from the date the guidance is first applied. The Group has early adopted this ASU on January 1, 2020 and did not have a material impact on its unaudited condensed consolidated financial statements and related disclosures.

F-15

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. Summary of Significant Accounting Policies (Continued)

(l)  Recent Accounting Pronouncements (Continued)

New accounting pronouncements not yet adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on balance sheet and disclose key information about lease arrangements. The new standard establishes a right-of-use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with terms of longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The standard is effective on January 1, 2019, with early adoption permitted, for public business entity ("PBE"). And it is effective on January 1, 2020 for non-issuers and PBEs that meet the definition of a PBE solely because their financial statements or financial information is included in a filing with the SEC. In July 2018, the FASB issued an update that provided an additional transition option that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the consolidated financial statements. Companies that elect this option would record a cumulative-effect adjustment to the opening balance of retained earnings on the date of adoption. In November 19, 2019, the FASB issued ASU 2019-10 to amend the effective date for ASU 2016-02 to be January 1, 2021 for non-issuers. The Group as an EGC has elected to adopt the new lease standard as of the effective date applicable to nonissuers and will implement the new lease standard on January 1, 2021 using the modified retrospective method. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. In addition, the Group will elect the transition practical referred to as the "package of three", that must be taken together and allows entities to (1) not reassess whether existing contracts contain leases, (2) carryforward the existing lease classification, and (3) not reassess initial direct costs associated with existing leases. The Group is in the process of evaluating the impact on its consolidated financial statements, as well as the impact of adoption on policies, practices, systems and financial statement disclosures. As of September 30, 2020, the Group has US$2.9 million of future minimum operating lease commitments that are not currently recognized on its consolidated balance sheets (see note 13).

In June 2016, the FASB issued ASU 2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments. This ASU provides more useful information about expected credit losses to financial statement users and changes how entities will measure credit losses on financial instruments and timing of when such losses should be recognized. This ASU is effective for annual and interim periods beginning after December 15, 2019 for the public business entities. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, and interim periods therein. In November 2019, the FASB issued ASU No. 2019-10 which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the U.S. Securities and Exchange Commission) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. The Company is currently assessing the impact the guidance will have on its consolidated financial statements.

3. Accounts Receivable, net

Accounts receivable, net, consisted of the following:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Accounts receivable	29,028,826	31,044,944
Allowance for doubtful accounts:
Balance at beginning of the year/period	(1,286,120)	(1,774,192)
Additions charged to bad debt expense	(4,104,458)	(322,361)
Write-off	3,616,076	141,266
Foreign exchange effect	310	(6,441)
Balance at end of the year/period	(1,774,192)	(1,961,728)
Accounts receivable, net	27,254,634	29,083,216

F-16

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Value added tax recoverable	3,750,491	4,649,736
Other receivables	1,575,467	3,856,326
Advance to suppliers	1,545,793	952,760
Others	976,043	1,305,359
Prepaid expenses and other current assets	7,847,794	10,764,181

5. Property and Equipment, net

Property and equipment, net, consisted of the following:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Electronic equipment	9,622,184	12,045,523
Office equipment and furniture	334,452	346,181
Motor vehicles	82,470	82,470
Leasehold improvements	1,410,105	1,561,612
Construction in progress	76,200	—
Total	11,525,411	14,035,786
Less: Accumulated depreciation	(5,855,562)	(8,438,638)
Property and equipment, net	5,669,849	5,597,148

For the nine months ended September 30, 2019 and 2020 depreciation expenses were US$2,077,516 and US$2,656,359, respectively.

6. Short-term Bank Borrowings

The Group’s bank borrowings consisted of the following:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Short-term borrowings	9,012,645	14,822,161

In July 2016, the Group entered into a credit facility agreement with a commercial bank under which the Group can draw-down up to US$6.0 million by October, 2018. In October 2019, the Group renewed the bank credit facility under which the Group can borrow up to US$6.0 million collateralized by its accounts receivable by October, 2020. In 2019, the Group has aggregately drawn down the credit facility of US$7.7 million and repaid US$1.9 million. The weighted average interest rate for borrowings drawn under such credit facility was 5.53% for the year ended December 31, 2019. In June 2020, the Group renewed the bank credit facility under which the Group can borrow up to US$11.0 million collateralized by its accounts receivable by June 2021. The interest rate for this credit facility is the LPR base interest rate plus 1.30%. For the nine months ended September 30, 2020, the Group has aggregately drawn down the credit facility of US$11.1million and repaid US$6.3 million, and the weighted average interest rate for borrowings drawn under such credit facility was 5.15%. The loan contains maximum quarterly net loss as financial covenants which the Group failed to fulfill as of September 30, 2020. The Group is negotiating for the waiver of the financial covenants with the bank.

F-17

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. Short-term Bank Borrowings (Continued)

In July 2018, the Group entered into a credit facility agreement with a commercial bank under which the Group can draw-down up to US$4.0 million by July, 2019. In October 2019, the Group renewed the bank credit facility under which the Group can borrow up to US$4.0 million collateralized by its accounts receivable by October 2020. In 2019, the Group has aggregately drawn down the credit facility of US$6.4 million and repaid US$3.2 million. The weighted average interest rate for borrowings drawn under such credit facility was 6.12% for the year ended December 31, 2019. In June 2020, the Group renewed the bank credit facility under which the Group can borrow up to US$4.0 million collateralized by its accounts receivable by June 2021. The interest rate for this credit facility is Libor plus 3.5%, determined on the draw-down date. For the nine months ended September 30, 2020, the Group has aggregately drawn down the credit facility of US$4 million and repaid US$3.2million, and the weighted average interest rate for borrowings drawn under such credit facility was 3.84%. The loan contains maximum quarterly net loss as financial covenants which the Group failed to fulfill as of September 30, 2020. The Group is negotiating for the waiver of the financial covenants with the bank.

As of September 30, 2020, the Group has fully utilized the credit facility.

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Other tax payables (Note 1)	3,239,430	4,564,615
Accrued expenses (Note 2)	2,106,993	4,665,599
Others	609,533	985,186
Total	5,955,956	10,215,400

Note 1: Other tax payables as of September 30, 2020, mainly consisted of value-added tax payable of US$4.6 million and other taxes such as individual income tax and stamp duty tax.

Note 2: Accrued expenses mainly consisted of accrued professional service fees and other miscellaneous accrued marketing and operation expenses.

8. Other Operating Income (Loss), net

Other operating loss, net for the nine months ended September 30, 2020, primarily consisted of government subsidies received by the Group, compensation payment of US$1.6 million to victims of alleged misconducts of certain third-party advertisers perpetrated on the Group's platform that the Group deposited to an escrow account controlled by a local authority conducting investigation on the advertisers and contingent liabilities for intellectual property infringement and unfair competition lawsuits during operations. Other operating income, net for the nine months ended September 30, 2019, primarily consisted of government subsidies received by the Group and contingent liabilities for intellectual property infringement lawsuit during operations.

F-18

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

9. Income Taxes Expense

The current and deferred portion of income tax expenses included in the consolidated statements of operations are as follows:

	For the nine months ended September 30,
	2019	2020
Current tax expenses	1,714	3,200
Deferred tax benefits	—	—
Total	1,714	3,200

The Group’s effective tax rates were nil for the nine months ended September 30, 2019 and 2020, respectively.

The Group recorded a full valuation allowance against deferred tax assets of all its consolidated entities because all entities were in a cumulative loss position as of December 31, 2019 and September 30, 2020. No unrecognized tax benefits and related interest and penalties were recorded in any of the periods presented.

10. Treasury Shares

Treasury shares represent shares repurchased by the Group that are no longer outstanding and are held by the Group. For the nine months ended September 30, 2020, under the repurchase plan, the Group had repurchased an aggregate of 64,770,700 ordinary shares on the open market for a total cash consideration of US$8,130,513, which were accounted for as the cost of the treasury shares.

As of September 30, 2020, 135,205,550 treasury shares have been cancelled.

11. Share-Based Compensation

Share Options

The options have a contractual term of ten years. The vesting date starts on the grant date or the commencement date of a participant’s employment agreement. The options vest 20% on each of the five anniversary dates of the vesting date and upon continued employment. In the event of termination of a participant’s employment, the unvested options shall be terminated immediately. The participant’s right to exercise the vested options shall be terminated 2 or 3 months after the termination of the employment.

The Group uses the binomial option pricing model and the following assumptions to estimate the fair value of the options at the date of granted:

		Nine Months ended
	Year ended December 31	September 30
	2019	2020
Average risk-free rate of interest	1.67%	0.67%
Expected volatility	42.50%-43.22%	43.18%-43.38%
Dividend yield	0%	0%
Contractual term	10 years	10 years
Fair value of the underlying shares on the date of option grants	0.09-0.10	0.10-0.13

On November 6, 2018, the Board of Directors approved an option modification to reduce the exercise price of certain options granted to employees. All other terms of the share options granted remain unchanged. The modification resulted in incremental compensation cost of US$285,661, of which US$68,530 and US$42,867 was recorded during the nine months ended September 30, 2019 and the nine months ended September 30, 2020, respectively. The remaining US$141,977 will be amortized over the remaining vesting period of the modified options, ranging from the remaining of 2020 to 2021.

F-19

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Share-Based Compensation (Continued)

Share Options (Continued)

The risk-free rate of interest is based on the US Treasury yield curve as of valuation date. Volatility is estimated based on annualized standard deviation of daily stock price return of comparable companies for the period before valuation date and with similar span as the expected expiration term. The Group has never declared or paid any cash dividends on its capital stock, and the Group does not anticipate any dividend payments in the foreseeable future.

A summary of the aggregate option activity and information regarding options outstanding as of September 30, 2020 is as follows:

		Weighted
	Number of	average exercise
	options	price
		US$
Outstanding on January 1, 2020	160,800,982	0.05
Granted	145,572,500	0.0002
Forfeited	(7,108,508)	0.03
Expired	—	—
Exercised	(15,220,000)	0.04
Outstanding on September 30, 2020	284,044,974	0.02
Options exercisable on September 30, 2020	128,681,130	0.05
Vested or expected to vest as of September 30, 2020	284,044,974	0.02

The weighted average grant date fair values of options granted during the nine months ended September 30, 2019 and the nine months ended September 30, 2020 were US$0.10 and US$0.10, respectively.

For the nine months ended September 30, 2020, 15,220,000 of options were exercised with an aggregate intrinsic value of US$944,105. For the nine months ended September 30, 2019, 8,330,150 of options were exercised with an aggregate intrinsic value of US$545,013.

For the nine months ended September 30, 2019 and 2020 excluding the incremental compensation cost resulted from the modification discussed above, the Group recognized share-based compensation expense of US$439,601 and US$2,292,252, respectively. As of September 30, 2020, there was US$12,686,969 in total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 3.28 years.

Restricted Share Units

In the nine months ended September 30, 2020, the Group granted to certain employees 1,578,500 Restricted Share Units ("RSUs"). The RSUs have a contractual term of ten years and vest 25% on each anniversary over four years from the grant date. The vesting of these RSUs is conditioned on continued employment. Compensation expense based on fair value is amortized over the requisite service period of award using the straight line vesting attribution method.

F-20

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

11. Share-Based Compensation (Continued)

Restricted Share Units (Continued)

A summary of the RSUs activity for the nine months ended September 30, 2020 is as follows:

		Weighted average
	Number of	grant date
	restricted shares	fair value
Unvested restricted shares outstanding at January 1, 2020	50,725,912	0.20
Granted	1,578,500	0.10
Vested	(11,331,332)	0.22
Forfeited	(11,779,000)	0.17
Unvested restricted shares outstanding at September 30, 2020	29,194,080	0.19
Expected to vest at September 30, 2020	29,194,080	0.19

The share-based compensation expense related to RSUs of US$2,708,567 and US$1,471,380 were recognized by the Group for the nine months ended September 30, 2019 and 2020, respectively.

As of September 30, 2020, there was US$4,477,292 in unrecognized compensation costs, net of actual forfeitures, related to unvested restricted shares, which is expected to be recognized over a weighted-average period of 2.30 years.

In June 2020, the Group cash settled certain vested share options and RSUs at fair value amounted to US$823,226. Given the transaction is an one-time transaction, negotiated after the award is vested, and not pursuant to a pre-existing right of the Group, the Group accounted for it as a repurchase of equity with amount of cash paid recorded as additional paid in capital.

12. Net Loss Per Share

Net loss per share was computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding for the nine months ended September 30, 2019 and 2020:

	For the nine months ended September 30,
	2019	2020
	US$	US$
Numerator:
Net loss—basic and diluted	(30,200,182)	(28,582,981)
Net loss attributable to ordinary shareholders	(30,200,182)	(28,582,981)
Shares (Denominator):
Weighted average number of ordinary shares outstanding
Basic	3,163,501,054	3,086,630,271
Diluted	3,163,501,054	3,086,630,271
Net loss earnings per share—basic and diluted	(0.01)	(0.01)

F-21

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Net Loss Per Share (Continued)

As a result of the Group’s net loss for the nine months ended September 30, 2019 and 2020, diluted net loss per share does not include the following instruments as their inclusion would be antidilutive:

	For the nine months ended September 30,
	2019	2020
Share options	160,139,359	284,044,974
Restricted shares units	60,108,963	29,194,080
Total	220,248,322	313,239,054

13. Commitments and Contingencies

Lease Commitments

The Group leases certain office premises under operating leases. The term of each lease agreement vary and may contain renewal options. Rental payments under operating leases are charged to operating expenses on a straight-line basis over the period of the lease based on contract terms. Rental expenses under operating leases for the nine months ended September 30, 2019 and 2020 were US$1,338,427, and US$1,096,762, respectively.

Future lease payments under operating leases as of September 30, 2020 were as follows:

Year ending December 31	US$
The remaining of 2020	494,753
2021	1,590,357
2022	741,411
2023	60,455
Total	2,886,976

The Group did not have other significant capital commitments or significant guarantees as of December 31, 2019 and September 30, 2020, respectively.

Contingencies

From time to time, the Group is a party to various legal actions arising in the ordinary course of business. The Group accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Group's management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have a material adverse impact on the Group's consolidated financial position, results of operations and cash flows.

14. Segment Information

The Group has only one reportable segment since the Group does not distinguish revenues, costs and expenses between segments in its internal reporting, and reports costs and expenses by nature as a whole.

The Group’s chief operating decision maker, who has been identified as the Chief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole. The Group does not distinguish among markets or segments for the purpose of internal reports.

F-22

COOTEK (CAYMAN) INC.

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)

14. Segment Information (Continued)

Information about the Group’s non-current assets is presented based on the geographical location of the assets as follows:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
PRC	2,655,953	4,258,416
USA	3,540,740	2,661,423
Total	6,196,693	6,919,839

15. Subsequent Event

Pursuant to the repurchase shares program announced on May 18, 2020, 5,486,350 shares (equivalent to 109,727 ADSs) of the Group’s Class A ordinary shares were purchased from October 1, 2020 through December 14, 2020 for a total cash consideration of US$0.5 million from the public market.

F-23

EX-99.2

Exhibit 99.2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

This management’s discussion and analysis is designed to provide you with a narrative explanation of our financial condition and results of operations for the nine months ended September 30, 2019 and 2020. This section should be read in conjunction with our unaudited condensed consolidated financial statements for the nine-month periods ended September 30, 2019 and 2020 and related notes thereto, or the Unaudited Condensed Consolidated Financial Statements, included as Exhibit 99.1 to the report on Form 6-K to which this discussion is included. We also recommend that you read our management’s discussion and analysis and our audited consolidated financial statements for fiscal year 2019, and the notes thereto, which appear in our annual report on Form 20-F for the year ended December 31, 2019, or the Annual Report, filed with the U.S. Securities and Exchange Commission, or the SEC.

Unless otherwise indicated or the context otherwise requires, all references to “our company,” “we,” “our,” “ours,” “us” or similar terms refer to CooTek (Cayman) Inc., its subsidiaries and its consolidated affiliated entities, as the context requires; all references to "VIEs" refer to Shanghai Chubao (CooTek) Information Technology Co., Ltd., Shanghai Hanxiang (CooTek) Information Technology Co., Ltd. and two other domestic companies; all references to “DAUs” refer to the number of active users of our products during a given day; and all references to “MAUs” refer to the number of active users of our products during a given month. For each individual product, we treat each mobile device on which at least one of the following actions is taken during a given day or month as one active user for that day or month: (1) activating or launching such product, (2) logging in with the user account for such product, or (3) any other actions that result in a successful network access to our services through such product. The DAUs of multiple products during a given day is the sum of active users of each such product for that day, and the MAUs of multiple products during a given month is the sum of active users of each such product for that month. "Average daily reading time" for any day is calculated by dividing (1) the sum of time spent on reading books on our Fengdu Novel for such day, by (2) the number of Fengdu Novel users who spent time on reading books for such day. "Average daily reading time" for any month is calculated by dividing (1) the sum of average daily reading time for each day in such month, by (2) the number of days in such month.

All such financial statements were prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. We have made rounding adjustments to some of the figures included in this management’s discussion and analysis. Accordingly, numerical figures shown as totals in some tables may not be an arithmetic aggregation of the figures that precede them. This discussion contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors.

Key Operating Metrics

We regularly review several key operating metrics to evaluate our business and measure our performance.

Average DAUs of our portfolio products were 27.7 million in September 2020, representing a 16% increase from 23.9 million in September 2019. Our portfolio products mainly focus on three categories: online literature, scenario-based content apps and casual games. Average DAUs of our online literature were 10.0 million in September 2020, representing a significant increase from 2.0 million in September 2019. The key product of our online literature apps is Fengdu Novel (originally known as Crazy Reading Novel). The average daily reading time of Fengdu Novel’s users was approximately 130 minutes in September 2020.

Average DAUs and MAUs of our TouchPal Smart Input were 130.0 million and 169.4 million, respectively, in September 2020.

The following table sets forth the average DAUs and MAUs of our portfolio products with the average DAUs and MAUs of online literature separately presented for each of the months indicated.

	For the Month Ended,
	Mar 31, 2019	Jun 30, 2019	Sep 30, 2019	Dec 31, 2019	Mar 30, 2020	Jun 30, 2020	Sep 30, 2020
	(in millions)
Portfolio Products
DAUs	23.1	27.6	23.9	24.7	25.2	23.9	27.7
MAUs	59.8	65.1	67.5	74.6	89.2	83.5	94.8
Including:
Online Literature
DAUs	0.3	0.3	2.0	4.8	7.3	8.1	10.0
MAUs	0.9	1.6	11.0	19.3	29.1	28.4	29.5

Results of Operations

The following table sets forth a summary of our consolidated statements of comprehensive loss, both in absolute amount and as a percentage of our net revenues, for the periods indicated. This information has been derived from and should be read together with our Unaudited Condensed Consolidated Financial Statements. The results of operations in any period are not necessarily indicative of the results that may be expected for any future period.

	For the Nine Months Ended September 30,
	2019			2020
	US$	%		US$	%
Net revenues:
Advertising revenue	106,575,374	97.9	%	337,037,822	99.4	%
Other revenue	2,324,105	2.1	%	2,027,633	0.6	%
Total net revenues	108,899,479	100.0	%	339,065,455	100.0	%
Cost of revenues(1)	(11,435,005)	(10.5)	%	(17,056,483)	(5.0)	%
Gross profit	97,464,474	89.5	%	322,008,972	95.0	%
Operating expenses:
Sales and marketing expenses(1)	(93,533,363)	(85.9)	%	(316,276,383)	(93.3)	%
Research and development expenses(1)	(21,197,631)	(19.5)	%	(23,153,735)	(6.8)	%
General and administrative expenses(1)	(13,504,075)	(12.4)	%	(11,144,938)	(3.3)	%
Other operating income (loss), net	228,302	0.2	%	(227,540)	(0.1)	%

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Total operating expenses	(128,006,767)	(117.6)	%	(350,802,596)	(103.5)	%
Loss from operation	(30,542,293)	(28.1)	%	(28,793,624)	(8.5)	%
Interest income, net	708,370	0.7	%	227,348	0.1	%
Foreign exchange losses, net	(364,545)	(0.3)	%	(13,505)	0.0	%
Loss before income taxes	(30,198,468)	(27.7)	%	(28,579,781)	(8.4)	%
Income tax expense	(1,714)	0.0	%	(3,200)	0.0	%
Net loss	(30,200,182)	(27.7)	%	(28,582,981)	(8.4)	%
Net loss per ordinary share:
Basic	(0.01)			(0.01)
Diluted	(0.01)			(0.01)
Weighted average shares used in calculating net loss per ordinary share:
Basic	3,163,501,054			3,086,630,271
Diluted	3,163,501,054			3,086,630,271

(1) Share-based compensation was allocated in costs of revenues and operating expenses as follows.

	For the Nine Months Ended September 30,
	2019	2020
	US$	US$
Cost of revenues	65,858	198,402
Sales and marketing expense	151,444	168,727
Research and development expenses	2,564,606	2,157,990
General and administrative expenses	434,790	1,281,380
Total	3,216,698	3,806,499

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2020

Net Revenues. Our net revenues increased significantly from US$108.9 million in the nine months ended September 30, 2019 to US$339.1 million in the nine months ended September 30, 2020, primarily due to an increase in mobile advertising revenue.

· Mobile Advertising Revenue. Our mobile advertising revenue increased significantly from US$106.6 million in the nine months ended September 30, 2019 to US$337.0 million in the nine months ended September 30, 2020. The increase was driven primarily by our strategic transition to the content-rich portfolio products offering and entertainment content ecosystem which have contributed to the increases in our user base and number of our portfolio products. Fengdu Novel, our key product in China, ranked third in terms of MAUs in free online literature market in China according to Quest Mobile, a professional business intelligence services provider in China’s mobile internet market. Our portfolio products contributed approximately 99% of our total net revenues in the nine months ended September 30, 2020,compared to approximately 77% in the nine months ended September 30, 2019. Among our portfolio products, online literature accounted for approximately 35% of our total net revenues in the nine months ended September 30, 2020, scenario-based content apps accounted for approximately 24%, and casual games accounted for approximately 40%.

· Other Revenues. We generate other revenues through cloud call business, licensing of our TouchPal Smart Input and membership fee from the users. Our other revenues decreased by 12.8% from US$2.3 million in the nine months ended September 30, 2019 to US$2.0 million in the nine months ended September 30, 2020, primarily due to the decrease in cloud call business as a result of our shift in business focus to portfolio products.

Cost of Revenues. Our cost of revenues increased by 49.2% from US$11.4 million in the nine months ended September 30, 2019 to US$17.1 million in the nine months ended September 30, 2020,

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primarily due to an increase in our content costs paid to freelancers and third-party content distributors and IT infrastructure, bandwidth and server costs and maintenance costs, all of which were generally in line with our continuous business growth, and partially offset by a decrease in VoIP-related expenses.

Gross Profit. As a result of the foregoing, our gross profit increased significantly from US$97.5 million in the nine months ended September 30, 2019 to US$322.0 million in the nine months ended September 30, 2020, primarily due to the rise in revenues.

Operating Expenses. Our total operating expenses increased significantly from US$128.0 million in the nine months ended September 30, 2019 to US$350.8 million in the nine months ended September 30, 2020.

· Sales and marketing expenses. Our sales and marketing expenses increased significantly from US$93.5 million in the nine months ended September 30, 2019 to US$316.3 million in the nine months ended September 30, 2020, primarily due to increased investment in user acquisition in connection with our continuous efforts to grow the user base.

· Research and development expenses. Our research and development expenses increased by 9.2% from US$21.2 million in the nine months ended September 30, 2019 to US$23.2 million in the nine months ended September 30, 2020, primarily due to an increase in costs associated with technology R&D staff and share-based compensation expenses which reflected our continuous efforts in improving our big data analytics and expand our product offerings.

· General and administrative expenses. Our general and administrative expenses decreased by 17.5% from US$13.5 million in the nine months ended September 30, 2019 to US$11.1 million in the nine months ended September 30, 2020, primarily due to the decrease in bad debt provision.

· Other operating income/ loss, net. We recorded other operating loss, net of US$0.2 million in the nine months ended September 30, 2020, which primarily consisted of government subsidies of US$1.7 million, compensation payment of US$1.6 million to victims of alleged misconducts of certain third-party advertisers perpetrated on our platform that we deposited to an escrow account controlled by a local authority conducting investigation on the advertisers and contingent liabilities for intellectual property infringement and unfair competition lawsuits during the ordinary course of business. We recorded other operating income, net of US$0.2 million in the nine months ended September 30, 2019, which, primarily consisted of government subsidies of US$0.3 million and contingent liabilities for intellectual property infringement lawsuit during the ordinary course of business.

Loss from operations. As a result of the foregoing, we recorded loss from operations of US$30.5 million and US$28.8 million in the nine months ended September 30, 2019 and 2020, respectively.

Interest income, net. We had interest income of US$0.7 million and US$0.2 million in the nine months ended September 30, 2019 and 2020, respectively. Interest income represents interest earned on our cash, cash equivalents and restricted cash, net of the interest expenses primarily related to our bank borrowings.

Foreign exchange losses, net. We incurred foreign exchange losses of US$0.4 million and US$13,505 in the nine months ended September 30, 2019 and 2020, respectively, which primarily represents costs incurred on foreign exchange conversion.

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Income tax expense. We recorded income tax expense of US$1,714 and US$3,200 in the nine months ended September 30, 2019 and 2020, respectively.

Net loss. As a result of the foregoing, we recorded net loss of US$30.2 million and US$28.6 million in the nine months ended September 30, 2019 and 2020, respectively.

Liquidity and Capital Resources

Historically, we have financed our operations primarily through funding from private issuances of preferred shares, loans from commercial banks and our initial public offering. As of September 30, 2019 and 2020, we had US$56.3 million and US$61.0 million in cash, cash equivalents and restricted cash, respectively. Our cash and cash equivalents consist of cash on hand, demand deposits and floating rate financial instruments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased. Our restricted cash represents amounts held in our bank account as guarantee deposit for payments processing services provided by the bank and amounts held in our bank accounts which were frozen by the PRC local authority in connection with an ongoing investigation of alleged misconducts of third-party advertisers conducted on our advertising platform. As of December 11, 2020, US$20.9 million out of total US$49.7 million bank balance was frozen and not available for use due to the ongoing investigation. We are still in the process of cooperating with the relevant authority on such investigation and expect the funds to be released upon the completion of such investigation, the timing of which is out of our control.

We had net loss of US$30.2 million and negative cash flows from operations of US$18.9 million for the nine months ended September 30, 2019. We had net loss of US$28.6 million and positive cash flows from operations of US$6.0 million for the nine months ended September 30, 2020. We had positive working capital, which equals the result of current assets minus current liabilities, of US$41.3 million as of September 30, 2019 and negative working capital of US$3.4 million as of September 30, 2020.

The total outstanding balance of our short-term bank borrowings as of September 30, 2020 was US$14.8 million. We have entered into the following short-term loan transactions, and fully utilized the credit facilities as of September 30, 2020.

· We entered into a credit facility agreement with a commercial bank initially in July 2016, which was renewed in October 2019 and further renewed in June 2020, under which agreement we can borrow up to US$11.0 million to be collateralized by our accounts receivable by June 2021. The loan contains maximum quarterly net loss as financial covenants which we failed to fulfill as of September 30, 2020. We are negotiating a waiver of the financial covenant with the bank.

· We entered into a credit facility agreement with a commercial bank initially in July 2018, which was renewed in October 2019 and further renewed in June 2020, under which agreement we can borrow up to US$4.0 million to be collateralized by our accounts receivable by June 2021. The loan contains maximum quarterly net loss as financial covenants which we failed to fulfill as of September 30, 2020. We are negotiating a waiver of the financial covenant with the bank.

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If we are not able to obtain the waiver, the short-term bank borrowings are subject to acceleration under the terms of the borrowing agreements.

While there can be no assurance that we will be able to refinance our short-term bank borrowings as they become due, we are negotiating for the waiver of the financial covenants with the bank, and historically, we have renewed or rolled over most of our short-term bank loans upon the maturity of such loans and believe we will continue to be able to do so. Meanwhile, we will seek additional credit facility with more financing banks. Additionally, we continue to monitor the daily expenditure regarding matters such as launching new products or upgrading existing products for experimental features, investing in R&D and IT infrastructure, spending in user acquisition and marketing expenses and determine the future business development plan when the necessary financial resources are available.

We believe that our current cash, cash equivalents and restricted cash, the available credit under our existing credit facilities, and our anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures in the ordinary course of business for the next 12 months. We may, however, need additional capital for business expansion in the future.

As of September 30, 2020, 71% of our cash, cash equivalents and restricted cash were held in China, among which 60% were held by our VIEs and denominated in Renminbi. Most of the remaining cash and cash equivalents we held as of September 30, 2020 were held in Hong Kong and mainly denominated in Hong Kong dollars and U.S. dollars. Although we consolidate the results of our VIEs, we only have access to the assets or earnings of our VIEs through our contractual arrangements with our VIEs and their shareholders.

To utilize the proceeds we received from our initial and any subsequent public offerings, we may make additional capital contributions to our PRC subsidiary, establish new PRC subsidiaries and make capital contributions to these new PRC subsidiaries, or make loans to the PRC subsidiaries. However, most of these uses are subject to PRC regulations. Foreign direct investment and loans must be approved by and/or registered with SAFE and its local branches. The total amount of loans we can make to our PRC subsidiary cannot exceed statutory limits and must be registered with the local counterpart of SAFE. The statutory limit for the total amount of foreign debts of a foreign-invested company is the difference between the amount of total investment as approved by the Ministry of Commerce or its local counterpart and the amount of registered capital of such foreign-invested company.

A portion of our future revenues are likely to continue to be in the form of Renminbi. Under existing PRC foreign exchange regulations, Renminbi may be converted into foreign exchange for current account items, including profit distributions, interest payments and trade-and service-related foreign exchange transactions without prior SAFE approval by following certain routine procedural requirements. However, current PRC regulations permit our PRC subsidiary to pay dividends to us only out of its accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. Our PRC subsidiary is required to set aside at least 10% of its after-tax profits after making up previous years’ accumulated losses each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of its registered capital. These reserves are not distributable as cash dividends.

The following table sets forth a summary of our cash flows for the periods indicated.

	For the Nine Months Ended September 30,
	2019	2020
	US$	US$
Net cash (used in)/ provided by operating activities	(18,899,694)	5,969,252
Net cash used in investing activities	(4,097,269)	(2,362,367)
Net cash used in financing activities	(5,232,595)	(2,937,138)
Net increase/ (decrease) in cash, cash equivalents, and restricted cash	(28,229,558)	669,747
Cash, cash equivalents, and restricted cash at the beginning of the period	84,859,915	59,966,031
Effect of exchange rate changes on cash, cash equivalents, and restricted cash	(360,608)	375,805
Cash, cash equivalents, and restricted cash at the end of the period	56,269,749	61,011,583

Operating Activities

Net cash provided by operating activities in the nine months ended September 30, 2020 was US$6.0 million, as compared to net loss of US$28.6 million in the same period. The difference was primarily due to the increase of US$26.9 million in accounts payable during the nine months ended September 30, 2020, driven primarily by the increase of our

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user acquisition costs. The principal non-cash items affecting the difference between our net loss and our net cash provided by operating activities primarily consisted of (1) US$3.8 million in share-based compensation expenses, (2) US$2.7 million in depreciation expenses, and (3) US$0.3 million in provision for allowance of doubtful accounts.

Net cash used in operating activities in the nine months ended September 30, 2019 was US$18.9 million, as compared to net loss of US$30.2 million in the same period. The difference was primarily due to the non-cash items, which primarily consisted of (1) US$4.7 million in provision for allowance of doubtful accounts, (2) US$3.2 million in share-based compensation expenses, and (3) US$2.1 million in depreciation expenses.

Investing Activities

Net cash used in investing activities in the nine months ended September 30, 2020 was US$2.4 million, primarily due to purchase of property, plant and equipment of US$2.2 million and purchases of long-term investments of US$0.1 million.

Net cash used in investing activities in the nine months ended September 30, 2019 was US$4.1 million, primarily due to purchase of property, plant and equipment of US$4.1 million.

Financing Activities

Net cash used in financing activities in the nine months ended September 30, 2020 was US$2.9 million, primarily due to payment of share repurchase of US$8.1 million and partially offset by the aggregate effect of proceeds from and repayment of bank borrowings of US$5.7 million.

Net cash used in financing activities in the nine months ended September 30, 2019 was US$5.2 million, primarily due to payment of share repurchase of US$9.7 million, and payment of issuance costs for the initial public offering of US$0.8 million and partially offset by proceeds from bank borrowings of US$5.0 million.

Capital Expenditures

We made capital expenditures of US$2.2 million and US$4.1 million in the nine months ended September 30, 2019 and 2020, respectively. In these periods, our capital expenditures were mainly used for purchases equipment, including servers and other IT equipment. We plan to continue to make capital expenditures to meet the needs that result from the expected growth of our business.

Off-balance Sheet Arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our

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shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.

Cautionary Statement Regarding Forward Looking Statements

We have made statements in this report that constitute forward-looking statements. Forward-looking statements involve risks and uncertainties, such as statements about our plans, objectives, expectations, assumptions or future events. In some cases, you can identify forward-looking statements by terminology such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “we believe,” “we intend,” “may,” “should,” “could” and similar expressions. These statements involve estimates, assumptions, known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from any future results, performances or achievements expressed or implied by the forward-looking statements.

Examples of forward-looking statements include:

· our mission and strategies;

· our future business development, financial conditions and results of operations;

· the expected growth of the mobile internet industry and mobile advertising industry;

· the expected growth of mobile advertising;

· our expectations regarding demand for and market acceptance of our products and services;

· competition in our industry; and

· relevant government policies and regulations relating to our industry.

The ultimate correctness of these forward-looking statements depends upon a number of known and unknown risks and events. Many factors could cause our actual results to differ materially from those expressed or implied in our forward-looking statements. Consequently, you should not place undue reliance on these forward-looking statements.

The forward-looking statements speak only as of the date on which they are made, and, except as required by law; we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. We undertake no obligation to update this forward-looking information. Nonetheless, we reserve the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

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EX-99.3

Exhibit 99.3

Risk Factors

This section includes material updates in certain risks relating to us since the date of our Annual Report, any of which we believe could materially and adversely affect our business, financial condition and results of operations. This section is a supplement to and should be read in conjunction with the section titled “Risk Factors” included in the Annual Report.

We have incurred net loss and negative cash flows from operating activities in the past, and we may not achieve or sustain profitability.

We recorded net loss of US$30.2 million and negative cash flows from operations of US$18.9 million for the nine months ended September 30, 2019. We recorded net loss of US$28.6 million and positive cash flows from operations of US$6.0 million for the nine months ended September 30, 2020. We cannot assure you that we will be able to generate net profit or positive cash flows from operating activities in the future. Our future revenue growth and profitability will depend on a variety of factors, many of which are beyond our control. These factors include market acceptance of our products, effectiveness of our monetization strategy, our ability to control cost and expenses and to manage our growth effectively, market competition, macroeconomic and regulatory environment. We also expect our cost and expenses to increase in the future as we continue to expand our operations and to increase our investments in research and development, which will place significant demands on our management and our operational and financial resources. Continuous expansion may increase the complexity of our business, and we may encounter various difficulties. We may fail to develop and improve our operational, financial and managerial controls, enhance our financial reporting systems and procedures, recruit, train and retain skilled professional personnel, or maintain customer satisfaction to effectively support and manage our growth. If we invest substantial time and resources to expand our operations but fail to manage the growth of our business and capitalize on our growth opportunities effectively, we may not be able to achieve profitability, and our business, financial condition, results of operations and prospects would be materially and adversely affected.

We are out of compliance with certain financial covenants in our credit facility agreements. If we fail to receive any required waiver, we may be in default, which could impose operating and financial restrictions on us.

We entered into two credit facility agreements with a commercial bank, both of which were further renewed in June 2020, under which we can borrow up to a total of US$15.0 million collateralized by our accounts receivable by June 2021. See “—Liquidity and Capital Resources.” In the nine months ended September 30, 2020, we had in the aggregate drawn down US$15.1 million and repaid US$9.5 million under these two credit facilities. The total outstanding balance of our short-term bank borrowings as of September 30, 2020 was US$14.8 million. These credit facility agreements contain financial covenants which require us to maintain a minimum net profit of US$1.00 on a consolidated basis in the three months ended September 30, 2020. We failed to meet such financial covenants as of September 30, 2020 and are negotiating a waiver of such financial covenants with the counterparty, which, if granted, will waive the financial covenants for such period.

We cannot assure you that we would be able to obtain such waivers in a timely manner, on acceptable terms or at all. If we were not able to obtain such waiver under any one or more of these credit facilities, we would be in default of such agreements, and the relevant counterparty could elect to declare the loans, together with accrued and unpaid interest and other fees, if any, immediately due and payable and proceed against any collateral securing such loans. If the loans under certain of our credit facility agreements that we entered into were to be accelerated, even though we believe that our assets would be sufficient to repay our loans in full, our business and liquidity could nevertheless be subject to adverse effects. In addition, such waiver, even if granted, may lead to increased costs, increased interest rates, additional restrictive covenants and other available counterparty protections that would be applicable to us under these credit facilities, including the granting of additional security our interests in collateral, which could adversely affect our business, financial condition, results of operations and our ability to acquire additional capital resources.

Our ability to comply with financial or other restrictive covenants under our credit facility agreements may be affected by factors beyond our control, including prevailing economic, financial and industry conditions, and our ability to issue additional equity. We may continue to fall out of compliance with such or other covenants in the future, which could materially and adversely affect our business, financial condition and results of operations.

Non-compliance on the part of third parties with whom we conduct business could disrupt our business and adversely affect our financial conditions and operating results.

We may be implicated by the non-compliant or improper activities of our users, advertising customers and business partners. For example, we may be involved in litigation related to user-generated content uploaded to our mobile applications. Similarly, we may also be subject to disputes related to advertisements displayed on our mobile applications. Although we have adopted a comprehensive internal control and screening procedure over the content of advertisements, a third party may find advertisements displaying on our mobile applications improper or illegal, and may take actions against us over such advertisements. As of December 11, 2020, bank accounts with a total balance of US$20.9 million were frozen by a local authority in connection with an ongoing investigation of alleged illegal advertisements posted by certain third-party advertisers on our platform. To facilitate the investigation, bank accounts through which our transactions with such advertisers took place were frozen by the local authority. In addition, we incurred costs of US$1.6 million to compensate victims of the alleged illegal advertisements for our failure to supervise advertising contents displayed on our platform in compliance with relevant PRC laws and regulations.

In addition, we may be impacted by lawsuits against our business partners, such as mobile devices manufacturers that have contractual arrangements with us. Although we have no control over the design, system, network or standard of the manufacturing of smartphones by these business partners, any lawsuits against them claiming infringement of intellectual property and any cessation of handset production resulting from such lawsuits may interrupt our collaborative operations and result in the reduction of our delivery of products and services to potential users.

EX-99.4

Exhibit 99.4

CooTek Announces Third Quarter 2020 Unaudited Results

SHANGHAI, China, December 15, 2020 – CooTek (Cayman) Inc. (NYSE: CTK) ("CooTek" or the "Company"), a fast-growing global mobile internet company, today reported unaudited financial results for the third quarter ended September 30, 2020.

Third Quarter 2020 Highlights

● Net revenue was US$105.7 million, an increase of 238% from US$31.3 million during the same period last year.

● Gross profit was US$98.9 million, an increase of 261% from US$27.4 million during the same period last year.

● Gross profit margin was 93.6%, an increase of 6% year-over-year.

● Net loss was US$22.0 million, compared with net loss of US$16.2 million during the same period last year.

● Adjusted net loss¹ (Non-GAAP) was US$20.5 million, compared with adjusted net loss (Non-GAAP) of US$15.4 million during the same period last year.

● The Company’s Portfolio Products² contributed approximately 99% of total revenues, with a focus on three main categories: online literature, scenario-based content apps, and casual games.

September 2020 Operational Highlights

● Average daily active users (“DAUs”) of the Company’s Portfolio Products were 27.7 million, an increase of 16% from 23.9 million in September 2019. Monthly active users (“MAUs”) of the Company’s Portfolio Products were 94.8 million, an increase of 40% from 67.5 million in September 2019.

● Average DAUs of the Company’s online literature products were 10.0 million, increased significantly from 2.0 million in September 2019. MAUs of the Company’s online literature products were 29.5 million, increased significantly from 11.0 million in September 2019. The average daily reading time³ of the key product Fengdu Novel users further increased to 130 minutes in September 2020 from 110 minutes in June 2020.

● Average DAUs of the Company’s TouchPal Smart Input were 130.0 million. MAUs of the Company’s TouchPal Smart Input were 169.4 million.

“I am pleased to report a resilient third quarter with revenue of US$105.7 million compared to US$31.3 million a year ago,” commented Mr. Karl Zhang, CooTek’s Chairman. “Driven by the strategic enhancement of our content ecosystem, we further upgraded and strengthened our core products aiming at delivering the sustainable business growth. We reinforced the market position of Fengdu Novel which ranked 3^rd in terms of MAUs in free online literature market in China⁴ with continuous growth in our user base. With its DAUs exceeding 10 million during the third quarter of 2020, Fengdu Novel constituted the core component of our content-rich portfolio with a strong emphasis on balancing its user expansion and user retention. We have been rapidly developing its customized content production model which contribute to its competitive user stickiness. Going forward, we will strive to further expand our content ecosystem by leveraging the core strength of Fengdu Novel and the growth synergy that we can achieve among the three main business segments of content-rich mobile apps.”

Mr. Robert Cui, CooTek’s CFO further commented, “Despite the growth pressure in global mobile internet advertising market, we still increased our revenue by 238% during the third quarter of 2020 compared to the same period in 2019. More importantly, we have witnessed solid growth in our online literature business in terms of its user base and revenue since the first quarter of 2019. We will continue to invest in the content and user expansion of Fengdu Novel by maintaining a reasonable return on investment level. We are convinced that our development strategy will result in building up a synergetic and diversified content ecosystem.”

(in millions)	Portfolio Products
	Portfolio Products		Including: Online literature
	DAUs	MAUs	DAUs	MAUs
Sep' 18	11.0	33.7	-	-
Dec' 18	16.9	46.1	-	-
Mar' 19	23.1	59.8	0.3	0.9
Jun' 19	27.6	65.1	0.3	1.6
Sep' 19	23.9	67.5	2.0	11.0
Dec' 19	24.7	74.6	4.8	19.3
Mar' 20	25.2	89.2	7.3	29.1
Jun' 20	23.9	83.5	8.1	28.4
Sep' 20	27.7	94.8	10.0	29.5

¹           “Adjusted net income (loss)” (Non-GAAP) is a non-GAAP measure, which is defined as net income (loss) excluding share-based compensation. For further information, please see “Non-GAAP Financial Measures” and “Reconciliations of GAAP and non-GAAP results” at the bottom of this release.

²           “Portfolio Products” is to the mobile applications that we develop and provide to our users and business partners, which exclude TouchPal Smart Input and TouchPal Phonebook.

³           “Average daily reading time” for any day is calculated by dividing (i) the sum of time spent on reading books on our Fengdu Novel for such day, by (ii) the number of Fengdu Novel users who spent time on reading books for such day. The average daily reading time for any month is calculated by dividing (i) the sum of average daily reading time for each day in such month, by (ii) the number of days in such month.

⁴           According to Quest Mobile, a professional business intelligence services provider in China’s mobile internet market.

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Third Quarter 2020 Financial Results

Net Revenues

(in US$ thousands, except percentage)	3Q 2020	2Q 2020	3Q 2019	QoQ % Change		YoY % Change
Mobile Advertising Revenue	104,842	125,774	30,548	(17)	%	243	%
Other Revenue	815	622	722	31	%	13	%
Total Net Revenues	105,657	126,396	31,270	(16)	%	238	%

Net revenues were US$105.7 million, an increase of 238% from US$31.3 million during the third quarter of 2019 and a decrease of 16% from US$126.4 million in the previous quarter. The fluctuation was primarily due to changes in our mobile advertising revenue.

Mobile advertising revenue was US$104.8 million, an increase of 243% from US$30.5 million during the third quarter of 2019 mainly due to increase in our user base and number of portfolio products, and a decrease of 17% from US$125.8 million in the previous quarter mainly due to restructuring of our portfolio products.

Our portfolio products focus on three categories: online literature, scenario-based content apps and casual games. Online literature accounted for approximately 34%, scenario-based content apps accounted for approximately 24%, and casual games accounted for approximately 41% of total net revenue.

Cost and Operating Expenses

	3Q 2020			2Q 2020			3Q 2019			QoQ %		YoY %
(in US$ thousands, except percentage)	US$	% of revenue		US$	% of revenue		US$	% of revenue		Change		Change
Cost of revenues	6,784	6	%	5,691	5	%	3,912	13	%	19	%	73	%
Sales and marketing	107,842	102	%	105,999	84	%	33,463	107	%	2	%	222	%
Research and development	8,204	8	%	8,103	6	%	6,933	22	%	1	%	18	%
General and administrative	3,707	4	%	4,136	3	%	3,387	11	%	(10)	%	9	%
Other operating loss (income), net	1,064	1	%	(446)	(0)	%	(58)	0	%	(339)	%	(1934)	%
Total Cost and Expenses	127,601	121	%	123,483	98	%	47,637	153	%	3	%	168	%
Share-based compensation expenses by function
Cost of revenues	75	0.1	%	71	0.1	%	25	0.1	%	6	%	200	%
Sales and marketing	59	0.1	%	61	0.0	%	32	0.1	%	(3)	%	84	%
Research and development	815	0.8	%	862	0.7	%	700	2.2	%	(5)	%	16	%
General and administrative	492	0.5	%	430	0.3	%	129	0.4	%	14	%	281	%
Total share-based compensation expenses	1,441	1.5	%	1,424	1.1	%	886	2.8	%	1	%	63	%

Cost of revenues was US$6.8 million, an increase of 73% from US$3.9 million during the same period last year, and an increase of 19% from US$5.7 million in the previous quarter. The year-over-year increase was mainly due to an increase in content costs paid to freelancers and third-party content distributors. The sequential increase was mainly due to the investment in operational workforce and maintenance-related expenses.

Gross profit was US$98.9 million, an increase of 261% from US$27.4 million during the same period last year, and a decrease of 18% from US$120.7 million in the previous quarter. Gross profit margin was 93.6%, compared with 87.5% in the same period last year and 95.5% in the previous quarter.

Sales and marketing expenses were US$107.8 million, an increase of 222% from US$33.5 million during the same period last year, and an increase of 2% from US$106.0 million in the previous quarter. As a percentage of total revenue, sales and marketing expenses accounted for 102%, compared with 107% during the same period last year, and 84% in the previous quarter. The sequential and year-over-year increases in sales and marketing expenses were primarily due to increased investment in user acquisition.

Research and development expenses were US$8.2 million, an increase of 18% from US$6.9 million during the same period last year and an increase of 1% from US$8.1 million in the previous quarter. The year-over-year increase was primarily due to an increase in costs associated with technology R&D staff. As a percentage of total net revenue, research and development expenses accounted for 8%, compared with 22% during the same period last year and 6% in the previous quarter.

General and administrative expenses were US$3.7 million, an increase of 9% from US$3.4 million during the same period last year and a decrease of 10% from US$4.1 million in the previous quarter. The year-over-year increase was mainly due to an increase in costs associated with G&A staff and share-based compensation expenses. The sequential decrease was mainly due to the reversal of accrued provision for bad debts on the collection of accounts receivables. As a percentage of total net revenue, general and administrative expenses accounted for 4%, compared with 11% during the same period last year and 3% in the previous quarter.

Other operating loss, net was US$1.1 million, compared with other operating income, net US$0.06 million during the same period last year and other operating income, net US$0.4 million in the previous quarter. The other operating loss during this quarter mainly relates to compensation payment to victims of alleged misconducts of certain third-party advertisers perpetrated on the Company's platform that the Company deposited to an escrow account controlled by a local authority conducting investigation on the advertisers.

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Net loss was US$22.0 million, compared with net loss of US$16.2 million during the same period last year and a net income of US$3.1 million in the previous quarter.

Adjusted net loss was US$20.5 million, compared with adjusted net loss of US$15.4 million in the same period last year and adjusted net income of US$4.5 million in the previous quarter.

In US$ thousands, except percentage	3Q 2020	2Q 2020	3Q 2019	QoQ % Change		YoY % Change
Net income (loss)	(21,964)	3,119	(16,246)	(804)	%	35	%
Add: Share-based Compensation related to share options and restricted share units	1,441	1,424	886	1	%	63	%
Adjusted Net Income (Loss) (Non-GAAP)	(20,523)	4,543	(15,360)	(552)	%	34	%

Basic and diluted net loss per ADS were US$0.36 and US$0.36, and basic and diluted Adjusted net loss (Non-GAAP) per ADS were US$0.33 and US$0.33.

Balance Sheet and Cash Flows

As of September 30, 2020, cash, cash equivalents and restricted cash were US$61.0 million, compared with US$64.9 million as of June 30, 2020. As of September 30, 2020,current portion of restricted cash were US$0.06 million, representing amounts held in Company's bank account as guarantee deposit for payments processing services provided by the bank. Amount of US$2.4 million, held in Company's bank accounts were frozen by the PRC local authority in connection with its investigation of alleged misconducts of certain third-party advertisers perpetrated on the Company's platform. In October 2020, an additional US$18.4 million was deposited into these frozen bank accounts. The Company is still in the process of cooperating with the relevant authority on such investigation and expect the funds to be released upon the completion of such investigation, the timing of which is out of the Company's control. In the interim, the Company cannot dispose of cash and cash equivalents in the frozen bank accounts.

Net cash outflow from operating activities during the third quarter of 2020 was US$14.4 million, compared with net cash outflow from operating activities of US$6.7 million for the same period in 2019 and net cash inflow from operating activities of US$5.4 million during the previous quarter. Cash outflow from operating activities during the third quarter of 2020 was mainly due to loss from operations.

Share Repurchase Plan

On May 18, 2020, the Company announced a share repurchase program (the “2020 Program”) whereby the Company is authorized to repurchase its class A ordinary shares in the form of ADSs with an aggregate value of up to US$20 million during the 12-month period starting from May 18, 2020. The Company expects to fund the repurchases under this program with its existing cash balance. As of September 30, 2020, the Company had used an aggregate of US$3.3 million to repurchase 0.5 million ADSs under the 2020 Program and recorded as treasury stock.

Business Outlook

For the fourth quarter of 2020, the Company expects total revenue to be approximately US$106 million, representing a year-over-year increase of approximately 54%. For the fiscal year of 2020, the Company expects total revenue to be approximately US$445 million, representing a year-over-year increase of approximately 150%. This outlook is based on information available as of the date of this press release and reflects the Company’s current and preliminary expectations, which are subject to change in light of various uncertainties, including those related to the ongoing COVID-19 pandemic.

Conference Call and Webcast

The Company management team will host a conference call at 8:00 AM U.S. Eastern Time on December 15, 2020 (9:00 PM Beijing Time on the same day), following the results announcement.

The dial-in details for the live conference call are:

United States: 1-888-346-8982

Hong Kong: 800-905-945

Mainland China: 4001-201-203

International: 1-412-902-4272

Please dial in 15 minutes before the call is scheduled to begin. When prompted, ask to be connected to the CooTek (Cayman) Inc. call.

A live webcast and archive of the conference call will be available on the Investor Relations section of the Company’s website at https://ir.cootek.com/.

3 / 9

About CooTek (Cayman) Inc.

CooTek is a fast-growing mobile internet company with a global vision, that offers content-rich mobile applications, focusing on three categories: online literature, scenario-based content apps and casual games. CooTek’s mission is to empower everyone to enjoy relevant content seamlessly. CooTek’s user-centric and data-driven approach has enabled it to release appealing products to capture mobile internet users' ever-evolving content needs and helps it rapidly attract targeted users.

Non-GAAP Financial Measure

To supplement the unaudited consolidated financial information prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), the Company uses non-GAAP financial measure of adjusted net (loss) income that is adjusted from results based on GAAP to exclude the impact of share-based compensation, and Adjusted EBITDA that is net (loss) income excluding interest income and expense, income taxes, depreciation and amortization, and share-based compensation. The measure should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

The Company believes that the non-GAAP measure help identify underlying financial and business trends relating to the Company’s results of operations that could otherwise be distorted by the effect of certain expenses that the Company include in (loss) income from operations and net (loss) income. By making the Company’s financial results comparable period over period, the Company believes adjusted net (loss) income and Adjusted EBITDA provides useful information to better understand the Company’s historical business operations and future prospects and allows for greater visibility with respect to key metrics used by the management in financial and operational decision-making. In order to mitigate these limitations, the Company has provided specific information regarding the GAAP amounts excluded from the non-GAAP measure. The table at the bottom of this press release includes details on the reconciliation between GAAP financial measure that is most directly comparable to the non-GAAP financial measure the Company has presented.

Safe Harbor Statement

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. CooTek may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about CooTek's beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: CooTek’s mission and strategies; future business development, financial conditions and results of operations; the expected growth of the mobile internet industry and mobile advertising industry; the expected growth of mobile advertising; expectations regarding demand for and market acceptance of our products and services; competition in mobile application and advertising industry; relevant government policies and regulations relating to the industry and the development and impacts of COVID-19. Further information regarding these and other risks, uncertainties or factors is included in CooTek’s filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and CooTek does not undertake any obligation to update such information, except as required under applicable law.

For investor enquiries, please contact:

CooTek (Cayman) Inc.

Mr. Robert Yi Cui

Email: IR@cootek.com

ICA (Institutional Capital Advisory)

Mr. Kevin Yang

Phone: +86-021-8028-6033

E-mail: cootek@icaasia.com

4 / 9

CooTek (Cayman) INC.

Unaudited Condensed Consolidated Statement of Operations

(in thousands, except for share and per share data)

	Three Months Ended			Nine Months Ended
	September 30,	June 30,	September 30,	September 30,
	2019	2020	2020	2019	2020
	US$	US$	US$	US$	US$
Net revenues	31,270	126,396	105,657	108,900	339,066
Cost of revenues	(3,912)	(5,691)	(6,784)	(11,435)	(17,057)
Gross Profit	27,358	120,705	98,873	97,465	322,009
Operating expenses:
Sales and marketing expenses	(33,463)	(105,999)	(107,842)	(93,534)	(316,277)
Research and development expenses	(6,933)	(8,103)	(8,204)	(21,198)	(23,154)
General and administrative expenses	(3,387)	(4,136)	(3,707)	(13,504)	(11,144)
Other operating income, net	58	446	(1,064)	229	(228)
Total operating expenses	(43,725)	(117,792)	(120,817)	(128,007)	(350,803)
(Loss) income from operations	(16,367)	2,913	(21,944)	(30,542)	(28,794)
Interest income, net	118	211	(7)	709	227
Foreign exchange gain (loss)	3	(2)	(13)	(365)	(13)
(Loss) income before income taxes	(16,246)	3,122	(21,964)	(30,198)	(28,580)
Income tax expense	—	(3)	—	(2)	(3)
Net (loss) income	(16,246)	3,119	(21,964)	(30,200)	(28,583)
Net (loss) income per ordinary share
Basic	(0.005)	0.001	(0.007)	(0.01)	(0.01)
Diluted	(0.005)	0.001	(0.007)	(0.01)	(0.01)
Weighted average shares used in calculating net (loss) income per ordinary share
Basic	3,148,392,266	3,084,894,043	3,070,510,051	3,163,501,054	3,086,630,271
Diluted	3,148,392,266	3,222,716,303	3,070,510,051	3,163,501,054	3,086,630,271
Non-GAAP Financial Data
Adjusted Net (Loss) income	(15,360)	4,543	(20,523)	(26,983)	(24,777)
Adjusted EBITDA	(14,469)	5,123	(19,318)	(25,594)	(22,263)

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Unaudited Condensed Consolidated Balance Sheets

(in thousands, except for share and per share data)

	As of
	June 30,	September 30,
	2020	2020
	US$	US$
ASSETS
Current assets:
Cash and cash equivalents	64,861	58,478
Restricted cash	60	60
Short-term investment	13,550	550
Accounts receivable, net of allowance for doubtful accounts of $2,262 as of June 30, 2020 and $1,962 as of September 30, 2020, respectively	34,043	29,083
Prepaid expenses and other current assets	9,900	10,764
Total current assets	122,414	98,935
Long-term restricted cash	—	2,473
Long-term investments	141	147
Property and equipment, net	5,544	5,597
Intangible assets, net	352	420
Other non-current assets	787	757
TOTAL ASSETS	129,238	108,329
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	64,408	64,805
Short-term bank borrowings	14,686	14,822
Accrued salary and benefits	6,618	7,748
Accrued expenses and other current liabilities	8,433	10,215
Deferred revenue	6,160	4,697
Total current liabilities	100,305	102,287
Other non-current liabilities	562	494
TOTAL LIABILITIES	100,867	102,781

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Unaudited Condensed Consolidated Balance Sheets (continued):

(in thousands, except for share and per share data)

	As of
	June 30,  2020	September 30,  2020
	US$	US$
Shareholders’ Equity:
Ordinary shares	31	31
Treasury Stock	(6,935)	(3,323)
Additional paid-in capital	196,750	192,376
Accumulated deficit	(160,217)	(182,181)
Accumulated other comprehensive loss	(1,258)	(1,355)
Total Shareholders' Equity	28,371	5,548
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	129,238	108,329

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Unaudited Condensed Consolidated Statement of Cash Flows

 (in thousands, except for share and per share data)

	Three Months Ended			Nine Months Ended
	September 30,	June 30,	September 30,	September 30,
	2019	2020	2020	2019	2020
	US$	US$	US$	US$	US$
Net cash (used in) provided by operating activities	(6,689)	5,402	(14,393)	(18,899)	5,969
Net cash (used in) provided by investing activities	(775)	(13,859)	12,266	(4,097)	(2,362)
Net cash provided by (used in) financing activities	1,494	3,100	(2,183)	(5,233)	(2,937)
Net (decrease) increase in cash and cash equivalents	(5,970)	(5,357)	(4,310)	(28,229)	670
Cash, cash equivalents, and restricted cash at beginning of period	62,774	70,026	64,921	84,860	59,966
Effect of exchange rate changes on cash and cash equivalents	(534)	252	400	(361)	375
Cash, cash equivalents, and restricted cash at end of period	56,270	64,921	61,011	56,270	61,011

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Reconciliations of GAAP and Non-GAAP Results

(in thousands, except for share and per share data)

	Three Months Ended			Nine Months Ended
	September 30,	June 30,	September 30,	September 30,
	2019	2020	2020	2019	2020
	US$	US$	US$	US$	US$
Net (loss) income	(16,246)	3,119	(21,964)	(30,200)	(28,583)
Add:
Share-based compensation related to share options and restricted share units	886	1,424	1,441	3,217	3,806
Adjusted Net (Loss) Income (Non-GAAP)*	(15,360)	4,543	(20,523)	(26,983)	(24,777)
Add:
Interest income, net	(118)	(211)	7	(709)	(227)
Income taxes	—	3	—	2	3
Depreciation and amortization	1,009	788	1,198	2,096	2,738
Adjusted EBITDA (Non-GAAP)*	(14,469)	5,123	(19,318)	(25,594)	(22,263)

* The tax impact to the non-GAAP adjustments is zero.

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XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2020
Document Information [Line Items]
Document Type	6-K
Document Period End Date	Sep. 30, 2020
Entity Registrant Name	CooTek(Cayman)Inc.
Entity Central Index Key	0001734262
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 58,478,376	$ 59,905,827
Restricted cash	60,209	60,204
Short-term investments	550,025	571,508
Accounts receivable, net of allowance for doubtful accounts of US$1,774,192 and US$1,961,728 as of December 31, 2019 and September 30, 2020, respectively	29,083,216	27,254,634
Prepaid expenses and other current assets	10,764,181	7,847,794
Total current assets	98,936,007	95,639,967
Long term restricted cash	2,472,998
Property and equipment, net	5,597,148	5,669,849
Intangible assets, net	419,343	267,736
Long-term investments	146,841
Other non-current assets	756,507	259,108
TOTAL ASSETS	108,328,844	101,836,660
Current liabilities (including amounts of the consolidated VIEs without recourse to the Company. See Note 2(b)):
Accounts payable	64,805,107	37,877,800
Short-term bank borrowings	14,822,161	9,012,645
Accrued salary and benefits	7,747,460	5,598,425
Accrued expenses and other current liabilities	10,215,400	5,955,956
Deferred revenue	4,697,267	3,887,908
Total current liabilities	102,287,395	62,332,734
Other non-current liabilities	493,467	595,563
TOTAL LIABILITIES	102,780,862	62,928,297
Commitments and contingencies
Shareholders' equity:
Treasury shares (9,937,000 and 25,426,900 shares as of December 31, 2019 and September 30, 2020, respectively)	(3,322,668)	(1,063,547)
Additional paid-in capital	192,375,859	194,971,827
Accumulated deficit	(182,181,327)	(153,598,346)
Accumulated other comprehensive loss	(1,354,788)	(1,432,833)
Total Shareholders' Equity	5,547,982	38,908,363
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	108,328,844	101,836,660
Class A
Shareholders' equity:
Ordinary shares	28,444	28,800
Class B
Shareholders' equity:
Ordinary shares	$ 2,462	$ 2,462

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Allowance for doubtful accounts	$ 1,961,728	$ 1,774,192
Treasury stock, shares	25,426,900	9,937,000
Class A
Ordinary shares, par value	$ 0.00001	$ 0.00001
Ordinary shares, shares authorized	13,750,000,000	13,750,000,000
Ordinary shares, shares issued	2,844,418,332	2,880,056,332
Ordinary shares, shares outstanding	2,818,991,432	2,870,119,332
Class B
Ordinary shares, par value	$ 0.00001	$ 0.00001
Ordinary shares, shares authorized	250,000,000	250,000,000
Ordinary shares, shares issued	246,224,465	246,224,465
Ordinary shares, shares outstanding	246,224,465	246,224,465

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Net revenues	$ 339,065,455	$ 108,899,479
Cost of revenue (including share-based compensation of US$65,858 and US$198,402 in the nine months ended September 30, 2019 and 2020, respectively)	(17,056,483)	(11,435,005)
Gross profit	322,008,972	97,464,474
Operating expenses:
General and administrative expenses (including share-based compensation of US$434,790 and US$1,281,380 in the nine months ended September 30, 2019 and 2020, respectively)	(11,144,938)	(13,504,075)
Research and development expenses (including share-based compensation of US$2,564,606 and US$2,157,990 in the nine months ended September 30, 2019 and 2020, respectively)	(23,153,735)	(21,197,631)
Sales and marketing expenses (including share-based compensation of US$151,444 and US$168,727 in the nine months ended September 30, 2019 and 2020, respectively)	(316,276,383)	(93,533,363)
Other operating income (loss), net	(227,540)	228,302
Total operating expenses	(350,802,596)	(128,006,767)
Loss from operations	(28,793,624)	(30,542,293)
Interest income, net	227,348	708,370
Foreign exchange losses, net	(13,505)	(364,545)
Loss before income taxes	(28,579,781)	(30,198,468)
Income tax expense	(3,200)	(1,714)
Net Loss attributable to ordinary shareholders	$ (28,582,981)	$ (30,200,182)
Net Loss per ordinary share:
Basic (in dollars per share)	$ (0.01)	$ (0.01)
Diluted (in dollars per share)	$ (0.01)	$ (0.01)
Weighted average shares used in calculating net loss per ordinary share:
Basic (in shares)	3,086,630,271	3,163,501,054
Diluted (in shares)	3,086,630,271	3,163,501,054
ADS
Net Loss per ordinary share:
Basic (in dollars per share)	$ (0.46)	$ (0.48)
Diluted (in dollars per share)	$ (0.46)	$ (0.48)

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Parenthetical)	9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)
Class A
ADS ratio	50	50
Cost of revenue
Share-based compensation expense	$ 198,402	$ 65,858
General and administrative expenses
Share-based compensation expense	1,281,380	434,790
Research and development expenses
Share-based compensation expense	2,157,990	2,564,606
Sales and marketing expenses
Share-based compensation expense	$ 168,727	$ 151,444

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Net Loss	$ (28,582,981)	$ (30,200,182)
Other comprehensive (loss) income
Foreign currency translation adjustments, net of tax of nil	78,045	(220,513)
Comprehensive Loss	$ (28,504,936)	$ (30,420,695)

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Parenthetical) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
Foreign currency translation adjustments, tax	$ 0	$ 0

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - USD ($)	Ordinary shares Class A	Ordinary shares Class B	Treasury Stock	Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive (loss) income	Class A	Class B	Total
Beginning balance at Dec. 31, 2018	$ 29,498	$ 2,462	$ (2,499,167)	$ 204,701,187	$ (116,752,285)	$ (1,158,900)			$ 84,322,795
Beginning balance (in shares) at Dec. 31, 2018	2,949,757,236	246,224,465	15,550,500
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Net Loss					(30,200,182)				(30,200,182)
Repurchase of ordinary shares			$ (9,741,378)						(9,741,378)
Repurchase of ordinary shares (in shares)			56,461,100
Share-based compensation				3,216,698					3,216,698
Issuance of ordinary shares upon vesting of restricted shares	$ 95			(95)
Issuance of ordinary shares upon vesting of restricted shares (in shares)	9,397,592
Exercise of share options	$ 84			277,838					277,922
Exercise of share options (in shares)	8,330,150
Cancellation of treasury shares	$ (323)		$ 5,737,950	(5,737,627)
Cancellation of treasury shares (in shares)	(32,268,350)		(32,268,350)
Foreign currency translation adjustments						(220,513)			(220,513)
Ending balance at Sep. 30, 2019	$ 29,354	$ 2,462	$ (6,502,595)	202,458,001	(146,952,467)	(1,379,413)			47,655,342
Ending balance (in shares) at Sep. 30, 2019	2,935,216,628	246,224,465	39,743,250
Beginning balance at Dec. 31, 2019	$ 28,800	$ 2,462	$ (1,063,547)	194,971,827	(153,598,346)	(1,432,833)			38,908,363
Beginning balance (in shares) at Dec. 31, 2019	2,880,056,332	246,224,465	9,937,000				2,870,119,332	246,224,465
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Net Loss					(28,582,981)				(28,582,981)
Repurchase of ordinary shares			$ (8,130,513)						(8,130,513)
Repurchase of ordinary shares (in shares)			64,770,700
Cash settlement on vested share options and restricted shares				(823,226)					(823,226)
Share-based compensation				3,806,499					3,806,499
Issuance of ordinary shares upon vesting of restricted shares	$ 42			(42)
Issuance of ordinary shares upon vesting of restricted shares (in shares)	4,227,200
Exercise of share options	$ 94			291,701					$ 291,795
Exercise of share options (in shares)	9,415,600
Cancellation of treasury shares	$ (492)		$ 5,871,392	(5,870,900)
Cancellation of treasury shares (in shares)	(49,280,800)		(49,280,800)						(135,205,550)
Foreign currency translation adjustments						78,045			$ 78,045
Ending balance at Sep. 30, 2020	$ 28,444	$ 2,462	$ (3,322,668)	$ 192,375,859	$ (182,181,327)	$ (1,354,788)			$ 5,547,982
Ending balance (in shares) at Sep. 30, 2020	2,844,418,332	246,224,465	25,426,900				2,818,991,432	246,224,465

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	9 Months Ended
	Sep. 30, 2020 USD ($)	Sep. 30, 2019 USD ($)
Cash flows from operating activities:
Net Loss	$ (28,582,981)	$ (30,200,182)
Depreciation and amortization	2,738,487	2,096,190
Provision for allowance of doubtful accounts	322,361	4,665,322
Share-based compensation	3,806,499	3,216,698
Loss on disposal of property and equipment	15,124	91
Changes in assets and liabilities:
Accounts receivable	(1,404,021)	(370,877)
Prepaid expenses and other current assets	(3,421,313)	(1,612,532)
Other non-current assets	(506,082)	238,762
Accounts payable	24,826,554	3,146,856
Accrued salary and benefits	1,578,215	(544,028)
Accrued expenses and other current liabilities	4,592,654	507,323
Deferred revenue	2,105,852	242,373
Other non-current liabilities	(102,097)	(285,690)
Net cash (used in) provided by operating activities	5,969,252	(18,899,694)
Cash flows from investing activities:
Purchases of property, equipment and intangible assets	(2,237,794)	(4,097,269)
Purchases of short-term investments	(13,000,000)
Maturity of short-term investments	13,022,268
Purchases of long-term investments	(146,841)
Net cash (used in) investing activities	(2,362,367)	(4,097,269)
Cash flows from financing activities:
Proceeds from short-term bank borrowings	15,240,004	5,040,813
Repayment of short-term bank borrowings	(9,515,198)
Proceeds from issuance of ordinary shares upon exercise of share options	291,795	277,922
Cash paid to settle vested share options and restricted shares	(823,226)
Cash paid for deferred issuance costs		(809,952)
Payments of share repurchases	(8,130,513)	(9,741,378)
Net cash (used in) financing activities	(2,937,138)	(5,232,595)
Net (decrease) increase in cash, cash equivalents, and restricted cash	669,747	(28,229,558)
Cash, cash equivalents, and restricted cash at beginning of period	59,966,031	84,859,915
Effect of exchange rate changes on cash, cash equivalents and restricted cash	375,805	(360,608)
Cash, cash equivalents, and restricted cash at end of period	61,011,583	56,269,749
Supplemental disclosure of cash flow information:
Income taxes paid	3,200	1,714
Interest paid	417,882	42,691
Supplemental disclosure of noncash investing and financing activities:
Purchases of property and equipment included in payables	224,410	54,814
Reconciliation in amounts on consolidated balance sheets:
Total cash, cash equivalents, and restricted cash	$ 61,011,583	$ 56,269,749

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Organization and Principal Activities

9 Months Ended

Sep. 30, 2020

Organization and Principal Activities

Organization and Principal Activities

1. Organization and Principal Activities

CooTek (Cayman) Inc. (the "Company") was incorporated in the Cayman Islands on March 5, 2012. The Company, its subsidiaries, its consolidated Variable Interest Entities ("VIEs") and VIEs’ subsidiaries (collectively referred to as the "Group") are a fast-growing mobile internet company with a global vision, offering mobile applications including a portfolio of content-rich mobile applications.

History of the Group and reorganization

The Group’s history began in August 2008 with the commencement of operations of Shanghai Han Xiang (CooTek) Information Technology Co., Ltd ("Han Xiang"), a limited liability company incorporated in the People’s Republic of China ("PRC") by certain individuals. In October 2010, three outside investors acquired an aggregate of 24.24% equity interest of Han Xiang. In 2012, Han Xiang and its shareholders undertook a reorganization which was conducted to establish a Cayman holding company for the existing business to obtain investment from outside investors and in preparation of an overseas initial public offering. The Group has recognized the net assets of Han Xiang on a historical cost with no change in basis in the consolidated financial statements upon the completion of the reorganization. The shareholders’ rights and obligations remained the same after the reorganization.

On October 2, 2018 the Group completed its initial public offering ("IPO") and issued 4,350,000 American depositary shares representing 217,500,000 of the Group’s ordinary shares. Net proceeds from the IPO after deducting underwriting discount and offering costs were US$45.1 million.

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2020

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

(a)   Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC"), regarding interim financial reporting, and include all normal and recurring adjustments that management of the Group considers necessary for a fair presentation of its financial position and operating results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these financial statements should be read in conjunction with the Group’s annual consolidated financial statements and notes thereto, included in the Company’s 2019 Annual Report on Form 20-F filed with the SEC on April 20, 2020, referred to as the Company’s 2019 Annual Report.

(b)   Principles of Consolidation

The consolidated financial statements include the financial information of the Company, its wholly owned subsidiaries, its consolidated VIEs and VIEs’ subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Applicable PRC laws and regulations currently limit foreign ownership of companies that provide internet content distribution services and any other restrictions. The Company is deemed a foreign legal person under PRC laws and accordingly subsidiaries owned by the Company are not eligible to engage in provisions of internet content or online services. The Group therefore conducts its online business through the following major consolidated VIEs:

● Shanghai Chu Bao (CooTek) Information Technology Co., Ltd. ("Chu Bao")

● Yingsun Information Technology (Ningbo) Co., Ltd. ("Yingsun")

● Shanghai Qiaohan Technology Co., Ltd. ("Qiaohan")

● Molihong (Shenzhen) Internet Technology Co., Ltd. ("Molihong")

● Shanghai Dengyong Information Technology Co., Ltd. ("Dengyong")

2. Summary of Significant Accounting Policies (Continued)

(b)   Principles of Consolidation (Continued)

The following consolidated financial statement balances and amounts of the Group’s VIEs were included in the accompanying unaudited condensed consolidated financial statements after the elimination of intercompany balances and transactions among the Company, its subsidiaries and its VIEs.

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
ASSETS
Cash and cash equivalents	13,714,304	23,294,883
Restricted cash	203	209
Short-term investments	21,502	—
Accounts receivable, net	21,582,641	23,473,397
Prepaid expense and other assets	3,643,649	8,569,904
Long term restricted cash	—	2,472,998
Long-term investments	—	146,841
Property and equipment, net	496	9,231
Intangible assets, net	47,122	61,020
Other non-current assets	—	2,131
Total Assets	39,009,917	58,030,614
LIABILITIES
Accounts payable	35,002,827	57,304,063
Short-term bank borrowings	408,264	256,697
Accrued salary and benefits	275,091	604,020
Accrued expenses and other current liabilities	1,385,303	3,696,308
Deferred revenue	3,658,808	1,928,241
Total Liabilities	40,730,293	63,789,329

	For the nine months ended September 30,
	2019	2020
	US$	US$
Net revenues	38,276,479	299,205,121
Loss from operations	(18,841,315)	(94,447)
Net (loss) income	(18,823,768)	150,325
Net cash (used in) provide by operating activities	(6,560,184)	18,000,288
Net cash used in investing activities	—	(201,320)
Net cash provided by (used in) financing activities	44,315	(179,412)

The VIEs’ assets are comprised of recognized and unrecognized revenue-producing assets. The recognized revenue producing assets mainly include purchased servers and software, which are presented in the account of "Property and equipment, net" and "Intangible assets, net". The unrecognized revenue-producing assets mainly consist of the Internet Content Provider license ("ICP" license), trademarks, copyrights and registered patents, which are not recognized in the consolidated balance sheets.

Revenues of VIEs included in the consolidated financial statements mainly include revenue of advertising services. The VIEs contributed 35% and 88% of the Group’s consolidated net revenues for the nine months ended September 30, 2019 and 2020, respectively. As of December 31, 2019 and September 30, 2020, the VIEs accounted for an aggregate of 38% and 54% respectively, of the consolidated total assets, and 65% and 62% respectively, of the consolidated total liabilities.

2. Summary of Significant Accounting Policies (Continued)

(b)   Principles of Consolidation (Continued)

There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs were ever to need financial support, the Group may, at its option and subject to statutory limits and restrictions, provide financial support to its VIE through loans to the shareholders of the VIEs.

The Group believes that there are no assets held in the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and the PRC statutory reserves. As the VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs. Relevant PRC laws and regulations restrict the VIEs from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends.

(c)   Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group's financial statements including but not limited to allowance for doubtful accounts, valuation allowances of deferred tax assets, and valuation of share-based compensation. Actual results may differ materially from those estimates.

(d)   Fair Value

Fair value reflects the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the assets or liabilities.

The Group applies a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This guidance specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:

● Level 1— Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.

● Level 2— Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques.

● Level 3— Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Group’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair value guidance describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

2. Summary of Significant Accounting Policies (Continued)

(d)   Fair Value (Continued)

When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates.

Beginning January 1, 2019, the Group’s equity investments without readily determinable fair values, which do not qualify for NAV practical expedient and over which the Group does not have the ability to exercise significant influence through the investments in common stock or in substance common stock, are accounted for under the measurement alternative upon the adoption of Accounting Standards Update ("ASU") 2016-01 Recognition and Measurement of Financial Assets and Liabilities (the "Measurement Alternative"). Under the Measurement Alternative, the carrying value is measured at cost, less any impairment, plus and minus changes resulting from observable price changes in orderly transactions for identical or similar investments. After management’s assessment of each of the long-term investments, management concluded that investments do not have readily determinable fair values, and elects the measurement alternative.

Financial instruments not reported at fair value include cash and cash equivalents, restricted cash, short-term investments, accounts receivable, accounts payable, other current liabilities and short-term bank borrowings. The carrying amounts of these financial instruments as of December 31, 2019 and September 30, 2020 were considered representative of their fair values due to their short-term nature.

(e)   Foreign Currency Translation

The functional currency of the Group is the United States Dollar ("US$"). The functional currency of the subsidiaries and the VIEs in the PRC is Renminbi ("RMB"). The functional currency of all the other subsidiaries is US$.

Foreign currency transactions have been translated into the functional currency at the exchange rates prevailing on the date of transactions. Foreign currency denominated monetary assets and liabilities are re-measured into the functional currency at exchange rates prevailing on the balance sheet date. Exchange gains and losses have been included in the determination of net income.

The Group has chosen the US$ as its reporting currency. Assets and liabilities have been translated using exchange rates prevailing on the balance sheet date. Equity accounts are translated at historical exchange rates. Income statement items have been translated using the average exchange rate for the year. Translation adjustments have been reported as cumulative translation adjustments and are shown as a component of other comprehensive income/loss in the consolidated statements of comprehensive (loss) income and consolidated statements of changes in shareholders’ equity.

(f)   Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash on hand, demand deposits and floating rate financial instruments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased.

The Group's current-portion restrict cash represents amounts held in Group's bank account as guarantee deposit for payments processing services provided by the bank.

Certain bank accounts were frozen by the PRC local authority in connection with an ongoing investigation of alleged misconducts of third-party advertisers perpetrated on the Group's advertising platform. As of September 30, 2020, cash held in these frozen bank accounts amounted to US$2,472,998. These funds are presented as long-term restricted cash on the consolidated balance sheet as of September 30, 2020 as the Group cannot control the timing of its release. In October 2020, an additional US$18.4 million was deposited into these frozen bank accounts. The Group is still in the process of cooperating with the relevant authority on such investigation and expect the funds to be released upon the completion of such investigation.

(g)   Short-term Investments

Short-term investments primarily comprises of the time deposits with banks maturities between three months and one year. The Group states the short-term investments at amortized cost.

2. Summary of Significant Accounting Policies (Continued)

(h)   Revenue Recognition

Mobile Advertising

The Group generates substantially all of its revenue through mobile advertising. As of January 1, 2019, the Group adopted ASU 2014-09 Revenue from Contracts with Customers - Topic 606 and all subsequent ASUs that modified ASC 606. The Group has elected to apply the ASU and all related ASUs under the modified retrospective method to all contracts that were not completed as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Group did not note any effects of applying the new revenue standard as an adjustment to the opening balance of retained earnings at the beginning of 2019.

In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

The Group provides advertising services to customers for promotion of their brands and products through its mobile applications, including a portfolio of content-rich mobile applications. The Group has two general pricing models for its advertising products: cost over a time period and cost for performance basis including per impression basis. For advertising contracts over a time period, the Group generally recognizes revenue ratably over time, because the customer simultaneously receives and consumes the benefits as the Group performs throughout a fixed contract term. For contracts that are charged on the cost for performance basis, the Group charges an agreed-upon fee to its customers determined based on the effectiveness of advertising links, which is typically measured by clicks, transactions, installations, user registrations, and other actions originating from the Group’s mobile applications. Revenue is recognized at a point in time when there is an effective click, transaction, installations, user registrations, and other actions originating from the Group’s mobile applications. For contracts that are charged on the cost per impression basis, the Group recognizes the revenue at a point in time when the impressions are delivered. Revenue for performance-based advertising services is recognized at a point in time when all the revenue recognition criteria are met.

The Group launched in-house developed advertising platform, CooTek Ads, to provide tailored advertising services from late 2019. Customers engaged through CooTek Ads are required to pay a deposit before using Group's services. The deposits received are recorded as deferred revenue on the consolidated balance sheets. The amounts due to the Group are deducted from the deposited amounts when performance criteria have been satisfied.

Others

The Group also generates other revenues through cloud call business, licensing of its Smart Inputs products and membership fee from the users. The revenue is recognized when service is rendered.

2. Summary of Significant Accounting Policies (Continued)

(h) Revenue Recognition (Continued)

Sales Incentives

The Group provides sales incentives to certain customers on the CooTek Ads in the form of sales rebates which entitle them to receive reductions in the price by meeting certain cumulative consumption requirement or replenishing required amount of deposit. The Group accounts for these incentives granted to customers as variable consideration and records it as reduction of revenue. The amount of variable consideration is measured based on the most likely amount of incentives to be. For the nine months ended September 30, 2019 and 2020, the rebates recorded by the Group were nil and US$48,491,685, respectively.

Disaggregation of Revenue

In the following table, revenue is disaggregated by revenue streams and geographic location of customers’ headquarters.

	For the nine months ended September 30,
	2019	2020
	US$	US$
Revenue:
Advertising revenue	106,575,374	337,037,822
Other revenue	2,324,105	2,027,633
Total	108,899,479	339,065,455

	For the nine months ended September 30,
	2019	2020
	US$	US$
USA	51,314,113	11,161,631
PRC	55,423,779	325,246,386
Others	2,161,587	2,657,438
Total	108,899,479	339,065,455

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced, and revenue recognized prior to invoicing when the Group has satisfied its performance obligations and has the unconditional right to payment.

2. Summary of Significant Accounting Policies (Continued)

(h) Revenue Recognition (Continued)

Contract liabilities include payments received in advance of performance under the contract or for differences between the amount billed to a customer and the revenue recognized for the completed performance obligation which is presented as deferred revenue on the consolidated balance sheets. Due to the generally short-term duration of the Group’s contracts, the majority of the performance obligations are satisfied in one year. The movements of the Group’s accounts receivable and deferred revenue are as follows:

	Accounts Receivable	Deferred Revenue
	US$	US$
Opening Balance at January 1, 2019	23,373,969	344,361
(Decrease) Increase, net	(3,966,005)	239,404
Ending Balance at September 30, 2019	19,407,964	583,765
Opening Balance at January 1, 2020	27,254,634	3,887,908
Increase, net	1,828,582	809,359
Ending Balance at September 30, 2020	29,083,216	4,697,267

The Group recognized revenue of US$263,383 and US$3,637,328 by the reducing the balance of deferred revenue in the nine months ended September 30, 2019 and 2020, respectively, which were included in the balance of deferred revenue at the beginning of the each period.

(i)   Sales and Marketing Expenses

Sales and marketing expenses primarily consist of advertising expenses, salaries and benefits of sales and marketing personnel and fees paid to mobile device manufacturers to pre-install the Group’s Smart Input products. Advertising expenses represent payment to the third parties for online user acquisition of the Group’s products via social media and demand-side platforms. Advertising expenses are expensed as sales and marketing expenses when the services are received. Such expenses amounted to US$86,189,395 and US$310,602,100 for the nine months ended September 30, 2019 and 2020, respectively.

(j)   Concentration and Risks

Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, short-term investments, accounts receivable and prepayments. The Group places its cash and cash equivalents and short-term investments with financial institutions with high-credit ratings and quality. The Group conducts credit evaluations of customers, and generally does not require collateral or other security from its customers. The Group establishes an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. With respect to prepayments, the Group performs on-going credit evaluations of the financial condition of these suppliers and has noted no significant credit risk.

2. Summary of Significant Accounting Policies (Continued)

(j)   Concentration and Risks (Continued)

Concentration of Customers

The following customers accounted for 10% or more of revenue:

	For the nine months ended September 30,
	2019			2020
	US$	%		US$	%
Company A	21,335,698	20	%	*	*
Company B	21,731,172	20	%	*	*
Company C	11,088,217	10	%	*	*
Company D	16,873,890	16	%	*	*
Company E	*	*		91,588,390	27	%

The following customers accounted for 10% or more of accounts receivable:

	As of December 31,			As of September 30,
	2019			2020
	US$	%		US$	%
Company B	17,944,840	62	%	*	*
Company C	4,142,638	14	%	*	*
Company D	3,840,005	13	%	*	*
Company E	*	*		12,354,156	40	%
Company F	*	*		9,824,384	32	%

Concentration of Vendors

The Group uses certain vendors to acquire users and those cost are recorded as sales and marketing expenses. Vendors accounted for 10% or more are listed as below:

	For the nine months ended September 30,
	2019			2020
	US$	%		US$	%
Company G	11,080,305	12	%	*	*
Company H	10,853,930	12	%	*	*
Company I	*	*		41,804,056	13	%

The following vendors accounted for 10% or more of accounts payable:

	As of December 31,		As of September 30,
	2019		2020
	US$	%	US$	%
Company H	*	*	8,433,642	13	%
Company J	*	*	7,378,433	11	%

* Less than 10%.

2. Summary of Significant Accounting Policies (Continued)

(j)   Concentration and Risks (Continued)

Business and Economic Risks

The Group participates in the dynamic and competitive high technology industry and believes that changes in any of the following areas could have a material adverse effect on the Group's future financial position, results of operations and cash flows: changes in the overall demand for services and products; competitive pressures due to existing and new entrants; advances and new trends in new technologies and industry standards; changes in certain strategic relationships or customer relationships; regulatory considerations; copyright regulations; brand maintenance and enhancement; and risks associated with the Company's ability to attract and retain employees necessary to support its growth.

The Group's operations could be adversely affected by significant political, economic and social uncertainties in the PRC.

Foreign Currency Risk

The RMB is not a freely convertible currency. The State Administration for Foreign Exchange in the PRC, under the authority of the Peoples Bank of China, controls the conversion of RMB into other currencies. The value of the RMB is subject to changes in central government policies, international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. The Group's cash and cash equivalents and restricted cash denominated in RMB amounted to RMB139,905,845 (amounted to US$20,054,735) and RMB292,519,950 (amounted to US$42,953,841) as of December 31, 2019 and September 30, 2020, respectively.

(k)  Recent Accounting Pronouncements

New accounting pronouncements recently adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which changes certain disclosure requirements, including those related to Level 3 fair value measurements. The provisions of ASU 2018-13 relating to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The remaining provisions should be applied retrospectively to all periods presented upon their effective date. The Group has adopted this ASU on January 1, 2020, which did not have a material impact on its unaudited condensed consolidated financial statements and related disclosures.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. Under the new guidance, to determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportionate basis, rather than in their entirety. ASU 2018-17 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted in any interim period. ASU 2018-17 is required to be applied retrospectively from the date the guidance is first applied. The Group has early adopted this ASU on January 1, 2020 and did not have a material impact on its unaudited condensed consolidated financial statements and related disclosures.

2. Summary of Significant Accounting Policies (Continued)

(l)  Recent Accounting Pronouncements (Continued)

New accounting pronouncements not yet adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on balance sheet and disclose key information about lease arrangements. The new standard establishes a right-of-use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with terms of longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The standard is effective on January 1, 2019, with early adoption permitted, for public business entity ("PBE"). And it is effective on January 1, 2020 for non-issuers and PBEs that meet the definition of a PBE solely because their financial statements or financial information is included in a filing with the SEC. In July 2018, the FASB issued an update that provided an additional transition option that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the consolidated financial statements. Companies that elect this option would record a cumulative-effect adjustment to the opening balance of retained earnings on the date of adoption. In November 19, 2019, the FASB issued ASU 2019-10 to amend the effective date for ASU 2016-02 to be January 1, 2021 for non-issuers. The Group as an EGC has elected to adopt the new lease standard as of the effective date applicable to nonissuers and will implement the new lease standard on January 1, 2021 using the modified retrospective method. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. In addition, the Group will elect the transition practical referred to as the "package of three", that must be taken together and allows entities to (1) not reassess whether existing contracts contain leases, (2) carryforward the existing lease classification, and (3) not reassess initial direct costs associated with existing leases. The Group is in the process of evaluating the impact on its consolidated financial statements, as well as the impact of adoption on policies, practices, systems and financial statement disclosures. As of September 30, 2020, the Group has US$2.9 million of future minimum operating lease commitments that are not currently recognized on its consolidated balance sheets (see note 13).

In June 2016, the FASB issued ASU 2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments. This ASU provides more useful information about expected credit losses to financial statement users and changes how entities will measure credit losses on financial instruments and timing of when such losses should be recognized. This ASU is effective for annual and interim periods beginning after December 15, 2019 for the public business entities. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, and interim periods therein. In November 2019, the FASB issued ASU No. 2019-10 which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the U.S. Securities and Exchange Commission) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. The Company is currently assessing the impact the guidance will have on its consolidated financial statements.

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Accounts Receivable, net

9 Months Ended

Sep. 30, 2020

Accounts Receivable, net

Accounts receivable, net

3. Accounts Receivable, net

Accounts receivable, net, consisted of the following:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Accounts receivable	29,028,826	31,044,944
Allowance for doubtful accounts:
Balance at beginning of the year/period	(1,286,120)	(1,774,192)
Additions charged to bad debt expense	(4,104,458)	(322,361)
Write-off	3,616,076	141,266
Foreign exchange effect	310	(6,441)
Balance at end of the year/period	(1,774,192)	(1,961,728)
Accounts receivable, net	27,254,634	29,083,216

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Prepaid Expenses and Other Current Assets

9 Months Ended

Sep. 30, 2020

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets

4. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Value added tax recoverable	3,750,491	4,649,736
Other receivables	1,575,467	3,856,326
Advance to suppliers	1,545,793	952,760
Others	976,043	1,305,359
Prepaid expenses and other current assets	7,847,794	10,764,181

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Property and Equipment, net

9 Months Ended

Sep. 30, 2020

Property and Equipment, net

Property and Equipment, net

5. Property and Equipment, net

Property and equipment, net, consisted of the following:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Electronic equipment	9,622,184	12,045,523
Office equipment and furniture	334,452	346,181
Motor vehicles	82,470	82,470
Leasehold improvements	1,410,105	1,561,612
Construction in progress	76,200	—
Total	11,525,411	14,035,786
Less: Accumulated depreciation	(5,855,562)	(8,438,638)
Property and equipment, net	5,669,849	5,597,148

For the nine months ended September 30, 2019 and 2020 depreciation expenses were US$2,077,516 and US$2,656,359, respectively.

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Short-term Bank Borrowings

9 Months Ended

Sep. 30, 2020

Short-term Bank Borrowings

Short-term Bank Borrowings

6. Short-term Bank Borrowings

The Group’s bank borrowings consisted of the following:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Short-term borrowings	9,012,645	14,822,161

In July 2016, the Group entered into a credit facility agreement with a commercial bank under which the Group can draw-down up to US$6.0 million by October, 2018. In October 2019, the Group renewed the bank credit facility under which the Group can borrow up to US$6.0 million collateralized by its accounts receivable by October, 2020. In 2019, the Group has aggregately drawn down the credit facility of US$7.7 million and repaid US$1.9 million. The weighted average interest rate for borrowings drawn under such credit facility was 5.53% for the year ended December 31, 2019. In June 2020, the Group renewed the bank credit facility under which the Group can borrow up to US$11.0 million collateralized by its accounts receivable by June 2021. The interest rate for this credit facility is the LPR base interest rate plus 1.30%. For the nine months ended September 30, 2020, the Group has aggregately drawn down the credit facility of US$11.1million and repaid US$6.3 million, and the weighted average interest rate for borrowings drawn under such credit facility was 5.15%. The loan contains maximum quarterly net loss as financial covenants which the Group failed to fulfill as of September 30, 2020. The Group is negotiating for the waiver of the financial covenants with the bank.

6. Short-term Bank Borrowings (Continued)

In July 2018, the Group entered into a credit facility agreement with a commercial bank under which the Group can draw-down up to US$4.0 million by July, 2019. In October 2019, the Group renewed the bank credit facility under which the Group can borrow up to US$4.0 million collateralized by its accounts receivable by October 2020. In 2019, the Group has aggregately drawn down the credit facility of US$6.4 million and repaid US$3.2 million. The weighted average interest rate for borrowings drawn under such credit facility was 6.12% for the year ended December 31, 2019. In June 2020, the Group renewed the bank credit facility under which the Group can borrow up to US$4.0 million collateralized by its accounts receivable by June 2021. The interest rate for this credit facility is Libor plus 3.5%, determined on the draw-down date. For the nine months ended September 30, 2020, the Group has aggregately drawn down the credit facility of US$4 million and repaid US$3.2million, and the weighted average interest rate for borrowings drawn under such credit facility was 3.84%. The loan contains maximum quarterly net loss as financial covenants which the Group failed to fulfill as of September 30, 2020. The Group is negotiating for the waiver of the financial covenants with the bank.

As of September 30, 2020, the Group has fully utilized the credit facility.

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Accrued Expenses and Other Current Liabilities

9 Months Ended

Sep. 30, 2020

Accrued Expenses and Other Current Liabilities

Accrued Expenses and Other Current Liabilities

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Other tax payables (Note 1)	3,239,430	4,564,615
Accrued expenses (Note 2)	2,106,993	4,665,599
Others	609,533	985,186
Total	5,955,956	10,215,400

Note 1: Other tax payables as of September 30, 2020, mainly consisted of value-added tax payable of US$4.6 million and other taxes such as individual income tax and stamp duty tax.

Note 2: Accrued expenses mainly consisted of accrued professional service fees and other miscellaneous accrued marketing and operation expenses.

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Other Operating Income (Loss), net

9 Months Ended

Sep. 30, 2020

Other Operating Income (Loss), net

Other Operating Income (Loss), net

8. Other Operating Income (Loss), net

Other operating loss, net for the nine months ended September 30, 2020, primarily consisted of government subsidies received by the Group, compensation payment of US$1.6 million to victims of alleged misconducts of certain third-party advertisers perpetrated on the Group's platform that the Group deposited to an escrow account controlled by a local authority conducting investigation on the advertisers and contingent liabilities for intellectual property infringement and unfair competition lawsuits during operations. Other operating income, net for the nine months ended September 30, 2019, primarily consisted of government subsidies received by the Group and contingent liabilities for intellectual property infringement lawsuit during operations.

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Income Taxes Expense

9 Months Ended

Sep. 30, 2020

Income Taxes Expense

Income Taxes Expense

9. Income Taxes Expense

The current and deferred portion of income tax expenses included in the consolidated statements of operations are as follows:

	For the nine months ended September 30,
	2019	2020
Current tax expenses	1,714	3,200
Deferred tax benefits	—	—
Total	1,714	3,200

The Group’s effective tax rates were nil for the nine months ended September 30, 2019 and 2020, respectively.

The Group recorded a full valuation allowance against deferred tax assets of all its consolidated entities because all entities were in a cumulative loss position as of December 31, 2019 and September 30, 2020. No unrecognized tax benefits and related interest and penalties were recorded in any of the periods presented.

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Treasury Shares

9 Months Ended

Sep. 30, 2020

Treasury Shares

Treasury Shares

10. Treasury Shares

Treasury shares represent shares repurchased by the Group that are no longer outstanding and are held by the Group. For the nine months ended September 30, 2020, under the repurchase plan, the Group had repurchased an aggregate of 64,770,700 ordinary shares on the open market for a total cash consideration of US$8,130,513, which were accounted for as the cost of the treasury shares.

As of September 30, 2020, 135,205,550 treasury shares have been cancelled.

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Share-Based Compensation

9 Months Ended

Sep. 30, 2020

Share-Based Compensation

Share-Based Compensation

11. Share-Based Compensation

Share Options

The options have a contractual term of ten years. The vesting date starts on the grant date or the commencement date of a participant’s employment agreement. The options vest 20% on each of the five anniversary dates of the vesting date and upon continued employment. In the event of termination of a participant’s employment, the unvested options shall be terminated immediately. The participant’s right to exercise the vested options shall be terminated 2 or 3 months after the termination of the employment.

The Group uses the binomial option pricing model and the following assumptions to estimate the fair value of the options at the date of granted:

		Nine Months ended
	Year ended December 31	September 30
	2019	2020
Average risk-free rate of interest	1.67%	0.67%
Expected volatility	42.50%-43.22%	43.18%-43.38%
Dividend yield	0%	0%
Contractual term	10 years	10 years
Fair value of the underlying shares on the date of option grants	0.09-0.10	0.10-0.13

On November 6, 2018, the Board of Directors approved an option modification to reduce the exercise price of certain options granted to employees. All other terms of the share options granted remain unchanged. The modification resulted in incremental compensation cost of US$285,661, of which US$68,530 and US$42,867 was recorded during the nine months ended September 30, 2019 and the nine months ended September 30, 2020, respectively. The remaining US$141,977 will be amortized over the remaining vesting period of the modified options, ranging from the remaining of 2020 to 2021.

11. Share-Based Compensation (Continued)

Share Options (Continued)

The risk-free rate of interest is based on the US Treasury yield curve as of valuation date. Volatility is estimated based on annualized standard deviation of daily stock price return of comparable companies for the period before valuation date and with similar span as the expected expiration term. The Group has never declared or paid any cash dividends on its capital stock, and the Group does not anticipate any dividend payments in the foreseeable future.

A summary of the aggregate option activity and information regarding options outstanding as of September 30, 2020 is as follows:

		Weighted
	Number of	average exercise
	options	price
		US$
Outstanding on January 1, 2020	160,800,982	0.05
Granted	145,572,500	0.0002
Forfeited	(7,108,508)	0.03
Expired	—	—
Exercised	(15,220,000)	0.04
Outstanding on September 30, 2020	284,044,974	0.02
Options exercisable on September 30, 2020	128,681,130	0.05
Vested or expected to vest as of September 30, 2020	284,044,974	0.02

The weighted average grant date fair values of options granted during the nine months ended September 30, 2019 and the nine months ended September 30, 2020 were US$0.10 and US$0.10, respectively.

For the nine months ended September 30, 2020, 15,220,000 of options were exercised with an aggregate intrinsic value of US$944,105. For the nine months ended September 30, 2019, 8,330,150 of options were exercised with an aggregate intrinsic value of US$545,013.

For the nine months ended September 30, 2019 and 2020 excluding the incremental compensation cost resulted from the modification discussed above, the Group recognized share-based compensation expense of US$439,601 and US$2,292,252, respectively. As of September 30, 2020, there was US$12,686,969 in total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 3.28 years.

Restricted Share Units

In the nine months ended September 30, 2020, the Group granted to certain employees 1,578,500 Restricted Share Units ("RSUs"). The RSUs have a contractual term of ten years and vest 25% on each anniversary over four years from the grant date. The vesting of these RSUs is conditioned on continued employment. Compensation expense based on fair value is amortized over the requisite service period of award using the straight line vesting attribution method.

11. Share-Based Compensation (Continued)

Restricted Share Units (Continued)

A summary of the RSUs activity for the nine months ended September 30, 2020 is as follows:

		Weighted average
	Number of	grant date
	restricted shares	fair value
Unvested restricted shares outstanding at January 1, 2020	50,725,912	0.20
Granted	1,578,500	0.10
Vested	(11,331,332)	0.22
Forfeited	(11,779,000)	0.17
Unvested restricted shares outstanding at September 30, 2020	29,194,080	0.19
Expected to vest at September 30, 2020	29,194,080	0.19

The share-based compensation expense related to RSUs of US$2,708,567 and US$1,471,380 were recognized by the Group for the nine months ended September 30, 2019 and 2020, respectively.

As of September 30, 2020, there was US$4,477,292 in unrecognized compensation costs, net of actual forfeitures, related to unvested restricted shares, which is expected to be recognized over a weighted-average period of 2.30 years.

In June 2020, the Group cash settled certain vested share options and RSUs at fair value amounted to US$823,226. Given the transaction is an one-time transaction, negotiated after the award is vested, and not pursuant to a pre-existing right of the Group, the Group accounted for it as a repurchase of equity with amount of cash paid recorded as additional paid in capital.

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Net Loss Per Share

9 Months Ended

Sep. 30, 2020

Net Loss Per Share

Net Loss Per Share

12. Net Loss Per Share

Net loss per share was computed by dividing net loss attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding for the nine months ended September 30, 2019 and 2020:

	For the nine months ended September 30,
	2019	2020
	US$	US$
Numerator:
Net loss—basic and diluted	(30,200,182)	(28,582,981)
Net loss attributable to ordinary shareholders	(30,200,182)	(28,582,981)
Shares (Denominator):
Weighted average number of ordinary shares outstanding
Basic	3,163,501,054	3,086,630,271
Diluted	3,163,501,054	3,086,630,271
Net loss earnings per share—basic and diluted	(0.01)	(0.01)

12. Net Loss Per Share (Continued)

As a result of the Group’s net loss for the nine months ended September 30, 2019 and 2020, diluted net loss per share does not include the following instruments as their inclusion would be antidilutive:

	For the nine months ended September 30,
	2019	2020
Share options	160,139,359	284,044,974
Restricted shares units	60,108,963	29,194,080
Total	220,248,322	313,239,054

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies.

Commitments and Contingencies

13. Commitments and Contingencies

Lease Commitments

The Group leases certain office premises under operating leases. The term of each lease agreement vary and may contain renewal options. Rental payments under operating leases are charged to operating expenses on a straight-line basis over the period of the lease based on contract terms. Rental expenses under operating leases for the nine months ended September 30, 2019 and 2020 were US$1,338,427, and US$1,096,762, respectively.

Future lease payments under operating leases as of September 30, 2020 were as follows:

Year ending December 31	US$
The remaining of 2020	494,753
2021	1,590,357
2022	741,411
2023	60,455
Total	2,886,976

The Group did not have other significant capital commitments or significant guarantees as of December 31, 2019 and September 30, 2020, respectively.

Contingencies

From time to time, the Group is a party to various legal actions arising in the ordinary course of business. The Group accrues costs associated with these matters when they become probable and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. The Group's management does not expect any liability from the disposition of such claims and litigation individually or in the aggregate would have a material adverse impact on the Group's consolidated financial position, results of operations and cash flows.

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Segment Information

9 Months Ended

Sep. 30, 2020

Segment Information

Segment Information

14. Segment Information

The Group has only one reportable segment since the Group does not distinguish revenues, costs and expenses between segments in its internal reporting, and reports costs and expenses by nature as a whole.

The Group’s chief operating decision maker, who has been identified as the Chief Executive Officer, reviews the consolidated results when making decisions about allocating resources and assessing performance of the Group as a whole. The Group does not distinguish among markets or segments for the purpose of internal reports.

14. Segment Information (Continued)

Information about the Group’s non-current assets is presented based on the geographical location of the assets as follows:

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
PRC	2,655,953	4,258,416
USA	3,540,740	2,661,423
Total	6,196,693	6,919,839

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Subsequent Event

9 Months Ended

Sep. 30, 2020

Subsequent Event

Subsequent Event

15. Subsequent Event

Pursuant to the repurchase shares program announced on May 18, 2020, 5,486,350 shares (equivalent to 109,727 ADSs) of the Group’s Class A ordinary shares were purchased from October 1, 2020 through December 14, 2020 for a total cash consideration of US$0.5 million from the public market.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2020

Summary of Significant Accounting Policies

Basis of Presentation

(a)   Basis of Presentation

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") and applicable rules and regulations of the Securities and Exchange Commission ("SEC"), regarding interim financial reporting, and include all normal and recurring adjustments that management of the Group considers necessary for a fair presentation of its financial position and operating results. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these financial statements should be read in conjunction with the Group’s annual consolidated financial statements and notes thereto, included in the Company’s 2019 Annual Report on Form 20-F filed with the SEC on April 20, 2020, referred to as the Company’s 2019 Annual Report.

Principles of Consolidation

(b)   Principles of Consolidation

The consolidated financial statements include the financial information of the Company, its wholly owned subsidiaries, its consolidated VIEs and VIEs’ subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Applicable PRC laws and regulations currently limit foreign ownership of companies that provide internet content distribution services and any other restrictions. The Company is deemed a foreign legal person under PRC laws and accordingly subsidiaries owned by the Company are not eligible to engage in provisions of internet content or online services. The Group therefore conducts its online business through the following major consolidated VIEs:

● Shanghai Chu Bao (CooTek) Information Technology Co., Ltd. ("Chu Bao")

● Yingsun Information Technology (Ningbo) Co., Ltd. ("Yingsun")

● Shanghai Qiaohan Technology Co., Ltd. ("Qiaohan")

● Molihong (Shenzhen) Internet Technology Co., Ltd. ("Molihong")

● Shanghai Dengyong Information Technology Co., Ltd. ("Dengyong")

2. Summary of Significant Accounting Policies (Continued)

(b)   Principles of Consolidation (Continued)

The following consolidated financial statement balances and amounts of the Group’s VIEs were included in the accompanying unaudited condensed consolidated financial statements after the elimination of intercompany balances and transactions among the Company, its subsidiaries and its VIEs.

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
ASSETS
Cash and cash equivalents	13,714,304	23,294,883
Restricted cash	203	209
Short-term investments	21,502	—
Accounts receivable, net	21,582,641	23,473,397
Prepaid expense and other assets	3,643,649	8,569,904
Long term restricted cash	—	2,472,998
Long-term investments	—	146,841
Property and equipment, net	496	9,231
Intangible assets, net	47,122	61,020
Other non-current assets	—	2,131
Total Assets	39,009,917	58,030,614
LIABILITIES
Accounts payable	35,002,827	57,304,063
Short-term bank borrowings	408,264	256,697
Accrued salary and benefits	275,091	604,020
Accrued expenses and other current liabilities	1,385,303	3,696,308
Deferred revenue	3,658,808	1,928,241
Total Liabilities	40,730,293	63,789,329

	For the nine months ended September 30,
	2019	2020
	US$	US$
Net revenues	38,276,479	299,205,121
Loss from operations	(18,841,315)	(94,447)
Net (loss) income	(18,823,768)	150,325
Net cash (used in) provide by operating activities	(6,560,184)	18,000,288
Net cash used in investing activities	—	(201,320)
Net cash provided by (used in) financing activities	44,315	(179,412)

The VIEs’ assets are comprised of recognized and unrecognized revenue-producing assets. The recognized revenue producing assets mainly include purchased servers and software, which are presented in the account of "Property and equipment, net" and "Intangible assets, net". The unrecognized revenue-producing assets mainly consist of the Internet Content Provider license ("ICP" license), trademarks, copyrights and registered patents, which are not recognized in the consolidated balance sheets.

Revenues of VIEs included in the consolidated financial statements mainly include revenue of advertising services. The VIEs contributed 35% and 88% of the Group’s consolidated net revenues for the nine months ended September 30, 2019 and 2020, respectively. As of December 31, 2019 and September 30, 2020, the VIEs accounted for an aggregate of 38% and 54% respectively, of the consolidated total assets, and 65% and 62% respectively, of the consolidated total liabilities.

2. Summary of Significant Accounting Policies (Continued)

(b)   Principles of Consolidation (Continued)

There are no terms in any arrangements, considering both explicit arrangements and implicit variable interests that require the Company or its subsidiaries to provide financial support to the VIEs. However, if the VIEs were ever to need financial support, the Group may, at its option and subject to statutory limits and restrictions, provide financial support to its VIE through loans to the shareholders of the VIEs.

The Group believes that there are no assets held in the VIEs that can be used only to settle obligations of the VIEs, except for registered capital and the PRC statutory reserves. As the VIEs are incorporated as limited liability companies under the PRC Company Law, creditors of the VIEs do not have recourse to the general credit of the Company for any of the liabilities of the VIEs. Relevant PRC laws and regulations restrict the VIEs from transferring a portion of their net assets, equivalent to the balance of its statutory reserve and its share capital, to the Company in the form of loans and advances or cash dividends.

Use of Estimates

(c)   Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates. The Group bases its estimates on historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant accounting estimates reflected in the Group's financial statements including but not limited to allowance for doubtful accounts, valuation allowances of deferred tax assets, and valuation of share-based compensation. Actual results may differ materially from those estimates.

Fair Value

(d)   Fair Value

Fair value reflects the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the assets or liabilities.

The Group applies a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. This guidance specifies a hierarchy of valuation techniques, which is based on whether the inputs into the valuation technique are observable or unobservable. The hierarchy is as follows:

● Level 1— Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.

● Level 2— Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques.

● Level 3— Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect the Group’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

The fair value guidance describes three main approaches to measure the fair value of assets and liabilities: (1) market approach; (2) income approach and (3) cost approach. The market approach uses prices and other relevant information generated from market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts to a single present value amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that would currently be required to replace an asset.

2. Summary of Significant Accounting Policies (Continued)

(d)   Fair Value (Continued)

When available, the Group uses quoted market prices to determine the fair value of an asset or liability. If quoted market prices are not available, the Group will measure fair value using valuation techniques that use, when possible, current market-based or independently sourced market parameters, such as interest rates and currency rates.

Beginning January 1, 2019, the Group’s equity investments without readily determinable fair values, which do not qualify for NAV practical expedient and over which the Group does not have the ability to exercise significant influence through the investments in common stock or in substance common stock, are accounted for under the measurement alternative upon the adoption of Accounting Standards Update ("ASU") 2016-01 Recognition and Measurement of Financial Assets and Liabilities (the "Measurement Alternative"). Under the Measurement Alternative, the carrying value is measured at cost, less any impairment, plus and minus changes resulting from observable price changes in orderly transactions for identical or similar investments. After management’s assessment of each of the long-term investments, management concluded that investments do not have readily determinable fair values, and elects the measurement alternative.

Financial instruments not reported at fair value include cash and cash equivalents, restricted cash, short-term investments, accounts receivable, accounts payable, other current liabilities and short-term bank borrowings. The carrying amounts of these financial instruments as of December 31, 2019 and September 30, 2020 were considered representative of their fair values due to their short-term nature.

Foreign Currency Translation

(e)   Foreign Currency Translation

The functional currency of the Group is the United States Dollar ("US$"). The functional currency of the subsidiaries and the VIEs in the PRC is Renminbi ("RMB"). The functional currency of all the other subsidiaries is US$.

Foreign currency transactions have been translated into the functional currency at the exchange rates prevailing on the date of transactions. Foreign currency denominated monetary assets and liabilities are re-measured into the functional currency at exchange rates prevailing on the balance sheet date. Exchange gains and losses have been included in the determination of net income.

The Group has chosen the US$ as its reporting currency. Assets and liabilities have been translated using exchange rates prevailing on the balance sheet date. Equity accounts are translated at historical exchange rates. Income statement items have been translated using the average exchange rate for the year. Translation adjustments have been reported as cumulative translation adjustments and are shown as a component of other comprehensive income/loss in the consolidated statements of comprehensive (loss) income and consolidated statements of changes in shareholders’ equity.

Cash, Cash Equivalents and Restricted Cash

(f)   Cash, Cash Equivalents and Restricted Cash

Cash and cash equivalents consist of cash on hand, demand deposits and floating rate financial instruments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less when purchased.

The Group's current-portion restrict cash represents amounts held in Group's bank account as guarantee deposit for payments processing services provided by the bank.

Certain bank accounts were frozen by the PRC local authority in connection with an ongoing investigation of alleged misconducts of third-party advertisers perpetrated on the Group's advertising platform. As of September 30, 2020, cash held in these frozen bank accounts amounted to US$2,472,998. These funds are presented as long-term restricted cash on the consolidated balance sheet as of September 30, 2020 as the Group cannot control the timing of its release. In October 2020, an additional US$18.4 million was deposited into these frozen bank accounts. The Group is still in the process of cooperating with the relevant authority on such investigation and expect the funds to be released upon the completion of such investigation.

Short-term Investments

(g)   Short-term Investments

Short-term investments primarily comprises of the time deposits with banks maturities between three months and one year. The Group states the short-term investments at amortized cost.

Revenue Recognition

(h)   Revenue Recognition

Mobile Advertising

The Group generates substantially all of its revenue through mobile advertising. As of January 1, 2019, the Group adopted ASU 2014-09 Revenue from Contracts with Customers - Topic 606 and all subsequent ASUs that modified ASC 606. The Group has elected to apply the ASU and all related ASUs under the modified retrospective method to all contracts that were not completed as of January 1, 2019. Results for reporting periods beginning after January 1, 2019 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Group did not note any effects of applying the new revenue standard as an adjustment to the opening balance of retained earnings at the beginning of 2019.

In order to achieve that core principle, the Company applies the following five-step approach: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when a performance obligation is satisfied.

The Group provides advertising services to customers for promotion of their brands and products through its mobile applications, including a portfolio of content-rich mobile applications. The Group has two general pricing models for its advertising products: cost over a time period and cost for performance basis including per impression basis. For advertising contracts over a time period, the Group generally recognizes revenue ratably over time, because the customer simultaneously receives and consumes the benefits as the Group performs throughout a fixed contract term. For contracts that are charged on the cost for performance basis, the Group charges an agreed-upon fee to its customers determined based on the effectiveness of advertising links, which is typically measured by clicks, transactions, installations, user registrations, and other actions originating from the Group’s mobile applications. Revenue is recognized at a point in time when there is an effective click, transaction, installations, user registrations, and other actions originating from the Group’s mobile applications. For contracts that are charged on the cost per impression basis, the Group recognizes the revenue at a point in time when the impressions are delivered. Revenue for performance-based advertising services is recognized at a point in time when all the revenue recognition criteria are met.

The Group launched in-house developed advertising platform, CooTek Ads, to provide tailored advertising services from late 2019. Customers engaged through CooTek Ads are required to pay a deposit before using Group's services. The deposits received are recorded as deferred revenue on the consolidated balance sheets. The amounts due to the Group are deducted from the deposited amounts when performance criteria have been satisfied.

Others

The Group also generates other revenues through cloud call business, licensing of its Smart Inputs products and membership fee from the users. The revenue is recognized when service is rendered.

2. Summary of Significant Accounting Policies (Continued)

(h) Revenue Recognition (Continued)

Sales Incentives

The Group provides sales incentives to certain customers on the CooTek Ads in the form of sales rebates which entitle them to receive reductions in the price by meeting certain cumulative consumption requirement or replenishing required amount of deposit. The Group accounts for these incentives granted to customers as variable consideration and records it as reduction of revenue. The amount of variable consideration is measured based on the most likely amount of incentives to be. For the nine months ended September 30, 2019 and 2020, the rebates recorded by the Group were nil and US$48,491,685, respectively.

Disaggregation of Revenue

In the following table, revenue is disaggregated by revenue streams and geographic location of customers’ headquarters.

	For the nine months ended September 30,
	2019	2020
	US$	US$
Revenue:
Advertising revenue	106,575,374	337,037,822
Other revenue	2,324,105	2,027,633
Total	108,899,479	339,065,455

	For the nine months ended September 30,
	2019	2020
	US$	US$
USA	51,314,113	11,161,631
PRC	55,423,779	325,246,386
Others	2,161,587	2,657,438
Total	108,899,479	339,065,455

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing to customers. Accounts receivable represent amounts invoiced, and revenue recognized prior to invoicing when the Group has satisfied its performance obligations and has the unconditional right to payment.

2. Summary of Significant Accounting Policies (Continued)

(h) Revenue Recognition (Continued)

Contract liabilities include payments received in advance of performance under the contract or for differences between the amount billed to a customer and the revenue recognized for the completed performance obligation which is presented as deferred revenue on the consolidated balance sheets. Due to the generally short-term duration of the Group’s contracts, the majority of the performance obligations are satisfied in one year. The movements of the Group’s accounts receivable and deferred revenue are as follows:

	Accounts Receivable	Deferred Revenue
	US$	US$
Opening Balance at January 1, 2019	23,373,969	344,361
(Decrease) Increase, net	(3,966,005)	239,404
Ending Balance at September 30, 2019	19,407,964	583,765
Opening Balance at January 1, 2020	27,254,634	3,887,908
Increase, net	1,828,582	809,359
Ending Balance at September 30, 2020	29,083,216	4,697,267

The Group recognized revenue of US$263,383 and US$3,637,328 by the reducing the balance of deferred revenue in the nine months ended September 30, 2019 and 2020, respectively, which were included in the balance of deferred revenue at the beginning of the each period.

Sales and Marketing Expenses

(i)   Sales and Marketing Expenses

Sales and marketing expenses primarily consist of advertising expenses, salaries and benefits of sales and marketing personnel and fees paid to mobile device manufacturers to pre-install the Group’s Smart Input products. Advertising expenses represent payment to the third parties for online user acquisition of the Group’s products via social media and demand-side platforms. Advertising expenses are expensed as sales and marketing expenses when the services are received. Such expenses amounted to US$86,189,395 and US$310,602,100 for the nine months ended September 30, 2019 and 2020, respectively.

Concentration and Risks

(j)   Concentration and Risks

Financial instruments that potentially expose the Group to concentration of credit risk consist primarily of cash and cash equivalents, short-term investments, accounts receivable and prepayments. The Group places its cash and cash equivalents and short-term investments with financial institutions with high-credit ratings and quality. The Group conducts credit evaluations of customers, and generally does not require collateral or other security from its customers. The Group establishes an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers. With respect to prepayments, the Group performs on-going credit evaluations of the financial condition of these suppliers and has noted no significant credit risk.

2. Summary of Significant Accounting Policies (Continued)

(j)   Concentration and Risks (Continued)

Concentration of Customers

The following customers accounted for 10% or more of revenue:

	For the nine months ended September 30,
	2019			2020
	US$	%		US$	%
Company A	21,335,698	20	%	*	*
Company B	21,731,172	20	%	*	*
Company C	11,088,217	10	%	*	*
Company D	16,873,890	16	%	*	*
Company E	*	*		91,588,390	27	%

The following customers accounted for 10% or more of accounts receivable:

	As of December 31,			As of September 30,
	2019			2020
	US$	%		US$	%
Company B	17,944,840	62	%	*	*
Company C	4,142,638	14	%	*	*
Company D	3,840,005	13	%	*	*
Company E	*	*		12,354,156	40	%
Company F	*	*		9,824,384	32	%

Concentration of Vendors

The Group uses certain vendors to acquire users and those cost are recorded as sales and marketing expenses. Vendors accounted for 10% or more are listed as below:

	For the nine months ended September 30,
	2019			2020
	US$	%		US$	%
Company G	11,080,305	12	%	*	*
Company H	10,853,930	12	%	*	*
Company I	*	*		41,804,056	13	%

The following vendors accounted for 10% or more of accounts payable:

	As of December 31,		As of September 30,
	2019		2020
	US$	%	US$	%
Company H	*	*	8,433,642	13	%
Company J	*	*	7,378,433	11	%

* Less than 10%.

2. Summary of Significant Accounting Policies (Continued)

(j)   Concentration and Risks (Continued)

Business and Economic Risks

The Group participates in the dynamic and competitive high technology industry and believes that changes in any of the following areas could have a material adverse effect on the Group's future financial position, results of operations and cash flows: changes in the overall demand for services and products; competitive pressures due to existing and new entrants; advances and new trends in new technologies and industry standards; changes in certain strategic relationships or customer relationships; regulatory considerations; copyright regulations; brand maintenance and enhancement; and risks associated with the Company's ability to attract and retain employees necessary to support its growth.

The Group's operations could be adversely affected by significant political, economic and social uncertainties in the PRC.

Foreign Currency Risk

The RMB is not a freely convertible currency. The State Administration for Foreign Exchange in the PRC, under the authority of the Peoples Bank of China, controls the conversion of RMB into other currencies. The value of the RMB is subject to changes in central government policies, international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market. The Group's cash and cash equivalents and restricted cash denominated in RMB amounted to RMB139,905,845 (amounted to US$20,054,735) and RMB292,519,950 (amounted to US$42,953,841) as of December 31, 2019 and September 30, 2020, respectively.

Recent Accounting Pronouncements

(k)  Recent Accounting Pronouncements

New accounting pronouncements recently adopted

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement, which changes certain disclosure requirements, including those related to Level 3 fair value measurements. The provisions of ASU 2018-13 relating to changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. The remaining provisions should be applied retrospectively to all periods presented upon their effective date. The Group has adopted this ASU on January 1, 2020, which did not have a material impact on its unaudited condensed consolidated financial statements and related disclosures.

In October 2018, the FASB issued ASU 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities. Under the new guidance, to determine whether decision-making fees represent a variable interest, an entity considers indirect interests held through related parties under common control on a proportionate basis, rather than in their entirety. ASU 2018-17 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years, and early adoption is permitted in any interim period. ASU 2018-17 is required to be applied retrospectively from the date the guidance is first applied. The Group has early adopted this ASU on January 1, 2020 and did not have a material impact on its unaudited condensed consolidated financial statements and related disclosures.

2. Summary of Significant Accounting Policies (Continued)

(l)  Recent Accounting Pronouncements (Continued)

New accounting pronouncements not yet adopted

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize leases on balance sheet and disclose key information about lease arrangements. The new standard establishes a right-of-use ("ROU") model that requires a lessee to recognize a ROU asset and lease liability on the balance sheet for all leases with terms of longer than 12 months. Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the income statement. The standard is effective on January 1, 2019, with early adoption permitted, for public business entity ("PBE"). And it is effective on January 1, 2020 for non-issuers and PBEs that meet the definition of a PBE solely because their financial statements or financial information is included in a filing with the SEC. In July 2018, the FASB issued an update that provided an additional transition option that allows companies to continue applying the guidance under the lease standard in effect at that time in the comparative periods presented in the consolidated financial statements. Companies that elect this option would record a cumulative-effect adjustment to the opening balance of retained earnings on the date of adoption. In November 19, 2019, the FASB issued ASU 2019-10 to amend the effective date for ASU 2016-02 to be January 1, 2021 for non-issuers. The Group as an EGC has elected to adopt the new lease standard as of the effective date applicable to nonissuers and will implement the new lease standard on January 1, 2021 using the modified retrospective method. The modified retrospective approach would not require any transition accounting for leases that expired before the earliest comparative period presented. In addition, the Group will elect the transition practical referred to as the "package of three", that must be taken together and allows entities to (1) not reassess whether existing contracts contain leases, (2) carryforward the existing lease classification, and (3) not reassess initial direct costs associated with existing leases. The Group is in the process of evaluating the impact on its consolidated financial statements, as well as the impact of adoption on policies, practices, systems and financial statement disclosures. As of September 30, 2020, the Group has US$2.9 million of future minimum operating lease commitments that are not currently recognized on its consolidated balance sheets (see note 13).

In June 2016, the FASB issued ASU 2016-13, Credit Losses, Measurement of Credit Losses on Financial Instruments. This ASU provides more useful information about expected credit losses to financial statement users and changes how entities will measure credit losses on financial instruments and timing of when such losses should be recognized. This ASU is effective for annual and interim periods beginning after December 15, 2019 for the public business entities. Early adoption is permitted for all entities for annual periods beginning after December 15, 2018, and interim periods therein. In November 2019, the FASB issued ASU No. 2019-10 which delayed the effective date of ASU 2016-13 for smaller reporting companies (as defined by the U.S. Securities and Exchange Commission) and other non-SEC reporting entities to fiscal years beginning after December 15, 2022, including interim periods within those fiscal periods. Early adoption is permitted. The Company is currently assessing the impact the guidance will have on its consolidated financial statements.

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Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2020

Summary of Significant Accounting Policies

Schedule of consolidated financial statement balances and amounts of the Group's VIEs

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
ASSETS
Cash and cash equivalents	13,714,304	23,294,883
Restricted cash	203	209
Short-term investments	21,502	—
Accounts receivable, net	21,582,641	23,473,397
Prepaid expense and other assets	3,643,649	8,569,904
Long term restricted cash	—	2,472,998
Long-term investments	—	146,841
Property and equipment, net	496	9,231
Intangible assets, net	47,122	61,020
Other non-current assets	—	2,131
Total Assets	39,009,917	58,030,614
LIABILITIES
Accounts payable	35,002,827	57,304,063
Short-term bank borrowings	408,264	256,697
Accrued salary and benefits	275,091	604,020
Accrued expenses and other current liabilities	1,385,303	3,696,308
Deferred revenue	3,658,808	1,928,241
Total Liabilities	40,730,293	63,789,329

	For the nine months ended September 30,
	2019	2020
	US$	US$
Net revenues	38,276,479	299,205,121
Loss from operations	(18,841,315)	(94,447)
Net (loss) income	(18,823,768)	150,325
Net cash (used in) provide by operating activities	(6,560,184)	18,000,288
Net cash used in investing activities	—	(201,320)
Net cash provided by (used in) financing activities	44,315	(179,412)

Schedule of revenue based on revenue streams

	For the nine months ended September 30,
	2019	2020
	US$	US$
Revenue:
Advertising revenue	106,575,374	337,037,822
Other revenue	2,324,105	2,027,633
Total	108,899,479	339,065,455

Schedule of revenues generated by geographic location of customers' headquarters

	For the nine months ended September 30,
	2019	2020
	US$	US$
USA	51,314,113	11,161,631
PRC	55,423,779	325,246,386
Others	2,161,587	2,657,438
Total	108,899,479	339,065,455

Schedule of movements in accounts receivable and deferred revenue

	Accounts Receivable	Deferred Revenue
	US$	US$
Opening Balance at January 1, 2019	23,373,969	344,361
(Decrease) Increase, net	(3,966,005)	239,404
Ending Balance at September 30, 2019	19,407,964	583,765
Opening Balance at January 1, 2020	27,254,634	3,887,908
Increase, net	1,828,582	809,359
Ending Balance at September 30, 2020	29,083,216	4,697,267

Schedule of concentration risk

Concentration of Customers

The following customers accounted for 10% or more of revenue:

	For the nine months ended September 30,
	2019			2020
	US$	%		US$	%
Company A	21,335,698	20	%	*	*
Company B	21,731,172	20	%	*	*
Company C	11,088,217	10	%	*	*
Company D	16,873,890	16	%	*	*
Company E	*	*		91,588,390	27	%

The following customers accounted for 10% or more of accounts receivable:

	As of December 31,			As of September 30,
	2019			2020
	US$	%		US$	%
Company B	17,944,840	62	%	*	*
Company C	4,142,638	14	%	*	*
Company D	3,840,005	13	%	*	*
Company E	*	*		12,354,156	40	%
Company F	*	*		9,824,384	32	%

Concentration of Vendors

The Group uses certain vendors to acquire users and those cost are recorded as sales and marketing expenses. Vendors accounted for 10% or more are listed as below:

	For the nine months ended September 30,
	2019			2020
	US$	%		US$	%
Company G	11,080,305	12	%	*	*
Company H	10,853,930	12	%	*	*
Company I	*	*		41,804,056	13	%

The following vendors accounted for 10% or more of accounts payable:

	As of December 31,		As of September 30,
	2019		2020
	US$	%	US$	%
Company H	*	*	8,433,642	13	%
Company J	*	*	7,378,433	11	%

* Less than 10%.

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Accounts Receivable, net (Tables)

9 Months Ended

Sep. 30, 2020

Accounts Receivable, net

Schedule of accounts receivable, net

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Accounts receivable	29,028,826	31,044,944
Allowance for doubtful accounts:
Balance at beginning of the year/period	(1,286,120)	(1,774,192)
Additions charged to bad debt expense	(4,104,458)	(322,361)
Write-off	3,616,076	141,266
Foreign exchange effect	310	(6,441)
Balance at end of the year/period	(1,774,192)	(1,961,728)
Accounts receivable, net	27,254,634	29,083,216

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Prepaid Expenses and Other Current Assets (Tables)

9 Months Ended

Sep. 30, 2020

Prepaid Expenses and Other Current Assets

Schedule of prepaid expenses and other current assets

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Value added tax recoverable	3,750,491	4,649,736
Other receivables	1,575,467	3,856,326
Advance to suppliers	1,545,793	952,760
Others	976,043	1,305,359
Prepaid expenses and other current assets	7,847,794	10,764,181

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Property and Equipment, net (Tables)

9 Months Ended

Sep. 30, 2020

Property and Equipment, net

Schedule of property and equipment, net

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Electronic equipment	9,622,184	12,045,523
Office equipment and furniture	334,452	346,181
Motor vehicles	82,470	82,470
Leasehold improvements	1,410,105	1,561,612
Construction in progress	76,200	—
Total	11,525,411	14,035,786
Less: Accumulated depreciation	(5,855,562)	(8,438,638)
Property and equipment, net	5,669,849	5,597,148

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Short-term bank borrowings (Tables)

9 Months Ended

Sep. 30, 2020

Short-term Bank Borrowings

Schedule of bank borrowings

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Short-term borrowings	9,012,645	14,822,161

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Accrued Expenses and Other Current Liabilities (Tables)

9 Months Ended

Sep. 30, 2020

Accrued Expenses and Other Current Liabilities

Schedule of accrued expenses and other current liabilities

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
Other tax payables (Note 1)	3,239,430	4,564,615
Accrued expenses (Note 2)	2,106,993	4,665,599
Others	609,533	985,186
Total	5,955,956	10,215,400

Note 1: Other tax payables as of September 30, 2020, mainly consisted of value-added tax payable of US$4.6 million and other taxes such as individual income tax and stamp duty tax.

Note 2: Accrued expenses mainly consisted of accrued professional service fees and other miscellaneous accrued marketing and operation expenses.

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Income Taxes Expense (Tables)

9 Months Ended

Sep. 30, 2020

Income Taxes Expense

Summary of current and deferred portion of income tax expenses

	For the nine months ended September 30,
	2019	2020
Current tax expenses	1,714	3,200
Deferred tax benefits	—	—
Total	1,714	3,200

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Share-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2020

Share-Based Compensation

Schedule of assumptions used to estimate the fair value of options at the date of granted

		Nine Months ended
	Year ended December 31	September 30
	2019	2020
Average risk-free rate of interest	1.67%	0.67%
Expected volatility	42.50%-43.22%	43.18%-43.38%
Dividend yield	0%	0%
Contractual term	10 years	10 years
Fair value of the underlying shares on the date of option grants	0.09-0.10	0.10-0.13

Summary of aggregate option activity and information regarding options outstanding

A summary of the aggregate option activity and information regarding options outstanding as of September 30, 2020 is as follows:

		Weighted
	Number of	average exercise
	options	price
		US$
Outstanding on January 1, 2020	160,800,982	0.05
Granted	145,572,500	0.0002
Forfeited	(7,108,508)	0.03
Expired	—	—
Exercised	(15,220,000)	0.04
Outstanding on September 30, 2020	284,044,974	0.02
Options exercisable on September 30, 2020	128,681,130	0.05
Vested or expected to vest as of September 30, 2020	284,044,974	0.02

Summary of the RSU activity

A summary of the RSUs activity for the nine months ended September 30, 2020 is as follows:

		Weighted average
	Number of	grant date
	restricted shares	fair value
Unvested restricted shares outstanding at January 1, 2020	50,725,912	0.20
Granted	1,578,500	0.10
Vested	(11,331,332)	0.22
Forfeited	(11,779,000)	0.17
Unvested restricted shares outstanding at September 30, 2020	29,194,080	0.19
Expected to vest at September 30, 2020	29,194,080	0.19

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Net Loss Per Share (Tables)

9 Months Ended

Sep. 30, 2020

Net Loss Per Share

Schedule of computation of basic and diluted net loss per share

	For the nine months ended September 30,
	2019	2020
	US$	US$
Numerator:
Net loss—basic and diluted	(30,200,182)	(28,582,981)
Net loss attributable to ordinary shareholders	(30,200,182)	(28,582,981)
Shares (Denominator):
Weighted average number of ordinary shares outstanding
Basic	3,163,501,054	3,086,630,271
Diluted	3,163,501,054	3,086,630,271
Net loss earnings per share—basic and diluted	(0.01)	(0.01)

Schedule of instruments excluded from calculation of diluted net loss per share

	For the nine months ended September 30,
	2019	2020
Share options	160,139,359	284,044,974
Restricted shares units	60,108,963	29,194,080
Total	220,248,322	313,239,054

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Commitments and Contingencies (Tables)

9 Months Ended

Sep. 30, 2020

Commitments and Contingencies.

Schedule of future lease payments under operating leases

Future lease payments under operating leases as of September 30, 2020 were as follows:

Year ending December 31	US$
The remaining of 2020	494,753
2021	1,590,357
2022	741,411
2023	60,455
Total	2,886,976

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Segment Information (Tables)

9 Months Ended

Sep. 30, 2020

Segment Information

Schedule of non-current assets based on geographical location of the assets

	As of December 31,	As of September 30,
	2019	2020
	US$	US$
PRC	2,655,953	4,258,416
USA	3,540,740	2,661,423
Total	6,196,693	6,919,839

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Organization and Principal Activities (Details) $ in Millions	Oct. 02, 2018 USD ($) shares	Oct. 31, 2010 item
Organization and Principal Activities
Proceeds from initial public offering, net of offering cost of US$2,615,726 | $	$ 45.1
IPO | Ordinary shares
Organization and Principal Activities
Number of shares issued during the period	217,500,000
IPO | American depositary shares
Organization and Principal Activities
Number of shares issued during the period	4,350,000
Han Xiang
Organization and Principal Activities
Number of Investors | item		3
Three Investors | Han Xiang
Organization and Principal Activities
Percentage of interest acquired by outside investors		24.24%

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Summary of Significant Accounting Policies - Consolidated financial statement balances and amounts of the Group's VIEs (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
ASSETS
Cash and cash equivalents	$ 58,478,376	$ 56,269,749	$ 59,905,827
Restricted cash	60,209		60,204
Short-term investments	550,025		571,508
Accounts receivable, net	29,083,216		27,254,634
Prepaid expense and other assets	10,764,181		7,847,794
Long term restricted cash	2,472,998
Long-term Investments	146,841
Property and equipment, net	5,597,148		5,669,849
Intangible assets, net	419,343		267,736
Other noncurrent assets	756,507		259,108
Assets	108,328,844		101,836,660
LIABILITIES
Accounts payable	64,805,107		37,877,800
Short-term bank borrowings	14,822,161		9,012,645
Accrued salary and benefits	7,747,460		5,598,425
Accrued expenses and other current liabilities	10,215,400		5,955,956
Deferred revenue	4,697,267		3,887,908
TOTAL LIABILITIES	102,780,862		62,928,297
Net revenues	339,065,455	108,899,479
Loss from operations	(28,793,624)	(30,542,293)
Net (loss) income	(28,582,981)	(30,200,182)
Net cash (used in) provided by operating activities	5,969,252	(18,899,694)
Net cash used in investing activities	(2,362,367)	(4,097,269)
Net cash provided by (used in) financing activities	(2,937,138)	(5,232,595)
VIEs
ASSETS
Cash and cash equivalents	23,294,883		13,714,304
Restricted cash	209		203
Short-term investments			21,502
Accounts receivable, net	23,473,397		21,582,641
Prepaid expense and other assets	8,569,904		3,643,649
Long term restricted cash	2,472,998
Long-term Investments	146,841
Property and equipment, net	9,231		496
Intangible assets, net	61,020		47,122
Other noncurrent assets	2,131
Assets	58,030,614		39,009,917
LIABILITIES
Accounts payable	57,304,063		35,002,827
Short-term bank borrowings	256,697		408,264
Accrued salary and benefits	604,020		275,091
Accrued expenses and other current liabilities	3,696,308		1,385,303
Deferred revenue	1,928,241		3,658,808
TOTAL LIABILITIES	63,789,329		$ 40,730,293
Net revenues	299,205,121	38,276,479
Loss from operations	(94,447)	(18,841,315)
Net (loss) income	150,325	(18,823,768)
Net cash (used in) provided by operating activities	18,000,288	(6,560,184)
Net cash used in investing activities	(201,320)
Net cash provided by (used in) financing activities	$ (179,412)	$ 44,315
Percentage of consolidated net revenues	88.00%	35.00%
Percentage of consolidated total assets	54.00%		38.00%
Percentage of consolidated total liabilities	62.00%		65.00%

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Summary of Significant Accounting Policies - Cash, Cash Equivalents and Restricted Cash (Details) - USD ($)	1 Months Ended
	Oct. 31, 2020	Sep. 30, 2020
Cash, Cash Equivalents and Restricted Cash
Cash held in these frozen bank accounts		$ 2,472,998
Subsequent event
Cash, Cash Equivalents and Restricted Cash
Addition in restricted cash	$ 18,400,000

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Summary of Significant Accounting Policies - Revenue Recognition (Details)	9 Months Ended
	Sep. 30, 2020 USD ($) item	Sep. 30, 2019 USD ($)
Revenue Recognition
Number of general pricing models | item	2
Sales rebates | $	$ 48,491,685	$ 0

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Summary of Significant Accounting Policies - Disaggregation of Revenue (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Disaggregation of Revenue [Line Items]
Net revenues	$ 339,065,455	$ 108,899,479
USA
Disaggregation of Revenue [Line Items]
Net revenues	11,161,631	51,314,113
PRC
Disaggregation of Revenue [Line Items]
Net revenues	325,246,386	55,423,779
Others
Disaggregation of Revenue [Line Items]
Net revenues	2,657,438	2,161,587
Advertising revenue
Disaggregation of Revenue [Line Items]
Net revenues	337,037,822	106,575,374
Other revenue
Disaggregation of Revenue [Line Items]
Net revenues	$ 2,027,633	$ 2,324,105

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Summary of Significant Accounting Policies - Contract Balances (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Accounts Receivable
Beginning balance	$ 27,254,634	$ 23,373,969
(Decrease) Increase, net	1,828,582	(3,966,005)
Ending balance	29,083,216	19,407,964
Deferred Revenue
Beginning balance	3,887,908	344,361
(Decrease) Increase, net	809,359	239,404
Ending balance	4,697,267	583,765
Revenue recognized included in contract liability at beginning of quarter	$ 3,637,328	$ 263,383

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Summary of Significant Accounting Policies - Sales and Marketing Expenses (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Summary of Significant Accounting Policies
Advertising expenses	$ 310,602,100	$ 86,189,395

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Summary of Significant Accounting Policies - Concentration and risks (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Concentration and risks
Revenues	$ 339,065,455	$ 108,899,479
Accounts receivable, net	29,083,216		$ 27,254,634
Sales and marketing expenses	316,276,383	93,533,363
Accounts payable	64,805,107		$ 37,877,800
Customer concentration risk | Revenue | Company A
Concentration and risks
Revenues		$ 21,335,698
Concentration risk (as a percent)		20.00%
Customer concentration risk | Revenue | Company B
Concentration and risks
Revenues		$ 21,731,172
Concentration risk (as a percent)		20.00%
Customer concentration risk | Revenue | Company C
Concentration and risks
Revenues		$ 11,088,217
Concentration risk (as a percent)		10.00%
Customer concentration risk | Revenue | Company D
Concentration and risks
Revenues		$ 16,873,890
Concentration risk (as a percent)		16.00%
Customer concentration risk | Revenue | Company E
Concentration and risks
Revenues	$ 91,588,390
Concentration risk (as a percent)	27.00%
Customer concentration risk | Accounts receivables | Company B
Concentration and risks
Concentration risk (as a percent)		62.00%
Accounts receivable, net		$ 17,944,840
Customer concentration risk | Accounts receivables | Company C
Concentration and risks
Concentration risk (as a percent)		14.00%
Accounts receivable, net		$ 4,142,638
Customer concentration risk | Accounts receivables | Company D
Concentration and risks
Concentration risk (as a percent)		13.00%
Accounts receivable, net		$ 3,840,005
Customer concentration risk | Accounts receivables | Company E
Concentration and risks
Concentration risk (as a percent)	40.00%
Accounts receivable, net	$ 12,354,156
Customer concentration risk | Accounts receivables | Company F
Concentration and risks
Concentration risk (as a percent)	32.00%
Accounts receivable, net	$ 9,824,384
Vendor concentration risk | Sales and marketing expenses | Company G
Concentration and risks
Concentration risk (as a percent)		12.00%
Sales and marketing expenses		$ 11,080,305
Vendor concentration risk | Sales and marketing expenses | Company H
Concentration and risks
Concentration risk (as a percent)		12.00%
Sales and marketing expenses		$ 10,853,930
Vendor concentration risk | Sales and marketing expenses | Company I
Concentration and risks
Concentration risk (as a percent)	13.00%
Sales and marketing expenses	$ 41,804,056
Vendor concentration risk | Accounts payable | Company H
Concentration and risks
Concentration risk (as a percent)	13.00%
Accounts payable	$ 8,433,642
Vendor concentration risk | Accounts payable | Company J
Concentration and risks
Concentration risk (as a percent)	11.00%
Accounts payable	$ 7,378,433

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Summary of Significant Accounting Policies - Foreign Currency Risk (Details)	Sep. 30, 2020 USD ($)	Sep. 30, 2020 CNY (¥)	Dec. 31, 2019 USD ($)	Dec. 31, 2019 CNY (¥)	Sep. 30, 2019 USD ($)	Dec. 31, 2018 USD ($)
Foreign Currency Risk [Line Items]
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	$ 61,011,583		$ 59,966,031	¥ 139,905,845	$ 56,269,749	$ 84,859,915
RMB
Foreign Currency Risk [Line Items]
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents	$ 42,953,841	¥ 292,519,950	$ 20,054,735

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Summary of Significant Accounting Policies - Recent Accounting Pronouncements (Details)	Sep. 30, 2020 USD ($)
Summary of Significant Accounting Policies
Future minimum operating lease commitments	$ 2,886,976

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Accounts Receivable, net (Details) - USD ($)	9 Months Ended		12 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Accounts Receivable, net
Accounts receivable	$ 31,044,944		$ 29,028,826
Allowance for doubtful accounts:
Balance at beginning of the year/period	(1,774,192)	$ (1,286,120)	(1,286,120)
Additions charged to bad debt expense	(322,361)	$ (4,665,322)	(4,104,458)
Write-off	141,266		3,616,076
Foreign exchange effect	(6,441)		310
Balance at end of the year/period	(1,961,728)		(1,774,192)
Accounts receivable, net	$ 29,083,216		$ 27,254,634

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Prepaid Expenses and Other Current Assets (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Prepaid Expenses and Other Current Assets
Value added tax recoverable	$ 4,649,736	$ 3,750,491
Other receivables	3,856,326	1,575,467
Advance to suppliers	952,760	1,545,793
Others	1,305,359	976,043
Prepaid expenses and other current assets	$ 10,764,181	$ 7,847,794

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Property and Equipment, net (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019
Property, Plant and Equipment, Net
Total	$ 14,035,786		$ 11,525,411
Less: Accumulated depreciation	(8,438,638)		(5,855,562)
Property and equipment, net	5,597,148		5,669,849
Depreciation expenses	2,656,359	$ 2,077,516
Electronic equipment
Property, Plant and Equipment, Net
Total	12,045,523		9,622,184
Office equipment and furniture
Property, Plant and Equipment, Net
Total	346,181		334,452
Motor vehicles
Property, Plant and Equipment, Net
Total	82,470		82,470
Leasehold improvements
Property, Plant and Equipment, Net
Total	$ 1,561,612		1,410,105
Construction in Progress
Property, Plant and Equipment, Net
Total			$ 76,200

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Short-term Bank Borrowings (Details) - USD ($)	1 Months Ended	9 Months Ended	12 Months Ended
	Oct. 31, 2019	Sep. 30, 2020	Dec. 31, 2019	Jun. 30, 2020	Jul. 31, 2018	Jun. 30, 2018	Jul. 31, 2016
Credit facility
Short-term bank borrowings		$ 14,822,161	$ 9,012,645
Credit facility, 2016
Credit facility
Total credit available under this facility	$ 6,000,000.0			$ 11,000,000.0			$ 6,000,000.0
Amount borrowed		11,100,000	7,700,000
Amount repaid		$ 6,300,000	$ 1,900,000
Variable interest rate (as a percent)		5.15%
Weighted average interest rate of short-term borrowings (as a percent)			5.53%
Credit facility, 2018
Credit facility
Total credit available under this facility	$ 4,000,000.0	$ 4,000,000			$ 4,000,000.0	$ 4,000,000.0
Amount borrowed			$ 6,400,000
Amount repaid		$ 3,200,000	$ 3,200,000
Weighted average interest rate of short-term borrowings (as a percent)		3.84%	6.12%
PBOC rate, one year | Credit facility, 2016
Credit facility
Variable interest rate (as a percent)	1.30%
PBOC rate, one year | Credit facility, 2018
Credit facility
Variable interest rate (as a percent)	3.50%

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Accrued Expenses and Other Current Liabilities (Details) - USD ($)	Sep. 30, 2020	Dec. 31, 2019
Other tax payables	$ 4,564,615	$ 3,239,430
Accrued expenses	4,665,599	2,106,993
Others	985,186	609,533
Total	10,215,400	$ 5,955,956
Value-added tax payable	$ 4,600,000

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Other Operating Income (Loss), net (Details) $ in Millions	9 Months Ended
	Sep. 30, 2020 USD ($)
Other Operating Income (Loss), net
Compensation made to local authority in relation to advertisement campaigns	$ 1.6

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Income Taxes Expense - Current and deferred portion of income tax expenses (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Current and deferred portion of income tax expenses
Current tax expenses	$ 3,200	$ 1,714
Total	$ 3,200	$ 1,714

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Income Taxes Expense (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Income Taxes Expense
Effective tax rate (as a percent)	0.00%	0.00%
Unrecognized tax benefits	$ 0
Unrecognized tax benefits, interest and penalties	$ 0

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Treasury Shares (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Repurchase of ordinary shares	$ 8,130,513	$ 9,741,378
Cancellation of treasury shares	135,205,550
Repurchase Plan, Group
Number of shares repurchased	64,770,700

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Share-Based Compensation - Share options (Details)	9 Months Ended
	Sep. 30, 2020 USD ($) item $ / shares shares	Sep. 30, 2019 USD ($) $ / shares
Stock options
Share-Based Compensation
Granted (in dollars per share) | $ / shares	$ 0.10	$ 0.10
Options granted (in shares) | shares	145,572,500
Share-based compensation expense | $	$ 2,292,252	$ 439,601
Stock options | 2012 Option Plan
Share-Based Compensation
Contractual term	10 years
Annual vesting percentage	20.00%
Vesting number of anniversaries | item	5
Stock options | 2012 Option Plan | Minimum
Share-Based Compensation
Participant right to exercise options cease period after termination of employment	2 months
Stock options | 2012 Option Plan | Maximum
Share-Based Compensation
Participant right to exercise options cease period after termination of employment	3 months
Restricted shares units
Share-Based Compensation
Granted (in shares) | shares	1,578,500
Contractual term	10 years
Annual vesting percentage	25.00%
Vesting number of anniversaries | item	4
Share-based compensation expense | $	$ 1,471,380	$ 2,708,567

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Share-Based Compensation - Assumptions to estimate the fair value of the options (Details) - USD ($)		9 Months Ended		12 Months Ended	15 Months Ended
	Nov. 06, 2018	Sep. 30, 2020	Sep. 30, 2019	Dec. 31, 2019	Dec. 31, 2021
Share-Based Compensation
Average risk-free rate of interest		0.67%		1.67%
Dividend yield (as a percent)		0.00%		0.00%
Incremental compensation cost	$ 285,661	$ 42,867	$ 68,530		$ 141,977
Stock options
Share-Based Compensation
Expected volatility, minimum (as a percent)		43.18%		42.50%
Expected volatility, maximum (as a percent)		43.38%		43.22%
Contractual term		10 years		10 years
Fair value of the underlying shares on the date of option grants, minimum (in dollars per share)		$ 0.10		$ 0.09
Fair value of the underlying shares on the date of option grants, maximum (in dollars per share)		$ 0.13		$ 0.10

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Share-Based Compensation - Summary of aggregate option activity (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Stock options
Number of options
Outstanding at beginning of the year (in shares)	160,800,982
Granted (in shares)	145,572,500
Forfeited (in shares)	(7,108,508)
Options exercised (in shares)	15,220,000	8,330,150
Outstanding at end of the year (in shares)	284,044,974
Exercisable on end of the year (in shares)	128,681,130
Vested or expected to vest (in shares)	284,044,974
Weighted average exercise price
Outstanding at beginning of the year (in dollars per share)	$ 0.05
Granted (in dollars per share)	0.0002
Forfeited (in dollars per share)	0.03
Exercised (in dollars per share)	0.04
Outstanding at end of the year (in dollars per share)	0.02
Exercisable on end of the year (in dollars per share)	0.05
Vested or expected to vest (in dollars per share)	$ 0.02
Aggregate intrinsic value
Options exercised aggregate intrinsic value (in dollars)	$ 944,105	$ 545,013
Weighted average grant date fair value
Granted (in dollars per share)	$ 0.10	$ 0.10
Unrecognized compensation cost related to non-vested stock options	$ 12,686,969
Weighted-average recognition period for unrecognized compensation cost	3 years 3 months 10 days
Share-based compensation expense	$ 2,292,252	$ 439,601
Restricted shares units
Number of options
Vested or expected to vest (in shares)	29,194,080
Weighted average exercise price
Vested or expected to vest (in dollars per share)	$ 0.19
Weighted average grant date fair value
Weighted-average recognition period for unrecognized compensation cost	2 years 3 months 18 days
Share-based compensation expense	$ 1,471,380	$ 2,708,567

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Share-Based Compensation - RSU Activity (Details) - Restricted shares units - USD ($)	9 Months Ended
	Sep. 30, 2020	Jun. 30, 2020
Number of restricted shares
Unvested restricted shares outstanding at beginning of the year (in shares)	50,725,912
Granted (in shares)	1,578,500
Vested (in shares)	11,331,332
Forfeited (in shares)	11,779,000
Unvested restricted shares outstanding at end of the year (in shares)	29,194,080
Vested or expected to vest (in shares)	29,194,080
Weighted average grant date fair value
Unvested restricted shares outstanding at beginning of the year (in dollars per share)	$ 0.20
Granted (in dollars per share)	0.10
Vested (in dollars per share)	0.22
Forfeited (in dollars per share)	0.17
Unvested restricted shares outstanding at end of the year (in dollars per share)	0.19
Vested or expected to vest (in dollars per share)	$ 0.19
Employee Service Share-based Compensation, Nonvested Awards, Compensation Not yet Recognized, Share-based Awards Other than Options	$ 4,477,292	$ 823,226

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Net Loss Per Share - Computation of basic and diluted net loss per share (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Numerator:
Net Loss	$ (28,582,981)	$ (30,200,182)
Net loss attributable to ordinary shareholders	$ (28,582,981)	$ (30,200,182)
Shares (Denominator):
Weighted average number of ordinary shares outstanding, Basic (in shares)	3,086,630,271	3,163,501,054
Weighted average number of ordinary shares outstanding, Diluted (in shares)	3,086,630,271	3,163,501,054
Net loss earnings per share-basic and diluted	$ (0.01)	$ (0.01)

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Net Loss Per Share - Shares outstanding were excluded from the calculation of diluted net loss per ordinary share (Details) - shares	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of anti-dilutive securities	313,239,054	220,248,322
Share options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of anti-dilutive securities	284,044,974	160,139,359
Restricted shares units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Number of anti-dilutive securities	29,194,080	60,108,963

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Commitments and Contingencies (Details) - USD ($)	9 Months Ended
	Sep. 30, 2020	Sep. 30, 2019
Commitments and Contingencies.
Rental expenses under operating leases	$ 1,096,762	$ 1,338,427
Future lease payments under operating leases
The remaining of 2020	494,753
2021	1,590,357
2022	741,411
2023	60,455
Total	$ 2,886,976

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Segment Information (Details)	9 Months Ended
	Sep. 30, 2020 USD ($) segment	Dec. 31, 2019 USD ($)
Segment Information
Number of reportable segments | segment	1
Non-current assets	$ 6,919,839	$ 6,196,693
PRC
Segment Information
Non-current assets	4,258,416	2,655,953
USA
Segment Information
Non-current assets	$ 2,661,423	$ 3,540,740

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Subsequent Event (Details) - USD ($) $ in Millions	Dec. 31, 2020	May 18, 2020
Subsequent event
Subsequent Event
Total cash consideration authorized to be repurchased	$ 0.5
ADS
Subsequent Event
Number of shares authorized to be repurchased		109,727
Class A
Subsequent Event
Number of shares authorized to be repurchased		5,486,350

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Label	Element	Value
Restricted Cash	us-gaap_RestrictedCash	$ 2,533,207